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The Politics of Competitive Austerity and Class War

by Frank Schnittger Wed Apr 3rd, 2013 at 02:17:46 AM EST

Paul Krugman keeps writing piece after piece lamenting how stupid politicians are to be heaping austerity policies onto already depressed economies and then wondering why the outcome is ever more depression. He heaps scorn on discredited theories of "expansionary austerity" or that excessive public borrowing might "crowd out" private investment pointing out that all the macro-economic evidence is to the contrary.

Absent from his analyses, however, is any theory as to why political leaders (and many of their economic advisers) might be following such counter-intuitive policies, other than the implied or explicit notion that these people must be really stupid. I want to begin the process of offering a more rigorous theory here, and it is in two parts:

Part 1 is a variant of our old friend competitive devaluations: In the days of floating currencies many countries sought to improve their short run competitive position by allowing or encouraging their currency to devalue relative to their trading partners. In the longer run of course, this resulted in inflation which tended to erode this advantage, and it only works in the short term if your country manages to devalue more than your trading partners.

Of course in a currency union this is no longer possible relative to your fellow currency members, and so the only way to improve your relative competitive position is to deflate your economy more than your "partners". This leads to two problems: Deflation is much more economically damaging than external currency devaluation, and if every country in a currency Union deflates at the same time, they achieve no competitive advantage relative to each other, but manage to massively deflate the currency area as a whole. Indeed one country's deflationary policies exacerbates deflation in their neighbours. This is what is currently happening in the Eurozone with record unemployment and forward economic indicators sufficiently bad to strike terror into the hearts of anyone likely to be looking for a job in the future - itself a cause of further depression.

But part 2 of the explanation is perhaps more insidious still, and it is to Marx rather than Keynes that we have to look for inspiration: What if the current depression is also being caused by an inter-generational and class war - currently really only being effectively fought and won by the older and wealthier classes? Not all older people are wealthier, I know, but there are inter-generational as well as class aspects to this divide. Follow me below the fold if you feel this hypothesis merits further exploration and elucidation.

front-paged by afew


There are a number of things that are striking about the current political responses to the crises in Europe:

  1. The almost complete dominance of conservative parties in most European countries and in the European Parliament and Commission.

  2. The rise to political dominance of the "Troika", made up of the European Commission, Central Bank and the IMF, the first two of which are the least democratic of the four main EU institutions, and the IMF which has no direct European mandate at all.  Indeed the Troika has no constitutional or institutional standing within the EU whatsoever.

  3. The almost complete abandonment of class analysis by "socialist" parties in the wake of the fall of the Soviet Union, the re-unification of Germany, and the expansion of the EU into eastern Europe.

  4. The almost complete imposition of the burden of adjustment on the relatively poor, the growing numbers of the unemployed, and those dependent on state services rather than private provision for basic needs like healthcare, housing, education, and employment.

----

Speaking as a relatively older and wealthier person in a country that has borne one of the most brutal brunts of adjustment in the EU - namely Ireland - I am continually struck by how relative little I am being personally hit by government cutbacks: My children have grown up, so cutbacks in child benefits do not effect me. I built my house 30 years ago, so I was never caught up in the property boom and negative equity bust.

The Irish economy was also in recession when I first entered the job market in the late 1970's, but I had many relatively good years since then to build up pension entitlements and a retirement nest egg and fund for a rainy day. Those investments naturally took a hit in 2008/9, but have been recovering strongly ever since.

When I compare all that to those younger people currently trying to find a job or make a career I note that they have been hit far harder by pay reductions, tax increases, public service reductions, unemployment increases and negative equity. Mine is truly perhaps the first generation in recent times whose children will be worse off than we are.

And yet when we look at how the Government parties are performing in the polls, we see the larger conservative party, Fine Gael, doing relatively well, and the notionally more left wing party, Labour, imploding. Hardly surprising when the propertied classes, at least those who bought or inherited their houses and farms and businesses many years ago are generally still doing relatively well, whilst those who have to start off with relatively little now are truly struggling. Marginal tax rates at higher income levels have hardly increased at all, and we still have no wealth tax.

The new property tax currently being introduced is still very low compared to other northern European countries, and is being levied on virtually all properties, regardless of income. It will marginally cost the owners of mansions more, but not in any way as to effect a significant redistribution of wealth, as opposed to income. Inheritance taxes remain very "liberal"and capital gains taxes (on unearned income) are actually lower than income tax.

In some ways many older and wealthier people are actually better off now in absolute terms, and certainly so in relative terms. If I wanted to buy an apartment in Dublin today, I could do so at a discount of c. 60% on the peak price. The relative prices of many modern conveniences and luxuries - computers, electronic goods, clothes, fashion, luxury foods and personal services like restaurants and hairdressing are probably cheaper now relative to income than they have ever been - if you have the money to actually buy them. And this is one of the paradoxes of austerity and deflation: It may make life very hard for the poor, the sick and the unemployed, but it can actually make life cheaper for the relatively wealthy. Eating out in Dublin is certainly more affordable than in the Celtic Tiger years.

So the dirty little secret of austerity and deflation is that if you are already a little better off with even a small stockpile of cash or assets, you can actually do rather well out of it, certainly as compared to the vast majority of your compatriots. The roads are less crowded because fewer people have cars. Virtually every hotel in the country is running remarkably cheap special offers - for those who have the time and money to get away. Even with 14% unemployment, there are still 86% of voters more inclined to support the status quo rather than rock the boat for fear of joining the 14%. Conservative parties are doing well because the relatively well off are still doing rather well, thank you very much.

It cannot be denied that there may also be a larger geopolitical game in play: that the EU as a whole is adjusting to a reduction in its historic competitive advantages relative to the "third world", and that we cannot compete with Chinese prices for manufactured goods, or even with India for low end software and support services. The gradual exhaustion of non-renewable resources cannot but put pressure on energy prices and living standards generally, even before you factor in the costs of climate change.  In a world of almost unlimited labour supply, the price of labour is always going to be under downward pressure.

