Greek Bailout Counterpunched

We now and then – time permitting – take a look at what we regard as the leading internet publication of America's Left (if such a labeling is actually appropriate in this case), Counterpunch. Why would we do that? Well, for one thing there is one area where we are usually in full agreement with its editorial line, namely the issues of imperialism, war and everything related to it. We actually came to know Counterpunch through links from the libertarian site 'Anti-war.com'. Anyway, we haven't looked at it in quite a while, due to the qualifier mentioned above ('time permitting'), until a friend sent us a link to Mike Whitney's article 'A Death Sentence for Greece'.

The final paragraph of the article largely meets with our approval; it reads:

 

„What Greece needs is a radical restructuring of its debt. It needs to wipe out bondholders, recapitalise its banks, and increase fiscal support until the economy gets back on its feet. Another loan package won’t help to achieve those goals. It will only delay the day of reckoning. It would be better for everyone, if the country defaulted quickly and began the process of digging out now rather than later.“

 

If there is anything to quibble with there, it is the innocuous sounding phrase 'increase fiscal support'. Greece is bankrupt. It can not 'increase fiscal support' and it would be a grave mistake to do so anyway, as even more scarce resources would end up wasted. However, we certainly agree with the main point, namely that a default would be the appropriate course. Such a default would hit the public sector lenders to Greece just as much as the 'non-default' has hit private sector lenders.

The public sector lenders have only themselves to blame: they should never have thrown money at the problem in the first place.  Their intention was to prop up unsound credit because they don't want people to realize that the entire modern-day welfare/warfare state system of the industrialized West is de facto insolvent. Moreover, this insolvency includes the quasi-socialistic fractionally reserved banking system, which could under no circumstances actually pay its depositors if a system-wide run on the banks were to occur (as things stand, less than 5% of the deposit money in the euro area was actually covered by standard money even before the ECB recently halved reserve requirements to a laughable 1%).  

Such an admission that the system is insolvent would hasten the process of bankruptcy, something no politician or bureaucrat wants to experience on his watch.

However, if you read through the Counterpunch article in its entirety, Whitney's main complaint seems to be that the 'troika' demands that Greece implement the type of reforms that might actually help it to return to economic growth. Admittedly it is humiliating for Greece's political leadership to be told what it has to do. Greece's sovereignty has basically been rescinded.

However, many of the demands Whitney criticizes are actually noteworthy for being quite  reasonable. If we were a Greek citizen who is not an insider belonging to the government and union-led circle of graft and corruption, we would fervently pray for their implementation.

For instance Whitney lists the following points from the EU memorandum to Greece (and proceeds to criticize them as an attempt to open Greece up to robbery by greedy capitalists):

 

1. “lift(ing) constraints for retailers to sell restricted product categories such as baby food.”

2. “The Government stands ready to offer for sale its remaining stakes in state-owned enterprises, if necessary in order to reach the privatisation objectives. Public control will be limited to only cases of critical network infrastructure.”

3. “The Government will neither propose nor implement measures which may infringe the rules on the free movement of capital. Neither the State nor other public bodies will conclude shareholder agreements with the intention or effect of hindering the free movement of capital or influence the management or control of companies. The Government will neither initiate nor introduce any voting or acquisition caps, and it will not establish any disproportionate and non-justifiable veto rights or any other form of special rights in privatised companies.”

4. “Given that the outcome of the social dialogue to promote employment and competitiveness fell short of expectations, the Government will take measures to foster a rapid adjustment of labour costs to fight unemployment and restore cost-competitiveness, ensure the effectiveness of recent labour market reforms, align labour conditions in former state-owned enterprises to those in the rest of the private sector and make working hours arrangements more flexible. This strategy should aim at reducing nominal unit labour costs in the business economy by 15 percent in 2012-14. At the same time, the Government will promote smooth wage bargaining at the various levels and fight undeclared work.”

5. „Implementation of law 3982/2011 on the fast track licensing procedure for technical professions, manufacturing activities and business parks and other provisions”.

6. “In line with the policy objectives of Law 3919/2011 on regulated professions, the Government removes entry barriers to the taxis market… in line with international best practice.”

