You entrusted your money to people who eat smoked guillemot?

You entrusted your money to people who eat smoked guillemot?

I was in the UK in 2008 and 2009 when the Icesave banking disaster happened, and the UK government rushed to use anti-terrorism legislation to try and protect the money of British investors. There were something like 300,000 “ordinary” British and Dutch investors with money in Icesave accounts, and when the disaster happened all but the first 20,000 pounds or so were not protected by deposit insurance, so the UK government acted to try and protect the full deposits of the savers. I remember this clearly [although, probably not details of dates and money amounts] because one of my colleagues at the time had 120,000 pounds parked in such an account, the proceeds of selling her house, and was looking forward to using the money – inflated by the high interest – to buy her next one, and she was understandably distraught when she woke up to discover it had vanished into volcanic smoke.

I also remember at the time that there was a lot of anger in the British public, not only at Iceland, but also at the British government for guaranteeing the deposits of people who were basically risking their money to get a higher rate of return. I often heard the refrain “they knew the risks” and many people pointed out at the time that higher interest rates usually correspond with higher risk, and these people could have had their money protected if they had taken more reasonable risks in a UK bank. This rhetoric probably wasn’t based entirely in fact, since British deposits weren’t fully guaranteed, and the UK government had to rush to assure large deposits in Northern Rock after it failed[1], but the general rhetorical principle was correct, British banks were safer than Iceland banks and had a correspondingly lower rate of return. The question was asked: should we bail out people who knew the risks they were taking? (Incidentally, I didn’t actually know at that time that a slightly higher rate of interest in a country that I assumed had good banking laws was a sign of higher risk; as a result of the rhetoric of that period I reassessed my involvement in an ING online account that is now defunct).

I can’t easily find articles online from the time that say these things, but I don’t think my memory is wrong. This comment by an academic from McGill University (Canada) makes the point that investors should wear the risk; this blog roundup suggests that many economists thought it was right for Iceland to refuse to protect investors, and indeed Christine Lagarde of the IMF thought Iceland took the right approach. I can’t find any articles directly demanding that deposit holders should carry their risk, but I do remember it being a commonly-stated view at the time, and the view that Iceland did the “right thing” by telling investors to take a haircut is well-accepted, I think, as is the view that it has recovered better than those economies that did not. A subsidiary view, that deposit insurance creates moral hazard, is widely broadcast I think and is consistent with the idea that if you want to get a high rate of return on your deposit you need to be willing to accept the risk that you will lose it, pour encourage les autres. So I don’t think I’m wrong about this perspective and how it was broadcast at the time even if I can’t find written evidence.

The idea that “investors” should wear the risk they take when chasing big profits seems completely reasonable, until one remembers that in this case the investors (and ultimately the creditors) for Icesave included depositors, that is ordinary people who put money in a high-risk/high-return account hoping for a short term gain. It seemed at the time that a lot of people were comfortable with the idea that creditors should just put up with their haircut, and depositors “knew the risks.”

So it’s interesting to compare this rhetoric with the rhetoric surrounding Greece’s recent troubles. Much of the rhetoric about Greece focuses on its profligacy, the easy-spending nature of the Greeks, their corruption, their crazy ideas that they could just keep taking on more debt and spending it however they want. You don’t see much rhetoric (or at least, I haven’t) questioning why people were willing to lend them all this money, and why their creditors are now so heavily exposed. Remember that for every debtor there is a creditor, and the creditor wouldn’t be lending the money if they didn’t want to, i.e. if they weren’t benefiting from it. When Icesave collapsed the greedy motives of the creditors (and, implicitly or explicitly, the depositors who make up a certain proportion of those creditors) was front and centre in the debate, but it’s strangely absent from the Greek debate. We know that in the early stages of its crisis Greece had to take on a lot of public debt to bail out banks that were in trouble; at the time of writing it appears that private debt constitutes about 60bn euros of Greece’s total, which would have been about 30% of the total debt before the collapse. Why were these people lending money to a country that was cooking its books, had apparently obviously unsustainable pension and welfare systems, and an entire population that we are now told were slurping up ouzo down by the beach rather than working 12 hour days like Germans? These creditors didn’t have to lend this money, they could have bought German bonds or Iranian nuclear futures or something more solid and reliable. They loaned money to Greece because up until the crisis Greece’s economy was growing faster than anywhere else in Europe, everyone wanted a slice of that golden Greek sunshine, and basically they thought they could make their motza[2] and get out before the whole shebang went tits-up. i.e., they were greedy. Yet nowhere do we hear tell of their greediness – even though at the same time as their golden goose was turning barren, Icesave depositors were copping flak in the press and the public for being greedy and reckless.

Why is that?