But much of what the EU is doing now is of the nature of a self-inflicted wound; an own goal in the international war of trade and competitiveness. Social cohesion and inter-class and inter-generational solidarity used to be part of what helped to define Irish and European societies as distinct from the rather more brutally divided and authoritarian societies elsewhere in the world. What we are doing in Europe is undermining the whole basis of that cohesion and historic competitiveness as a society as a whole. What took many generations to build up is now being willfully destroyed in the space of a few years in the interests of the better off.

And don't get me started on the really rich top 1% who mainly authored the crash and are now its chief beneficiaries. That was a scam on an international scale without precedent, but it is different from the petty jealousies and differentials which are enabling conservative parties and ideologies to thrive in the face of all economic evidence that these policies are counter-productive as well as socially unjust.

So the answer to Krugman's incomprehension as to why the EU is pursuing policies which are objectively destructive of its own growth and wealth potential is that it is doing so because many of its older, wealthier, and more influential citizens are still doing very well out of austerity, thank you very much, and especially in relation to their perceived inferiors in society - be they the relatively poor, younger or less experienced, less well connected, or members of a less favoured minority.

Display:
That the older, better off group aren't being hurt very much by these policies is part of the explanation of why they can be inflicted, not necessarily an explanation of why they're being done. It occurs to me that if you assume that the underlying intention is to reduce the power of the working class (to include almost anyone who is dependent on a salary and has a boss, so most white collar workers) then it's not as startling that those who aren't in the labour force or are about to leave it aren't affected - they are on the fringes of the true middle class (who have some economic independence) and their short-term economic interests align with the interests of the middle class and the elite. An awful lot of the detail of what has happened has been aimed at protecting the middle class and authored by the middle class - the civil servants writing and implementing policy form part of that, as do the journalists writing about it and (in Ireland) a lot of the politicians voting on it.

Your citation of the competition argument for "reform" is nice, and very serious, but highly arguable. The cost of products in the reformed world doesn't seem to have dropped all that much, it's just that the surplus has moved from workers to corporations.

by Colman (colman at eurotrib.com) on Wed Apr 3rd, 2013 at 05:15:39 AM EST
If you define the working class as anyone with a salary and a boss, you are defining it very widely and it then becomes difficult to see how the "boss" class can so easily construct large ideological and governing majorities. Certainly pensioners whose pensions are directly dependent on their investments doing well are going to have a very conservative bias and self-interest, but many working class members, as you define them, also have aspirations to join the "boss" class and share their ideological and value base. Insofar as their remuneration is also dependent on bonuses etc. which depend on profitability, their interests are also directly aligned with the boss class.

Krugman makes the point often enough that "competitive austerity" doesn't work as advertised. That is not to say, however that it doesn't work as intended, which is to protect the better off (as I have argued) and to reduce the power of the working class (as you have argued). Any policy which increases unemployment is going to reduce the bargaining power of workers relative to employers, which is why unemployment is such a useful tool for the wealthy - so long as it doesn't effect them and theirs. Why else would there be such opposition to include a full employment mandate into the governing terms of operation of the ECB - 9n the same way as it is included in the Fed mandate. This is one area where  the US policy and institutional structure is actually more enlightened that the EU.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 3rd, 2013 at 07:22:50 AM EST
[ Parent ]
You construct it any more narrowly and you've declared defeat in the class war. Sure, there are loads of people who want to join the boss class. There are loads of people who want to be pop stars and reality tv stars and sports stars too. So what? That just makes it easier to co-opt them.

You're neglecting tribal warfare, again. Most people have no fucking idea what's in their economic interest. They're more worried about making sure them are doing worse. See the emphasis on welfare fraud, single mothers, welfare scum, scroungers etc, etc, etc. See race and identity politics. See the entire output of the tabloid press and so on.

by Colman (colman at eurotrib.com) on Wed Apr 3rd, 2013 at 07:54:02 AM EST
[ Parent ]
I have been meaning to write something about the consequences of consumption as mostly a show of status. As Galbraith points out in The Affluent Society, needs we need to be told about from an ever-expanding amount of commercials are actually different from physicla needs like hunger, coldness or illness. And once one accepts that much of our consumption is positional, the focus shifts to position which is inherently relative. For me to be above you, you need to be below me. So it makes utilitarian sense to vote down competitors just as much as it makes utilitarian sense to vote up once own group.

And once that coin drops, the conservative strategy of appealing to one group by thrashing another and promising to bring that other groups relative position down makes perfect sense both from the perspective of politicians and voters. The matter with Kansas is that white men are voting in their self interest by voting to preserve or improve their relative position, even at the cost of absolute living standards.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Apr 3rd, 2013 at 08:11:09 AM EST
[ Parent ]
Yeah, for pretty appalling values of "self-interest". Although, that need to keep others down does seem to correlated to very unequal, red-in-tooth-and-clase societies. [citation needed]
by Colman (colman at eurotrib.com) on Wed Apr 3rd, 2013 at 08:17:14 AM EST
[ Parent ]
Thanks to Randian and tragedy-of-commons panic stories, the attention to "self-interest" and relative status reach mythical - nnah, theological - proportions.
by das monde on Thu Apr 4th, 2013 at 05:20:44 AM EST
[ Parent ]
The boss class has been doing this, overwhelmingly successfully, for about forever.  It controls the wealth, the media, and education, so it is able to constantly peddle fairy tales and horror stories to the general populous, fairy tales about upward mobility and the returns on hard work, and horror stories about the threats posed by scapegoat groups.  Look at the number of people in the US who are willfully ignorant of the criminal activities of the Reagan administration; who still believe Bush was justified in invading Iraq because Saddam had WMDs and was supporting the Taliban; who give Obama a pass on drone attacks but are convinced the 2007 collapse happened on his watch; who thought Clinton was a great liberal (US definition) while ignoring his deregulation of the economy and dismantling of the social safety net.  For most people, Denial is just a big river in Africa, and to the extent they notice they are being led by the nose, they are largely indifferent, so long as the Ueberklass makes them feel safe.
by rifek on Tue Apr 9th, 2013 at 09:15:04 PM EST
[ Parent ]
Good essay, and valid arguments, but 2 quibbles:


 Even with 14% unemployment, there are still 86% of voters more inclined to support the status quo rather than rock the boat for fear of joining the 14%.

