http://geostadia.blogspot.com/2010/03/greek-tragedy-of-olympic-proportions.html
In the current book that I am reading, Fredric Jameson argues that a key element of the current economic system (post-modernity/ late capitalism) is the primacy of the spacial over the temporal. The speed of communication, and the immense liquidity of the banking sector combine to erase time as a factor of analysis. In this sense history becomes meaningless with the only thing of any importance the further advancement of technological progress and capitalist growth. This is both a function of the current means of production ( re: economic structure) and an ideological construct designed to reproduce the social relations that currently allow capitalism to exist.
"Capitalism itself lives in a perpetual present; the human past seems to be a senseless accumulation of unsuccessful human efforts and intentions; yet the future of technology inspires blind and unshakable faith."(Jameson, 2009)
By eliminating our sense of history, we loose the ability to analyze problems in the world. We have nothing to compare them to, and no ability to connect the causes of the worlds problems with their effects.
How much profit was generate building those Olympic venues, and how much is currently being generated on interest payments and the short selling of Greek government debt. The same companies that encouraged the spectacular waste, and easily flow of money required to stage the Olympics, are now once again profiting from the increased interest rates thrust upon the Greek government. All of this represents a flow of resources away from public and towards private interests.
The borrowing for the 2004 Olympics in Athens represents about 10% of the total national debt in Greece. This represents billions of dollars of annual debt servicing payments (actually somewhere between 2-7 billion dollars per year depending on the term). Money the Greek people must now pay back, and that could be used to do productive/helpful things for society.We tend to think of government debt the same way we think of personal debt. This is a mistake. Government debt is not a question of living beyond our means but rather the ultimate form of fictitious capital and speculation. It is quite literally money created out of nothing, its only "value" based only on the prospects it creates for future growth. Problems of government debt are problems of the structure of the world economy, global trade imbalances, and falling profit rates, not a problem of governments spending to much.
As the crisis in Greece spreads around the world, and the losses of the rich are increasingly visited on regular people. We must work to develop a sense of history and analytical prowess to see event as the are. It is not working people who must pay for the excesses and poor decisions of the wealthy and influential, although this is what is happening. Rather those in power who made the decisions should suffer the consequences of their actions.
Check out the planet money podcast on Greece, really brilliant analysis. Includes a conversation between a Greek public servant and a bond company manager. A good point that is made is that the rich classes in Greece pay very little taxes, and the government there did not go after that group at all, instead choosing to gut the public service.
ReplyDeleteAlso, I'm going to have to argue that government debt is similar to personal debt. The yield is analogous to one's credit rating. In the case of Greece, their lack of bankability led to rapidly increasing yields and an inability to roll-over maturing debts.
Hey Mike,
ReplyDeleteYah Friday new blog comments, I will listen to the planet money podcast on Greece as they are always interesting. Also tax evasion is obviously a big problem in Greece but it’s a big problem everywhere as rich people are generally smart enough to avoid paying taxes.
I will respond to the comment about government debt. The reason that government debt is not analogous to personal debt is that I do not have the ability to print money to pay off debts. (I mean neither does Greece, but as a "sovereign" country they should, this is part of the problem and another example of the needs of banks being placed against those of people)
Government debt is essentially just money created out of nothing, a bet against future growth prospects. In the case of Greece the government was encouraged to take out massive loans to grow the economy at interest rates that were very low. Now that this has failed and the economy is in trouble, interest rates rise further exacerbating the problem.
The other main difference is that if all the government debt in the world was paid off the economy would collapse. Government debt is a massive interlocking system of payments and counter payments constructed to provide an outlay for surplus capital, the money to invest in things that the market can not or will not pursue….treating it like a personal car loan is absurd.
This line is little more than an ideological construct used to justify gutting public services. A need to “reduce the deficit” or pay back debt, described in misleading terms akin to personal finance, is just another way of saying bank profits are more important than meeting the social needs of people.
In a sense you are correct, that government debt and personal debt are the same. But only in the fact that, as this crisis shows, Greece has about the same influence over bank policy as I do. This however, should not be the case.
If Greece could devalue their currency, it would have the same effect on working people as the proposed austerity measures. Inflation would spiral out of control and salaries would ultimately fall. This was a strategy commonly used in developed economies in the 1970's and contributed to the rise of the "freshwater economists" that are reviled by the left (eg. Friedman and the like). The whole concept of monetarism is that central banks should prevent inflation from happening, and they have been successful so-far in most developed economies.
ReplyDeleteTo get back to the crux, a sovereign inflating their way out of debt is not any better of a solution than cutting public services. In both cases, the rich prevail as they are able to accumulate foreign reserves and hedges against inflation. Also, in both cases the poorest members of society are hurt the most, as real income falls and the values of personal assets are wiped out.
I'm all for a strong public service and welfare state, but it must be done within a country's means. To accomplish these goals, a strong taxation regime is needed. To make these goals sustainable, budgets must be balanced.
Lastly, the ultimate source of foreign government debt, which is what we are talking about in the case of Greece, is a trade deficit. In this case, surplus nations are lending money to debtor nations. Under this example, surplus nations are living below their means (weak public service, high personal savings), and debtor nations are living above their means (unfunded entitlements, high personal debt loads).