Thursday, July 16, 2015
Greece is a corrupt society that CANNOT pay its way
The negotiations over the last few months have been marked by a remarkable degree of public acrimony. Most of the other Eurozone governments have become increasingly and publicly exasperated with the Greeks and the expressions of hostility towards the Greek government from members of national parliaments have grown ever more outspoken. Some of the reasons for this are well known, above all the lack of a true European demos, which means there is not the kind of ultimate solidarity or shared interest that one finds in, for example, the United States. However there is another reason for the acrimony that has not received much attention. The creditors misunderstand what it is they are asking the Greek government and society to do. This lack of understanding is why any deal made now is likely to prove a disappointment.
The impression given by media reports is that this is all about debt, specifically the debts run up by the Greek state before 2009. Certainly there is a problem but it is one that is soluble and does not require the kind of fraught negotiations we have seen. The difficulty is that the fiscal state of Greece before the first bailout in 2010, and the underlying state of the Greek economy, are symptoms of a much more serious underlying problem. This is one not of debt but of competitiveness. Quite simply the Greek economy is not productive enough to support the levels of income and public spending that it now has, without significant capital inflows from outside Greece. Before 2008 these came in the form of private loans, since then in the form of bailouts (even if much of this has been recycled back to private creditors). Greek firms and individuals are simply not competitive with their counterparts elsewhere in Europe, above all in Germany. Being in the Euro means that they cannot adopt the traditional way of regaining at least some competitiveness by devaluing their currency. Instead they have to deflate internally and the attempt to do this has devastated economic life in Greece.
This is well known. It is the reason why the creditors are demanding that in return for a third bailout the Greek government introduce a series of reforms to public spending, the tax system, and the machinery of the Greek state, particularly its tax collecting apparatus. Successive Greek government have either refused to do this or have promised to do it and then failed to. This is why the rest of the Eurozone is becoming ever more exasperated. It is here, however, that the misunderstanding comes in to play.
What the creditors think they are asking for is major shift in public policy. They recognise that the shift they are asking for is radical and many realise in addition that it would involve a shift in the general ideological basis of Greek politics, in a more market liberal direction. However they are actually, without realising it, asking for something much more fundamental and radical.
One question that should be asked is why Greece got into a position that was so much worse than that of other ‘peripheral’ economies. Also, why has the performance of the Greek economy been so much worse than that of other countries that have had bailouts and austerity, such as Spain, Portugal, and Ireland? The answer lies in the fundamental nature of the Greek state and the political economy of which it is the central part.
Greek political culture is dominated by practices and institutions that certainly exist elsewhere in Europe but are not as dominant. The state has a narrow tax base, with powerful interests such as the Orthodox Church effectively exempt. The revenue collection apparatus is completely ineffective so that tax evasion is endemic at every level of income. This means that simply raising or extending VAT for instance is not enough because so many transactions are off the books. At the same time, the Greek state provides generous pensions and other benefits, which it cannot fund. The political system appears to be a modern democracy but is in fact a much older model. The key institution is clientilism: Political actors give out rewards to their clients in the shape of handouts and sinecures in the very large public sector. This is done much more directly than with the kind of interest group politics that we find in most countries and it is central to the whole way that politics works.
The extent of patronage means that the Greek government (whoever they are) does not have a modern, Weberian, bureaucracy to call on. Instead most of the people in the public service owe their positions to networks of patronage and these command their loyalty. The economy is highly regulated in ways that entrench settled interests and inhibit innovation. In particular a very wide range of occupations are subject to rules that make it very difficult for new entrants to get into those sectors. Because of the inefficiency and the existence of a plethora of rules that are irksome but ultimately unenforceable, corruption is endemic and widespread throughout Greek society. This system cannot maintain anything like the standard of living to which most Greeks aspire and as such it means that via membership of the Euro we have seen the development of an economy that depends upon inward transfers to a much greater degree than is the case in countries such as Spain and Ireland.