14% is 14% of the active population, which is itself a (high) fraction of the 18-65 age class, so the voters also include the inactive young (probably predominantly women), and all the older people that are no longer part of the active population (as defined in economic terms)


In a world of almost unlimited labour supply, the price of labour is always going to be under downward pressure.

Thankfully, it's not unlimited. Chinese wages were increasing by 10-15% per year when the active population was growing; now that China's active population is actually going to go down(thanks to the on child policy and the rapid aging of the population), the trend can only get stronger. There is some way to go, but the gap in wages is probably shrinking in the medium term. Small comfort in the short term, but an important trend will son reverse.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Apr 3rd, 2013 at 06:18:01 AM EST

Thankfully, it's not unlimited. Chinese wages were increasing by 10-15% per year when the active population was growing; now that China's active population is actually going to go down(thanks to the on child policy and the rapid aging of the population), the trend can only get stronger. There is some way to go, but the gap in wages is probably shrinking in the medium term. Small comfort in the short term, but an important trend will son reverse.

In the mean time, the political arrangements and cultural memory of a society with a fair sharing of wealth will be eroded over here. When Chinese demography asserts itself, people over here might not remember anymore of the meaning of "middle class" or "decent life".

by cagatacos on Wed Apr 3rd, 2013 at 06:45:37 AM EST
[ Parent ]
Both fair points and I will see how I can rephrase things to better reflect the reality.

The 86:14 point was of of the nature of a rhetorical flourish aimed that at illustrating that whilst many people are suffering, the majority are still doing relatively well and are fearful of being forced to join the suffering minority and thus are relatively easy to encourage to support the status quo.

Of course if you include the retired in the numbers, the majority supporting basically conservative policies actually increases (but that may be somewhat off-set by a minority of those in work who are anything but happy with their lot and who are willing to risk all in solidarity with the unemployed and their own self-advancement.

Secondly, Chinese wages may well be going up, but that doesn't take away from the fact that from a European perspective any diminution of European pay differentials relative to Chinese pay feels like a leveling down. Also, with inequality in European societies on the rise, the relativities which really matter to people - how much you're earning relative to the Jones' up the road with the big house - are felt much more acutely.

Globalisation is essentially a way of tapping into relatively untapped (and much lower priced) labour markets around the globe, and so long as the world's population keeps rising, it will always enable local labour shortages and price rises to be circumvented to a large degree, particularly for goods and services which can be produced remotely from the main customer base.

One of the characteristics of "modern" open economies is that the price of manufactured goods which can be produced remotely keeps falling, whilst the price of services which can only be produced close to the customer may actually be rising at the same time. State services, whose consumption can be forced, are the most price insensitive of all, even when the rest of the economy is imploding.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 3rd, 2013 at 06:55:16 AM EST
[ Parent ]
Frank Schnittger:
State services, whose consumption can be forced, are the most price insensitive of all, even when the rest of the economy is imploding.

There is nothing related to Chna that determines the size of state services. So that China is returning to its old manufacturing position in the world trade system does not affect unemployment here, merely amount of jobs in manufacturing sectors. With or without China the state can decide to employ everyone who is willing and able and find service jobs that needs to be doing - taking care of the young, the sick and the old for example - or were more is better - science and arts for example.

That we are not doing that but instead are having states opting for unemployment is dependent on central banking following the concept of NAIRU and raising interest rates in order to force businesses on the margin out of existance and its employees into unemployment. But while the policy of unemployment coincides with the policy of global re-structuring of trade patterns, I don't think one caused the other.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Apr 3rd, 2013 at 08:02:04 AM EST
[ Parent ]
What we need is a solid pitch to change the perception of the game.
Because the Natural Rate of Unemployment is zero. Having people unwillingly idle is insanity.
by Thomas on Wed Apr 3rd, 2013 at 12:42:12 PM EST
[ Parent ]
I'd caution against too much hope that increasing scarcity of labour will save us.

Cambridge capital controversy - Wikipedia, the free encyclopedia

However, Sraffa then pointed out that this accurate measuring technique still involved the rate of profit: the amount of capital depended on the rate of profit. This reversed the direction of causality that neoclassical economics assumed between the rate of profit and the amount of capital. Further, Sraffa showed that a change in the rate of profit would change the measured amount of capital, and in highly nonlinear ways: an increase in the rate of profit might initially increase the perceived value of the truck more than the laser, but then reverse the effect at still higher rates of profit. See "Reswitching" below. The analysis further implies that a more intensive use of a factor of production, including other factors than capital, may be associated with a higher, not lower price, of that factor.

Labour abundance in China has been an excuse from the start. They'll find a new one.

by generic on Wed Apr 3rd, 2013 at 12:13:44 PM EST
[ Parent ]
Great post. Let me chip in with a few unassorted things:

  1. On the Marxian hypothesis of class war: I agree, but there is a milder version of this - as the people in power do not have direct contact with the people suffering (i.e. people in power are older, more well off, connected with like minded people) then they do not feel the problem and it is invisible to them. I know of quite a few people that were completely unaware of the crisis until they lost their job.

  2. Let me re-state that I am not going against the Marxian hypothesis. In the Portuguese case that can clearly be seen. But complete ignorance/indifference for the suffering of other people also happens (which is different from the intention of putting them down).

  3. While I agree with the generational argument, I note that that varies slightly from country to country. For instance, in the Portuguese case, much of the wealth in  older age comes from (state) pensions and these are being hit.

  4. Where I completely disagree is in the argument that conservative parties play an important part here: The current rule set-up was made with the full support of social democratic parties (new labour). The problem is not just the conjectural issue of government (and note that where socialist parties were in power during austerity, they did not do much better - think Zapatero). The problem is the institutional arrangement where the rules are biased in favour of the rich (euro,  international competition, fiscal arbitrage, free flow of capital, ...) and these rules were created with the full support of labour parties. The reason the argument that capital can flow away if the conditions are not "competitive" is because it is true: the rules allow for that capital flow.

