Marcus Miller and Robert Skidelsky ask in the FT this morning how Keynes would have solved the Greek / Euro crisis. As they observe:
Underpinning the German position is the belief that resolving debt problems is the sole responsibility of the debtor. Keynes, by contrast, held that both creditors and debtors should share the task of getting economies out of holes they had jointly dug. “The absolutists of contract,” he wrote in 1923, “are the real parents of revolution.”
As they also note:
Talks to form a Greek government have collapsed. This is unsurprising: no government pledged to unalloyed austerity in response to its debt obligations can face its voters with confidence.
Yet Greece is only an extreme example. Centrist governments across the Mediterranean are increasingly seen by their citizens as powerless. They have no independent monetary policy; no capacity to devalue; no right to impose capital controls; limited ability to support failing national enterprises; and now they are mandated to tighten fiscal policy. When moderation fails, the time comes for citizens to turn to those promising to take power into their hands, be they from the right or the left — anything but the pusillanimous centre!
And as they warn:
That is what happened in the 1930s. It is a historical irony that European countries that avoided a repeat of the Great Depression after the banking crisis are now driving into the blind cul-de-sac that led to extremism in that earlier disaster. German historical memory has vivid recall of the hyperinflation of 1920-23. But it is possible to forget it was deflation and the Great Depression that brought Hitler to power in 1933.
The elevation of credibility into a central economic doctrine has turned a sensible point — that policy stability is good for both business and households — into a dogma that endangers stability. The credibility the models describe is impossible in a democracy. Worse, the attempt to achieve it threatens democracy. Pasok, the established party of the Greek left, lost votes to the moderate Democratic Left and more extreme Syriza party because it committed to seeing austerity measures through. Now the Democratic Left cannot commit to that package because it would lose to Syriza if it did. The UK's Liberal Democrats, by making such a deal, have suffered electoral disaster. The more comprehensive the coalition supporting unpalatable policies, the more votes will go to extremists who reject them.
The writings of these eminent thinkers, and Martin Wolf to whom Kay refers, could not be clearer. We change our economic policies or extremism - most likely in the form of fascism - will result.
That's how big the stakes are now - and brave people are even willing to say so in the FT.
It's time to listen.
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It is indeed, Richard, and for that reason I’ve found myself on more than one occasion this last week wondering what the Greek military think about what’s going on there just now and likely to continue for some while. And while I fully appreciate the parallels drawn with the 1920s and 30s I think it also worth remembering that in some European countries dictatorships are far more recent than that.
Ivan
So true
I remember dictatorship in Greece, Spain and Portugal
And, of course, in the Eastern bloc
And then we have the de facto dictatorship of finance in many small states now
We fool ourselves if we think democracy does not need defending, resolutely
Richard
Richard, I lived in Greece when I was doing research into Modern Greek literature at the University of Athens in 1972 – under the Colonels’ dictatorship.
They were a nasty, narrow-minded, grubby bunch of crackpots – the Deputy Prime Minister, Stelios Pattakos once stopped his car, when he saw someone throw a lighted cigarette out of their car window, and went over to berate him, having the poor unfortunate arrested for creating litter.
As for the ineffable Papadopoulos, the “Leader”, he had a “clean desk” policy – no papers (a “genius” such as himself didn’t need to be bothered with such trifles, but school-children were forced to study his turgid rambllings as part of their curriculum) – but only a sort of egg-timer, which went off “ping”, whereupon the person in his office would be ushered out – time over!
However, the real key to their thinking was one of their buzz-phrases “He syngratemene Dhemokratia”, which translates a “Self-controlled democracy”, or better “Disciplined democracy”.
That’s what all these technocrat governments are after, but we know what it REALLY means = fettered democracy, a democracy bound by the rules – sorry “the laws” – of the “free” market, i.e. a market free for the 1% and fettered for all the other 99%.
The price of liberty is eternal vigilance, and the Tories and their Lib-Dem side-kicks have already stepped over the “event horizon” into destructive self-interest; destructive to the 99%, of interest only to the 1%. I think the time is coming, may already be here, when we need a truly General Strike, or a concerted campaign of civil disobedience, for I do not believe the current Government deserves the loyalty of the electorate, given the arc and real trajectory of its policies.
“They have no independent monetary policy; no capacity to devalue; no right to impose capital controls; limited ability to support failing national enterprises; and now they are mandated to tighten fiscal policy. ”
All of these are national solutions and nationalism feeds fascism. I am in favour of subsidiarity, decisions being taken at the lowest practical level but as economies become increasingly integrated, the answer also lies with joint action at a European level ( but not Europe wide austerity).
There is human temptation to psychologically ‘split’ i.e. divide the world into the good (us) and the bad (them). The Nazis went to extremes and the war trial dating from the Balkan Wars started today. Patriots love their country: nationalists hate everyone else’s! There is a difference. We must not go back to that sort of thinking.
The noeliberal system is international and has to be confronted at this level.
Debt, the transfer of wealth from the debtors to the creditors, is creating fascism through the financial route:
Tony Benn puts this very nicely in a nutshell:
http://www.youtube.com/watch?v=VuNJUc3lfQM