Wednesday, July 01, 2015

back to the drachma with you!

This promises to be a short post, given my lack of expertise in economics, but I'm writing not from the perspective of an economist but, rather, from the perspective of someone with a bit of common sense and a pronounced free-market capitalist bias.

First: about that bias. Suffice it to say that, if you're more into socialism, statism, and central planning, you and I will have nothing to talk about. Just look at what centralized economies have given us in such paradises as Cuba, North Korea, and the Soviet Unio—oh, wait. There IS no more Soviet Union, is there? People like to respond with counterexamples like western Europe, Scandinavia, and Canada, but (1) France's and England's economies aren't exactly healthy these days, (2) Scandinavia and Canada—a bit like China—have leavened their socialism with quite a lot of free-market capitalism, probably because they're not stupid. In the meantime, look at the tanking economies of all the Latin countries in South America that have embraced el socialismo. How have they been doing lately? Venezuela, anyone?

Now that we've gotten that out of the way, let's talk a bit about Greece. Greece is part of a cluster of nations that I uncharitably labeled, in a recent post, as "indolent Mediterranean sun-belt siesta cultures." Ouch.

I've never been to Greece, but I've lived in and traveled throughout western Europe, so I don't think my intuitions on this matter are far wrong. The closer you get to the sunny Mediterranean, the more likely you are to encounter cultures that emphasize siestas, sipping your wine while basking in the sun, and enjoying life instead of working yourself to death. In some ways, it's an enviable way to look at life, and it puts something like the maniacal Korean work ethic to shame if we think only in terms of in-the-moment satisfaction and contentment. The problem, though, is that such cultures breed—there's no way around this, so I'll just say it—laziness. Yes, laziness: a lack of any work ethic, a lack of any desire to see one's own country rise high in the economic ranks. How did an economic miracle like South Korea happen? It happened through hard work. People have said that North Korea used to have a stronger economy than the South, but remember that North Korea was originally backed by burlier powers like the Soviet Union and China. South Korea received help, too, but it essentially rose again primarily under its own power. The contrast between South Korea and Greece is telling. I'm reminded of Aesop's classic fable about the grasshopper and the ants.

Greece has, through corruption, a lack of a work ethic, and other factors, spent and borrowed itself into ridiculously deep debt. Its dead weight is now dragging down the Eurozone, and harder-working countries like Germany, with its robust economy, are grumbling that the time has come to excise the tumor. Personally, I think Greece needs to leave the Eurozone and go back to the drachma. In fact, I think it's high time for Europe to reconsider the folly that led to the Eurozone to begin with.

I can't come at this from a economist's perspective, but I know that some of the factors that conjured up the Eurozone were non-economic: they were historical and cultural. Europe's history is one of long and bloody strife, but over the past century Europe has shown both an awareness of this history and a desire to transcend it. To that extent, I find Europe's modern impulses to be laudable. Most large, successful countries these days have ugly pasts; America is no exception, and I can understand why Europe would want to put away the specter of war and move toward a peaceful, harmonious future. The notion of "transnational progressivism"—a term used more by American conservatives than by the people placed under that label—probably arises from this eros of the European spirit. As a result, we have the European Union (EU), which governs from Brussels under a rotating presidency. These forces also produced the EU's Constitution, a ridiculously Byzantine document the size of a dictionary that could easily hold several hundred copies of the pamphlet-sized United States Constitution. Today's Europeans want peace; many of them want to think of themselves as primarily European, not Hungarian or French or Irish. The EU, its Constitution, and the Eurozone are all children of this basic desire.

But the utopianism of the transnational vision has its pitfalls, and with Greece these days, we're witnessing one of those massive fissures as it spreads and reveals the underlying truth, which is that Europe is far from ready to be unified. To cover over massive differences in culture, language, history, and philosophy by saying "I'm European" is to blind oneself to the fact that Europeans can't simply wish their history away. The cultural forces that made each European country into what it is today are still operating, and something like the Eurozone merely papers over that fact. In my opinion, the Eurozone was folly to begin with because it was tying its progress to the lowest-performing member of the zone.