We also shouldn’t stop with these faceless private lenders, who are no doubt lounging around in a gold-plated yacht off some private Greek Island, fluffy white cat firmly en-lapped. We can also wonder why none of this rhetoric of recklessness extends to the dour and responsible Germans. Germany has 60bn Euros sunk in the Greek project, and it is earning a healthy rate of interest. Germany, the country that has never paid its debts, the ultimate trust fund kid, is now strangely insistent on Greece paying its debts, and no one anywhere is questioning why Germany is so exposed to the economy of a country it has deplored as reckless, irresponsible, intransigent and wayward (indeed, worse than Iran if we are to judge by their negotiating results). A handful of eurozone countries have something north of 200 bn Euros sunk into the Greek project, and we now know that they are making a lot of money from this little act of charity: the Guardian’s live blog today tells us that David Cameron is contemplating demanding some of the 1.9bn Euros in profit that the ECB has made from its loans to Greece (though it doesn’t tell us over what period that profit was made). How come this fact – that the eurozone lenders are making fat scads of cash – is not being broadcast widely, as the Icesave depositors’ greedy winnings were being broadcast in 2008? Instead of this morality play, we are constantly reminded that the German taxpayer doesn’t want to have to cough up his or her hard-earned dollars to cover Greek mistakes. Yet right now the German taxpayer is making money from this debacle, so shouldn’t we be instead asking why the German taxpayer tolerates his or her government sinking 60bn Euros into a high-risk, high short-term profit venture in junk bonds? Germany is a responsible country, we’re told, whose taxpayers don’t take risks – at the same time as the media carefully avoids reporting on the big money Germany stands to make if Greece doesn’t default.

The situations aren’t exactly the same of course, and people could argue that the eurozone nations didn’t have a choice – they aren’t loaning this money because they want to, the poor darlings, they’re doing it to save Greece and the euro project. But they did have choices, many choices: they could have told those (primarily French and German) banks to fail, as Iceland did, back at the beginning of the crisis; they could have rushed through some changes to the welfare transfers in the EU to ensure that Greece received direct payments rather than loans[3]; they could have printed money and handed it to the banks, as the UK and US did; they could have raised debt in their own countries, which are much less financially at risk, and provided it as a grant or something; they could have told Greece to find the money on private money markets. But they didn’t, they chose to lend money to Greece on terms that just happen to deliver them large profits – profits that are likely larger than they could have got from e.g. buying each others’ government bonds, or investing in the kind of low-return portfolios that would be politically acceptable to their electorates. And it just so happens that, since they control the mechanism by which Greece generates the repayments of those debts, they are able to turn the screws to ensure the money keeps coming – unlike those investors in Icelandic banks, who have no direct means of control over Icelandic politics and economy (and anyone from Britain who is old enough to know about the Cod Wars should surely know how hard it is to control Iceland!)

And all while this was going on, we were being told about how irresponsible ordinary depositors were to put their money in a bank that had a high interest rate. It’s almost as if the morality underlying the rhetoric depends entirely on the people who took the risks …

Fn1: Northern Rock was then run by famous climate change denialist Matt Ridley, which one should always remember when one is considering how far our modern banks have sunk, and how much one should trust the risk assessment abilities of climate change denialists.

Fn2: This is a Greek word, trust me, I’m Australian so I know Greek slang

Fn3: Something you might argue is hard to do, but it appears that today the leaders of the ESMF have been able to magic up 20 billion euros from the Common Agricultural Policy, in order to find a way to provide rapid finance without leaning on the ECB[4]

Fn4: Which makes one wonder, doesn’t it? Have these people been listening to the Greek government when it tells them how fucked it is? Had they not noticed? They just spent two days arguing with a Greek dude about whether to give him any money, and after they agree they find they don’t have any mechanism to provide the money, and he needs it now and he’s been telling them that for weeks! Perhaps instead of spending that two days arguing, they could have spent it more productively looking for their wallet.

At least it's not debt relief!

At least it’s not debt relief!

This week the European Union was involved in two major deals that settled two outstanding issues. One involved a long-standing issue that posed a threat to global economic prosperity, with an intransigent and corrupt government that consistently refused to adhere to past agreements, was not transparent about its activities, consistently responded to criticism of its activities with aggressive and nationalist rhetoric, and was suffering serious economic problems that required it to rapidly come to a deal that the rest of the world could agree to. The other involved Greece.

The first of these two deals is, of course, the Iranian nuclear deal, which sees Iran keep its peaceful nuclear program and the vindication of its claim to a right to peaceful nuclear power, despite 10 years of obfuscation, secret development, and often dangerously inflammatory rhetoric. For much of that time Iran has been actively undermining US foreign policy interests in the region, including those of its allies, and any concessions to Iran are widely seen as both an insult and a threat to the US’s regional allies. But somehow the EU plus Russia and the USA managed to come up with a genuine compromise that respects Iranian sovereignty, allows it to continue to broadly control (and in many ways, expand) its nuclear science program, eases sanctions and gives security guarantees to the whole region. This deal is realistic about the realpolitik of the region, sensitive to the levers required to influence a sovereign nation’s domestic policy, and mindful of the long-term sustainability of the actions proposed. On a first reading it seems like a masterpiece of cooperative diplomacy.

In contrast, in the same week the EU managed to come up with a completely reprehensible deal that crushes Greek national sovereignty, removes all national control over the key levers of the economy, and doesn’t offer any promise that the problem will go away in 5, 10 or even 30 years. It is both ignorant of the underlying economics of the problem and completely unrealistic about what can be achieved with the policy levers available. On a first reading, it seems like a dog’s breakfast of coercion and wishful thinking.

