Shush! Don’t make a sound. Don’t stand up! He’ll put you down. Big Brother has arrived. His arrival is much later than envisaged by 1984 author George Orwell, neither did Orwell anticipate that the controlling hand would stem from a democratic rather than a totalitarian regime. Few could have foreseen the rise of the troika, renamed ‘The Institution’.
Poor Greece it doesn’t stand a chance against the might of the EU and its enforcers, the troika, the faceless: the European Commission (E Comm) the European Central Bank (ECB) and the International Monetary Fund (IMF) all unelected. It is their way or the highway.
This is your Europe where democracy does not matter, where decisions will be made for you. The democratically elected government of Greece tried to uphold the principles by which it was elected but has been brow beaten by ‘The Institution’. Greece wanted to opt out of the austerity economic plan followed by the rest of Europe. The new government wanted to reverse the savage cuts imposed on its workers by ‘The Institution’.
As far as the faceless are concerned there is no alternative to their adopted policy. They are wrong, very wrong. I can point them to two Nobel Prize winning economists, a Harvard university economist and a Cambridge university economist who all advocate a positive alternative to the austerity / neoliberal model now in force.
- J.E. Stiglitz, The Price of Inequality
- Paul Krugman, End This Depression Now!
- Dani Rodrik, The Globalization Paradox
- Ha-Joon Chang, Economics: The User’s Guide
Greece did not cause this mess, though the propaganda would have you believe otherwise. What Krugman p177 calls the Big Delusion when he points out that Ireland and Spain both had budget surpluses and low debt prior to the banking crisis of 2008 but ended in the same bog as Greece. So it was not that Greece spent more than it could afford. Krugman p179 goes on to suggest that the political, financial and banking leaders are deeply committed to their version of events. Others may define their logic as ‘groupthink’.
A large part of the blame rests with the introduction of the € euro currency but they will never admit their complicity in creating a mess. At the time of the discussion to adopt the euro many pointed out that while America had a good model, “Europe fell far short of that model”. Krugman p173 Stiglitz p30 is equally scathing in stating that there was no “…political or institutional arrangements to make it work, and they will pay a high price for that failure”. I think we can all agree they are.
Moreover, it’s not just Greece that’s in trouble: Ireland, Portugal, Spain, Cyprus and Italy are trapped in the same bog. These nations have opted to wield the axe and cut the life blood of so many families by cutting jobs by the thousand, cutting welfare, lowering wages and refusing to increase the minimum wage and allowing privatisation which entails job cuts.
Ha-Joon Chang p105 therefore concludes, “With the austerity budget, the prospect for economic recovery in many of these countries is dim”. That they might even face a ‘lost decade’ as Japan suffered in the1990s and Latin America 1980s. The point is supported by Krugman p186, “…deficit countries have been required to impose…draconian…spending cuts and tax hikes—programs that push them into deeper slumps…” Krugman p42 suggests that the ‘Institution’ should look at the work of past economists e.g. John Maynard Keynes, Irving Fisher and Hyman Minsky to find an alternative to the neoliberal austerity package.
The IMF, the World Bank and the Federal Bank of the USA are commonly referred to as the Washington Consensus as these are the guys pushing the neoliberal model, free trade and globalization. Rodrik p171 opines that it is a “damaged brand” and has abundant evidence to support his statement.
The role of the IMF is quite confusing:
- In the years 1978 – 2009 the IMF found 173 cases of fiscal austerity in advanced countries, “And what they found was that austerity policies were followed by economic contraction and higher unemployment”. Krugman p237
- In February 2010 the IMF document Rethinking Macroeconomic Policy, suggested that central banks such as the ECB in Europe “might be better to aim for 4% inflation rather than the 2% or less that has become the norm for ‘sound’ policy”. A policy of ‘groupthink’. P161
- In 2011 a study by the IMF found that inequality in income affects the economy on the demand side and suggests that ‘reduced inequality’, the reverse of austerity, can lead to sustained growth. Stiglitz p114
The conclusion drawn by Stiglitz p288 is that, “The worst myths are that austerity will bring recovery and that more government spending will not”. Support comes from the Organisation for Economic Cooperation and Development (OECD) “…income inequality has a sizeable and statistically negative impact on growth”. Guardian 14/12/09
Nonetheless we find the IMF as part of the ‘Institution’ that is promoting austerity in Europe. Who are the faceless that they can disrupt the lives of millions and simply walk away with their own pockets filled? Stiglitz p290 condemns them as akin to blood letters of the Middle Ages who cut to release bad blood and when the patient didn’t recover argue that more of the same was needed. They are fixed in their opinion. Groupthink!
“Groupthink is one of the most dangerous traps in our decision-making. It’s particularly likely because it taps into our deep social identification mechanisms – everyone likes to feel part of a group – and our avoidance of social challenges. But consensus without conflict almost always means that other viewpoints are being ignored, and the consequences of groupthink can be disastrous”. (p137)
Dr Nicky Hayes, Understand Psychology
A telling point by the author comes with the observation, perhaps tongue in cheek, “…our understanding of what it is and how it happens doesn’t seem to stop politicians and others from doing it”.
The Greek people were not alone in rejecting austerity the Netherlands and France voted out pro-austerity parties in 2012. A year later the Italians did the same. Chang (p106) It will be interesting as other elections come up how the people will respond but will it make a difference. The ‘Institution’ has set its parameters and seems unlikely to budge. Can people power move them? Or are we powerless against the ‘bureaucratic order’. He’s Here. Are we witnessing the start of the overt rule by the faceless? Democracy, write it in your diaries for your grandchildren to read.
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