Browsing the blog archivesfor the day Thursday, July 16th, 2015.


A Global Disaster

economy, Europe

Paul Krugman is calling the European summit agreement on Greece “the sacking of Athens.” He said, gloomily, “So we have learned that the euro is a Roach Motel — once you go in, you can never get out. And once inside you are at the mercy of those who can pull your financing and crash your banking system unless you toe the line.”

See also Krugman’s blog posts “Faithocrats,” “The Pause of 2014,” “An Unsustainable Position,” and “History Lessons for Euro Debtors,” which together make about as good a primer on the Greek situation that there is. See also Ivan Krastev, “A Greek Farce.”

The immediate impact of the Greek agreement is calmer markets, defeated Greeks and skeptical Germans. So should Europe celebrate? Do European leaders expect Greece to be transformed by the accord as Central Europe was transformed in the 1990s? Is it possible that the whole referendum episode — a resounding public “no” followed by Mr. Tsipras’s climb-down with the creditors — could serve not to humiliate Greek voters but instead to re-educate them?

While many in Brussels are hoping that the Greeks have learned, it is more than likely that the new reform package agreed to on Monday will result in further radicalization of certain segments of the European left and the spread of apathy in Greece.

Mr. Tsipras’s leftist populism failed to win Greece a better deal. Instead, the real political winner is most likely to be not the moderate center but the anti-European right. And while European leaders can congratulate themselves on keeping the Union going, the price that Europe will pay for saving Greece economically and losing it politically is the transformation of the Union from a project sustained by hopes and aspirations into one surviving on shared fears and confusion.

Krugman says in “Faithocrats,”

But let me note, as I have before, that what Europe calls technocrats aren’t people who know how the world works; they’re people who subscribe to the approved fantasies, and never change their minds no matter how badly wrong things go. Despite the overwhelming evidence that austerity has exactly the dire effects basic textbook macro says it will, they cling to belief in the confidence fairy. Despite a striking lack of evidence that “structural reform” delivers much of a growth boost, especially in an economy suffering from a huge output gap, they continue to present structural reform — mainly in the form of disempowering workers — as a sovereign remedy for all ills. Despite a clear record of past failure, they continue to push for asset sales as a supposed answer to debt overhang.

In short, what Europe usually means by a “technocrat” is a Very Serious Person, someone distinguished by his faith in received orthodoxy no matter the evidence.

Structural reform in the form of disempowering workers sounds pretty much like what the Republicans want to impose on us, here.  Faith-ocratism will be our doom.

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