What’s a Grecian Government Urn?

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James K

James is a government policy analyst, and lives in Wellington, New Zealand. His interests including wargaming, computer gaming (especially RPGs and strategy games), Dungeons & Dragons and scepticism. No part of any of his posts or comments should be construed as the position of any part of the New Zealand government, or indeed any agency he may be associated with.

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51 Responses

  1. Avatar Burt Likko says:

    If we (the USA) don’t cut spending now, then will it be easier for us to do that (politically speaking) later when times are better? I think it will be harder.

    How did New Zealand escape its analogue to contemporary Greece’s dilemma?Report

    • Avatar James K in reply to Burt Likko says:

      We engaged in a package of fiscal and economic reforms collectively referred to as Rogernomics, named for Roger Douglas, the Minister of Finance who designed and implemented them.

      Rogernomics was implemented by the newly-elected Labour government (note Labour is the major left-wing party down here), which came into power after Robert Muldoon, a Nixonian conservative, got drunk and called a snap election. Since the government didn’t have to disclose its financial position before elections in those days the new government didn’t know how much trouble it was in until it actually got into power. Basically, they had two options: go begging to the IMF (which would merely delay the inevitable) or emergency austerity. The result was one of the sharpest contractions in government ever seen outside Eastern Europe. The government payroll was halved, our system of tariffs and subsidies was dismantled, our currency was floated, and devalued sharply. The Reserve Bank was granted greater independence, our confusing network of sales taxes was converted into a simple uniform rate and large swaths of government-owned industries were converted into companies and sold to the highest bidder.

      This al happened mostly within about 3 years and in the face of significant opposition, both within the government and from the public. The result was a purge of Labour that resulted in Douglas and many of his supporters leaving the party, and a realignment of our left-right ectrum akin to the Dixoecrats becoming Republicans.

      Our economy went into a funk it took 10 years to come out of. All in all, probably the best-case scenario..Report

  2. Austerity? Anarchy. The very left UKGuardian:

    Southern Europe fears summer of violence

    http://www.guardian.co.uk/world/2012/may/18/southern-europe-fears-summer-violence

    Protests, strikes and sit-ins have long since become the norm for Greece, Italy and Spain. But some authorities are warning that rage is on the verge of tipping over into serious violence, and concerns are mounting over the knock-on effect on tourism, a vital source of income for southern Europe.

    In Italy, military, police and intelligence officials are hammering out an emergency security plan for combating violent anarchy in the wake of a recent spate of violent attacks on individuals and institutions.

    “The risk of escalation exists,” said interior minister Annamaria Cancellieri, adding that the government was prepared to send out the armed forces to protect sensitive targets if necessary.

    The Equitalia tax offices in charge of collecting unpaid debts seems to be taking the brunt of public anger. Laid-off Fiat factory workers recently occupied a tax office in Sicily, and protests outside the Naples office turned violent. Several petrol bombs were thrown against a tax office in Tuscany last week.

    Last week a small but violent group of Greek and Italian anarchists claimed responsibility for kneecapping the head of Ansaldo Energia, a nuclear engineering firm owned by Finmeccanica. Roberto Adinolfi was shot in the leg as he left home for work last Monday. Authors of the letter claiming responsibility said they were the Olga cell of the Federazione Anarchiste Informale (FAI). The group said it was named after Olga Ikonomidou, one of eight anarchists jailed in Greece. They said there would be seven more attacks to avenge the jailing of the other activists.

    Government officials began heightening security at approximately 400 “sensitive” locations this week, with 24-hour surveillance initiated at Finmeccanica and Equitalia tax offices, as well as for several at risk individuals. Another 1,500 soldiers were detailed to maintaining public order, bringing the total to more than 4,000. As well as corporate offices, they will protect the contested high-speed train (TAV) line under construction between Turin and Lyons, according to Corriere della Sera.

    In Spain, protests have largely been peaceful, with the exception of masked radicals in Barcelona who smashed windows and lit street fires during a general strike in March. But the conservative government is taking no chances, promising to tighten up laws on public protest. Street violence, it claims, will send the country’s already dangerously high bond yields soaring.