Imagine a classroom in the which the teacher tells the class: "In the spirit of equality, justice, and compassion, all students in this class will receive the same grade, but that grade will be based on the performance of the worst student in the class. I will calculate your grades the normal way at first, but once I have determined who has the worst grade, that student's grade will become the grade for every student in the class." Assuming the students actually accept this nightmarish rule without rioting or rebelling (and in the Eurozone's case, this is what various European countries have done), it's only a matter of time before feckless and low-performing Otto, cringing in the back of the class, becomes the object of every other student's hatred, and the class tries to eject him.

It was economic insanity for Europe to agree to tie its fate to that of its lowest-performing member. I have nothing but sympathy for Germany—the hard-working ant to Greece's indolent grasshopper—when it complains about sun-belt countries like Greece, Spain, and Portugal. Eject them all, I say, and while you're at it, dismantle the Eurozone and let every country breathe free again. Europe created the Eurozone in a spirit of harmonious accord. It was a gesture that said, "We share a common destiny, a common fate." Unfortunately, such gestures should normally be symbolic, but this one had actual, practical effects, and all of Europe—all of the world, really—is feeling the pain now as Greece implodes.

Allowing each European country to stand or fall on its own merits would be more consistent with my bias toward free-market capitalism. The Eurozone is an attempt at top-down control, and we see how well that's going. One thing I failed to mention above, in my recitation of the motives and forces involved in the inception of the Eurozone, was the pragmatic desire to establish a counterbalance to the USA's economy. Europe, as a bloc, would be a contender against the USA: a baguette-wielding Jaeger to Uncle Sam's taco-munching kaiju.* This type of thinking—that America is a juggernaut in need of a counterweight—stems from the febrile, wine-addled fantasies of Charles de Gaulle, who gave us the notion of le contrepoids—the counterweight—which later president Jacques Chirac would take to heart, and which Europe as a whole would take to heart as well. This is not how an ally is supposed to think. If my best friend is Iron man, I don't secretly think to myself that Iron Man needs to be counterbalanced by the Hulk. No: I just let Iron Man be Iron Man because he's my friend.

So my feeling is that, if Europe would truly save itself, it needs to let go of the fantasy that monetary unity somehow equals actual unity. Actual unity will eventually arise organically: the good will is already there, in abundance, emanating from the grassroots level. In the meantime, O Europe, dissolve the misguided Eurozone, let Greece go its own way (it'll find its way back, I'm sure), weather the turmoil that accompanies any major adjustment, and watch your countries rebound over the next ten to fifteen years. You'll find plenty of other ways to express your evolving sense of unity. Just remember that old proverb: friendship and motherhood end at the cash register. A true friendship won't express itself in monetary terms.

Ah, yes: before I forget, let me anticipate an easily foreseeable objection. Some readers will counter by saying, "What's so great about working yourself to the bone instead of enjoying life the way the Greeks, the Italians, and the French do? Sip your wine, take it easy, don't be so serious about life!" I'm somewhat sympathetic to this objection, but only somewhat. The problem is that such an outlook works fine on the personal level, but when it becomes more like a national philosophy, the long-term ramifications are dangerous, not to mention widespread. Look at how it goes with so many warm-weather siesta cultures: how powerful are their economies? How rich are their people? I'd submit that, if you value people's happiness, the surer route to happiness for the greatest number of people would be for everyone to work hard for the economic betterment of the nation. That's when it can truly be said that a rising tide lifts all boats.

"Well," you retort petulantly, "those supposedly indolent, supposedly lazy warm-weather people value deeper things than material comfort." Maybe. Maybe. And that might also be true in places like poverty-stricken India, where gurus and other enlightened folk do indeed seem to get along happily with less material clutter in their lives. I can't argue with that. But at the same time, be realistic: if you could choose between (1) a life that allows you to think deep, compassionate thoughts while you live in abject squalor, or (2) a life that allows you to think deep, compassionate thoughts while you live in relative comfort and cleanliness, which would you honestly prefer? We could almost do a reductio ad absurdum here: why bother being environmentalist and humanitarian, advocating a clean Earth and combating poverty? Why don't we all just roll around in garbage and dung? It's the enlightened thing to do, after all!

OK, so maybe this wasn't that short of a post.

*If you're unfamiliar with Jaeger/kaiju imagery, you need to see "Pacific Rim," reviewed here.



