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Let Them Eat π

December 3, 2011

Some months ago I tried to explain that the crisis in Greece concerned the entire globe directly and that what was happening to my country was nothing short of an economic coup d’état. Naturally, I was accused of doom-mongering and over-dramatising. It pains me to have been proven absolutely right on both points.

If we are to learn lessons from the events of the last three years, it is vital to challenge dominant and convenient narratives on the issue. They range from, at worst, malicious propaganda and, at best, distracting fairy-tales.

The first of those is the idea that the current crisis is made in Greece. It is not. It is the inevitable fallout of the global crisis experienced in 2008. But do not take my word for it. Here is what Angela Merkel had to say on the matter in February 2010, when the “Greek problem” started to rear its head, as reported by Bloomberg:

German Chancellor Angela Merkel criticized market speculation against the euro, saying that financial institutions bailed out with public funds are exploiting the budget crisis in Greece and elsewhere. In a speech in Hamburg, she hit out at currency speculators, who she said are taking advantage of debt piled up by euro-area governments to combat the financial crisis. “The debt that had to be accumulated, when it was going badly, is now becoming the object of speculation by precisely those institutions that we saved a year-and-a-half ago. That’s very difficult to explain to people in a democracy who should trust us.”

Do you understand that? The debt was piled up to bail out banks. Those same banks then bet against nations being able to repay it, amplifying the crisis. This is not a purely Greek phenomenon. It is happening everywhere – read this article on the UK position. Greece was in a particularly vulnerable position because of the proximity of an incredibly expensive Olympics in 2004 which left a huge legacy of debt.

I really wish knowledgeable commentators would stop perpetuating the idea of another or second crisis. We are still experiencing the global crisis which started in 2008.

The second is the notion that the current crisis is a financial one. It is not. It is a political crisis and an ideological one. The demise of an economy the size of Greece (1.8% of Eurozone GDP, 0.47% of World GDP according to 2010 IMF figures) should hardly register as a blip on the global radar.

The primary reason it is causing such a panic is the interconnectedness of the banking system – the very same systemic relationship which caused the domino effect in 2008 and which we have failed to address or regulate. The secondary reason for the widespread nature of the problem is the Eurozone’s refusal to allow Greece to proceed with what most commentators have seen as an inevitable default for some months now.

Both these factors are down to political decisions, not sound fiscal policy. The panic over the proposed Greek referendum a few weeks ago, exposes much deeper tensions between Democracy and Economic Policy. The announcement of a referendum – the ultimate exercise of democracy – sends economic indicators into a nose-dive. As soon as it is scrapped, they recover. Tensions between the US executive and Congress over budget issues – an integral part of their democratic process – resulted in their debt rating being downgraded.

In Greece, the man who presided over our entry into the Euro – seen universally as a huge error at the root of current troubles – has been appointed to solve the problem. In Italy, an advisor of Goldman Sachs – seen by many as the crooked firm who cooked the books of Southern European economies at the root of current troubles – has been appointed to solve the problem. The blind leading the fucked.

So, we have ended up with two EU countries with appointed, rather than elected leaders. And nobody seems to find this disquieting. Yes, times are very difficult. Yes, they both succeed incompetent and disastrous governments. Yes, they come at a time when urgent action was required. But all three of those excuses have applied to every junta that has ever taken control of a nation by force. But, no matter. Markets like them.

And that is precisely the third issue: our obsession with markets and the theory that markets do not lie. Markets are the collective expression of individual greed. They are the overview of a no-holds-barred fight of  individual interests, scrambling to make money. They position themselves, posture, exaggerate and lie all the time. They exist based on the economic theory that they are “self-correcting” and yet they have shown themselves repeatedly not only to be unable to correct their flaws but also to cause or exacerbate systemic errors.

We increasingly humanise them in the language that we use – “markets are jittery”; “markets have reacted with anger”; “markets seem to have confidence”. Meanwhile we dehumanise and objectify real people who are, right now, suffering untold misery.

Famines in Africa, created and perpetuated by financial speculation on food commodities, become mathematical equations. Pensioners in Greece having to live on 400 Euros a month, an increase of 40% in suicides and 60% in immigration and 20% in homelessness in a three month period, become figures to be fed into an economic model. Whether we should or should not treat patients on the NHS with a particular condition (for which treatment exists) becomes an accounting exercise of considering cost versus benefit.

If one were to assess world economies by purely market criteria, the most successful of the large players (by a long way) would be China – huge surplus, record growth, productivity and innovation. The USA and the EU, those self-appointed beacons of democracy, are currently begging China cap-in-hand for some of their spare cash. Or put a different way – the one surviving authoritarian, communist state is a model of capitalist success. Another topical example is Libya. At the very moment its people were getting shot in the street for rising up against its oppressive regime, it was the only country in the world with zero sovereign debt.

Markets are the ultimate victory of applied science on human consideration. They have become the new Marie Antoinette – an entity standing on a balcony, presiding over its people – who when confronted with news of war, suffering and death, invariably responds with “let them eat π”.