  5. The truth is, the society that was created in the post Reagan-Thatcher years (supported by left-wing "cosmopolitan" individualism) is self-centered and egotistical: The idea of burden sharing is "passe" - suggesting, say that salaries should be decreased to everyone so that the saved income can be used to hire unemployed is politically suicidal: The 86% who have jobs (and are the majority) will crucify you. The suffering of the remaining 14% is totally ignored. Of course, this is totally self-defeating, but that is besides the point: people are not ready to make the least sacrifice for their neighbours.

  6. Long time ago the left stopped being left: It went on the "defensive" (i.e. maintaining the existing welfare state). This is the charitable interpretation because one can suggest that the "left" has changed sides (Blair, Schroeder, ...). There was actually no new ideas, only the view of maintaining what existed ("maintaining what existed" is actually the definition of conservativism, by the way)

  7. Talking of new ideas: things like property taxes and wealth taxes and not by definition good. If they are made regressive then they can be quite disastrous. Indeed the final destruction of the middle classes can be done with regressive property taxes: destroying their home equity. Well done wealth/property taxes would be fantastic, but we will see the opposite in the years to come...
by cagatacos on Wed Apr 3rd, 2013 at 06:36:19 AM EST
Thanks for this insight from a Portuguese perspective. It is interesting to note variations on this theme from different countries. You will note that I emphasized both the dominance of Conservative parties in European Governments and institutions, AND the abandonment of any semblance of class analysis by "Socialist" parties. As you note, once socialist parties abandon class analysis (despite huge increases in inequality) and focus on preserving as much of the existing welfare state as they think they can, they become, in essence, conservative parties too.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Apr 3rd, 2013 at 07:06:51 AM EST
[ Parent ]
the people in power do not have direct contact with the people suffering

There is a lot of social-political compartamentalization (apartheid?!) indeed. That is quite a feature today, after the Reagan-Thatcher and information revolutions. Like basically all political trends of these decades, this is very convenient for the wealthy elites and their capabilities of social control. Remarkable coherence, not?

The political problem is not so much the rise of conservative parties, but the (eventually) utter betrayal of the liberal and socialdemocratic parties. Can you disarm a political side more effectively than by infiltrating its leaders and posing for them?

I do not say that the one-directional political shift was all synthetic. There were plenty of natural pressures and weaknesses - but what about selection?  Like in a cheating casino, selection of political trends, venture winners, looks of public figures could be very straightforward. Especially with concentrated control of the media, aggressive ideological utilization of the internet. Just remember the Gore-Bush media circus, compare political plays throughout different countries.

It is not controvercial that the Chicago school economics teaching was well coordinated and financed. Economic and political shocks are routine in their regularity and style. How much more "intelligent dessin" is here? How naive is to assume less rather than more?

by das monde on Wed Apr 3rd, 2013 at 08:19:35 AM EST
[ Parent ]
Regarding the control of the media.

As far as I understand (Italians here could correct me), M5S mostly refuses to participate in the media circus. In any case, I think, for now, it is the only way to go: if you depend on the media, you can be sure that you will be shut down (a "soft" shut down is worse than a "hard" shutdown - i.e. you are discredited/ignored, not made illegal) as soon as you become a threat.

The only way to go, in this sense, will be to cut completely and state very clearly why. You then do not depend on the media (with the Internet there is now a clear alternative to pass any message/organize) and can much more easily advance a claim of bias.

by cagatacos on Wed Apr 3rd, 2013 at 08:41:43 AM EST
[ Parent ]
Italy's M5S is more complex than that. By refusing to participate M5S centers several objectives:

  1. M5S becomes the talk of the town and receives as much media coverage as other forces because of its grandstanding attitude;

  2. It concentrates its one way messages in anonymous posts on its blog which can be commented but do not constitute a dialogue: the author never interacts on his blog;

  3. This position entails that the owner of the registered trademark, MoveMento Cinque, in no way dialogues with the other political forces or citizens;

  4. The owner of the trademark releases interviews to the foreign press which is understandably not as informed of the Italian situation as are its Italian colleagues;

  5. The owner occasionally releases interviews to sympathetic Italian outlets that are not prone to ask tough questions.

A similar strategy has been used by Berlusconi since he got into politics in 1994: He creates the setting by creating a fascinating structure interposed between his person and others; He avoids answering questions by resorting to fraudulent dialectical shifts such as insults or wise-cracks; He buffers and conditions the dialogical field by pre-emptively invading it with denigrating ad hominem messages and vacuous talking points.
by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Thu Apr 4th, 2013 at 05:27:43 AM EST
[ Parent ]
i beg to disagree...

his blog draws attention to many facets of italy's problems, social, economic, political, financial. hardly vacuous.

if his suggested policies were nefarious or self-serving, then his attitude to his movement could fairly be called autocratic or tyrannical.

as his platform is realistic and benign, (especially compared to the others, um, offerings), then his absolutism becomes a bright line for his 5*ers to follow, a boundary...

his movement is polling 75% happy with this, proving they want to continue this direction.

i see his injunction as a form of binding-to-the-mast to avoid succumbing to the other two big parites' sirn song.

i think beppe was shocked himself at how many voters he got, it discombobulated him, as it still wasn't enough to really rule, even though it was a greater success than anyone imagined.

the movement has dragged the discussions/overton window several degrees left from the mshy, corrupt faux-centrism of recent times. if they melted away that would already be no mean achievement.

he's gambling on the shenanigans of the usual suspects continuing italy's downfall, (due to policies he had no hand in creating), and he doesn't want to sup with them, no spoon is long enough.

the 5*ers first exposure to the media was frosty, forbidding. this is changing, happily as they find their feet, still coming across as serious, but more at ease, empowered.

best thing that's happened to italy since 'mani pulite'.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Apr 5th, 2013 at 01:40:29 PM EST
[ Parent ]
I agree with many of his talking points. Grillo is riding a long wave of popular discontent and despair. Beyond the themes he treats on his blog, he has a Manichaean vein that deeply irritates me.

