Home > Eurozone Crisis, Greece > Euro — the antithesis of democracy

Euro — the antithesis of democracy

from Lars Syll

That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.

And, sure enough, what we are seeing now, 16 years after the eurozone institutionalised those relationships, is the antithesis of democracy: many European leaders want to see the end of prime minister Alexis Tsipras’ leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.  Joseph Stiglitz

One of my life’s proudest moments was when back in 2003  — together with economists like Nils Lundgren and Sören Wibe — campaigning to keep Sweden out of the euro madness.

What’s happening in Greece today, just shows how right we were.

  1. July 7, 2015 at 2:09 pm

    Exactly, Lars. Greetings from Norway!

    But why this ritual genuflexion at the EU “altar” also from so many other progressives, especially in the UK? (I suspect we even have a few of them here … ;-) )

    – Leave that to the big but incompetent egos in the EU hierarchy. Better with a looser but still comprehensive cooperative arrangement between European countries. Small is beautiful. And more efficient.

    Norwegians voted no to joining EU in 1972 & 1994 (I participated very actively on the NO side in both campaigns). Resistance was and is left-wing, something that is hardly known among academics and pundits outside Scandinavia – they think that all EU skepticism must right-wing like in the UK. We EU-skeptic Norwegians can’t understand progressives (also some Post Keynesians) considering the EU as worthwile.

    Ok, if one wishes to save the euro, change it into a bancor for the EU: “European Clearing Union”: National currencies, but trade in euro, with adjustable exchange rates by the European Clearing Union, following Keynes’ recipe from Bretton Woods 1944. If the euro had functioned like the bancor in his International Clearing Union proposal, it would have worked well.

  2. Blissex
    July 7, 2015 at 3:53 pm

    What that graph shows is mainly that both Denmark and Greece did not grow in any appreciable measure between 2000 and 2015, like several other “middle to high” income EU countries, and that in particular, as I pointed out at great length, the GDP per capita of Greece by any measure in 2014, before SYRIZA, was not at a distressed level, and Grece is not more a victim of austerity in 2014 than it was in 2000, and no more than Denmark.

    Greece GDP per capita went up up to 20% and between 2000 and 2011, but that was due (almost) entirely to a monstrous import boom paid for with borrowed money on a “fraudulent bankruptcy” plan.

    It also shows that the other countries that grew between 2000 and 2015 were mostly special cases.

    What it does not show is that the absolute level of GDP per capita in the countries that grew most started and remains at a very low level, for Bulgaria and Romania for example have GDP per capita of about 1/4 (25%) of the GDP per capita in Greece, and that’s why so many emigrated to Greece even after 2008.

    That it is much easier in the modern era to grow faster at low levels of GDP per capita should not be astounding news to practicing economists…

    So far the EU and the euro from the data above seem to work pretty well. What has not worked well is the desire of european “core” countries to contrive a domestic export boom by legalizing accounting fraud in lending to “subprime” (kleptocratic) countries like Greece.

    The plan of the “subprime” (kleptocratic) ruling class of Greece instead has worked very well too: they have borrowed a lot of money that ended in large part in their swiss bank accounts, and in part in a monstrous import boom for their voters, and now it will be their poorer voters and german voters who will pay the price, while they buy a lot of Greece at firesale prices, as the Russian oligarchs did in the 1990s, as the plan was all along. The greek “subprime” (kleptocratic) ruling class have been cleverly playing the “disaster capitalism” game.

    • July 7, 2015 at 7:22 pm

      So how come you can blame Greece and not its thieving oligarchs, Blissex? The whole point of the objection to austerity is that the wrong people are paying as a result of going by what it says one label, ignoring the fact that the EU treaties opened the can and let the theives help themselves to the contents.

      And very much in defence of Trond and “Small is Beautiful”, it is because people mindlessly pursue economic growth only necessary for the functioning of the present system of wholesale monetary defrauding that the world is on the brink of becoming uninhabitable instead of a delight capable of providing us with all we need. The original EEC was conceived as a family union in which the more fortunate members helped the less fortunate and made sure they didn’t go short, not as an American style EU run by a Federation of unaccountable, self-serving hirers of IOU’s fraudulently described as money, masquerading as responsbile Reserve Bankers of other people’s money and again by now mindlessly incapable of seeing themselves as like Shakespeare’s heartless Shylock: willing to cut the heart out of the European family and in doing so breaking laws more fundamental even than those prohibiting fraud.