There appears to be an inverse relationship between democratic deficit and economic surplus; an unbearable tension between human suffering and economic health. To not devote the intellectual capital to exploring this paradox with urgency, is a dangerous form of elective blindness.

I would encourage you to read my extensive article Democracy vs Mythology: The Battle in Syntagma Square. While I do not tender that piece as scientifically probative, it is certainly a more informed view that those held by the many economist hacks paraded by news organisations, whose sole relationship to the situation seems to be that they once, in their youth, in a moment of weakness, had a greek salad.

26 Comments leave one →
  1. nick james permalink
    December 3, 2011 4:27 pm

    Alex, it’s hard to disagree with a word you’ve written.

    What’s truly depressing is the degree to which people are prepared to suspend their critical faculties when presented with endless and obvious drivel. How else would anyone be prepared to vote for the Tory MP on Newsnight this week who agreed that there was not inconsiderable evidence that Keynsian economics work but couldn’t support them because she found the principles difficult to understand. Instead, she wanted to continue the current approach in the hope of getting different results. It’s not the blind leading the fucked, it’s the insane.

    Keep up the great work

  2. blackwatertown permalink
    December 3, 2011 4:33 pm

    Good piece. (And I like the title.)

  3. December 3, 2011 5:46 pm

    We aren’t ruled by the markets though (and this isn’t capitalism, straying a bit) because if we were and it really was then Goldman Sachs would have gone down years ago, along with all the other banks now popularly referred to as zombies. They’d be gone and there’d be a new order out there of successful businesses, those that can survive through good economic practice rather than by bribing governments to support them so they survive uber alles no matter what. Whenever genuinely laissez-faire economics looks like toppling the over-fed incompetent businesses off their branch at the top of the tree they implement law to stop it. That isn’t market forces at work at all. The rules get disobeyed whenever it gets too inconvenient to the established order. We’re ruled by the establishment, not market forces.

  4. Cath permalink
    December 3, 2011 6:07 pm

    Thank you Alex. You have an amazing ability to put into words the ‘storm’ that goes on in my head.

  5. Hobbes permalink
    December 3, 2011 7:33 pm

    Your fundamental premise is absolutely spot on. However, I’d argue that there’s nothing scientific whatsoever about the markets. They’re based not on evidence, peer review and constant criticism leading to refinement. They are instead based on faith, chicanery herd mentality and fear – complete anathemas to scientific process. The markets are anything but applied science. They’re completely the opposite in fact.

  6. December 3, 2011 11:15 pm

    The basis of capitalism is that when you become unprofitable then you fail as the market rules except when that private capitalist entity the banks fail big time (showing the failure of government to govern fairly) they have to be supported by the public, the whole system stinks to the very core. The bankers from Iceland who have international warrants out for their arrest for their criminal actions are living in the city of London which is a tax haven and as such are beyond the rule of law protected by UK government. We are all in it together!

  7. December 4, 2011 9:49 am

    You really have hit then nail on the head with this piece. I would like your permission to translate into Greek and spread to my Greek friends here. I am part of a loose group trying to change things. Articles like these are a great help to make other people undestand. Well written, plain language, sensible arguments!! Great stuff!!

  8. December 4, 2011 2:37 pm

    You have marshalled into sequence and put into words what I have have been thinking (although there is more in your piece than I have managed to work out). Thank you for the post. I will read your expanded piece.

  9. December 4, 2011 3:30 pm


    “Like Smil says, there is not one grand solution,” he says. “There are a myriad of solutions but the whole concept and idea of sustainability and the reinvention of the world in a sustainable way is something we’ve never done before. We have to begin seriously imagining how this is to happen. My personal take-away is this: civilization is a very recent experiment in the life of our species and for the entirety of that experiment we’ve thought of individual morality as the key to salvation. If we do one thing we’ll go to heaven, if we do something else we’ll go to hell. But being just and ethical about everything is the key. It’s not just about justice for the sake of personal salvation.”

  10. December 4, 2011 8:06 pm

    Sorry another link Greeks Balk at Paying Steep New Property Tax

    We have the same people who stumbled blindly into this financial catastrophe none of which foresaw what was happening yet the same people are trying to sort it like a ten thousand piece jigsaw with welding goggles and gloves on. The whole system is fraudulent and corrupt.

  11. December 4, 2011 9:26 pm

    Great blog Alex

  12. December 5, 2011 3:51 am

    Plenty to reflect on in this analysis.

  13. Mac permalink
    December 5, 2011 7:42 am

    The first of those is the idea that the current crisis is made in Greece. It is not. It is the inevitable fallout of the global crisis experienced in 2008.

    There is an almost exact analogy with the start of World War One. That the point where everything flashed over was Sarajevo was almost irrelevant: the years of alliance-building meant that war was inevitable.

    Please God this does not lead us to the same place.

