Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Tuesday, November 01, 2011

I'm Sick of the Greeks!

I have often blogged or commented about my opposition to direct democracy. Usually, my ire is directed at Prop 13 and other examples of how direct democracy undermines good government in California. But today I'm going to direct my disapproval at the proposal of the Greek Prime Minister, George Papandreou's, that the EU debt deal be subjected to a popular referendum in Greece. In particular, Mr. Papandreou, a social democrat from the PASOK party, is arguing that since the deal requires further austerity measures in Greece, he cannot implement them without the mandate of a popular referendum. I shall make three arguments against this step. The first is institutional: that Mr. Papandreou could in fact implement these measures immediately. The second is practical: that the average Greek citizen is not qualified to understand the implications of rejecting this plan and is even unlikely to understand which alternatives are genuinely viable. The third argument is moral: that since a significant contributing cause of the crisis is the widespread tax evasion of ordinary Greeks, they do not have the moral authority to plunge the entire European Union and the world with it, into another Great Recession.


Greek institutions are exceptionally centralized. Policy implementation in Greece, when it happens, is a relatively straightforward process. Most policies are implemented under the supervision of local prefects appointed by the interior minister. The interior minister is appointed by the Prime Minister and since Greece is nearly always governed by a single party government, Prime Ministers are the top of a highly centralized chain of command within the bureaucracy. There might be a legislative problem. Mr. Papandreou's party have a very slim majority and there have been resignations. One might suggest that this could prevent Mr. Papandreou from enacting the necessary legislation. However, the main principles of the austerity measures are in line with the typical agenda of the center right. As it happens the only serious opposition party in Greece is a center right party, New Democracy. Surely some deal could be struck that would allow cooperation between both parties. Indeed, several PASOK members of parliament have called for a grand coalition of national unity between the two major parties to do exactly that. The only reason a referendum is "necessary" is because Papandreou is trying to avoid getting the political blame for painful austerity measures.

So why is it more practical for this be done by a representative legislature instead of a referendum? There a three reasons for this. First, a referendum by its nature can only be a straight up or down vote on a given proposal. Negotiations and amendments, even minor ones, are not possible. A legislature allows for nuance and flexibility that may be critical in a time of monumental economic crisis. Second, voters cannot be expected to understand the complexity of all policies. One should not expect the average voter to understand the enormous complexity of a debt restructuring program that involves numerous national governments in Europe, North America and beyond along with global intergovernmental organizations like the International Monetary Fund. Third, if a majority of Greek voters reject the restructuring package out of a reluctance to accept the pain of the austerity elements, it would almost certainly provoke a disastrous financial tsunami on the order of the 2008 financial collapse. The Greek voters simply cannot be relied upon to understand the consequences not only for their own country but for the world if they indulge in some emotional populism in the form of this referendum.

But why, you may well ask, should a democratic society be expected to accept massive economic pain (and it will be painful) without being given the chance to vote for their own interests? Normally, I'd be quite open to this line of reasoning. However, the Greek situation is one of their own making. International banks did not force the Greek government to neglect the training and staffing of their tax collection authority. International banks did not force individual Greeks to take advantage of that lack of tax collecting enforcement by engaging in widespread tax evasion. As I have said in other blog entries that raising taxes is not a viable option because the Greek tax collection capacity combined with the ubiquitous tax evasion means that raising the nominal tax rates will simply change the text of the tax laws that everyone is ignoring. It won't actually generate more revenue. The Greek people, politicians and bureaucrats brought this catastrophe on themselves and the rest of us. They should NOT be given a veto over how the world decides to fix the mess.

There is plenty of pain being shared around the world in this restructuring. German tax payers will be paying off Greek pensions for a generation or more as it is. German taxpayers are also putting up additional emergency funds to cover future problems should the debt crisis spread to Italy or Spain. French banks are going to write off enormous portions of the debts Greek borrowers owe them. The Italian parliament just approved austerity measures of their own to stave off a similar crisis emerging in that country. Ireland has been living with these austerity policies since 2009. For the Greeks to now sabotage this plan is adding insult to the injuries already being endured around Europe! Enough! Mr. Papandreou should enact this law NOW. And if it means his political career ends after that, so be it!

11 comments:

USWest said...

I agree with RBR. The Greeks are just irritating now. It's time for them to straighten up, pay their dues and clear their debt. They've procrastinated long enough. After all, had it not been for the funds send to Greece by the EU over their years, this crisis would have probably surfaced much sooner.

Greece was never observant to the criteria for joining the EU to begin with. This is a great article from Der Spiegal on this very issue.

http://www.spiegel.de/international/europe/0,1518,676634,00.html

Basically, Greece has eaten at the troth too long. Time to barf it up.

Anonymous said...

The Greek people are not responsible for the debts of their corrupt elites.

The bankers that are in bed with the political class are criminals who seek to enslave entire nations.

Raised By Republicans said...

That's a good point about how Greece has been a net beneficiary of EU agricultural subsidies and structural funds for decades. It's also arguable that Greece has not been a particularly good implementer of EU law (but then Italy, France, Belgium and Luxembourg are as bad or worse at implementing EU law depending on the measure).

The problems in Greece are certainly exacerbated by the decisions of a series corrupt governments. However, it would be extremely misleading to absolve the Greek population at large of complicity. Tax evasion is a major contributing factor to the crisis and is a major impediment to resolving it smoothly. There is no global capitalist conspiracy of bankers enslaving the Greek people and making them cheat on their taxes. Nor was it a global banking elite that made the Greek population become dependent on absurdly young retirement ages with benefits packages that the existing tax base in the country could not sustain.

Finally, although private banks and financial institutions (like Goldman Sachs and several big French commercial banks) conspired with the government in Greece to cover up much of the debt while continuing to make ill advised loans to them, the 50% "haircut" though which they are forgiving half of debts the Greek government owes them argues against the idea that the banks are somehow robbing Greece or the Greek people here. On the contrary, the big banks are taking a big bath on this.

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