How could the EU have come up with two such radically different deals in the same week? Ostensibly the former concerns a much greater threat – nuclear proliferation – from a much less tractable nation that shares no strong cultural, political or even geographic ties with any of the nations involved, while the latter involves an ultimately manageable debt crisis in an allied country with strong cultural, political and geographic ties. The latter problem could have been solved by unilateral EU fiat (debt relief) while the former required cooperation from the other power. Yet the deal on Greece has been forged as if that unilateral action were inconceivable, while the deal with Iran has taken a nuanced approach to the real challenges of securing cooperation from such a belligerent negotiating partner. I don’t believe that anyone negotiating with Iran really believed that Iran has a nuclear weapon, so they weren’t negotiating under such a threat, so it appears that they really, genuinely have just tried to come to good terms. It’s not even the case that oil diplomacy or regional military concerns could have been that influential – oil is losing its importance as a geostrategic asset (and will rapidly drop in value as global warming bites), and although Iran has something to offer the US in dealing with ISIS, it is effectively militarily contained.

So what drove this difference? My suspicion is that the economic ideologies underlying the politics of most developed nations are now so completely unhinged and divorced from reality that it is impossible for them to negotiate reasonably in a sovereign debt crisis. They don’t (or won’t) understand fiat currencies, and won’t act with the authority and power that proper understanding of fiat currencies gives, so their negotiations have to be conducted in such a way as to carefully skirt around the actual economic facts in evidence. Connected with this is the related problem of ideologies and moralities – about work ethics, deserving vs undeserving poor, leaners and lifters – that are really hangovers from 100 years ago, and have no place in modern economic discourse (whether sub-national or international). In comparison, the nations involved in negotiating with Iran remain very cognizant and accepting of the basic principles of realpolitik and so are able to incorporate them into decision making and policy development. Hence the apparently bipolar mind at work on these two deals.

An alternative explanation is that negotiations with Greece involved only the EU central powers, whereas negotiations with Iran involved Obama and Putin – who at the moment are looking waaaay saner than the European leadership …

In recent days there has been a tiny bit of discussion on this blog about whether a group of 9 unelected philosopher-kings should be able to decide social issues for 330 million people, so it seems appropriate that I turn my attention briefly to the chaos rolling over Europe and the threat of a Greek exit from the EU. From the outside looking in it seems like the three main powers involved in this shit-show (the European Central Bank, IMF and European Commission) have refused to give any serious ground on their demands, even though these demands are obviously not going to help Greece out of its crisis, and have instead decided to essentially dictate to Greece the terms of its fiscal, labour, welfare and banking policies. Given that they are well aware of how much their austerity policies have failed, and know full well that Syriza was voted in on the promise of no more austerity, it’s just ridiculous bloody-mindedness that drives them to force their ultimatum on Greece. The ECB even appears to have withdrawn its standard emergency credit line for banks experiencing instability, without any justification. They’ve basically made clear to Greece that they won’t accept any political options except those that suit their ideology. This is not how politics works, and it’s no surprise that under this pressure Syriza have decided to tell the troika to jump. Paul Krugman (who for some reason I never normally read) has a particularly deft explanation of this referendum decision:

until now Syriza has been in an awkward place politically, with voters both furious at ever-greater demands for austerity and unwilling to leave the euro. It has always been hard to see how these desires could be reconciled; it’s even harder now. The referendum will, in effect, ask voters to choose their priority, and give Tsipras a mandate to do what he must if the troika pushes it all the way

This is how politics should work, and giving Greece a week of grace to sort this out and set a clear future path would be a good way to indicate respect for its political autonomy. This is also the reason that David Cameron’s promise of an in-out referendum, though insane for Britain, is politically the right thing to do. Tsipras has taken the chance to make sure that his country’s decision is politically validated, and that he can make his final decision about the euro from a position of democratic legitimacy; the leaders of the EU’s main powers are flabbergasted by this, and the troika are confused. It appears that they don’t understand where their authority ends and the democratic demands of the people of Europe begins, and it looks as if a lot of Greek people are going to have to go through a fair amount of pain in order to teach them. This is disappointing, given the states involved are apparently all democratic, and it gives the lie to what I think is increasingly shaping up as the central fiction of the European project: that it can stop another war in Europe.

The EU is a fairweather friend

This isn’t the first piece of brinksmanship that has been deployed by an EU member in recent time. A few weeks ago Italy’s prime minister, Matteo Renzi, threatened to issue Schengen visas to refugees coming from Africa and send them on to other parts of Europe, after it was revealed that not only were other countries doing nothing to help, but German, French and Swiss authorities were turning migrants back at their borders, forcing Italy to manage both the rescue and the housing and welfare of tens of thousands of migrants – even though most of those migrants are hoping to move north to other parts of Europe. Basically Italy had to shoulder this whole burden because the rest of Europe has shown itself unwilling to help its members when they face serious problems. The same could also be said for the UK’s welfare and work problems: it is obvious that the UK is a preferred destination for migrant labour in Europe, because everyone in Europe learns English and the pound is so strong, but the EU has absolutely refused to bend the rules for the UK on welfare and migration issues.