We should write a diary "For and Against Grillo." The fun would be were you to be the devil's advocate and write against him while I assume the thankless job of defending him.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Sat Apr 6th, 2013 at 05:39:56 AM EST
[ Parent ]
I will thank both of you because I don't understand where he is going to (whatever about where he is coming from)!

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Apr 6th, 2013 at 06:33:27 AM EST
[ Parent ]
i am seriously up for that. i don't like everything he is, so would welcome the role as devil's avocado, and it would be that, as i don't see anything else remoteley hopeful in italy, and even points beyond.

we can do it through email or FB.

manichean? not really...

more like a religion-of-renewables theocrat!

it's the policies that are spot on, it wouldn't bother me if the leader was a x-eyed little green man with atenas coming out of his parietals, if the policies were enacted.

the fact that this loudmouth tourettes-sufferer has managed to forge a movement in the political incest-party of italian politics is as improbable as bilding a house of cards in a hurricane, and i respect that too.

to get these policies enacted will be nothing less than a complete upheaval of all that is dearly beloved in state corruption, be it draghi and the ECB, bersani with the incinerators, berlu with the mob and the secret service, the vatican.

beppe may be barking, but it takes a full-bore madman to pull 20 tigers' tails at once, and his life is worth a lot less than falcone or borsellino's right now.

as social phenomenon, this is epic, and i am super surprised it has got this far, a privilege to see democracy being used instead of the pitchfork, one i had given up on, frankly.

so let's do it. i will start making notes, when i have 3 paras i'll fly them to you.

heh...

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Apr 6th, 2013 at 06:57:21 AM EST
[ Parent ]
looking forward to them!
by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Sat Apr 6th, 2013 at 11:10:19 AM EST
[ Parent ]
...and as for 'thankless', if half of his policies are enacted, it will be a kind of soft power-revolution.

i'd sure be thankful...


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Apr 6th, 2013 at 10:31:59 AM EST
[ Parent ]
Why the Euro Is Doomed in 4 Steps - Matthew O'Brien - The Atlantic

The euro is the gold standard minus the shiny rocks. Both force countries to give up their ability to fight recessions in return for fixed exchange rates and open capital flows. But giving up the ability to fight recessions just makes it easier for recessions to turn into depressions. And that puts all of the pressure on wages to adjust down when a shock hits -- the most painful and destructive way of doing things.
But the gold standard had an even bigger design flaw than creating depressions. That was perpetuating depressions. Under the rules of the game, countries short on gold were supposed to raise interest rates, which would push down wages, and push up exports. More exports would mean more gold, and then lower interest rates. But there was an asymmetry. Countries needed gold to create money, but countries didn't need to create money if they had gold. During the Great Depression, the U.S. and France sucked up most of the world's gold, but didn't turn it into money out of fear of nonexistent inflation. Countries that needed gold needed to push down wages even more to make their exports competitive -- not that there were any booming markets for them to export to, due to the self-inflicted economics wounds of the U.S. and France. Instead, the depression just fed on itself.
The euro suffers from a similar asymmetry. Debtor-euro countries are to cut wages and deficits, but creditor-euro countries aren't forced to increase wages and deficits. Perversely, the opposite. In other words, northern Europe isn't doing enough to offset the demand destruction in southern Europe. And it's sinking them all. Even worse, this slow-motion collapse is turning loans that would have otherwise been good into losses -- losses that force bailouts and faster collapses. But, to be clear, this isn't only a problem for the periphery. As the U.S. and France found out in the 1930s, it's generally not a good idea to force your customers into bankruptcy. That just creates depression without end -- until the gold (or euro) standard ends. It's no coincidence that the countries that ditched the gold standard first recovered from the Great Depression first.

not allowing a little inflation for all, to try and freeze asset value for a few is a suicide pact.

even i understand it!

since those with most assets have captured the regulatory and oversight factors and de-fanged them, the many will continue be impoverished so the few can sustain the illusion that what's theirs is so by divine right of superior cunning.

i don't see any end to this unless a country whose economy is big enough to roundly crash the euro threatens convincingly to have no qualms about doing exactly that.

at which point the invisible puppet masters have a serious choice to make...

until then few people care enough about little flyspeck economies like cyprus, so...

next!

go grillo, french exposure to italian banks is so great france will side with the PIIGS. threatening to pull italy out of the eurozone would be leverage enough to make the PTB really worry about whether they really want to be the architects of the destruction of it.

that would be after the next elections in italy, probably around june.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Apr 3rd, 2013 at 07:05:02 AM EST
The wealthy calling all the shots around the world aren't stupid. You may not like the shots they're calling but, with no exceptions I can recall, the decisions always favor them.

Second, the wealthy can read and global climate change is real. They knew that a long time ago and they know that people, specifically the 99.99% , i.e the breeding class, is causing it.

Question: What's the point of being filthy rich if your planet is turning into a septic tank by all those excess people?

So what to do about it? Why, kill off the people, of course. The same strategy I employ with the bacteria which would love to run rampant in my kitchen.

But humans, even the non-wealthy, have survival instincts, brains, and the internet. Can't just round the buggers up and start executing ... look to what happened in dinky Cyprus when they tried to raid the bank accounts.

So this is the old slow cooked frog strategy.

My question is: Why the hell hasn't Krugman caught on yet? Afraid of losing his job, called "not serious"?

All this financial crap you people dote on.  Come back to earth before it's too late.

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Wed Apr 3rd, 2013 at 12:34:18 PM EST
I think the view from the top is that they are, individually, just as powerless to command significant change as is anybody else. If you are the CEO of a big polluting coal company, you could, in theory start up an "eliminate coal" program. But your competitors would step in and replace whatever you withdrew from the market.

Pure capitalism.

So if the system is going to collapse anyway, maybe it's better to grab what you can.

by asdf on Wed Apr 3rd, 2013 at 02:14:48 PM EST
[ Parent ]
There are various perceptions on the top: earned entitlement, alpha control, some competative needs. The "trickle" up of passive incomes allows the 1% a lot of assumption freedom and opportunities to cooperate directly or indirectly, strengthening the sucking-up machinery.

