Tuesday, June 5, 2012

Levy your myths on Greece



“Greece must be clear that it agreed to this rehabilitation program, there is no alternative, if it wants to remain a member of the Euro-zone,” - ECB executive board member Jörg Asmussen
Rehabilitation implies a return to health, or to normalcy, of course, and two years after the therapy started, the patient is sicker than ever, undeveloping and suffering societal collapse.

That these fiscal doctors are quacks therefore is indisputable. That they have no ability to learn from their mistakes or, perhaps, that indeed this political butchery is not incidental but purposeful, is evidenced by their persistence on the social and economic disaster being visited by the Frankfurt (or is it Brussels?) Consensus (worthy heir to the devastating Washington Consensus) not only on Greece but on country after peripheral country in the EU, a policy cancer that is metastasizing to the EU core - again, perhaps as intended...

I'm leaving aside the horrifying casualness with which all sorts of European officials consider or even advocate the removal of a member country from the euro. This is simply indefensible, and even "respectable" authorities call it for what it is: propaganda meant to influence the Greek electorate, terrorize them into passivity and acceptance of their fate avoiding the feared radicals... These are the sort of statements that have immediate market consequences and this is something that is possibly even illegal but certainly breathtakingly irresponsible, especially since a Greek Euro-exit has the potential to become a cataclysmic world-event.

Let's focus instead on the dominant distorted narrative about Greece and the way it is influencing not just consumers of propaganda, but even the people setting the agenda. How indeed policy makers and mainstream analysts have internalized as objective facts, all sorts of flawed arguments about the Greek crisis. This is not a fluke, it is a practice: cherry-picking or even inventing facts (as we have seen many times in the case of the EU crisis), setting up policies with no evidentiary base and with a historical record of failure, married with the sort of de-politicization of economy that is a hallmark of neoliberalism, an apolitical economy in which systemic analysis is eschewed in favor of conceptually flawed yet elegant models, and  whose accompanying rhetoric are moralistic bromides. And of course ignoring the complete failure of all "official" economic predictions. Until recently I believed that the dominant misrepresentations about Greece from the EU were no more than cunning and amoral political posturing. More and more I am coming to the conclusion lately that this complete lack of understanding of the Greek economy, what went wrong and who is to blame for its implosion, is not a bug but a feature of the austerian world view, a prerequisite for viewing the imposed policies not only as desirable but as inevitable. There truly Is No Alternative, if you filter your inputs appropriately...

Dr. Jörg Asmussen: Clueless in Frankfurt

Take Jörg Asmussen, an ECB Executive Board member now, and until recently "State Secretary at the German Federal Ministry of Finance, responsible for the Directorates Fiscal Policy and Macroeconomic Affairs, Financial Market Policy and European Policy". Surely a man who is intimate with basic facts about the Greek economy, right? Well... not exactly.

In an interview last September in Vanity Fair, Asmussen states the following after reading an IMF report on Greece (emphasis mine):
“They have not sufficiently implemented the measures they have promised to implement,” he says simply. “And they have a massive problem still with revenue collection. Not with the tax law itself. It’s the collection which needs to be overhauled.”
Greeks are still refusing to pay their taxes, in other words. But it is only one of many Greek sins. “They are also having a problem with the structural reform. Their labor market is changing—but not as fast as it needs to,” he continues. “Due to the developments in the last 10 years, a similar job in Germany pays 55,000 euros. In Greece it is 70,000.” To get around pay restraints in the calendar year the Greek government simply paid employees a 13th and even 14th monthly salary—months that didn’t exist. “There needs to be a change of the relationship between people and the government,” he continues. “It is not a task that can be done in three months. You need time.”
 Asmussen thus makes two assertions that supposedly support what he has to say: One: that a job in Germany pays less than a similar job in Greece, and that the "13th and 14th" salary is a scheme that the Greek government invented in order to pay employees more. The first assertion is mindbogglingly wrong and the second assertion is not even wrong. As this is illustrative of the the extent of the empirical void upon which the austerity prescriptions are built let's see some data:

Average gross earnings in Greece are a fraction of earnings in Germany, there were very few people, if any, in Greece that made more on any given job than their German counterparts. It is not clear if Mr Asmussen is talking about private sector jobs (which talk about "labor markets" in Greece indicates) or public sector jobs (which would be consistent with government paying salaries as stated in the next sentence). Yet in neither case is it true that Greek jobs were better paid (not even in purchasing power, as Athens is more expensive than all major German cities). Greek median salaries in fact were consistently either the lowest in the EU15 or second lowest (after Portugal), and that applied especially to low and mid-range jobs (see here - warning Google translation!). The large gap between salaries for jobs at the top and average salaries was mentioned in a Greek Unions' report for 2007:
In Greece the mean wage is approximately €1,250. In other words, 50% of paid employees receive gross monthly pay of less than €1,250. Average gross monthly pay stands at €1,668, much higher than the mean wage, since 15% of paid employees have extremely high wages, which raise the average, creating false impressions regarding the great majority of paid employees. The threshold below which workers are designated as low-paid is 2/3 of the mean wage, i.e. around €830 a month. Based on this figure, 22% of workers in Greece are low-paid. The purchasing power of the mean gross wage in Greece in 2007 was 83% of the average in the EU15. Only in Portugal was the purchasing power of wages lower (61%).
Since then, salaries and wages have been declining rapidly: by more than a quarter in 2011 according to the OECD, and heading towards a further 25% reduction in 2012.
If one was to examine compensation in public sector jobs, teachers were indicative: both entry and end-career gross salaries for teachers in Greece were around~60% of those in Germany. 

Recently some Greek teachers had to actually *pay* in order to keep their jobs, while the decline is significant and net salaries start at about 600 Euros per month, not reaching much beyond 1400 euros... Thus the average Greek teacher now makes a third to a quarter of what a German teacher makes, in a country that is more expensive than Germany...

Asmussen's second point is even more breathtakingly uninformed however: the so-called "13th and 14th" salaries are in fact: a. given in both the private and the public sector, b. not bonuses but a way to distribute annual salaries (which is what counts - duh!) in a way convenient for most Greeks and c. in place practically immediately after WWII, legally generalized in 1981 but based on a practice dating back to... 1822 [Google translation]. 
This is common knowledge in Greece, but apparently a man who gets to decide on the survival of the Greek economy and issues warnings and threats, while chiding the locals for imagined shortcomings, does not need to actually have any idea about the economy he is helping destroy...
Finally one cannot help but note that the troika under ECB supervision and the German government's acquiescence has cut down in numbers of, and reduced salaries in, exactly the government mechanism that is supposed to collect taxes. Unsurprisingly this has not made the tax collection mechanism more efficient or less corrupt...

So let us recap: important German Finance Secretary in charge of European policy gives interview in which he shows clear signs of getting his data about Greece from Bild and similar paragons of journalistic integrity. This would not have been the first time a German public official adopts anti-southern populism as a guiding light for policy recommendations, but since this was an interview in a US magazine, in a clearly relaxed conversation one is lead to believe that Mr. Asmussen's misrepresentations about the Greek economy were not a guise, or a political stratagem but a real gaping hole in his understanding of the situation...

So could be worse for Greece than a clueless German Central Banker? A clueless IMF director perhaps...

Lagarde: Most children in Greece are not starving to death, Greeks will have to try harder - till they do