    Proposals for toughening up laws include making trades unions, associations and political parties pay for any vandalism by its members during protest marches.

    Sanctions for “disobeying public authorities” (meaning the police), are also set to be increased.

    In Greece, bursts of anarchy and civil disobedience have sporadically infected the anti-austerity protest movement. Far from subsiding, it shows every sign of growing as Greeks prepare to head back to the polls in a climate of deepening political division and uncertainty.

    Authorities admit they are worried. Athens, once one of Europe’s sleepiest capitals, now resembles a garrison town with riot police stationed on every corner. The police force is the only part of the public sector that is expanding.Report

  3. Avatar Stillwater says:

    I don’t mean for this question to minimize some of the real lessons being learned from Greece right now, but to what degree would this problem have been avoided if the Greek government actually collected revenue from it’s highest tax brackets? From what I can gather, collecting revenue was the (or at least a) central problem leading to the huge deficit and downgrades. If it’s part of the problem, then it’s part of every other country’s prevention/solution, no?Report

    • Avatar Stillwater in reply to Stillwater says:

      That is, the solution isn’t merely to cut spending.Report

      • Avatar Scott in reply to Stillwater says:

        Stillwater:

        How about if the Greeks had collected taxes from any tax bracket. Apparently avoiding paying ones taxes is the national past time right after demanding that the gov’t pay for everything.

        James K:

        Frankly, I say let them leave any let them the Euro and stew in their own third world country. They are a bunch of leftists that borrowed money to fund the welfare state and now don’t what to pay it back.Report

        • Avatar Stillwater in reply to Scott says:

          If revenue and outlays have to balance, there are a bunch of ways to achieve that. The trick is finding an optimal balance, right? But failure to collect any revenues appears to introduce an element which makes finding that balance a bit more challenging. In a fun way!Report

          • Avatar Liberty60 in reply to Stillwater says:

            Hmm.
            So if the Bush tax cuts were allowed to lapse, and we extricated ourselves from ruinous foreign wars, make modest adjustments to defense and Medicare spending, we could avoid a Grecian style meltdown?

            Just crazy enough to work!Report

            • Avatar Scott in reply to Liberty60 says:

              Liberty60:

              If the “Bush” tax cuts are so bad then why did Barry agree to extend them. Since Barry extend them why aren’t they now the “Barry” tax cuts?Report

              • Avatar Liberty60 in reply to Scott says:

                Good question. Why were they extended anyway?

                And since we are facing a deficit that will kill us all, shouldn’t we accept that we can’t afford them?

                Austerity, sober realism, and all that.Report

              • 2010:

                NEW YORK (CNNMoney.com) — With income tax rates set to go up on Dec. 31, Congress is hotly debating what to do next. But most economists agree: Keep them where they are.

                One option, to let the tax cuts passed during the Bush administration expire for only the richest 3% of taxpayers while renewing them for everyone else, is popular among Democrats and the choice of the Obama administration.

                But a majority of a panel of leading economists surveyed by CNNMoney.com said that the tax cuts should be renewed for everyone.

                http://money.cnn.com/2010/09/19/news/economy/what_to_do_economists_survey/index.htmReport

              • Avatar Morat20 in reply to Scott says:

                Calling him “barry” really, really makes it hard to take you seriously.

                But hey, my memory stretches back a whole year or two, so I can tell you: Because it was the only form of economic stimulus he could get Republicans to agree to when the economy was crap.

                Then again, they only sunsetted in the first place as a GOP gambit to avoid disclosing their true costs. Seriously, the Bush tax cuts were just a mess from the get-go, and any “fiscal conservative” who voted for them should be tar-and-feathered and never allowed near a budget again.Report

              • Avatar Tom Van Dyke in reply to Morat20 says:

                Calling the president “Barry” suggests whatever follows is unlikely to be even-handed or incisive.

