Tuesday, 21 February 2012

The wealth of nations

Greece has been bailed out again. Yaay!! goes the financial world. Yaayy!! Go the rest of the EU countries which will see their banking sector survive another day. They all congratulate themselves, they pose for front page pictures, they exchange kisses on both their cheeks (except for the British, they don’t kiss. And the Belgians, they kiss 3 times) and handshakes, they hug each other and promise to see each other for drinks at a later date. They saved the world, they think. Prevented an economic Armageddon, they say. They are happy.
14 hours of negotiations have ended with an agreement to save Greece again. 130 billion Euros will be given to Greece so that Greece can then give it to other parties. Greece will not actually be able to use this money to fix its own economy. But yaaay!! go the markets so who cares what actually happens to the money as long as the panic is (briefly) over.
As I write this, details are starting to appear about last night’s deal. It is clear, onece again, that this bailout will not work. The scenario presented in the report on which the deal was based reads more like a fairy tale than the nightmare that it actually is. They still believe the Greek GDP will bounce upwards even with more austerity introduced (well, there is the option of EU structural funds that the Greeks can use but they have no efficient structures in place for that  and it’s very unlikely for them to be able to build them up in a few weeks).  The general consensus is that the deal will not work. But who cares? We are happy because the markets are happy.
At the beginning of the crisis, Merkel was adamant in urging the primacy of politics over the markets. She said the political system comes before the market requests. Democracy was more important than yields and people came before banks. Then the system started falling apart. Merkel’s mistake was that she didn’t see how interconnected the banks and the people had become. Politics and economics were now connected at all levels and while politicians could not control bankers, bankers could control the economy, hence the people, hence the politicians. Who would vote for a moral, principled politician that protected democracy but brought bankruptcy?
And when Merkel realised that she needs to start playing politics in the economical field, the entire game changed. Wealth was no longer a measure of living standards but it became a simple formula in calculating the debt levels of public institutions. As long as the numbers looked good, it didn’t matter if the people behind the numbers were smiling. They would smile if they have a job, they said. They would smile if the banks keep lending, they said. It didn’t matter if the jobs that people had were paying crappy salaries or that the banks only lent to people who didn’t actually need more money.
At some point about 3 to 4 years ago, the wealth of nations started being measured in cold numbers. Happiness, development, culture, freedom and democracy, they were all dashed in the background. We are now happy if the markets are happy. That is basically what Lagarde is telling us.
But what about the people of Greece? Are they happy? Their country has been saved from economic hell; you would assume that they would take to the streets to celebrate. Well, they are taking to the streets but there is no celebration planned. Instead they will protest. They will protest because they believe that the humiliation that they have been put through and will be made to suffer many, many years from now is not a price worth paying for their wealth.  They want their wealth to be measured by other standards. Cold, neutral numbers are not enough.
Well they deserve it, you might say. They spent more than they had, you might argue. They stamped on the EU budget rules! Yes, but so did Germany and France and most of the other euro-members.  Greece was a bubble because foreign banks allowed it to become a bubble. The EU in its entire composition decided that borrowing is a right, not a privilege. And Greece now has to pay more than it can because of mistakes made by Germany and other EU countries in handling the crisis. Don’t blame the Greeks, blame everybody.
The ideal solution would have been for the EU to stand behind Greece in renegotiating its debt burden. Iceland has done that, putting people before the banks (mainly because the Icelanders attacked their leaders. Literally.) and is now doing great. But who could have expected the EU countries to actually agree on something like that?
Don’t get me wrong, I am not a leftist. Not even close. But I do believe that the people are more important than their debt. I do believe that wealth is not only defined by how much money you have. Freedom and democracy are more important than access to financial markets. I do believe that Greece should have defaulted inside the EU and then get support to rebuild its economy. They would have gone through hardship but they would have retained their pride.
As it stands right now, the crisis will continue. And probably get worse. Maybe not economically. The economy might start growing again (not in the South). But socially it will get worse. Because people don’t care about the numbers.  They care about their living standards. And though they might accept lower living standards, they will only do so if they see that it benefits them and not some abstract market. We will get poor in so many ways that when the numbers will finally say that we have regained our wealth, we won’t care anymore. Respect for the individual and its needs will have become a thing of the past and the primacy of politics over economics will be completely over. But what did we expect? We laugh at people who dare to share ideas and we call them idealists like it’s a bad thing. Socially, politics, in its pure form of debating ideas and values, has lost its preferred position over economics long ago. We are now just institutionalising this reality.
Welcome to the age where electronic impulses in bank computers have become the way by which we measure wealth! Hope you left such ideas as democracy and sovereignty at the door. You won’t need them here. And now that you finished reading this, could you please go back to work? We need to add another percent to that growth figure so that the markets stay happy and we can all smile.

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