      • Blissex
        July 7, 2015 at 8:26 pm

        «So how come you can blame Greece and not its thieving oligarchs, Blissex?»

        There is a small thing called “democracy” under which voters who elect and endorse (and in the case, numerous times) a kleptocracy are accountable for their choices. Greek voters are not idiots as you seem to think, who vote many times for know kleptocrats and are alwayys surprised by the consequences, Greek voters have elected kleptocrapts because that’s their well reasoned choice, and so far it has worked very well: in 2001-2011 greeks enjoyed a huge boost of 20% in their living standards thanks to imports funded by loans they never had any chance of repaying. The only consequence of their plan has been that once the looting ended their living standards went back to those they had in 2001, which is a pretty high level.

        But democracy also means that voters pay the price of their choices, it means that if the majority of voters willingly elect knaves and crooks they eventually will pay the price of doing so. USA voters have elected and re-elected the lawmakers who enacted the PATRIOT act and the war in Iraq, Guantanamo and executive branch murders, bank accounting fraud and immense bailouts for the rich, and they are fully responsible for that.

        So are the greek voters who elected PASOK and ND governments who planned and executed a fraudulent bankruptcy strategy, and who now have rejected the offer by 18 other EU governments of a quite generous bailout with very mild “austerity”.

        Hopefully eventually voters learn from their mistakes, or their countries wither and disappear.

        That’s the purpose of democracy: to make sure that voters suffer from their own mistake, not those of unelected elites.

      • Michael Kowalik
        July 7, 2015 at 9:50 pm

        The notion of political representation is not uncontroversial. It does not automatically impose liability on the electorate for actions of the elected if the relevant actions could not be reasonably predicted at the time of voting. It is a fact that most stealing of public good by politicians is done in secret, and that politicians often lie to get into office, it would therefore be unfair to the public to blame if for every secret action of an individual, especially where some voted against that individual assuming any authority. Sometimes individual is responsible for his own immoral or illegal actions and nobody else. The creditors should use their own judgement if the person borrowing is of ‘good character’, not simply assume that their deceived taxpayers will simply pick up the tab if things go wrong.

      • July 7, 2015 at 9:54 pm

        Obviously you are not a keen observer of political theory and behaviour, Blissex. (Or perhaps you are and pretending you are not)? Aristotle already saw democracy as a cover for demogogy and the first Parliaments were about aristocracies controlling kings. The purpose of electoral democracy has been to ensure the aristocracy continue to rule despite most people realising that is not in their best interest. The techniques of “first past the post”, “divide and rule”, “buying” representatives and media in all parties and misrepresenting likely opposition has resulted in our recent British election to almost unfettered power of supporters of finance rather than representatives of the electorate. That didn’t happen accidentally. The purpose of democracy now is to ensure that the unelected elites financing the political system get richer at the expense of truth and (not all voters but) those least able to defend themselves. The adoption of GDP as a measure in a grossly unequal society is in itself a gross lie.

    • July 7, 2015 at 8:46 pm

      It should be added as collateral damage that a lot of economists have left their field of professional competence and volunteered for the role as useful political idiot. Count the scientific standing of economics among the bankruptcies.

      • Blissex
        July 7, 2015 at 11:04 pm

        «collateral damage that a lot of economists have left their field of professional competence and volunteered for the role as useful political idiot.»

        Economists in some large part today are the replacement of the abbots, theologians and preachers of the past; in the fairly recent past one of the hymns sung in church contained this part:

        “The rich man in his castle
        The poor man at his gate
        God made them high and lowly
        And ordered their estate.”

        That’s the same message that people like Mankiw and Hubbard deliver from their modern equivalents of pulpits. And like on-message abbots, theologians and preachers of the past they have become very rich thanks to the sponsorship of wealthy patrons:

        «But to put it bluntly, the entire situation smells very, very bad. Enormous conflicts of interest among former government officials and/or economists, particularly those who specialize in regulation or antitrust policy, are now the rule rather than the exception. In addition, many of these economists violate their own university regulations by spending more time consulting than doing academic work, by not fully disclosing their consulting relationships, and by publishing research favorable to their clients without stating that they consult for the industries discussed in their publications.
        Now, given this situation, suppose you’re a graduate student in economics or management, writing a Ph.D. thesis on telecommunications policy. Choice A: attack the clients and publications of all the senior professors supervising your work, and who are critical to your career. Choice B: make lots of money working for them, and then continue in their footsteps. Perhaps unsurprisingly, very few seem to opt for choice A. A number of prominent economists are privately very disturbed by this situation, but they are outnumbered and few dare to comment publicly about it. University administrators seem to be remarkably timid about reining in this problem.»