                And while I’m at it, it’s appalling that a well-respected history scholar had/has a blog called “The Smirking Chimp” [after President You-Know-Who] is still well-respected.

                http://withintheblackcommunity.blogspot.com/2010/02/left-wing-professor-smirking-chimp-blog.htmlReport

              • Avatar Liberty60 in reply to Morat20 says:

                Well Mr. Smarty-Pants, it was that massive cut in government revenue that provided funds for the Iraq and Afghan Wars, the Prescription Drug benefit and the creation of Homeland Security Department.

                Trust me, I read it on RedState.Report

    • Avatar James K in reply to Stillwater says:

      Certainly, you can have a sustainable high tax, high spend country (though things start to get dodgy if marginal taxes get too high). Of course you have to consider how much tax your population is actually willing to pay.Report

  4. Avatar John Parker says:

    @Burt – as a New Zealander I can fill you in on some of the details. The Labour Government slashed welfare spending and fully privatized a large number of state assets (railways, telecoms, airports). They also slashed a a lot of agricultural subsidies. The result was a deep recession which lasted well into the early 1990s, with corresponding rises in child poverty, unemployment, etc. It was a painful time, and not looked on fondly by the population who had to live through it.

    The privatized businesses eventually failed under their foreign owners and had to be bought back by the NZ Government in the late 1990s / early 2000s.Report

    • Or not. NZ before Rogernomics seems a statist absurdity.

      “Blame Rogernomics then let Nanny make it better”
      By Deborah Coddington- NZ Herald

      http://www.nzherald.co.nz/economy/news/article.cfm?c_id=34&objectid=10747846

      But Easton and Bertram are quite right. All this choice and freedom is killing us. We should repair to Nanny Muldoon’s policies with haste.

      By law, only four trading banks were permitted. They opened at 10am and closed at 3pm. There were no ATM machines. If you wanted cash for the weekend, you withdrew money on Friday before the bank closed. Interest was set on savings accounts at 3 per cent.

      To send money overseas you bought money orders from the Post Office. Above a certain amount “about $5 a day” you applied to the Reserve Bank. Same for international magazines – you filled out a form, sent it to the Reserve Bank, and got permission from Nanny to send funds offshore.

      No lives must be risked in the spending of this money. And marginal tax rates will go back to 66 per cent, kicking in at $30,000.

      Why stop the death toll culpability at 29? What about those killed while driving to the shops on weekends? Shop trading hours were finally liberalised in 1989. Surely we can blame Rogernomics for that?

      We should return to Nanny-enforced leisure time, when weekends were for washing the car and family fun. Friday night was late-night shopping – a great privilege (some might say it was blighted by bodgies and widgies). And we were allowed, by Nanny, one special late-night shopping near Christmas (when dads disappeared to pubs.

      Rogernomics should be blamed for the 25 drivers killed while using their cellphones. These are weapons of mass destruction. Douglas liberated telecommunications.

      In 1985 the state-owned Post Office stockpiled 2000 spare desks and chairs, and a two-year supply of dial phones nobody wanted.

      Before you got a new phone you had to prove the one you had was beyond repair – but that was okay because nobody died and the phones didn’t leak.

      When the state owned our assets, the Post Office landed 13,000 faulty telephones, and a further $30 million of PABX equipment stayed in storage until someone felt like fixing the software. The numbers of people on waiting lists for telecommunications services nearly doubled in the three years to 1985, from 8000 to 15,000. But nobody overseas laughed at us.

      How comforting were the arms of Nanny, pre-1984, when she decided what we could and couldn’t buy. Government chose who could have import licences, and which local manufacturers should be protected.

      It doesn’t matter if New Zealand families can’t afford cheap clothes and shoes for their children. That’s not the point. It’s Nanny’s job – as these two erudite economists will happily point out – to protect the privileged, not the consumers who want to shop around, or go online, for cheaper goods.

      Competition hurts producers, manufacturers, banks, supermarkets – goodness, even those selling milk and vegetables. Here, let Nanny put a plaster on it.Report

      • Avatar John Parker in reply to Tom Van Dyke says:

        I’m not saying New Zealand was a socialist paradise before Rogernomics (I was born in 1981, to a solo mother who worked three jobs in order to buy a house, and put my sister and I through college debt-free).