Galen Davis said...

Every transaction has two sides. You gleefully dismiss the Greeks as lazy and perhaps they are. But it's not like this perception is new. The northern Europeans, especially the Germans, gleefully participated in the fiction that all government debt in the Euro zone was equally good. So the banks lent extravagantly, at rates that were nearly below inflation in those southern economies. These banks lent even to village municipalities, secure in the knowledge that their governments would bail them out if those loans "went south."

So where is your outrage that those banks, especially in Germany, should have known better? Shouldn't they have to write the loans down? We ignore their role and we bail them out with the IMF. Then we pontificate on how poor the overall Greek character is.

Both sides should have to eat this shit sandwich, but we're only making one side gag on it. There are no good guys in this situation. Shit, I kind of look down on the Greeks for not breaking out in armed rebellion after all they've endured recently. 30% unemployment for 7 years -- how do you not burn the capitol to the ground?

John (I'm not a robot) said...

Another outstanding post. I would just note that it is one thing to make a national/cultural decision to "take it easy". But the Greeks were taking it easy using other people's money. And now that money has run out.

We don't have to look far to see other examples of this type situation. Detroit comes to mind. When you are granting overly generous pensions while taxing the people who do work out of existence (or out of town to be more precise) there can be only one ultimate result.

As you might guess, I'm totally down with free market capitalism. Unfortunately, the US economy is more and more being poisoned by crony capitalism with the government (and corrupt Congress critters) picking the winners and losers to everyone else's detriment. We are certainly not Greece--yet. I don't like the road we are going down though. Ah well, like I tell me left leaning children, I'll be dead and gone when you reap what you are sowing with your ill-advised votes.

John from Daejeon said...

Good analysis, only you left out the similar crisis striking the United States which is being exacerbated by those idiots in Washington, D.C. thinking that not being able to speak English in a Spanish-speaking colony is a disability requiring the rest of the U.S. taxpayers to subsidize.

Kevin Kim said...

Maybe Puerto Rico will be the topic of another post, John. I didn't "leave it out": I simply wasn't talking about it.

Kevin Kim said...


You make great points, but blaming banks for being banks is a bit like blaming the Devil for being the Devil. When Satan appears before you, all fangs and wild eyes and brimstone fetor, and he offers you a seemingly sweet deal, it's good to remember whom you're dealing with before signing. I lay the blame for that oversight at Greece's door. And why did Greece find itself in need of loans to begin with? That strikes me as the logically prior question.

None of the above means that the banks are blameless, of course, just as Satan isn't blameless. I suspect you're right on that score, and now that you've gotten me considering the matter-- which I admit I hadn't thought about-- yes, I do feel some outrage, although not enough to counter my general cynicism about banks.

Another point to consider: when Angela Merkel complains about Greece, is she representing the banks? I don't think so, unless the German government controls the banks more closely than I thought. It might be charitable to assume that Merkel's frustration at Greece is legitimately rooted in Greek incompetence.

And on the incompetence note-- regarding those banks: did they know they were making bad loans? This might be a good moment to invoke Hanlon's (also known as Heinlein's) Razor: never ascribe to malice what can be ascribed to stupidity. Should I be outraged at German banks because they're evil or because they're stupid? I'd need to know more before I can answer that.


Yes, I've noticed that that Margaret Thatcher quote about "other people's money" has been making the rounds of late.

John from Daejeon said...

I wasn't sure about you leaving Puerto Rico out as a lot of your Greek points also fit Puerto Rico. It's just a shame that the U.S. government basically pays the locals there not to work as they make more from government handouts than they would from working while their leaders squander billions.

Kevin Kim said...

"I wasn't sure about you leaving Puerto Rico out as a lot of your Greek points also fit Puerto Rico."

Well, I'm not sure what more I can do to make the topic clearer. I was focusing primarily on Greece and the EU. The very title of my post referenced the drachma, the old Greek currency; the third, fourth, and fifth paragraphs all explicitly mention Greece before I branch out into EU utopianism, indolence, and history.

True, a lot of parallels are being drawn, these days, between Greece and Puerto Rico, but some articles are noting disanalogies as well (here, for example).