Any evolution depends not just on inviduals, but on the environment trajectory as well. What is perhaps most remarkable about the latest political economy is that the environment, competition rules and perceptions became extremely favourable to the big guys. Competing trends and regulations became so powerless, marginal. This the power of managed mass psychology, combined with mercelessly skewed distribution of financial resources, I think.

by das monde on Thu Apr 4th, 2013 at 05:49:39 AM EST
[ Parent ]
Speaking as someone who has worked in a global business, I think the corporate attitude would likely be very different. Any CEO of a major coal company or power utility who isn't diversifying into renewables should be sacked. If you are a Utility you will want to control a mix of Baseload, semi-baseload and peaker plants with a mix of feedstocks to avoid dependency on any one fuel source and vulnerability to market price fluctuations.

If you are a coal company you will be aware how vulnerable you are to changing political/social conditions and so you may very well "invest" heavily in political parties and lobbying capabilities with a view to delaying any regulatory support for a switch from coal for as long as possible and also perhaps engaging in marketing scams like "clean coal" and "carbon capture".

But you will also be looking at pursuing a long term strategy of diversifying away from coal - unless you are a relatively small company with no diversification capabilities.  Forestry/Biomass/Waste processing seems an option: It's relatively low tech with low costs of entry and you can claim to be investing in renewables, capturing carbon, utilising waste timber, and diversifying all in one go.

Coal owners know their seams won't last forever, that their costs of production will go up, and that there are probably more valuable chemical industry uses for their products if they conserve them and sell them more selectively. Any coal company owner who isn't looking at other options is an idiot - the equivalent of a fixed line phone company boss who didn't look at Mobile and VOIP technologies.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Apr 4th, 2013 at 05:55:52 AM EST
[ Parent ]
Any coal company owner who isn't looking at other options is an idiot - the equivalent of a fixed line phone company boss who didn't look at Mobile and VOIP technologies.

And that's never happened.

by Colman (colman at eurotrib.com) on Thu Apr 4th, 2013 at 06:19:11 AM EST
[ Parent ]
The problem is most CEOS seem to be MBAs who are fixated on short-term gains. And in the US especially, it's damn hard to sell a medium-long term strategy to any listed company.

What's more likely to happen in reality is that the dinosaurs die very slowly, and they're eventually replaced by competing start-ups with a more open-minded approach.

It's not impossible to change direction but it usually takes a crisis, and the inertia is enormous. Many companies literally have to be at the brink of failure before anyone at board level considers a change of plan. And sometimes not even then.

I have a lateral theory that US business culture is actually driven by sports machismo as much as anything else. Business metaphors are either sport-based - e.g. sprints in SCRUM - or explicitly military.

No one seems to check if any of these ideas actually produce measurable benefits. But they're sold because they speak a recognisable language, and they promise control over outcomes and instant(ish) success.

The pep-talk/coach/evangelical motivator/narcissistic superstar models are very familiar at board level. Empirical testing, and cool-headed strategy and planning seem to be much less common.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Apr 4th, 2013 at 08:19:56 AM EST
[ Parent ]
Certainly the US senior execs I came across didn't fill me with awe, a blithe lack of self-awareness and cultural insensitivity seemed to be prime criteria for selection... Having said that, I also came across some brilliant guys, though not in very senior positions.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Apr 4th, 2013 at 08:36:22 AM EST
[ Parent ]
My experience is that they fall into two categories, leaders and administrators. Successful companies are founded by leaders, whether they be financial wizards or tech geniuses or marketing experts; whatever is appropriate for their field. But then their companies evolve, maybe the founder dies or makes a big error or the outfit gets bought. Then the administrators come in, the yes men who have got their MBAs and brown-nosed their way up through the ranks. The main qualification for that sort of job is complete lack of human empathy, with a mix of bullying and ability to drink the other guy under the table. Which works in the short run, as they shut down long-term investment, concentrate on short-term stock price, and divert as much money as possible into their own pockets.
by asdf on Thu Apr 4th, 2013 at 01:13:32 PM EST
[ Parent ]
BP, formerly "Beyond Petroleum," announced this week it is selling off its entire wind business of some 2 gigawatts operational. The reason for this reverse diversification? To focus on more oil 'n gas.

Coal companies tend to diversify from mining into removing the top of mountains.

Meanwhile the entire supply chain in wind and solar is heading towards insolvency, with bankruptcies common in north amurka and western yurp.

[System.Is.Broken Alert]

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Thu Apr 4th, 2013 at 01:30:05 PM EST
[ Parent ]
Well, BP's CEO has been there since 2010, so maybe he's ready for the mandatory sacking now.
by asdf on Thu Apr 4th, 2013 at 01:49:37 PM EST
[ Parent ]
Well he had to do something dramatic to justify his existence. Has BP not made any major oil/gas field discoveries recently?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Apr 4th, 2013 at 01:53:54 PM EST
[ Parent ]
What's causing the insolvency? Reduced demand due to reduced FITs?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Apr 4th, 2013 at 01:52:24 PM EST
[ Parent ]
price war that is not leading to increased sales because the component sold is a part of a more expensive system, so customers get a much weaker price signal than would be naively expected?

Or in other words, "making voltaic cells cheaper does not reduce the cost of sticking them on rooftops significantly" This makes it difficult to earn money on volume. In order to crash the price of solar electricity further  - And thus increase market - a better mode of use is needed.
Niche solution; integrate the cells into rooftiles. Sell to new build and roof replacements. This reduces the marginal labor cost of putting the cells up to zero, as a rooflayer is not going to charge extra because the tile came in solar black. (.. how big is this market? should be possible to find out how much roof tile is sold annually.)

Faster solution: Increase utilization and reduce balance of system costs: Aka: "Desertec".

by Thomas on Thu Apr 4th, 2013 at 05:28:29 PM EST
[ Parent ]
Sorry, Thomas, can you find what's wrong in your analysis on the price wars? Can you find what's wrong about roof tiles?

If you get that far, then do the math on BOP costs for Desertec, and don't forget to include the damage caused by centralization.