        I’m just saying that, as James K notes above, the reforms were pushed through in extreme haste, against the will of the majority of the population, and caused a lot of unnecessary hardship to those at the bottom of the socio-economic ladder (as economic and welfare reforms always seem to). If New Zealand living standards hadn’t been reasonably high to begin with, widespread social unrest might have been the result, as looks likely in Europe.

        Also, citing Deborah Coddington as any kind of reputable source shows a certain lack of familiarity with the New Zealand media landscape. She’s on par with Fox News pundits in terms of credibility.Report

        • Yes, I noticed your chattering class has it in for Deborah Coddington upon further review. When someone’s Wiki entry has more criticism than substance, we know the left have been busy little bees.

          This does not mean her ridicule of the NZ nanny state isn’t accurate, of course. In fact, since you yrself are born in 1981, you seem to be steeped in the chattering class wisdom.

          It does appear that the changes were radical, and as a Burkean conservative, I don’t approve of radical change. However the unwillingness of the populace appears questionable: it’s the sort of opposition of the “I told you so” sort that is painted as much more coherent in retrospect than it was in reality.

          And the historical revision of the revisionism is interesting, that NZ’s stability today is unthinkable without the radical Rx that took place in the ’80s.

          Cheers.Report

        • Avatar James K in reply to John Parker says:

          Hi John, good to see another kiwi at the League.

          I’d dispute the “unnecessary” part of the suffering to the poor. The government was out of money, and the use of government departments as jobs programmes was a large part of the reason why. Sure, ideally these reforms would have taken 10 years instead of 4 and been accompanied with transitional benefits to minimise the harm to the freshly-unemployed, but there wasn’t time or money left to do that.

          As for the state assets, most of them are still in private hands, and the ones that were repurchased are still run like for-profit companies instead of Gliding On style government departments (of course not even government departments are run Gliding On style these days), plus I never did buy the justification for buying them back. Mind you, I’m not keen on how Douglas went a bout selling them, I would have preferred more of a Thatcher-esque approach where the share were mostly sold at discount in small parcels to New Zealanders, but that would have yielded much less revenue, and the government desperately needed money.

          If Muldoon had been prepared to fix some of these issues over a long period it would have been better for everyone. Unfortunately a sad truth of politics is that while reforms are best accomplished during good times, they are inevitably left until the last minute, which almost always comes during bad times.Report

          • Avatar Tom Van Dyke in reply to James K says:

            Aye, JamesK: When Greenspan was complaining about the market’s “irrational exuberance,” a tax increase would have been just the tonic. But nobody [Dem or GOP] wanted to spoil the party.Report

          • Avatar John Parker in reply to James K says:

            Thanks James – been a lurker on here for a while, but I thought I should chip in on a subject where I actually had something to contribute 🙂

            Agree with your comment on politics – someone should write a thesis on ‘systemic procrastination’ at the nation-state level some time.Report

  5. The lesson of Greece is: Don’t let non-functional criminal mismanaged states into your monetary union.Report

  6. Avatar Morat20 says:

    I find Italy and Spain to be more interesting cases, insofar as they weren’t a governmental basket case before the crises.

    As for Greece, they really have two choices:

    1) Austerity for now and everymore, driving themselves deeper into the hole with no light at the end of the tunnel. Cutting spending will shove the economy deeper into the hole, cutting reciepts further leading to more austerity….a nasty little cycle that should be familiar to anyone who has studied history. (Or, to those of us merely old enough — remember stagflation? Sorta like that, but a lot worse). Eventually it would end, but only once enough of it’s neighbors got their engines roaring so much Greece got sucked along despite itself.

    2) Issue their own currency, devalue the living snot out of it, and face years to a decade+ of bad economic times. With, however, a light at the end of the tunnel as at LEAST the pain would be eating their debt away instead of making it worse. (Think: Sorta like how stagflation was fixed. AKA: Making crap a lot worse for awhile, but it led to a path out of the mess.)