You may not agree with the specific governments on any of these issues (I don’t agree with the UK, for example) but I should hope it’s obvious what the problem here is: the EU member states are fairweather friends. They can carefully hammer out a compromise agreement on a shared issue like the free movement of labour or the role of the ECB that will enable them to handle the normal, stable times, but they are completely unwilling to compromise their own interests for the greater good when extraordinary circumstances roll around. The free movement of labour is fine but sharing the resettlement of refugees is impossible, and will be left for the country that happens to be unlucky enough to get them first; shared work and welfare goals are fine but they absolutely won’t consider an exception for a country that is bearing an unusual proportion of the effects of those rules; stability targets are fine but no one is willing to risk either their ideological purity or their own taxpayers (Germany’s constant petty battle cry) when a shared financial crisis hits one of their weakest members unusually hard. Basically, the countries of Europe are behaving like fairweather friends who pat you on the back and congratulate you when you have a success, and are happy to split the bill at your Friday pizza-and-beer nights, but would rather you didn’t come if you’ve fallen on hard times and might like to skip paying for the odd Friday night. They’re happy to talk about helping you move house, or minding your pets while you visit a sick relative, but strangely they’re all busy when the time comes.

This is funny because the regular refrain we hear from the EU’s main sales merchants is that the EU establishes a bulwark against the risk of a future war in Europe. I’m sorry, but if the countries of the EU can’t come up with a mutually acceptable target for distributing 50,000 refugees among a population of 350 million without being threatened with an ultimatum, it’s unlikely that any one of them are going to pause for even the blink of an eye if war is in their interests. Indeed, while the EU rumbles on with its chaotic and obstinate mismanagement of what should have been a complete non-crisis in Greece, certain countries on the eastern edge are entertaining military antics by a non-EU member (the USA) that threatens to involve them in a war so catastrophic that they’ll all be running to Greece. If this is how you construct an “ever closer union of peoples” that will guarantee peace, then peace must be pretty easy to come by.

The reality is that war isn’t going to happen inside Europe because no one wants it, and the major powers are aging so fast that they are no longer able to field a decent war machine. I think this is great, and one of the many untold benefits of rapid aging, but I don’t think it has much at all to do with the European project, which is looking increasingly like a German/French alternative to colonialism, intended to drive down the competitiveness of the European periphery and ensure the centre gets access to reliable markets and a long-term pool of cheap labour. Students of history might suggest that this is exactly the wrong way to go about ensuring a non-chaotic future: the students of Greece are likely to soon provide an object lesson on the topic.

If the EU wants to retain any kind of democratic legitimacy, its member states need to think about how to rein in their executive, and start giving more credence to the (disparate) complaints of countries like Greece and the UK, about precisely how governance should work in such a confederacy. Because right now it’s looking like a couple of people from primarily northern and western powers think that they can dictate political terms to entire nations on the periphery. That’s empire, not union, and I think people are starting to notice …

Addendum: Joseph Stiglitz also seems to think that the EU is behaving poorly, and Krugman has a couple of pieces pointing out that Greece wasn’t as badly off as we are told, and austerity has really done Greece no favours.

In your bases, pWning your Austerity

In your bases, pWning your Austerity

Following up on yesterday’s post about the new Greek finance minister, Yanis Varoufakis, today I investigated his involvement in computer game economics a little more. I found this article by Brad Plumer, written for the Washington Post in 2012, which describes the growing role of economists in computer gaming. Modern online multiplayer computer games are now so complex that they have their own economies, and small decisions by the game company can have major effects on the economies operating in the game and, by extension through the money players invest in some products, on the real world economy. The decisions can be political decisions – such as a decision by Second Life to ban certain kinds of gambling – or they can be god like interventions, such as when the people running Eve Online decide to change the distribution of resources in their galaxy. Some companies have recognized that they need to understand the consequences of their decisions if they want to keep players happy, and the company running Eve Online appear to have led the pack by assembling a whole team of economists.

Into this fray in 2012 stepped the new Greek finance minister, Yanis Varoufakis. Valve, the company now running Steam, wanted to join together a bunch of different games so that players could trade between game worlds. I’m not sure how this works or why one would want to do it but they seemed to think it was a good idea, but in essence what they were trying to do was set up a kind of European Union, in which different games are sovereign in their own resources and political decisions but not in their own currency. So they employed an expert on currency zone economics – Yanis Varoufakis, the new Greek finance minister. According to Varoufakis in the article, his academic colleagues

know I don’t have any actual interest in video games. But I only need to talk to them for a few minutes, and they quickly get excited, asking, ‘Well, what if you tried this . . . ?’

and I can see the appeal of this. You can run experiments, and learn about how decisions will affect the economy, which can provide useful information outside of the computer game world. Varoufakis has apparently used this to show interesting things about General Equilibrium theory, but interestingly the players quickly realize an experiment is being conducted, and game it. What does that tell us about the way ordinary people react to economic policy even when they don’t know it is coming?