Given all this it becomes clear that what the creditors are asking for is much more than a shift in policy, no matter how sharp and dramatic. Policy shifts of that kind are part of the normal or regular political process and take place infrequently but still regularly in most polities. The shift brought about by Margaret Thatcher’s election in 1979 is an example. What is needed in Greece, and what the creditors are asking for without realising it, is something more fundamental, a change in the very nature of the political system and in the entire nature of politics and government rather than a change of policy within a system. This is a regime change in the original and correct use of that term.
The point of course is that changes of this kind are extremely difficult and only happen rarely. Sometimes it requires a revolution as in France, on other occasions it takes place in the context of a fundamental crisis such as defeat in a major war. Very rarely can it happen when there is a near consensus in a society over what to do, as in Japan in the 1870s. The current Greek government is almost certainly aware of this but apart from ideological objections to part of the list of reforms, they are quite simply unable to do what is asked rather than unwilling because a change in the political order is simply very, very hard.
So the creditors are likely to be disappointed and will then become even more enraged. Moreover, being in the Euro makes any attempt at systemic change in Greece even more difficult than it would be already, because if removes a range of policy options that could alleviate some of the transition costs. As most economists of all persuasions now think, the best option is a managed Greek exit from the Euro. If this does not happen (as seems likely) then this is a production that will run for some time.
How to insult a "progressive"
Pat Condell's latest --- superb
An illegitimate union
By Walter E. Williams
The victors of war write its history in order to cast themselves in the most favorable light. That explains the considerable historical ignorance about our war of 1861 and panic over the Confederate flag. To create better understanding, we have to start a bit before the 1787 Constitutional Convention in Philadelphia.
The 1783 Treaty of Paris ended the war between the colonies and Great Britain. Its first article declared the 13 colonies "to be free, sovereign and independent states." These 13 sovereign nations came together in 1787 as principals and created the federal government as their agent. Principals have always held the right to fire agents. In other words, states held a right to withdraw from the pact — secede.
During the 1787 Constitutional Convention, a proposal was made that would allow the federal government to suppress a seceding state. James Madison rejected it, saying, "A union of the states containing such an ingredient seemed to provide for its own destruction. The use of force against a state would look more like a declaration of war than an infliction of punishment and would probably be considered by the party attacked as a dissolution of all previous compacts by which it might be bound."
In fact, the ratification documents of Virginia, New York and Rhode Island explicitly said they held the right to resume powers delegated should the federal government become abusive of those powers. The Constitution never would have been ratified if states thought they could not regain their sovereignty — in a word, secede.
On March 2, 1861, after seven states seceded and two days before Abraham Lincoln's inauguration, Sen. James R. Doolittle of Wisconsin proposed a constitutional amendment that read, "No state or any part thereof, heretofore admitted or hereafter admitted into the union, shall have the power to withdraw from the jurisdiction of the United States."
Several months earlier, Reps. Daniel E. Sickles of New York, Thomas B. Florence of Pennsylvania and Otis S. Ferry of Connecticut proposed a constitutional amendment to prohibit secession. Here's a question for the reader: Would there have been any point to offering these amendments if secession were already unconstitutional?
On the eve of the War of 1861, even unionist politicians saw secession as a right of states. Rep. Jacob M. Kunkel of Maryland said, "Any attempt to preserve the union between the states of this Confederacy by force would be impractical, and destructive of republican liberty."
Both Northern Democratic and Republican Parties favored allowing the South to secede in peace. Just about every major Northern newspaper editorialized in favor of the South's right to secede. New York Tribune (Feb. 5, 1860): "If tyranny and despotism justified the Revolution of 1776, then we do not see why it would not justify the secession of Five Millions of Southrons from the Federal Union in 1861." Detroit Free Press (Feb. 19, 1861): "An attempt to subjugate the seceded states, even if successful, could produce nothing but evil — evil unmitigated in character and appalling in content." The New York Times (March 21, 1861): "There is growing sentiment throughout the North in favor of letting the Gulf States go."