        Some authors have pointed out that in the theology of the new abbots, theologians and preachers who call themselves “Economists” the market has replaced God as the metaphysical entity that is all-knowing and all-powerful and gives everybody their just rewards and punishments:


    • Blissex
      July 7, 2015 at 10:54 pm

      «The notion of political representation is not uncontroversial. It does not automatically impose liability»

      As to “liability” the actions of the duly elected government of a state impose liability on that state in all cases. Then the citizens of that state can deal with their government according to their laws if that government violated them.

      It would be madness if a state government’s actions could be disclaimed by its citizens by claims of “we were swindled”. The only recognized case is when the state government is a recognized dictatorship and operates openly against the will of the majority of citizens.

      Greece is a working democracy, as the NO vote showed (even if some neutral observers complained about the way the referendum was biased), and so are Germany, France, Italy and the other creditor countries.

      «on the electorate for actions of the elected if the relevant actions could not be reasonably predicted at the time of voting.»

      First of all, really? REALLY? if distracted or stupid voters cannot reasonably predict the looting actions of their elected government, then some other government and its citizens should suffer the consequences?

      What about instead giving voters every incentive to be vigilant and smart when electing their government? That’s indeed how things work in practice. Stupid or uncaring voters elect swindlers who take advantage of them? Too bad, they should try harder next time. If they don’t their country will wither and disappear. So many have over gone over the course of history.

      But in the case of Greece even shysteristic excuses do not hold because greek voters know fully well that their politicians are crooks, and continue to re-elect them, they just change the brand of crooks to which they give a majority.

      For example Greece, a rich, developed state, does not have a working tax system or land registry not because endlessly surprised greek voters continue to elect decade after decade by mistake governments that act in a way that “could not be reasonably predicted at the time of voting”, but because they badly want to evade taxes and hide the ownership of assets, and any party that wants to get a majority knows that very well.

      • July 8, 2015 at 11:14 am

        Clearly Blissex is not going to admit that people should not be blamed for voting for the apparently best of the only bad choices opened to them, especially given the corruption of legal systems such as is all too evident in the USA and UK. The Greeks voted differently when they had the Syriza option.

        Rather than argue with him/her I am going to put on record my gratitude to the ordinary people of rural Greece, living in conditions and with roads and other communications facilities which in Britain would be considered primitive, who looked after me when I became extremely ill. A retired doctor who came miles to provide emergency treatment and transport to hospital, that being so primitive and underfunded that families had to provide care for its patients; a kindly old lady who cared for me as well as her own husband because my own family wasn’t around. I refuse to blame people like these for the actions of a government they know practicaly nothing about, and they certainly didn’t deserve having further austerity thrust upon them by people as ignorant of and unncaring about their reality as Blissex seems to be.

      • Michael Kowalik
        July 8, 2015 at 2:11 pm

        If my understanding is correct, the premise that “the actions of the duly elected government of a state impose liability on that state in all cases” has been comprehensively refuted in international law, most notably, by Nuremberg trials. In no case jurisdiction can be obtained to judge a sovereign nation as a whole, but only specific persons (including corporations) deemed culpable under international law. The voting public may indeed be morally complicit, but that of itself does not impose liability in a legal sense of the term. On the other hand, the public can never completely distance itself from the actions of its government, and even if not legally culpable, is bound to be exposed to economic consequences of government corruption, and that is what happens to the Greek people right now. It is difficult to know how much the present situation has been influenced by foreign conspiracy to ‘colonise’ the nation, and how much by the tacit acquiescence of the nation itself, although both elements were clearly present with repect to Greece. In any case, I find it unreasonable to put the blame solely on the Greek people.

      • Blissex
        July 8, 2015 at 7:15 pm

        «the premise that “the actions of the duly elected government of a state impose liability on that state in all cases” has been comprehensively refuted in international law, most notably, by Nuremberg trials. [ … ] only specific persons (including corporations) deemed culpable under international law.»