Besides being a fascinating field of study in itself, this tells me interesting things about Varoufakis. While some people seem to see him as a threatening radical, and the Guardian‘s initial reaction to his appointment was to publish a whole run of “sky is falling” quotes from German bankers[1], in the world outside of politics it appears he is seen as a serious and intelligent judge of how to manage monetary unions, to the extent that people who depend on getting this right have paid him to help them do so. My guess is that his work on computer game economics will not register at all to Europe’s deep thinkers, or will even constitute a black mark against his name – further evidence he is not a “serious” economist – but it seems to me that he is someone they should listen to, and probably the only finance minister in Europe who might know something about the fundamentals of the EU process. Perhaps all of Europe could benefit from listening to the experience of Greece’s new finance Minister – if they can see past his party and their biases about Greek.

Varoufakis’s ascension to power politics in Europe also puts computer game economics in the spotlight. Maybe it’s time computer game companies started taking the possibility of economic experiments within their worlds seriously, and presenting their virtual worlds to world leaders as an opportunity to study economics in a safe environment. It appears we can learn a lot about the shortcomings of real world theories by testing how they work in worlds in which we can control the fundamentals, right down to the raw materials. There are many questions in economics that could be answered through interventions in these worlds.

My guess is that the European Union will ignore Varoufakis’s expertise, and even if they wanted to computer game companies will have little intellectual impact on the economics world, even though they offer a unique opportunity to test a wide range of economic theories. A shame, for both Europe and the economics profession. Let’s hope the Europeans listen to the economic aspirations of a bunch of dragon slayers and space pirates, and use the lessons learned to fix their most intractable problems!

fn1: They put these on their execrable blog-formatted “live” news section, so I can’t find them or link them now. Why they thought German bankers would be objective commentators on Greek political appointments is beyond me.


Adventure stories for economists ...

Adventure stories for economists …

As expected, Syriza have won the Greek elections, taking a near majority and forming a government with a minority right wing populist party, and so far none of my fears have been realized (yay). As expected, Syriza’s “radical” economist Yanis Varoufakis has been selected as finance minister, putting him on a direct collision course with the Troika. Varoufakis seems like an interesting guy, and it will be interesting to see what the burden of his position does to him. He is young, an academic economist until he decided to run for parliament, seems to be quite a handsome chap, and is also a dual citizen of Greece and the Duchy of Edinburgh Australia. So now it appears Australia has two finance ministers, Matthias Corman the actual finance minister of Australia who was born in Belgium and Yanis Varoufakis, the Greek finance minister who was born, somewhat surprisingly, in Greece. Yanis Varoufakis has written a book and is also a private consultant for Valve, the game company responsible for Half-Life and Steam. I wonder if he’s a gamer?

That’s a pretty interesting background and, whatever one might think of his political views, pretty solid qualifications for a finance minister. In sad comparison, Matthias Cormann has been a political apparatchik since the 1990s, has an undergraduate degree in law, and has never written anything as far as I can tell. But in addition to writing a book and some academic articles, Varoufakis also maintains a blog. He’s just like me! And in his latest post he has promised to try and keep blogging while working as a minister, which I suspect makes him the first ever blogger finance minister. This potentially means we are going to get some kind of real-time coverage of how and what the finance minister of Greece is thinking as he negotiates with the EU, IMF and ECB on the tricky issue of Greek debt. He has previously written alternative solutions to the problems of public debt in the EU, which seem to have worked their way into The Economist. His blog is a pretty interesting read, and if he does manage to find time to maintain it while managing his new position I think it will make a fascinating and unique contribution to both the blogosphere and the disciplines of economics and politics.

This also gets me thinking: will there come a day when an active role-player gets into the halls of power, and chooses not to stop gaming? Imagine if they turned up at conferences, and you could role-play with the US president … (I bet there’d be no rules-lawyering at that table! “Why can’t I get +2? It’s in the rules!” “I am the president of the USA, you get whatever bonus I give you!”) Or if they were a regular commenter at an RPG forum, posting in between meetings with heads of state to complain about why Bards are the worst character class. Maybe they could run online role-playing sessions where they run adventures in all the trouble spots they’ve invaded and messed up, until it gets to the point that the electorate start thinking the President is only starting new wars so that he can have new campaign settings. That may seem crazy, but it seems like a better rationale for a war than the gloop we were actually fed before Gulf War 2…

Greece has been suffering difficult economic times, and it seems obvious that something has to be done. Austerity has failed Europe dismally, and the economic pressures it is creating are being released through politics of the worst kind, as extremist right wing parties grow in influence across the continent, perhaps most especially in Greece. The search for a solution is going to be really challenging for Syriza, and it is my hope that they will find a solution that makes Greeks better off, and averts the social catastrophe they seem to be sliding towards. Yanis Varoufakis seems like a man well-placed to take on the job, and it is my hope that he can find success despite the challenges he faces. I also hope he can find the time to blog about it, so we can get some insight into what happens both behind the scenes and behind the man. Good luck, Dr. Varoufakis, and I hope more bloggers in future (and eventually, more gamers) can get to the halls of power.

