Wednesday, February 18, 2015

Playing a game of chicken with your Country? Does it matter?

Most likely prodded by my previous posts about the overall ineffectiveness of the solutions the “new old left” parties in Europe were proposing for the ailments of our current socioeconomic system, the week has presented us with some outstanding contributions to the public debate by two of their most prominent figureheads. First, my countryman Pablo Iglesias, head of Podemos, penned this nifty little piece in the Grauniad: Platitudinous Pablo Pleas for Pleasant treatment of Greece (if at least it was originally written by himself, and as a former university professor he shouldn’t stoop to hiring speechwirters for little compilations of platitudes and stereotypes as these, it already raises him a notch above your average functionally illiterate politician); little afterwards, the very notorious (and not necessarily for his academic contributions, the press is fickle like that) Yanis Varoufakis, finance minister of Greece since Syriza won the latest election, used the space afforded to him by the very newspaper of reference that has come to epitomize mainstream media to insist on the same vein in this very similar piece: Bruce Willis lookalike poses as tough negotiator
Why this coincidence, we may ask? Well, for Greece the rubber has finally hit the road (more prosaically, the shit has already hit the fan) and they are in discount time towards Grexit, a most dreaded scenario because of the uncertainties that come with it. After having campaigned on the premise of a free lunch (again, like politicians of every sign in every age are wont to do), this time in the form of a painless renegotiation of their debt terms with their European Union partners, they have to face the harsh reality of the unyielding nature of creditors everywhere, specially ideologically distant ones. They may choose to stay in the Euro, and essentially maintain the harsh austerity measures they so vilified the previous government for agreeing to accept, or send those measures to the dust bin and leave the Euro (for which they will have to improvise a lot, as famously nobody in all this years spent any time thinking how such an exit would be effected). Our friend Varoufakis just tried to buy himself a little negotiating leeway by doing the media equivalent of throwing the steering wheel through the window when playing a game of chicken (more technically, in terms of game theory he seems to be so fond of, he is signaling to the other part the high price he is willing to pay rather to renounce his demands), with the following message: “after publicly stating we would never back down, you cannot expect me (my government, the whole people who elected us) to loose face and now accept your starting conditions”.

The advantage for the Troika (or the Ecofin negotiating in their name) is that they don’t have to resort to those slightly desperate maneuvers, as they are not really accountable to any electoral body, so they can be as reckless or as cautious as their character impels them to be, the consequences be damned (which makes for a much more comfortable, and potentially more successful, depending on how you define success, negotiating strategy), and were I to bet I would put my money in them getting their way rather than the Greeks getting theirs. As an aside, Iglesias does have a dog in this fight which explains the timing and time of his own article, as the exit of Greece from the euro (and even worse, the potential subsequent implosion of their economy after a massive capital run) would be very bad news for him, giving fresh ammunition to the leading parties in his country, which he is willing to displace, and which would no doubt point to the Greek drama as a cautionary tale of what would happen in Spain were he to gain power. Note that were he to really believe in the soundness of his political receipts, that is not necessarily a bad thing in the medium term, as for the next electoral cycle (he should assume) the social policies Greece would be able to freely pursue once outside the straitjacket of European deficit-obsessed, austerity-imposing, elite-dictated policies would cause it to recover economically much faster than her erstwhile partners, and would then become an exemplar and a beacon for progressive policies everywhere else.

But I do not think Mr. Iglesias (or Mr. Varoufakis, for what it’s worth) does really believe in the soundness of their policies in the first place, or they would have advocated leaving the Euro from the get go. So the safest bet for him is to win not the next election in five years time (which would require him to manage an newly minted organization under the harsh limelight of intense public scrutiny for all that long, no small task), but win the immediate one, cashing on the dissatisfaction of the electorate with the incumbent parties and in the nadir of the crisis that austerity has imposed on most of society. The possibility of economic recovery is very bad news for him (although, again, being consistent he should believe that such a recovery is a mirage, and can not happen, as the economic consensus is wrong and can not deliver growth and/or an improvement in most people’s living conditions).

Now, coming back to this post title, does it matter at all? In the big scheme of things, probably not. We in the West better get used to a long phase of low growth, and soon of nearly permanent recession, as the double whammy of demographic contraction and technological stagnation kick in. It really doesn’t matter what policies the government pursue: high indebtedness (which will not cause interest rates to spike, as money has nowhere else to go in a landscape of universal low growth and low yields) or low indebtedness; high taxes or low taxes; high public investment (the aggregate demand is not going to budge, as the private sector becomes more and more aware the mass of new consumer lining up to buy their products, and thus justifying new investment in additional capacity, is not going to materialize because ooops!, they just have not been born at all) or low public investment; Keynesianism or monetarism… More or less debt is not the solution, and if that is the case, more or less austerity is just a means of causing unnecessary suffering in the population (as reducing debt in no way improves the economic prospect of the nations that do it), the solution is to reengineer society’s operating system so it stops working only under the illusion of unceasing growth in the ability to produce measurable quantities of material goods. And a first step in that direction is to wean ourselves off from the need to work as many hours as possible, regardless of station, inclination or desire. And I hope every reader of this blog already knows what the first step of that weaning off is…

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