 

(we've numbered the list to make it easier to refer back to it below)

To the latter point (6), Whitney says, with great consternation:

 

„So even taxi drivers get a spot at the trough? Doesn’t that seem a bit irrelevant?

None of this has anything to do with helping Greece. It’s just corporate pillaging gone haywire. Greece is a big pinata that’s just been cracked open and everyone is pushing and shoving to grab their fistful of candy.“

 

He apparently doesn't realize that it is indeed relevant and that he has things completely the wrong way around. Contrary to what he says, it is the current practice in Greece that 'gives taxi drivers a spot at the trough', because the licensing regulations and costs are such that they make competition impossible. This may be great for incumbent taxi drivers, but it is bad for everybody else in society: the fact of the matter is that consumers suffer as long as taxi drivers are allowed to keep their spot at the trough.

It is the same with all his other complaints. Contrary to what he implies, these demands are the only sensible thing that has emerged from the whole bailout mess so far.

To point 1): again, the current constraints on retailers regarding the sale of baby food are designed to hinder competition. There is no other reason for their eistence. They create vast opportunities for graft, as do all the other things Whitney thinks the Greeks should leave as they are.

To point 2): Whitney as a good lefty thinks privatization is bad and amounts to an invitation for corporate highway robbery. Now, we would agree that the privatization process must be implemented with great care – as we know from Yeltsin's privatizations in Russia, as long as the government is still involved, the process can be abused to the point of constituting outright theft.

Other than that, we would note though that Greece's state-owned companies  are wasting tax payer money on a truly staggering scale and exist mainly to give the political class the means to distribute favors among its supporters. All the militant unions that support (or used to support) PASOK are installed at these state-run companies and have been robbing tax payers blind for decades (and are now repeating the process with Greece's creditors, which the creditors understandably want to put a stop to). In return for being robbed by this repulsive clique, tax payers got sub-par services. Just as a reminder: There was a state-run hospital in Athens that employed 39 gardeners, but actually has no garden. If Whitney is really concerned about Greek citizens getting proper medical care as he avers, he should cheer the privatizations on.

To point 3): This is a sine qua non if one wants the privatization process to succeed. If government can subsequently influence the management of privatized entities, we'd be back at square one. Graft and corruption would continue unabated. Finally, investors must be reasonably assured that they can indeed move their capital freely. There is nothing untoward about that, it is after all their capital. Whitney's complaint about this point implicitly amounts to a demand that the Greek government should be free to steal whatever it wants after the privatizations.

To point 4): it should be clear that reforming the labor market to make it more competitive and more free market oriented is a key point that needs to be implemented if Greece wants to succeed economically. As everybody has by now realized, there is a good reason why Germany  has one of the lowest unemployment rates in Europe today (recall that a decade ago, Germany was known as the 'sick man of Europe'). It reformed its labor market and made it more free market oriented. It should not even be necessary to debate such things. Much of the unemployment in the regulatory democracies is institutionalized unemployment: it is a result of hampering the market economy.

To point 5): this is intimately related to point 6). In Greece, various professions are shielded from competition by a veritable jungle of licensing regulations. This retards economic growth and is to the detriment of society at large, while creating countless opportunities for corruption. It is high time something was changed and the fact of the matter is that the Greek government has so far proved incapable of doing so.

We will illustrate further below how utterly sick the current system in Greece is. It is a wonder its economy hasn't collapsed much earlier already.

 

The Nightmare of Opening An Online Business in Greece

As is the case elsewhere in the world, online business is growing fast in Greece. It is one of the areas of the economy that has experienced brisk growth in spite of the economic downturn. Ekathimerini recently published an article about the difficulties involved in starting such a business in Greece. To just name one point: the approval for the application to the FDA in the US was received by this business within 24 hours. It took 10 months to get exactly  the same approval in Greece.

The entire article is well worth reading. We excerpt a few snips below:

 

“It took 10 months, a fat bundle of paperwork, countless certificates, long hours of haggling with bureaucrats and overcoming myriad other inconceivable obstacles for one group of young entrepreneurs to open an online store.”

[…]

“An online store is more complicated than a regular store basically because of the way payments are carried out,” explained Fotis Antonopoulos, one of the co-founders of www.oliveshop.com, which sells olive oil-based products such as cosmetics, mostly to foreign markets.