And remember, if you find Greek debt challenges too tough, you can always come to Australia and help out our government…

This Sunday Greece is holding a general election in a very tense and fraught environment. It looks likely that the “radical” left wing group Syriza will win, with the threat that they will default on Greece’s debts and possibly lead it out of the Euro, back to the Drachma. Meanwhile Golden Dawn remain a real menace to migrants on the streets of Greece, and there are rumours that they have connections with what is sometimes called the “Deep State,” internal security and police who hold a secret longing for a return to the days of dictatorship and a deep hatred of the left. The London Review of Books published a good and very disturbing account of the behaviour of Golden Dawn and its links to this alleged Deep State, written by a journalist who managed to get some way into the organization. Meanwhile the European Central Bank has announced a new run of quantitative easing, perhaps intended to send a message to the Greek electorate that they might expect some support in their austerity plans, but the austerity program the Greek electorate is facing is shockingly tight and extremely disruptive.

Given this environment, and being safely ensconced far away from the trouble, I have thought of a few possible outcomes of the election, and have a few questions about what might happen. Even though I think asking a question and answering it yourself is the first mark of a dickhead, here are some of my questions with my thoughts on the possible answers.

  • Will Syriza win? The polls seem to give them an edge but maybe the possibility of a real default will lead Greeks to return to the status quo
  • How will Golden Dawn react? It seems to me that there is a very real possibility they will try and instigate some kind of communal violence, and the state doesn’t seem interested in confronting Golden Dawn
  • Will the Deep State act to preserve the interests of the elite? Assuming this Deep State is even a thing, will it react to a communist victory by moving to interfere in the functionings of democracy? If it is true that a large minority of powerful people still hanker after the era of the Generals, will they move to act on this?
  • Will Syriza back down on default and exit? Some are suggesting Syriza have been mellowing their rhetoric on default and exit as the election looms, but this could just be a campaigning tactic. Even if they really are starting to feel the heat, backing down on key parts of their platform will probably break them apart and bring about more instability. It seems to me they’re going to be hard-pressed not to follow through on core policies
  • What will the effect of this be on other countries, especially the UK? The UK is slated for a referendum on EU membership if the Torie win in 2017. If Greece exits and it is not a catastrophe for Greece or the EU, this will potentially influence that referendum, since the pro-exit people will be able to point to Greece as an example. Likewise if exit is disastrous for Greece. If Greece starts a chain of exits by highly-indebted or highly anti-EU countries it could spell tough times for the EU. Will the much-maligned Greek left be the trigger for a conservative rebellion in the UK?

I don’t have an opinion on what Greeks or Syriza should do, being too far away and too ignorant to have strong views, and although I think much of the narrative on Greece and its economic problems is shallow and ideologically driven, and I’m generally not in favour of the Euro, I can’t say what I think is right or wrong about the whole sorry mess. If Syriza win I hope the transition to radical left leadership happens without neo-fascist street violence, and if Greece exits I hope they are able to solve their economic problems quickly and with minimum fuss. If a Greek exit begins a chain reaction that sees the EU scaled back a bit and maybe made more fiscally flexible I think that would be a good thing, though it won’t change British angst about the EU so long as the free movement of people remains at the heart of the project. But I really really hope that if Syriza win, their victory doesn’t lead to a long period of instability that turns Greece into the neo-fascist cradle for all of Europe. That would spell trouble far beyond Greece’s borders, and well beyond this election, and I hope the Greek people are able to avert such a disaster regardless of how they vote this weekend.

Outside the city ...

Outside the city …

I am finally away from my Greek Island and the “five star” resort with no internet access, so I am able to resume blogging. Yesterday evening I arrived in Athens for a three day stay, and as is my wont in a new city, the first thing I did was go out for a wander. My hotel has a rooftop bar with a view direct to the acropolis, which is pretty amazing, and is on the temple slopes so it’s a short walk to the old town. Walking through the old town one can catch regular glimpses of the acropolis from the streets, and also experience the pleasures of a summer night in the city. The streets were heaving with people, all out to enjoy the evening air. All the restaurants in Greece seem to be open to the sky, and alfresco dining is the norm, so everywhere you look people are enjoying eating under the stars. I passed a Suleimanese punch-and-judy show, where the puppets are dressed in Persian-style pantaloons and curled hats (but still beating each other) and the horde of gathered children scream at the villain in Greek. I passed a concert being held in an old temple ruin, all lit up with red spotlights. Every square was full of people sitting chatting and drinking; the main square was absolutely heaving with young people in groups just enjoying the night air. The weather was dry and warm, the temperature perfect, the sky a million miles away and clear and the whole balmy evening cupped within the bowl of the distant mountains, with the Acropolis the gleaming jewel set in the middle of that frame, seen occasionally between buildings and lit up against the night sky.

I found a stylish open restaurant in the old town, that served excellent food and had a massively camp Swiss host. They serve a chicken cooked whole inside a loaf of bread and cut up on your plate for you, and an exquisite lemon-flavoured pumpkin soup garnished with little cthulhu-esque octopuslets. I didn’t have my camera with me so didn’t order the cockerel; I may return to experience this strangeness this evening. I have to say, the way Greek people use lemons in their cooking – and the predominance of citrus throughout their cuisine – is excellent and commendable.

After dinner I wandered a little more, enjoying the chaos and light-heartedness of the city. I found myself in the area just west of the Syntagma square, which is supposedy full of bars and night clubs, and in front of a rock bar called Six Dogs. They were hosting an American band called The Shrine, some sort of classic heavy rock outfit that I’ve never heard of, so in I went, for my first experience of Greek punk/metal fans.