  14. miquel molina permalink
    December 5, 2011 9:40 am

    wonder how do you manage to read my thoughts! You say exactly what I think, only I don’t have your skill to explain it clearly and plain. May I translate into catalan and spread it here?

  15. December 5, 2011 11:06 am

    Really enjoyed this post, particularly the point about markets being personified through language. Sometimes easy to forget what can be gleaned from an effective close reading of the media.

  16. Rupert permalink
    December 5, 2011 2:08 pm

    You do write beautifully but it just reads like another piece on banker bashing which hasn’t really grasped the issues.

    The markets are indicating to us that a number of European sovereigns are heavily over-indebted. I don’t think many people disagree with that assessment. In my mind this demonstrates the effiency of the market place.

    You also assume that it is banks that are betting against the price of these financially weak European countries. Any bank that has received state aid in recent years is currently undergoing the long and difficult task of shrinking their balance sheets and taking risk off the table. The last thing any of them would be doing is taking on further exposure to Portugal, Ireland, Greece.

    And while you list China and Libya as market favourites with poor records on democracy, you conveniently brush over other nations that are well perceived by the markets – such as Canada – which has an established track record of democracy.

    • December 5, 2011 2:19 pm

      The assumption is Merkel’s, Rupert; not mine. I am simply pointing out the interesting fact that it disappeared as a narrative when things got tough.

      “Efficiency of the market place” is no goal of its own – hence the examples of “successful” economies with poor records on democracy. Free market theory became dominant as an ideology because it is meant to lead to higher levels of welfare, health, happiness and prosperity. To persist with it in cases where its effects are clearly the contrary is not science. It is not even policy. It is religion.

      Did you watch “How The West Went Bust” last night on BBC2? I couldn’t resist transcribing what Sir Philip Hampton (Chairman, RBS) just said.

      Peston: “What’s you view about why we just didn’t see the risks that we were taking?”

      Hampton: “I think we became convinced that Markets would always find a solution. And that if we let Markets operate they would be self-correcting. And that turned out to be the wrong judgement.”

      • Rupert permalink
        December 5, 2011 4:21 pm

        Whether it be Merkel’s assumption, or your own, I don’t believe it to be correct. I dont think you or I want to get bogged down with financial concepts, but I suspect that any short trading the banks are currently doing will be to hedge outstanding long positions. The suggestion that they are taking on additional risk by betting against Greece (for instance) seems very far fetched.

        Other institutions that may be selling greek bonds (for example) will be large pension providers. I for one am glad they are able to do so. Because they are looking after my savings into retirement. Its not a matter of greed – I like everyone else will need an income when I can no longer work. I could rely on the state to support me, but that would exasperate current problems if we all just sat back and waited for the goverment to support us.

        But I’m straying from the point. My argument is that the markets are efficient and will continue to drive the solution. The market will push for political upheaval and the market will push for tighter regulation. The upheaval we see today is the “self correction” that Hampton speaks of. Of course its not smooth, and its not easy. But it is nonetheless underway.

        As a final point, I don’t subscribe to the view that a free market leads to “welfare, health, happiness and prosperity”. But at the same time I cannot conceive of a fair and just system which did not promote free market principles at its very core.

  17. December 6, 2011 2:03 pm

    As usual a pleasure to read.

    Markets, like the gods, suffer no repercussions.

    Once again, idiocy claims its place on the plinth of idolatry.

  18. Steve Bean permalink
    December 6, 2011 6:47 pm

    I invite you to explore this thought, Alex (and all): the use of money–the arbitrary, voluntary, unnecessary use of money–is at the root of that paradox. Which will we choose, money or sanity?

  19. December 6, 2011 9:49 pm

    @ Steve Bean that is a subject that many of us, here in Greece have often gone into recently… I read a book called “Debt: The first 5000 years” which I found to be most informing… One conclusion that I have come to is that money is not all that bad as long as it is being used for what it was originally conceived to do, namely to act as a “neutral” way of evaluating goods and services and facilitating trade between people and especially goods that are not easily comparable. The thing is that money is now used to make some people extremely rich while keeping others extremely poor. What needs to be done is for money to return to the people’s control. Money needs to be a tool of democracy, and not a weapon used for it’s destruction…

    • Steve Bean permalink
      December 6, 2011 10:15 pm

      Thanks, Peter. I have that book on hold at my local library. I’m looking forward to reading it.

      As for the nature of the use of money (note: the use of it is distinct from money itself), I suspect that the incentives which stem from that use will always exist and will always be a challenge to counteract. To put it in your terms, I don’t believe that money can be a tool of democracy due to the inherently corrupting and divisive influence of its use. In the long run the use of money can’t be controlled. Short term regulation merely postpones the inevitable manipulation of the system by those motivated enough to accumulate the power to do so.

      The good news is that those of us who don’t covet such power (and suffer from such delusions) are the majority. As such we have the power to change the social contract to end the use of money if we choose to. The power-hungry would have no choice but to go along. It’s mostly a matter of members of that majority seeing the reality of money’s use and the potential of the alternative.


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