Mme Lagarde, IMF director was quoted in an interview a few days ago in the Guardian talking about many things - Greece and the crisis among them. She seems to have a problem with social categories and logical consistency though, and I'll quote here the whole relevant passage:
So when she studies the Greek balance sheet and demands measures she knows may mean women won't have access to a midwife when they give birth, and patients won't get life-saving drugs, and the elderly will die alone for lack of care – does she block all of that out and just look at the sums?
"No, I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens." She breaks off for a pointedly meaningful pause, before leaning forward.
"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."
Even more than she thinks about all those now struggling to survive without jobs or public services? "I think of them equally. And I think they should also help themselves collectively." How? "By all paying their tax. Yeah."
It sounds as if she's essentially saying to the Greeks and others in Europe, you've had a nice time and now it's payback time.
"That's right." She nods calmly. "Yeah."
And what about their children, who can't conceivably be held responsible? "Well, hey, parents are responsible, right? So parents have to pay their tax."
Most of what I wanted to say about this interview, and more, has been said by Alex Andreou in the New Statesman, in an excellent piece where he debunks this nonsense, starting with the implausibility of an IMF head giving two damns about children in Niger, which the Fund has a history of helping to starve  in a country devastated more by its policies than draught.
I would simply like to highlight the following from Andreou's article:
Faced with the question of women without access to a midwife when they give birth, patients dying without access to drugs, the elderly dying alone for lack of care and children starving, Lagarde’s response is simply to say that it is very easy for them to help themselves. How? "By all paying their tax. Yeah."
That’s right. Because, plainly, it is the same mothers without access to midwives, the elderly without care, the sick who cannot afford the newly introduced €5 hospital admission fee, the children without food, who have hoards of taxable income and are busily trying to send it to banks in Switzerland, while starving. Greece as one homogenous, tax-dodging mass responsible for its own downfall.
Yet this is the quality of the arguments presented here: Lagarde starts from the correct premise that there is significant tax-evasion in Greece and then distributes blame to all Greeks despite knowing (?) full well that it is the richest members of society that have been tax-dodging and evading, while the tax burden on the average working Greek has sky-rocketed. Salaried employees and pensioners i.e. the large majority of Greek taxpayers cannot evade taxes since income tax (along with huge social security taxes) is deducted directly from their pay-checks. That the bulk of tax evasion occurs in the highest income brackets is known, as is the fact that Greek ship-owners are totally tax-exempt (including income of their employees in their offices in Greece), in one of the most tax-friendly regimes for shipping in the World contributing almost zero to state revenues despite contributing near 10% of GDP. Yet these people, along with the bulk of the Greek rich, the real and only winners of the supposed Greek "boom" in the decade before the crash of 2009, are never really targeted by anyone - much less the troika. But Lagarde would naturally feel sympathy for her peers in tax-exemption and income level as she pays no taxes at all on her close to half a million dollar annual salary in the IMF...
Lagarde's comments about the parents of hungry Greek children being guilty of not paying taxes also fail simple logic: obviously all such parents do not have to pay income tax, since they are demonstrably under the 5000 Euro/year tax floor which the IMF is working hard to remove, having as a maxim that the only kind of taxes it likes are those on the poor and the middle class. They do however pay VAT which has increased to 23% in general, and 6,5% for basic necessities. The really big tax-evaders most definitely do not have starving children... instead they have property in London, and bank accounts in Switzerland and Germany.
But let's focus on taxes and see some of "tax - reform" proposals the troika is trying to impose - probably successfully if pro-austerity parties win in the coming elections. [My comments in italics next to the proposed measures]:
The basis for the envisioned changes in the new taxation system will reportedly be the IMF and European Commission’s proposals - included in their recently released reports... Among others, these should include:
i) elimination of several tax exemptions (related to e.g. medical visits and hospital fees) and of special privileged status for certain taxpayer categories; [privileged = sick people]
ii) abolition of the VAT discount on islands and an end to reduced income tax rates for those who live in islands with fewer than 3,100 inhabitants; [privileged = people who leave in remote areas and need incentives for remaining there and aid to counter the costs of isolation]
...
iv) reduction in income tax brackets from 8 currently to 5, including a reduction in the upper tax rate for personal incomes to 40% from 45% currently. A reduction to the tax-free threshold of €5,000 per year to €3,000 or its complete elimination may also come under consideration; [That means "lower taxes for the rich, higher taxes for the poor, much higher taxes for the poorest]
vi) adoption of a uniform tax for all business and legal entities at 20% initially, with a option to reduce it further (to as low as 15%) once domestic economic conditions stabilize; [Thus mega-corporations and small shops in the same tax bracket. Again less taxes for the rich, more taxes on the poor]
Plus the property taxes imposed are set up in such a way that the home-owner is taxed at the same rate as the bank which owns 100.000 buildings and houses around Greece... The property taxes prescribed by the IMF for home-owners and small scale owners are confiscatory in their extent under the economic conditions prevailing in Greece right now.