The War of 1861 settled the issue of secession through brute force that cost 600,000 American lives. We Americans celebrate Abraham Lincoln's Gettysburg Address, but H.L. Mencken correctly evaluated the speech: "It is poetry, not logic; beauty, not sense." Lincoln said the soldiers sacrificed their lives "to the cause of self-determination — that government of the people, by the people, for the people should not perish from the earth." Mencken says: "It is difficult to imagine anything more untrue. The Union soldiers in the battle actually fought against self-determination; it was the Confederates who fought for the right of people to govern themselves."
The War of 1861 brutally established that states could not secede. We are still living with its effects. Because states cannot secede, the federal government can run roughshod over the U.S. Constitution's limitations of the Ninth and Tenth Amendments. States have little or no response.
Truth is an existential threat to the US government
by LAWRENCE SELLIN, PHD
The United States is not a constitutional republic. It is an oligarchy controlled by wealthy financiers who hire politicians to pass legislation beneficial to them and employ journalists to keep the citizens ignorant and compliant.
Neither the Democrats nor the Republicans believe in democracy. It is simply an ideological contest between two different forms of totalitarianism based on big government, where they represent only themselves in their pursuit of personal power and profit.
Over the last hundred years, the Democrat Party has moved farther and farther to the left, evolving from populism to Marxism and developing an operational model resembling that of the mafia. Its leaders are a gaggle of coffeehouse communists and unindicted felons, who seek the lifestyles of the rich and famous while practicing the politics of Joseph Stalin.
The Republicans are democratic only in the sense that they are willing to sell their votes to the highest bidder, where their political power and, ultimately, compensation from their rich donors increase proportionally with the expansion of government.
The federal government is now an industry competing with the private sector for revenues and resources, but, unlike the private sector, government is unconstrained by regulation and the rule of law.
The cost of public-sector pay and benefits, for example, which in many cases far exceed what comparable workers earn in the private sector, combined with hundreds of billions of dollars in unfunded pension liabilities for retired government workers, are weighing down the economy.
The fundamental problem is public-sector collective bargaining. It is appropriate in the private sector, where workers bargain with private, profit-making corporations and where market forces provide an independent check on both sides' demands.
Yet there is an unholy alliance and a mutually beneficial relationship for money and votes between Democrats and public sector unions, which, in terms of government services, translate into higher costs, lower efficiency and, worst of all, less democracy.
Why are such illogical and dishonest policies allowed to continue? Because it is profitable.
To foster big government from which they personally benefit, the Democrats nurture a Marxist-type victim class, while the Republicans serve the affluent, both at the expense of the Middle Class, whose propensities toward liberty and accountability represent a threat to the hopelessly corrupt status quo that the two major parties and the media endeavor so vigorously to protect.
Ergo, the War on the Middle Class, now pursued by both Democrats and Republicans, albeit for different reasons.
As a consequence and, not surprisingly, today the main the activity of the federal government is lying. Barack Obama lied to get elected, lied to enact his policies and lied when those policies failed. In response, the Republicans added cowardice to their own set of lies.
As George Orwell noted: "In a time of universal deceit - telling the truth is a revolutionary act."
That is why the political establishment and the media find Donald Trump so frightening; the danger that the truth might be spoken.
There is, however, a greater peril - when blatant and outrageous lies are no longer sufficient to soothe the electorate into complacency, such a government must begin to curtail liberty and oppress the people in order to sustain itself, an approach with which both Democrats and Republicans find agreement.
The United States is on the cusp of a second civil war, one to determine who should control the federal government. It is not a contest between the Democrats and Republicans or liberals and conservatives, but a battle between the entrenched power and tyranny of the bipartisan political-media establishment versus the rights and liberties of the American people.
Only the truth will set us free.
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Posted by JR at 12:35 AM