Tuesday, December 13, 2011

Greek Post Democracy 1.0 and the debt repayment

I just read an article from a German historical journal, Vierteljahresheft für Zeitgeschichte, about how various social tensions can threaten democracy. It was by Horst Möller, "Gefährdungen der Demokratie.Aktuelle Probleme in historishcer Sicht" ("Danger for democracy: current problem in historical perspective") 3/2007, and was written before the dimensions of the depression that began in 2007 were clear.

He cites some interesting facts from the years between the First and Second World Wars. But when he discusses what he sees as the main problems that are manifestations of the dangers to democracy, it turns out that the crisis of democracy has to do with those silly, irresponsible ninety-nine percenters, not all of whom are weekly to meekly agree to neoliberal policies that will reduce the income and opportunities, eliminate their jobs, wreck their retirement security and give their homes to the banksters.

If the rabble would just stop moaning and groaning and just agree to the demands of their betters, this democracy thing would work just fine. The bankers and businesses could buy their politicians in the free market, and the invisible hand will take care of the deserving. If some of the Small People don't come out so well, then they made Bad Choices in life, I guess.

What will the one percent have to do to solve these annoying problems of democracy that let peasants have a say in how they are governed?

We have relevant cases in Greece and Italy, where Angela Merkel's EU replaced the elected governments of those countries with new governments whose sole purpose is to act as creditors' deputies, i.e., bill collectors for the giant European banks holding their bonds. These Post Democracy 1.0 governments were approved through the technical forms of parliamentary legitimacy. But they are governments of "technocrats" who are not supposed to be subject to all those ninety-nine percenter scruples that so concern Horst Möller and other advocates of the Brave New World of neoliberal economics.

How is Greek Democracy 1.0 fulfilling their main function?

Reuters reports (Greece's Jan-Nov budget deficit widens 5.1 pct y/y 12/13/2011), "Greece's budget deficit continued to widen in November as austerity-fuelled recession cancelled out much of the extra revenues the government was hoping to raise through emergency taxes, data showed on Friday."

According to Pleite-Griechen.Athen spart wieder nicht wie EU und IWF versprochen Die Welt 13.12.2011, Greece's economy is likely to shrink by as much as 5% this year, after three previous years of annual decline, while national debt has increased in numerical terms and tax receipts are lower than expected. Algebra is brutal here: increasing debt divided by shrinking economy equals a higher debt-to-GDP ratio, making full repayment even less likely. And lower tax receipts than projected mean less money to pay off the debts. The awesome outcome of austerity economics as a solution to a sovereign debt crisis.

Paul Krugman writes (No Draghi Ex Machina 12/12/2011):

What Anglo-Saxon economists need to understand is that the Germans and the ECB really, really don't share our worldview; they really do believe that austerity is all you need. And all indications are that they will cling to that belief, even as the euro falls apart — an event they will insist was caused by the fecklessness of the debtors. Given a choice between saving Europe and remaining righteous, they'll choose the latter.

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