What is on your playlist, Archilokos?

What is on your playlist, Archilokos?

The band was average, I have to say, and somewhat hamstrung by the fact that their singer has exactly the same accent as the weird zoo-owner from the Mighty Boosh. They were a pacey, hard rocking classic metal outfit with a bit of skate-punk overtone, so pretty likeable overall. The crowd, however, were fascinating. First of all they were really lively and cheerful, bouncing around with way more energy than the band deserved, and managing to do spontaneous crowd-surfing efforts even though there were only about 50 of them. This meant that whenever one of their number wanted to go up, he had to get the others to lift him, and then a group of 10 or 15 fans would go charging around the room in a little chaotic loop, carrying the surfer aloft, and then drop him. It’s not quite lollapalooza, is it? But they were really into it. But the best thing about them was the way they looked so … classical.

I think every second rocker in the crowd was basically a classical Greek stereotype, come to life then covered in tattoos and stuffed into a pair of skate-punk shorts and a band t-shirt. They all had the broad shoulders and narrow waste of the classic Greek pottery or statues, and that particular style of Greek beard that you see in the classic pictures: the one that is cropped close to the skin along the jaw and near the ears, but extends to a block or point out from the chin, and merges in a perfect gradient with short-cropped hair. It works perfectly with the classical Greek profile of aquiline nose and strong jaw. The rockers also had the same classical hair style, that is neatly cropped at the back but then a little unruly or longer and forward-pointing near the front.

It was like moshing with the guys from 300, if they had bothered to put on t-shirts. It was one of those classic moments, like when a French waiter pulls a 110% expressive face, or a German man says very precisely about one of his most memorable experiences, “it was in general perfect” with German precision, or a Japanese person bows on the phone – one of those moments where the person you are talking to is subconsciously channelling a million years of cultural history and to the rest of the world they’re a stereotype of fantastic proportions, but to them it is so completely normal that they would never realize they were doing it, even if you could play them a video of the moment. So it was that these Greek rockers were moshing not to the tune of an ordinary Venice Beach band, but to a couple of thousand years of classical Greek history. The Pelopennese war through hardcore, or something. I think I will dub this style of Greek counter-culture “300-core.” I hope to see more of it as I wander this city of romance and history!

Yesterday I arrived in Rhodes, Greece on a two week work-related trip. Rhodes is a very nice spot, and Greece generally excellent, after a day here I can recommend it to anyone looking for a warm, pleasant and friendly place to spend a little time. And really, what could be a better way to spend two weeks of work time than on a Greek island? However, as soon as I arrived in Rhodes I was struck by a hint of something going wrong in Greece, something which I think may not be the fault of ordinary Greek people, and which maybe serves as a harbinger of all of Europe’s fate. I thought I’d blog on my first impressions of Greece, with perhaps a little added opinionating about how Greece’s economic problems are presented by the pro-austerity gang who are in the ascendant in America and Europe. I’ve only been here a day so nothing I say is even worth of elevation to the level of considered opinion; it’s just idle musings on my first impressions of one (very rural) part of Greece.

Before I came I had visions of the islands from Porco Rosso, and pretty much everything else I knew about Greece I got from Gerald Durrell and sir Lawrence Alma-Tadema, so I think it’s safe to say that I was arriving here with a pretty blank slate as far as cultural expectations go. However, Greece has been in the news a bit recently, with its economic woes being seen as a barometer for the trouble spreading over all of Europe. So I was interested, given my limited knowledge of life in Greece, to see how the land of capricious gods compares with the scary stories and hype that are broadcast across the western print media.

The first thing that I have to say is that everyone I have met (except the scary tattooed guy on the plane) has been friendly and warm, and embarrassingly multilingual. The food is excellent and the weather perfect – the only noticeable drawback of May weather in Greece appears to be that it is bone dry, and I really don’t know where the water for the hotel pool is coming from – I have seen precious little evidence of any water that isn’t in the sea. And there is a lot of sea, cobalt blue and amazingly pure. But then, I am on an Island… and the sea wasn’t very kind to me. Within minutes of dipping my toe in, I was stung by something.

However, as soon as I arrived in Greece I noticed a kind of neglect and decay that I really wasn’t expecting from a European nation. I don’t think it’s new either, and I have a suspicion that what I see hereabouts has very little to do with the global financial crisis and its effects on Greece. I think it’s part of an older, deeper malaise that is moving through all of Europe and just happens to have affected Greece first. Amongst the countries I’m familiar with, I think it will hit Britain next (or already has). What I see in Greece makes me think of many of the things I see in Britain, only without the patina of aggressive British defensiveness, and with sunshine.

This decay was obvious at the airport, which is a kind of cute but crumbling 70s relic, with holes in the ceiling through which the wiring can be seen, those low and oppressive ceilings so common in 70s public architecture, and a barely functioning arrivals lounge – there is no passport control, but it hardly matters anyway because the doors for non-EU passport holders are broken and don’t open. Once you’re outside that and out into the sunshine, you’re greeted immediately by a site that is quite rare in most of the rest of Western Europe and certainly very rare in Japan or Australia: a horde of extremely old passenger cars. They’re tiny, dusty relics from before the era of pollution controls – 80s and early 90s vehicles mostly, and battered, obviously heavily used. The taxis are all new Mercedes, but ordinary passenger vehicles are often much older than I am used to seeing in Europe. The city bus is also very old and battered, the seats obviously replaced many times and the shell battered and scuffed.

