by Neil H. Buchanan
Last Tuesday and Thursday, in what amounted to my own personal "Greek week," I published a two-part Verdict column (here and here) and associated Dorf on Law posts (here and here) discussing the economic and political crisis in Greece. That crisis has brought into question the viability of the common currency of the Eurozone (and The European Project more broadly), with some commentators suggesting not only that Greece or Italy might drop out, but that France and Germany might now decide to give up on the whole misbegotten, premature idea of fiscal union without political union.
In my various writings last week, I described how and why the German government (as the de facto leader of Europe) has been inflicting gratuitous and unyielding pain on the Greek people. Invoking an almost comically rigid version of contract formalism, Germany's leaders have turned the entire affair into a morality play, somehow convincing themselves that they are the victims of those wily, opportunistic, yet lazy Greeks.
As I noted, the German leaders' position is inconsistent with their own history, and it conveniently sidesteps the fact that even if "the Greeks" are somehow responsible for their own fate, the people who are actually suffering in Athens and throughout that poor country are not the ones who might deserve some level of condemnation. An entire generation of young people in Greece and elsewhere in Europe is being used as helpless pawns by Germany (and its allies in this endeavor, apparently including Austria, the Netherlands, and a few others), as the German-dominated European Commission and the equally German-dominated European Central Bank defy not only logic and humanity but even the International Monetary Fund in refusing to renegotiate the crippling debt in Greece. No one can deny that the basic arithmetic no longer works, that is, that Greece will never be able to pay the interest and principal on those loans, under the conditions that the Germans require. The German leaders just do not seem to care, because they appear to be more concerned with making an example of Greece, to show who is really in charge.
In response to the second of my Dorf on Law posts last week, one of our readers (a philosophy professor) posed a question on the comment board for that post. He suggested that the details of the agreement imposed on the Tsipras government include some very useful and positive requirements that will allow the Greek economy to throw off some archaic practices, as well as imposing some reforms that might make a significant dent in the encrusted corruption that reportedly has characterized the Greek government for decades. The latest deal also imposes some rules on collecting taxes via the value-added tax (VAT), in response to the large tax gap in Greece.
The reader then asked whether it might be reasonable to view all of those reforms as positive outcomes of what is otherwise an unconscionably callous approach by the Germans and their associates. In his words: "So my thought is that the moralism of the Germans and the pleas for
democracy from the Greece are really, in the end, so much
window-dressing. What is really going on under the hood is much more
practical. Does this seem right to you?" As I will explain presently, my answer is, "Perhaps a bit, but mostly no."
Before I explain that answer in some detail, I should point out that the basic concept here is familiar and quite sensible. In the early days of the first Obama Administration, former White House Chief of Staff Rahm Emmanuel (who, it turns out, really is as awful as he seemed to be at the time) famously said that "you never let a serious crisis go to waste." The idea was that there are times when a sense of overwhelming fear can shake people loose from positions to which they would otherwise cling, because they see that the stakes are far too high for the old political games.
I certainly joined in the calls on the Obama people not to let the crisis go to waste, mostly to no avail. In any event, as I described in my Dorf on Law post two days ago, there certainly does seem to be something valuable in thinking about "forcing events" as opportunities to get things done. Just as the imminent expiration of the Bush/Obama tax cuts in late 2012 imposed the risk of serious economic damage (because, even though those tax cuts were overwhelmingly regressive, there would have been just enough negative Keynesian impact to threaten the recovery), the Greek debt crisis could be viewed as a major forcing event, allowing good things to be done that could never happen in normal times.
There is, in short, a very good reason in theory to think that the Greek crisis could end up causing some welcome reforms to be enacted. So why is my answer to the reader's question mostly negative?