So much for everybody paying their fair share, eh? Somehow the monstrous regressivity of the troika's tax proposals is seldom mentioned in much of the international discussion about Greece.

International Press: A vibrant mythology

The stereotypes and misinformation about Greece being pushed by MS media around the world are legend. The mention of Greece's "bloated public sector" is part of the standard clichés about the Greek crisis, seen i.e. in this article in the New York Times from this past autumn:
Some experts believe that Greece could reap significant savings by reducing its bureaucracy, which employs one out of five workers in the country and by some estimates could be trimmed by as much as a third without materially affecting services. But though salaries have been cut, the government has yet to lay off anyone.
Although I've been through this issue on this blog many times let me point out the mistakes in this single paragraph:
Although Greece could indeed reap significant savings by reducing its bureaucracy, this bureaucracy is not
a fifth of the workforce, as this blog has tirelessly pointed out since the start of this crisis. The total number of public sector employees (and that includes Greece's really bloated military, police, doctors, teachers, etc) is under 15% already and heading South fast. Here are the official, updated numbers on Greek public sector, (total workforce = approximately 5 million) and here are the real facts about public sector employment. The bureaucracy is a much, much smaller subset. However even if it was true that one could trim down this, small, bureaucracy by a third without materially affecting services, this would be a process that would necessarily extend over the space of 5-10 years, and would require a surgeon's scalpel. Instead what the IMF is insisting upon is indiscriminate firings in all sorts of public services that have nothing to do with bureaucracy in as little time as possible and through a process that utilizes an axe. As a result, public services have deteriorated to the point of total collapse, creating functional problems where there weren't any before and undermining public health, education, tax collection, infrastructure etc. The government was loathe to lay people off (it reduced the numbers though, only a bit more gradually than the IMF would like) because already at that time unemployment was pushing towards 20%, a milestone already passed now, and they were scared of the social consequences...
And this was in the NYT, not some yahoo red-state rag, failing to even google what they're writing about.

Or take this recent report from Reuters ("Greeks embrace some new myths about life with the euro") where real attitudes in Greece are misrepresented and contrasted to a supposed determination on behalf of the Eurozone to "kick Greece" out. It is implied that Greeks are delusional because they want both an end to austerity (which has failed in every goal it set and has driven Greece to a depression greater than the US depression of the 1930s) and to remain in the Eurozone. The authors seem to think that this is impossible and it may yet be, but there is no evidence presented for this. Nowhere is it even hinted that the whole austerity policy was a failure, or that the measures being demanded of Greece in return for the bailout lead Greece to the Third World (not to mention out of the eurozone) and are causing already a humanitarian crisis in the country. But see how the issue is framed:

Solemn warnings from abroad that Athens cannot stay in the Euro while rejecting the terms attached to the billions offered to pull Greece out of its financial hole are widely disbelieved in a land that considers itself the envy of foreigners.
Note that these billions are "offered to pull Greece out of its financial hole" according to the article despite the rather evident fact that these billions have actually dragged Greece deeper into a financial hole, caused a societal disaster and have sabotaged the economy to an extent that will require a decade of rapid recovery to mend. The Greeks have this funny notion that failed programs should be stopped not because this is rational, but because they generally entertain quaint notions such as that their country "is the envy of foreigners" (one would be hard pressed to find a single person nowadays in Greece that would support such an assertion).
In what many foreign partners see as the great Greek paradox, opinion polls show over 75 percent of Greeks want to stay in the euro, but two thirds oppose an international bailout, a lifeline which came with harsh salary, pension and job cuts.
Frankfurt and Brussels say it is impossible for Greece to have one without the other: no bailout means no euro and a return to the drachma - "drachmageddon", as some Greeks call it.
It isn't much of a paradox however when one realizes that there is no official way of Greece leaving the Eurozone, unless it unilaterally withdraws from the EU, and why would it choose to do that? The paradox is resoled however in opinion polls that ask whether Greeks would prefer to live with the Euro under the terms of the current austerity plan or leave: 47,8% of respondents say that they would then prefer to leave while 41,7% would choose to remain in the Eurozone even under the current plan of permanent austerity according to a recent MRB poll, while the percentage of those that set a limit to the amount of punishment they would accept to stay in the eurozone was 54% (vs 34% and 7% who wanted an immediate return to the drachma) in another poll by Pulse. This is an inconvenient fact that escapes mention in stories from Greece because it reverses the threat: most Greeks are ready to dump the Euro (if they are forced to, because very few wish to leave the EU) in order to avoid austerity - and how ready is everyone else to cope with that?
The other thing often missed when Greece is discussed in the MSM is that the vast majority of funds for the bailout never went to fill the Greek state's coffers, in fact Greece serves as a mechanism for European taxpayer money to end up back at the ECB. Indeed the whole of the bailout has had the effect of giving time to the ECB to transfer debts of private and public banks to its own back, that is again, on the backs of European taxpayers. This too is a nuance often missed by media commentators...

Many parties show no sign of heeding warnings to make clear to a public confused about what is at stake that elections next month are effectively a referendum - euro or drachma.
Again this is stated as fact. Despite the tiny detail that no one is advocating leaving the Euro. And many parties of course do not accept this (false, as they see it) dilemma which the article states as a given. It is not impossible for Greece to be pushed out of the Eurozone. However one could claim that should Greece follow the route of compliance it is much more likely that it will find itself in no time with no euro and even more disastrous conditions, as the eurostorm is breaking all over the continent and predictions about the future of the euro are quite precarious at this point, quite independently from what Greece does.

The narrative sustained by mainstream media, eurocrats and elites around the world, but especially Europe, of a "lazy" and profligate country that "boomed" with "foreign money" and now is getting its just deserts, is false. As is the meme being spread that the IMF/ECB/EU Commission program has anything to do with "getting Greece's fiscal house in order" and helping Greece out of the slump. Actually the troika program is the prime factor behind the collapse of the Greek economy, a collapse almost unique in scale during peacetime. In terms of its stated goals and socioeconomic collateral damage it is an abject failure. The dismantling of the meager welfare state that Greece had to begin with, as well as the demolition of the impotent and poorly implemented pre-crisis labor laws in favor of a framework that converges toward that of a third world dictatorship, coupled with a salary and wage cut, a high inflation rate, >20% unemployment and a mad tax-spree against working people, pensioners and small businesses, is a political project run by dangerous neoliberal ideologues, not an answer to Greece's real deep economic malaise.

The narrative is the message

All these misrepresentations, the silences, the omissions, the outright lies, the misinformation, the urban legends and the often naked condescension, form an integral part of the narrative of Greece, a narrative that is used to legitimize the policies being pursued by the core EU governments to the electorates there, not only by stereotyping but by indirectly implying that solidarity is pointless, and that they mustn't demand too much of the state and their superiors, or else the fate of the profligate Greeks will befall them.
By narrative here I imply a rhetorical tool meant to frame the issues in Greece in such a way as to exclude certain kinds of questions and objections and invite only particular others. Though it is true that in one sense every depiction of events, especially of a procession of events, is a narrative of one form or another,what we have here is a narrative that does not even try to include the relevant facts, but rather to make them opaque, to misrepresent and deny coherently, and by plan. This is a weaponized narrative, in a permanent communication war taking place where societal consensus is forged.
However the thing is that these sort of devices work better if you believe their content. As "the plan" here emerges through the alignment of elite interests, and the reflexes of the already indoctrinated who are in place at critical positions in the political-financial-industrial-media complex that supports and defines the global elites, what you get is Asmussens and Lagardes, and everything from Bild all the way to the WSJ and the NYT: people that at the same time realize the political expediency and the real economic stakes, yet seem to honestly entertain and believe the dumb BS they are peddling to the population at large, both at home and in the target country: Greece and the PIIGS in general...