        That is a reply of great hallucinatory depth because “liability” and “culpability” are completely different concepts. and never mind the immense stupidity of mentioning the Nuremberg trials when talking of a “duly elected government”.

        The *culpability* of WW2 belonged in a criminal law sense only to a number of individuals, but regardless Germany, even if their culpable government was gone (mostly hanged), was punished by occupation by foreign powers for a long time, and by forced separation for far longer, and no foreign power compensated individual german citizens whose lives, limbs or mere properties had been destroyed by enemies of their government, even when they had voted against that culpable government in 1933, and the german state, even if distinct from the german government, was comprehensively stripped of assets for “reparations”.

        Tremendous *liability* was thus imposed on the german state and german citizens as a consequence of the actions of their culpable government, even by way of indiscriminate massacre of civilians thanks to carpet bombing with incendiary bombs, even if their government was not duly democratically elected but was a monstrous dictatorship that massacred a large number of germans and that a large number of germans opposed.

        As to the voters of the USA who have elected and re-elected the politicians who have enacted and supported their government’s war crimes and crimes against individuals including widespread torture and many murders, they don’t have direct criminal culpability, but they have at the very least political liability, as in the “blood on their hands” wider sense.

        In more ordinary terms, treaties and other simpler commercial acts like borrowing, agreed to by the duly elected government of a state are rightly considered binding on that state except in very rare circumstances, and individual citizens are entitled to suffer the consequences, so they had better vote more carefully next time.

      • Michael Kowalik
        July 9, 2015 at 2:41 am

        Since you assert that all people of a nation are legally and economically liable for actions of their government puts the burden of proof on you to substantiate such an assertion. So far you have presented only your personal opinions/beliefs, which amounts to very little. Skip the emotional fluff, and present objective evidence (ie firsthand personal knowledge, not hearsay or opinion) to support your claim, if you are serious about it.

        It may be useful to start a new thread on this issue.

  3. July 7, 2015 at 6:20 pm

    Reblogged this on ihtis69.

  4. July 7, 2015 at 11:59 pm

    “Blissex” (do you have a real name? I think this forum should demand that commenters are not allowed to use pseudonyms) continues the useless exercise of moralising over the faults of what he considers “the average Greek”.

    Could you perhaps instead explain how you think one could solve today’s acute Greek debt crisis? Have you at all looked at the recent proposals from the current government, and if you have, what do you think of them?

    • July 8, 2015 at 7:05 am

      No flip-flop
      Comment on Trond Andresen

      Blissex’s argument has much to it. The Italian electorate brought Berlusconi several times to power well-knowing that he was corrupt. It is not a far-fetched hypothesis that presidential corruption is the enlarged mirror image of the small-scale corruption of the tax-evading citizen. What we see in several countries is a new form of democracy which is actually a tacit complicity of tricksters.

      I argued on the parallel thread* that, from the scientific viewpoint, the outstanding characteristic of political economics is a permanent flip-flop between politics and economics that botches up both.

      From this quite naturally follows that economists should get out of politics and focus on their proper job. Economics is a failed science. The task of economists is to fix economics and to leave failed states to political science.

      From this in turn logically follows that I cannot comment on political matters. This said, I would like to make an exception: (i) Blissex’s political analysis is the best I have seen on all economics blogs, and (ii), Trond Andresen flip-flops suddenly back to economics after he enthusiastically embarked on politics in his first post. This is a fine example of the double-face of political economics (see Ditto and the hazards of diprosopus **).

      In sum: Heterodoxy has arrived at the point where it must choose between politics and science.

      Egmont Kakarot-Handtke

      * https://rwer.wordpress.com/2015/07/05/in-greece-no-is-the-answer/
      ** https://rwer.wordpress.com/2015/06/21/war-of-finance/#comment-95237

      • Paul Schächterle
        July 8, 2015 at 7:58 am

        Well what I can conclude is quite the opposite. To ban “political” issues from economic debate is dangerous because the term “political” is ill-defined as we can see here. A totally “apolitical” economic science is not possible and demanding it opens up the way to make hidden political choices.

        Discussing a Bancor-like system for Europe may be viewed as “political” but is clearly related to economic issues in my book. As is discussing whether Greece is actually statistically worse off than in 2001. As is, actually, whether there are internal reasons for the Greek crisis (tax morale, corruption).

        The quality or helpfulness of the arguments may vary but that is up for the reader to decide.