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Mon Apr 8th, 2013 at 03:08:37 AM EST
[ Parent ]
At least one case exists in Germany of optimistic and creative financial montages created in approx. 2008, where shares in structured products based on wind parks not yet built were sold to/by hedge funds; based on unrealistic production figures, in some cases.

Guess what happens next...

The good news is that the windmills got built and produce electricity; the insolvency swallowed the sunk costs.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Fri Apr 5th, 2013 at 08:55:04 AM EST
[ Parent ]
Sounds like the usual creative financing scam, not necessarily a structural solvency problem in the industry supply chain itself as indicted by Crazy Horse?

Of course such scams can be hugely damaging to the image of the industry when it tries to attract further financing especially given it is so capital intensive.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Apr 5th, 2013 at 10:37:51 AM EST
[ Parent ]
Wrong filter. CEO's are used to their wishes becoming reality, and in realms outside their direct control, they still get catered to by a political system running on donations. No learned helplessness there.
But noone fights their way to the top of a coal corporation if they believe coal as such is a problem. the rationalizations happen waay before they reach the top, so any buisness types who believe the evidence on AGW will be in sectors not related to energy at all, or trying to build windmills/reactors/ect.  
And while corporate governance has severe problems, any CEO of such a buisness that had an epiphany after getting there would probably get handed a golden parachute and asked to leave.
by Thomas on Wed Apr 3rd, 2013 at 03:57:26 PM EST
It's important that we don't see CEO's as one undifferentiated class. The CEO of a Coal or Utility company many well be an engineer who sees the potential of other technologies and wants to diversify to them. He can sell any such projects to his Board/shareholders as a diversification strategy to avoid over dependency on any one market niche or product range.

If he is an accountant/marketeer or an imposition from a bank or hedge fund which has invested in the business, on the other hand, he may well be focused on short term gain with a view to moving on to another job/business in a couple of years because the longer term prospects of the industry are so poor.  Fixing power lines isn't a sexy business to be in. There are few windfall gains or spectacular returns on investment.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Thu Apr 4th, 2013 at 06:09:51 AM EST
[ Parent ]
So the answer to Krugman's incomprehension as to why the EU is pursuing policies which are objectively destructive of its own growth and wealth potential is that it is doing so because many of its older, wealthier, and more influential citizens are still doing very well out of austerity, thank you very much, and especially in relation to their perceived inferiors in society - be they the relatively poor, younger or less experienced, less well connected, or members of a less favoured minority.

I suspect there is another factor of social psychology at play, somewhat analogous to survivor guilt and my take on how it is handled by very many people. In a situation of high unemployment and grotesque mal-distribution of wealth those that complain about either to their fellow employees are immediately suspect by management - if they find out. And those who have accepted the current arrangements quietly so as not to jeopardize their job resent those who voice such complaints. "You should just be grateful you have a job and shut up!" And they make this view clear even if no one is speaking out. Upward identification or identification with the aggressor is at play for most. These attitudes may be reinforced by a need to suppress feelings of guilt about having a job while so many do not. Blaming the victims is an easy way out. Silencing the critics makes it easier to just get along. The ugly side of social stasis at work?    

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 5th, 2013 at 12:11:46 PM EST
As in "If you case so much for the unemployed, why don't you join them?" Or as happened to matt yglesias recently, you're a hypocrite if you're a liberal AND have a nice house and good job.  You're a traitor to your class (and race) if you have money and don't join the Republican Country Club set. Class "solidarity" is key to maintaining the status quo. You are betraying your family and friends and won't even be welcomed by the "other side" as far as they are concerned. They have their own support networks - you should be loyal to yours. It is difficult to overestimate the importance of tribal/family/class allegiances in maintaining the social stability of even a grossly unfair status quo - an unfairness that many privately acknowledge but rationalise as being beyond their ability to do anything about - except for some perhaps patronizing charity work.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Apr 5th, 2013 at 12:28:08 PM EST
[ Parent ]
You describe it from the POV of those higher up in the hierarchy while my description is more that of what I observed among shop workers and journeymen in a contracting organization from the '70s through the '90s. I stayed with one company for almost 20 years just because they were relatively tolerant of someone with my views. It helped that it was a union house and that my father was the founding president of a local branch of a union in the Oklahoma oil fields. Many of the union members probably recognized some of my views as having been expressed by union officials, even if they didn't fully agree. And they grudgingly admitted that they were better off, as was I in engineering, because of the wage setting by the union.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 5th, 2013 at 12:44:15 PM EST
[ Parent ]
I think the in-group, out-group psychology can work both ways, even for those at the lower end of the scale, and especially if religion or race is involved. What distinguishes a ruling from a subordinate class is the amout of affirmation and legitimisation ruling class members get for their identity from the dominant media, educational/business establishments and organs of state. Members of non ruling class groups are supposed to aspire to ruling class symbols of status and power and are considered at least mildly subversive or deviant (DFH) if they don't.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Apr 5th, 2013 at 01:14:00 PM EST
[ Parent ]
Members of non ruling class groups are supposed to aspire to ruling class symbols of status and power and are considered at least mildly subversive or deviant (DFH) if they don't.

In Eric Hobswawm's history of the short 20th century, (1914-1991), The Age of Extremes he notes that the 20th century is the first time in history that substantial portions of society looked to others than the elite for social role models. He was referring to working class anti-heroes, etc. That has weakened the hold of the elite over society and has led some of them to ludicrous attempts to gain 'street cred'. The current situation should lead to radicalization of large numbers of well educated students and recent college graduates who find themselves without prospects under the current regime. But the facility with which people are recruited to work against their own, (and society's), best interests remains amazing. Hopefully the wretched excess to which elites have taken things, as exemplified by ~4,000 people of US origin holding tens of trillions of dollars in off-shore accounts will awaken some more of the sleeping.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 5th, 2013 at 09:33:52 PM EST
[ Parent ]
Great point. The main concern is that the modern working classes do not have a sense of class identity whereas the elite have always had one.

This too can be in part attributed to the structure of our modern states and such incidents as the winning over or neutralization of workers' syndicates. Syndicates now participate in the fiscalization of the economy. They have become part of the problem.