Myths prop-up corruption

It is in Greece where the project of the dismantling of the European welfare state, a desire acknowledged by Mario Draghi himself openly, is being tested, after two years of daily struggles the unfolding disaster is leading to an unprecedented electoral result .
Up to a month ago the plan was moving along, supported by massive police violence whenever protesters were on the verge of dominating the streets. These protests however, as they were increasing in anger, determination and ferocity created a crisis of legitimacy, that not even the Greek oligarchs' corrupt media system could impede. In fact the media system's delegitimization was a key factor that allowed the electoral earthquake that followed. Elections were then announced with the widespread conviction that the two-party system propping the bailout and the subjugation to the IMF / ECB dictates, would be wounded yet would have managed to form some sort of legitimate government capable of moving ahead with even more anti-social cuts and productive sabotage...

But things were explosibe and SYRIZA, a small party of the radical left emerged as the main beneficiary, electorally speaking, on May 6th, and is poised to win, perhaps even win big, on the repeat elections of June 17. This is met by a chorus of local and european dismay, trying to push the the idea of Greek elections being a referendum for or against the Euro, despite the fact that SYRIZA has been insisting forever that it wants to Greece to remain in the euro, and is arguably the only pro-european party in Greece, if by Europe one means social-europe, the Europe of redistribution and democracy. In fact SYRIZA is fighting a battle that concerns everyone who doesn't want a "Europe with Asian values" as Slavoj Zizek recently pointed out or that sees austerity as the death knell of the Euro and a ticket for re-inventing the 1930s, as Yanis Varoufakis warns...

So the same forces that imposed on Greece a historically failed policy - as part of a political plan, or through sheer dogmatism, it doesn't matter - are now encouraging Greeks to vote for the same two parties that have been historically at the root cause of the Greek economy's many ills. Clientilism and corruption, oligarchs and tax-evasion, public coffers at the service of the bureaucracy/ ship-owner / public procurer / media complex, the underdevelopment of the Greek welfare state, are all the work of the two parties, ND and PASOK that the EU bureaucrats and assorted European elites are basing their hopes on. SYRIZA on the other hand has no clientilist roots, was the only major party opposed to the Athens' Olympics and the Pactolus of funds (total cost is still unknown but estimates reach 30 billion euros) that were diverted there. SYRIZA was the only parliamentary party to note that the funding growth through borrowing, 2,5 euros of debt for every euro of growth as they noted at the middle of the "boom", is a Ponzi scheme, not an economic policy, and that not reducing public debt at a time of growth is suicidal.
But the powers that be are creating a new myth, the myth of the dangerous radicals that are going to wreck Europe, and they are actively supporting the mishmash of carrierists, neoliberals and enablers of corruption that are the two parties - not to mention the scary drift to the far-right of ND that now includes a large part of the extreme-right LAOS, with fascist roots and an anti-immigrant rhetoric that would embarrass Marine Le Pen. The eurocrats and the mouthpieces of global elites are mythologizing the political landscape of Greece and they are still insisting that the disastrous measures that SYRIZA refuses to implement are the only alternative. The process by which Greece and its "radical" choice (and to be frank, SYRIZA's prescription for dealing with the crisis is a bit to the right of Paul Krugman) is to be made the scapegoat for the collapse of the euro project in the new series of myths in the post-euro landscape, is now underway...
The reasons are obvious: they fear a left wing contagion in their own countries they fear an end of the era of rule of the 1%, by the 1%, and for the 1%...

 A dilemma will emerge in the coming period regardless of what happens in Greece: the dilemma of whether Europe will drift towards a post-democratic dystopia, or whether social Europe persists and emerges stronger from this chaos. The battle that SYRIZA is facing, unprepared and nervous as it may be, is the first in a political war that can engulf the continent. "They have decided without us, we will go on without them" as SYRIZA's slogan declared. Let's go on without them, then, on a European scale...

[Crossposted at the European Tribune]


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1 comment:

Ira Morse said...

Did Greece committed a mistake? What will happen after Greece departs from Euro Zone is unpredictable.