        Where is becomes difficult in my view is when *purely* political questions are pushed to the foreground, e.g. the representativeness of elections. I think that is a question pretty for off the economic focus. To assess that fully we would have to discuss things like electoral systems, electronic vote counting, voting fraud, philosophy of law, etc. etc. So that is a topic that seems not fitted for this Blog in my opinion.

      • July 8, 2015 at 11:37 am

        I’m with Paul, of course. On flip-flopping, as in theoretically estimating the probability of heads or tails by symmetry then checking it in practice, that is not (as Egmont suggests here) just a means of the practice corrupting the theory, but the only practical means of discovering the theoretical assumptions (e.g. perfect symmetry) which need correcting.

  5. July 8, 2015 at 7:40 am

    You can’t raise impenetrable walls between “economics” and “politics”, they are unavoidably entangled. Economics will never be a “science” as in “natural sciences”. It will always be politically, sociologically, psychologically coloured. But we should work to make it more honest.

    That said, a big step in right direction towards a more stringent and correct macroeconomics is stock-flow monetary models (and preferably in continuous, not discrete time).

    Btw, I am not an economist but a control systems academic.

    • July 8, 2015 at 9:46 am

      The way ahead
      Comment on Trond Andresen

      You say: “You can’t raise impenetrable walls between “economics” and “politics”, they are unavoidably entangled.”

      I never said anything about ‘impenetrable walls’. But I said something about the shell-games of political economics. And by invoking the nonsense of ‘impenetrable walls’ you are shell-gaming.

      As a matter of fact, what I have said is that political economics has hijacked theoretical economics.* The outcome has been that economics has produced not much of scientific value in the last 200 years and that the representative economist can at this very moment not even tell the difference between income and profit.

      My argument boils down to a very practical one: scientists who have disqualified themselves in their own domain should not lecture the rest of the world on political matters.

      So: Economists, do your scientific homework first! Or more precisely, since Orthodoxy has to be left behind as scientific zombie: Heterodox economists, do your scientific homework first!

      Egmont Kakarot-Handtke

      * https://rwer.wordpress.com/2015/07/05/in-greece-no-is-the-answer/#comment-95595

  6. July 8, 2015 at 10:52 am

    In my opinion there is only one correct theoretical (macro)economics — that which is based on stock-flow consistent dynamic modeling (as in Godley & Lavoie, but I prefer doing it in continuous, not discrete time).

    A macroeconomy is a very large network of nodes with stocks, and flows between these. The nodes may reasonably be aggregated into four sectors: households, firms, banks and government. But parameters of this network — the most important being node money velocity — is influenced by psychology and moods, and there is positive feedback because of connections back to the moods. The system is therefore fundamentally unstable, and also nonlinear. Still it is quite simple to understand. And much simpler than the mathematically complicated and erroneous DSGE models.

    This — for what it is worth — is my take on theoretical economics. I wrote my basic paper on this many years ago, in 1999. It is here: http://folk.ntnu.no/tronda/econ/network.pdf

    Later on I have been putting banks, debt and a government into it — more feedbacks influencing moods etc. So, I am very interested in “theoretical economics”.

    But also in politics!

    • July 8, 2015 at 11:29 am

      I fully share your assessment of the stock-flow approach. Indeed, that’s the way ahead. However, Goodley and Lavoie, too, got the profit theory wrong.


      The Emergence of Profit and Interest in the Monetary Circuit. SSRN Working Paper Series, 1973952: 1–22.

      The Common Error of Common Sense: An Essential Rectification of the Accounting Approach. SSRN Working Paper Series, 2124415: 1–23.

      Primary and Secondary Markets. SSRN Working Paper Series, 1917012: 1–26.

    • July 8, 2015 at 12:05 pm

      So do I, Trond, but not your choice of institutions. Production (and thereafter reproduction) has to come before distribution before consumption, and improvement after that cycle has been established. Banks accounting for this and temporary storage smoothing out seasonal, mood etc variations in flow come still later, and misappropriation of real estate by monetary fraud, insider gambling, overpriced insurance and derivative misrepresentations later still. My model ends up with real (consumption and development) flows and the interaction of ordered monetary flows originating in both real (biological) and shadow (fictitious accounting) economies, the latter having “emerged” from the former.

      As a control systems academic, Trond, how do you relate your economic thinking to PID control servos and information systems? Or for that matter, the euro to the practices of democracy?

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