    Anyhoo, I think if you want to talk economics we should start with unemployment. The numbers from around Europe are staggering. The real question should be “How the heck can we possibly recover with all these unemployed dragging us into the abyss? We have GOT to get these guys jobs.”Report

    • Nob Akimoto Nob Akimoto in reply to Morat20 says:

      The overall European situation shows how bad things get when you lose control of your monetary policy.Report

    • Avatar Scott in reply to Morat20 says:

      Morat20:

      Sorry but I must disagree. The link below from a 2011 Atlantic article details why Italy is in this mess. It has been a basket case for some time. Maybe now that Berlusconi is gone they can change but I think it will be too little too late.

      http://www.theatlantic.com/business/archive/2011/11/4-reasons-why-italys-economy-is-such-a-disaster/248238/Report

    • Avatar Will Truman in reply to Morat20 says:

      Scott actually sort of beat me to it. Italy was discussed in my Constitutional Design class in college in the How Not To category. Arguably, it shouldn’t even be a singular country.Report

    • Avatar James K in reply to Morat20 says:

      It’s not quite that stark Morat. Modern Keynesian theory predicts that the de-stimulative effect of cutting deficits is temporary, and some empirical study suggests the effects may start wearing off in 18-24 months. So the downward spiral you identify would be self-arresting, eventually.

      Still option 2 is better than option 1, though Greece would still need austerity in that scenario too.Report

      • Nob Akimoto Nob Akimoto in reply to James K says:

        I think the macroeconomic effects of option 2 are probably better for Greece IF they can keep their public order intact.

        Specifically a highly inflated drachma would make Greece much more attractive to European tourism since the Euros that would be spent at cost in say Cyprus or Southern France or Spain would go much much further in a Drachma’d Greece. And tourism (outside of government spending) was one of the big drivers of Greek economic growth.

        Of course poor Cyprus would suffer terribly as a result.Report

      • Avatar Morat20 in reply to James K says:

        I think you’re neglecting the fact that in addition to the de-stimulative effects of austerity on a recessionary economy, Greece (as are all the other ‘austerity’ countries) is also dealing with a monetary policy being driven in exactly the wrong direction.

        Hence the spirial — it’s not just fiscal anti-stimulus, it’s constant monetary anti-stimulus with absolutely no hope the central bank pulls it’s head out of it’s nether regions.

        Greece is at an ugly intersection between counter-productive monetary policy, counter-productive fiscal policy, and a series of birds coming home to roost. And they’re all cycling through each other, driving downwards.

        It could solve one easily. Perhaps two simultaneously. But all three at once? I think that’s a bridge too far.Report

  7. Avatar Anderson says:

    Good bloggingheads on this topic too, with Ygelsias and Robert Farley (http://bloggingheads.tv/videos/9682). They bring up the very important points that 1) Alot of Greece’s problems are not the fault of EU/IMF austerity. Rather, the Greeks led themselves down this road (not collecting taxes, excess defense spending, elaborate debt restructurings via Goldman Sachs, too many gov’t jobs) and the true mistake of Europe was not to call them out on it earlier. and 2) The EU is a liberal project worth defending. They note that some on the American left have come to prefer Greece over the “austerity-driven” EU, which makes no sense. After all, EU membership is what gave so many poorer countries access to the wealth an open market provides. Say, many former USSR states like Slovenia.

    Anyway, the main thing that bugs me when I hear TV debates about Greece is this notion that it’s somehow austerity vs growth. Greece really has no choice now. They reject austerity, they lose their creditors (which is really all their economy has now.) Or, even worse, they leave the EU and have to suffer through an even more painstaking austerity. Listening to the far-left party (Syzira or something?) talk about the need for jobs, jobs, jobs drives me nuts. It’d be like the people of Jefferson County AL (http://www.bloomberg.com/news/2011-11-09/alabama-s-jefferson-county-files-for-u-s-s-biggest-municipal-bankruptcy.html) demanding the county government build more roads for jobs when they had no money left….If eventually all of your general fund comes from outside creditors, you’re fucked. Whether you’re Greece or Jefferson county.Report

    • Avatar Stillwater in reply to Anderson says:

      Have you read the Matt Taibbi stuff on Jefferson county in RollingStone? He’s been on that for a couple years now. Amazing stuff.Report

    • Avatar damon in reply to Anderson says:

      Actually, it was BOTH the EU and Greece’s fault. Greece for what you said and the EU for accepting them into the union with their cooked books. That was done for most of the Med countries.