In both my Verdict column and my Dorf on Law post last Thursday, I linked to a NYT op-ed by the great Keynesian economist Joseph Stiglitz. Stiglitz, the former chief economist of the World Bank (a position from which he offered a devastating critique of the neoliberal "Washington Consensus," which looks like a beta version of the German approach to the euro crisis), specifically takes on the question of whether the "structural reforms" being imposed on the Greeks are necessarily a good thing. He is, shall we say, skeptical. He notes, for example, that what non-Greeks are viewing as a necessary "opening" of the Greek milk market is in fact simply a matter of requiring the Greeks to substitute neoclassical economic imperatives for the Greeks' preference for fresh milk. That the European market is far from competitive does not seem to matter to those who would impose neoclassical orthodoxy on the Greeks.
More broadly, Stiglitz suggests that what are being called structural reforms are actually nothing more than special pleading by politically connected business interests in Europe. And it is especially important to note that "[t]he important reforms that would curb the Greek oligarchs are largely left off the agenda." In other words, if this is a matter of using a forcing event to get things done, it is more than a little disturbing that all of the force is being aimed at the people least responsible for Greece's political and economic dysfunction, while protecting and rewarding the people who have benefited the most over the decades from the system's pathologies.
Moreover, the supposed benefits of collecting more taxes via the VAT are being offered instead of collecting taxes owed under law by the rich, apparently because the crisis is not a good enough reason to force action on cracking down on tax cheating at the top. And as I noted last week, we can call it "tax reform" to make it sound better, but the simple fact is that closing the tax gap by collecting more taxes from non-rich Greeks during this crisis amounts to a very deliberate form of additional austerity. That is, no matter what one thinks of the value of using a crisis to secure changes to the tax system, the Germans have imposed on the Greeks a requirement to worsen the economic crisis -- which, again, will only make the debt-to-GDP ratio in Greece rise, further reducing the Greek economy's ability to carry its debts.
Notwithstanding my arguments in the last few paragraphs, there are surely some good things that the latest deal requires of the Greek government. And those changes might well be the kind of thing that would simply never happen if the Greek political system were left to its own very problematic devices. Just as local political leaders in the U.S. love to blame "Washington" for everything, even while being secretly relieved that the feds are doing something important that could never be done locally, perhaps there are people in Greece (and maybe even in the Tsipras government) who would concede that the package is a necessarily anti-democratic compromise to get some good things done. I am deeply skeptical that the package includes much good along those lines, but I am not sufficiently knowledgeable about the specifics to know this with any certainty.
Nonetheless, any such positive aspects of the latest deal still cannot justify what the Germans have required. First, let us be clear that all of these requirements have been imposed as conditions to allow Greece simply to have the opportunity to engage in another round of negotiations. Second, given that Germany is saying that those further negotiations cannot possibly include debt relief, the result of that next round of negotiations is almost surely going to be a further tightening of the screws on Greece.
In other words, the German/European negotiating position is: "Accept these structural reforms, but even if you do accept our conditions, don't expect anything good to happen in return." The most that one can say is that the Greeks are not immediately being forced to exit the Eurozone. That is apparently valuable to the Tsipras government, which campaigned on the promise to keep Greece in Europe. But I would feel a lot better if the reward for Greece's taking difficult actions -- especially actions that are aimed at non-rich Greeks -- was a reduction in the austerity measures that have strangled Greece's economy for the last five years.
Had the Germans said, "You do these things that we really want you to do, and we'll ease up on you," then that would have been a meaningful agreement in which both sides offer consideration (in a contractual sense) and walk away with mixed feelings. Instead, the Greeks were told, "Do what we say, and we'll agree not to throw you into the abyss. And by the way, if you do leave and Turkey starts making aggressive moves toward you, we might just pretend that we don't know you."
This is why there is a serious conversation now among Greece's leaders about leaving the Eurozone. The only thing that they gained from agreeing to all of these demands (the bad ones as well as the good) was the promise of continued stagnation under the thumb of sovereign governments that view Greeks as deadbeats. The many uncertainties of exiting the euro might reasonably seem less scary now than they did a few weeks ago.
In short, I am not at all convinced that the so-called structural reforms being imposed upon Greece will actually have the positive effects that neoliberals would have us believe. Those required changes are certainly regressive, and they are accompanied not by improved prospects for the Greek economy but by additional immediate austerity measures, with no relief in sight. That strikes me as a very high price to pay for the privilege of continued debt peonage.