In the Roman republic and Renaissance Italy classes had a very strong sense of identity because those classes had their own representative institutions that served as a counterweight to the elite classes. Now that we are all equal, different classes no longer exist, or, bluntly, it is only the elite class in the name of equality that lords it over the other 99%.

by de Gondi (publiobestia aaaatttthotmaildaughtusual) on Sat Apr 6th, 2013 at 05:48:58 AM EST
[ Parent ]
...the 20th century is the first time in history that substantial portions of society looked to others than the elite for social role models.

Wow do we know?

by generic on Sat Apr 6th, 2013 at 06:42:51 AM EST
[ Parent ]
I suspect this is one of those historical generalizations that is very difficult to justify or evidence comprehensively - beyond a few examples. Don't forget that the "Nation State" and even "Society" are relatively recent inventions and the prior model of empires, kings, feudal Lords, knights, merchants, traders, farmers and artisans was very variable from place to place and membership of different groups was primarily by birthright and not something a member of one group could easily aspire to in  another. Kids might dream of being knights but ended up as cannon fodder. War could change the structure of things and the membership of different groups but I suspect identifications were primarily local and with exemplars of status or  excellence or prowess within a group. Why would you aspire to be a Duke or the values of the aristocracy when you had no means of ever becoming one bar some absolutely extraordinary sequence of events?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Apr 6th, 2013 at 06:58:40 AM EST
[ Parent ]
Unfortunately, practical realities do not seem particularly relevant to identity or aspiration. It would be a mistake to apply the criteria of rigorous logic to what are emotional and pre-logical 'choices'. A child can have a clear sense of who they are, i.e, who their parents are, where they live, whose speech sounds 'normal', whose appearance is 'normal', etc. well well before the faculty of reason is particularly well developed and well before they are easily able to perform arithmetic computations. Their concepts of what constitutes a proper relationship between parent and child are primarily based on their own relationships with their parents and the presence or absence of nurturing and/or rejection of other adults in their lives. It is silly to say that they made these 'choices' freely or rationally. Nor is it necessary to feasible to become a duke in order to admire and identify as a supporter of that duke or hate him as an oppressor. One's position within the structure of society is also learned very early.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Apr 6th, 2013 at 10:58:47 AM EST
[ Parent ]
In the 1960's many thousands of middle and upper class students were radicalised by the prospect of being drafted to fight in Vietnam - in a way that would never have happened had the army remained an all-volunteer forces drawn mainly from the poorer classes and racial minorities. The threat has to be pretty personal for the children of the elite to be radicalised... So long as daddy can get them a job or they can inherit his wealth or business, what's the problem?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Apr 6th, 2013 at 06:44:37 AM EST
[ Parent ]
The Powers That Be were smart to squash OWS as fast as they did - every young person who got wacked with a police baton was a young person whose belief systems regarding democracy were challenged very directly.

you are the media you consume.

by MillMan (millguy at gmail) on Sun Apr 7th, 2013 at 12:21:38 AM EST
[ Parent ]
Frank Schnittger:
"If you case so much for the unemployed, why don't you join them?"

that's a twist on another old chestnut: 'the best thing you can do for the poor is not to become one of them yourself'

 

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Fri Apr 5th, 2013 at 01:18:07 PM EST
[ Parent ]
"Class "solidarity" is key to maintaining the status quo. You are betraying your family and friends and won't even be welcomed by the "other side" as far as they are concerned."

Well, that is one of the reasons why I don't feel that leftist parties (and I would argue that left/right is far too simplistic, the entirety of public policy cannot be described with a single dimension) always should have a class analysis.

It's perfectly possible to be progressive without describing all events in terms of a class war. Yes, at the moment there is a rich group waging a class war. But where do you place the well-off liberals if you define everything in those terms?

I feel that a more integrated and equal society is an improvement per se, not merely in terms of making the poor better off. Actually, there is ample evidence of that, though it flies in the face of individualistic theories. So the psychopaths need society to be fragmented so most will forget that they share it with the others. Reversing that trend is, or maybe should be, a major progressive objective, though it does not derive from a class analysis.

As for equality between men and women, or improving the environment, they are totally independent of the idea of class, yet they too are progressive aims.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Sun Apr 7th, 2013 at 02:39:50 AM EST
[ Parent ]
Daily Kos: The U.S. has learned nothing from Europe's deadly obsession with austerity
attribution: David Siqueira Alexander Kokolakis, a high school student in Greece, sent a letter this week to Greece's Minister of Finance, schooling him on basic economic theory.

Quoting p. 183 of his Principles in Economic Theory book, which explains that in times of recession and high unemployment "the budget should be in deficit" and that there should be "greater expenditure by the State through public spending in order to increase income and to avoid as much as possible a recession," the student challenged the eurozone's austerity policies as implemented by Greece:

"What are you doing, Mr. Finance Minister? The exact opposite. You increase taxes on the low-income and impoverished class and incomes are increasingly reduced, without these acts having meaningful results, other than to drag us deeper into the recession. What are the consequences of these actions? They've destroyed the dreams of thousands of young people (like my own at this point) forcing them to migrate abroad for a better future. Unemployment rates are skyrocketing and quality of life for citizens is decreasing even though they have no responsibility for the situation thus formed, for which the political system is solely responsible.
The student begs the Finance Minister to stop the austerity policies and ends his letter with this postscript:
P.S. If during my upcoming exams I am asked what policy applies during times of recession, what should I write as the correct answer? That we must have a budget surplus with increased taxes and decreased benefits, as you practice, or a deficit, which is what the book says is needed since we must increase spending and income to get out of the recession?
Europe's handling of its economic crisis has been astonishingly inept, with the European Central Bank, the International Monetary Fund, and the European Commission demanding brutal austerity measures that defy both common sense and compassion.



'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty
by melo (melometa4(at)gmail.com) on Mon Apr 8th, 2013 at 04:07:40 AM EST
Austerity in Europe...sorry guys :)


Science without religion is lame, religion without science is blind...Albert Einstein
by vbo on Wed Apr 10th, 2013 at 08:47:51 PM EST


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