      I support Greece in pulling out and a 100% default. It’d be what Euroland deserves for letting them in in the first place, and as was said before, there’d be the light at the end of the tunnel.Report

  8. Avatar Pyre says:

    Option 4: Pull an Iceland.

    1) Go bankrupt.

    2) Give the finger to everyone who says “This is how things are done and, by God, you will follow our system.”

    3) Rebuild your economy to the point that your bonds are investment-grade as opposed to Greece’s Junk-bond status.

    4) Profit!Report

    • Avatar North in reply to Pyre says:

      Greece isn’t Iceland. What happened in Iceland was that a fundamentally sound economy got driven onto the rocks by some really radical and crazy financial shenanigans in their banking sector. What is happening in Greece is that a fundamentally rotten and non-functioning state has been exposed as such by the receeding tide of a recession. People in Iceland actually pay their taxes for example.

      A better contrast to Iceland would be Ireland. Both of those countries experienced similar problems (though Irelands banking mess was something the government foolishly volonteered for). Ireland has played by the rules that were laid out; Iceland in contrast did, as you note, essentially give them the finger. In both cases investors are quite aware that beneath the financial brou-haha there’s an investment grade state.Report

      • Avatar Kimmi in reply to North says:

        Ireland, the south carolina of europe. You want to invest in it?Report

        • Avatar Jaybird in reply to Kimmi says:

          Perhaps a liquor store…Report

        • Avatar North in reply to Kimmi says:

          I only hate the Irish when it’s meritless, harmless and part of my heritage. On the numbers they’re a good place to invest.

          Economically speaking right up to and after this banking disaster (*note* a lot of Irish politicians and bankers should have ended up hanging from the lamp posts of Dublin over the banking fiasco) they’ve been a pretty decently run country. Things were coming along pretty nicely and I expect that in time things will resume going nicely. I wouldn’t be afraid to invest in them once this banking insanity is resolved.

          An important thing to note: what happened in Ireland and Iceland was basically exotic to those countries. You had an unusual financial situation that grew to an unusual size and blew up in an unusual way (and in Ireland’s case you have some politicians who acted with unusual stupidity/cupidity with their bankers). This has been horrible for their economies and their businesses but once this black swan is over and done with underneath they are an industrious people with solid fundamentals and excellent capacity for economic development and a good climate for business.

          Greece on the other hand is anything but unusual. You have a government utterly laden with graft, corruption and the worst kind of politics as usual. You have an electorate hopelessly addicted to both not paying taxes and collecting insane benefits from either the government or government owned companies. Under this current disaster is a non-functioning government and a society that’s collectively lost their minds.

          If economic agnostic Jesus descended from agnostic heaven (or Germany), waved his magic wand and made all these three countries problems disappear then you can be pretty confident that Ireland and Iceland will be in the black and making money hand over fist in fifty years. In fifty years the Greeks would be right back where they started (assuming that agnostic Jesus also made the markets forget that the Greeks are out of their mind).Report

  9. Avatar Jaybird says:

    From what I understand, they can afford to bail out Greece. They can’t, however, afford to bail out Greece *AND* Italy *AND* Spain… and if they bail out Greece, Italy and Spain will demand similar treatment.

    The question comes whether Greece would be better off today if they had been kicked out of the Euro back when stuff first started smelling fishy… because there is an air of inevitability here.Report

    • Avatar North in reply to Jaybird says:

      The answer is Greece would be as bad, if not worse off, if they’d been given the boot. Certainly the rest of Europe would be in a worse boat since a prompt booting would have probably collapsed the Eurozone. They’d be rioting in Spain and France, there’s probably be a coup in Italy, Greece would probably be in some kind of civil war and unemployment would be 15 plus % in Germany.

      Oh and in America we’d be in a double dip and Romney would have had a much more difficult primary.Report

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