The next thing I noticed, once in my taxi, was how overgrown and neglected the countryside looks. Thick, wild shrub and grasses that were obviously untended reached right up to the roads (which are also in quite bad shape), and there was rubbish everywhere. It doesn’t appear that any effort has been made to maintain the unused land near roads and public facilities, and it’s turned into a kind of wasteland. I don’t think this the Greek government, local city authorities, or residents intend to let the countryside go wild, and in a dry and fire-prone area like Greece it’s probably not a very good idea to allow wild shrub to encroach on roads to the extent that they do here. I think this is neglect, and this sense is only enhanced by the state of the buildings I saw on my journeys through Rhodes.

Rhodes is littered with abandoned, half-finished buildings, and also with the deserted shells of abandoned businesses – especially hotels. Many of these buildings are obviously in the early stages of construction, and obviously no one is coming back to them. Some appear to have been abandoned a long time ago, not as far as I can tell during Greece’s most recent economic problems. This reminded me of Beppu, which is also a town undergoing a collapse in tourism revenue, and also has abandoned hotels and pachinko parlours scattered across the urban landscape – as well as areas of overgrown landscape that should be (and probably once was) carefully tended. It’s as if the Greek municipal authorities don’t really care about the impression that their town gives when people first arrive, or don’t have the money to do anything about it, or both.

We hear much about the infamous Greek government’s “profligate” spending and taxing policies, but looking around Rhodes I don’t see much evidence that ordinary Greek tax-payers are getting much bang for their buck. Whatever municipal services Greece provides don’t seem to be showing up in the most obvious and immediate way – rubbish disposal and parks management. I suspect that there are many Greeks who observe the same thing, and wonder why they’re suddenly having to tighten their belts when they don’t get much in the way of visible public services to start with.

I think Rhodes has in common with Beppu a long-term collapse in its main industry – tourism. This isn’t a novel, post-GFC phenomenon, but is a long-term, sustained trend that isn’t going away and reflects a brutal reality for peripheral tourism towns in developed nations. These towns grew during the boom eras of population growth and tourism, before globalizaion, and in the period when the working class of the developed world had relative purchasing power and free time. These factors combined meant that it was easy for these towns to sustain a huge tourist industry, and areas like Beppu or Rhodes grew rapidly on tourist money. But after the purchasing power of the working and middle classes began to decline, and as Asia developed, I think these tourist towns began to run into trouble. They had to compete with Asian countries for tourists, but comparatively they aren’t a great deal cheaper – travelling to Beppu, for example, costs a Japanese worker only half as much as a trip to Thailand or Cambodia, but hotels cost more. I suspect the same is true for Europeans, who now have options in Eastern Europe (places like Latvia and Croatia) for short trips, and Asia for longer trips. In such a situation, former tourist towns have to either adapt and find new industries, or they will become fading remnants. Beppu may adapt or may fade, depending on the success of its new university; but Beppu has easy road and rail connections with population centres like Kokura and Fukuoka that have huge industrial bases and thriving economies. Rhodes is an island in a country that doesn’t have a large industrial base to start with. What is it going to do?

This is another example of how the GFC may be a symptom of a bigger economic shift, and of western nations’ inability to find a solution to that shift. Industry and economic growth is heading East, and with the development of the East huge sections of traditional western economic activity are being hollowed out. In response to this the west has tried to sustain its economic growth through bubbles, and each successive collapse has simply destroyed more jobs. Greece’s economic problems aren’t solely caused by the GFC, which is simply a symptom of the desperate measures western economic policy-makers have taken to try to deal with the loss of real economic power. The result of this long-term economic decline in Rhodes is a countryside festooned with abandoned, half-finished buildings and sad, empty hotels. The same phenomenon is hitting the UK now, but instead of too many buildings unfinished, the UK has too few buildings, and too many ordinary people up to their eyeballs in debt trying to keep hold of the home they have. They do have the empty businesses though, as whole towns lose their retail sectors and corporate lending dries up.

I’ve got no idea what western policy-makers should do to stave off this change. I don’t know if they can, but I think that “wait for Asia to collapse” is not a policy option, and neither is it wise to seek new and innovative ways to reinflate the housing bubble. I think that maybe they need to revitalize industry policy: pick things they’re good at and make them work. Spend taxpayer money on finding ways to make stuff again. Industry policy is what made Japan, Korea and Thailand successful, and the fruit of that policy can be seen in their theft of western business. But fighting off Asia is going to mean a return to deficit spending, an acceptance of government debt, and a recognition that the market doesn’t just pick winners: it strangles losers. And currently, Europe and the USA are looking like the losers. Rhodes is the sign of things to come, and I think the UK is next if they can’t begin to reflect on the underlying causes of the GFC, and the best way of coming to terms with the new world order.