“Most stores begin operating after receiving only the approval regarding their brand name, as the bureaucracy involved takes such a long time to complete that it is simply impossible to keep up with the operational costs, such as paying rent on obligatory headquarters, without making any sales,” said Antonopoulos.

Antonopoulos and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.

Once they climbed the crazy mountain of Greek bureaucracy and reached the summit, they faced the quagmire of the bank, where the issue of how to confirm the credit card details of customers ended in the bank demanding that the entire website be in Greek only, including the names of the products.

“They completely ignored us, however much we explained that our products are aimed at foreign markets and everything has to be written in English as well,” said Antonopoulos.

Eventually, Antonopoulos and his associates decided to use foreign banking systems like PayPal, and cut the Greek bank, with which they had been negotiating for three months, from the middle. “It’s their loss, not ours. We eventually solved the problem in just one day,” explained Antonopoulos.

[,,,]

Antonopoulos describes the massive difference between the treatment he and his partners received from the Greek authorities and the American Food and Drug Administration (FDA), whose approval Oliveshop.com needed in order to export its products to the USA.

“I contacted the FDA and they sent us an e-mail with directions immediately. I filled in an online form and was done in five minutes. We received the approval 24 hours after making our application.”

 

(emphasis added)

This bureaucratic nightmare is not only typical for Greece: it is encountered in many other European nations as well. Every year, hundreds of thousands of pages of new laws and regulations are created all over Europe, on the supra-national (EU), the national and provincial level, and in addition a monstrous amount of 'administrative law' is created by bureaucracies themselves (without any democratic oversight we should add).

As despicable as the 'troika' may be and as crazy as the whole bailout charade is, the demands regarding the reform of the Greek economy and the streamlining of this bureaucratic nightmare are something that Greece evidently urgently needs. This is entirely independent of the fact that a default is inevitable and that the subsidization of the current account deficits of the 'PIIGS' via the euro system's 'TARGET2' payments system is creating an ever bigger risk for savers in the surplus countries.

Whitney stresses in his article that his critique is first and foremost about what is good for Greece. As we have always pointed out, the most important thing from the point of view of Greece's citizens is that they need a light at the end of the tunnel: there has to be a prospect of economic recovery. Obviously a 'bailout' that merely serves to keep the claims of creditors current on paper and will – if everything goes according to plan – lower the public debt-to-GDP ratio to 120% in several years time is not offering  such a prospect.

However, the list of reform demands is a different cup of tea. It is what Greece would have to do anyway if the country is to have a chance to recover. The widespread idea that all that will be required to set things right is the return to a rapidly devaluing new drachma is entirely misguided. It would expropriate Greek savers to the advantage of its debtors and any advantages it would create on the export front would soon disappear due to soaring import costs and prices.

The vagaries involved in opening an online shop in Greece are symptomatic for what ails the country. These are precisely the things economic reform must do away with. The power of the country's byzantine bureaucracies needs to be broken.

Or does anyone really think that there is nothing untoward about having to send 'chest x-rays and stool samples' to the bureaucrats before one can open an online shop?

 


 
 

Emigrate While You Can... Learn More

 
 

 

Dear Readers! We are happy to report that we have reached our turn-of-the-year funding goal and want to extend a special thank you to all of you who have chipped in. We are very grateful for your support! As a general remark, according to usually well informed circles, exercising the donation button in between funding drives is definitely legal and highly appreciated as well.

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Why Greece Needs A Nudge In the Right Direction”

  • The more I read, the more I can see why men of libertarian ilk like Frank Chodorov and Murray Rothbard didn’t vote. To engage in the political process in itself, violates the ethics. In the case of an advanced mess like Greece, there are clearly no ethics that government itself can fix. The free market is going to have to do it, once the free stream of money runs out. The rest of the socialized/ponzi/racketeering world take note.

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • tintedFree Money Leaves Everyone Poorer
      Destroying Lives BALTIMORE – A dear reader reminded us of the comment, supposedly made by Groucho Marx: “A free lunch? You can’t afford a free lunch.”   Groucho dispensing valuable advice Photo via imdb.com   He was responding to last week’s Diary about the national referendum in Switzerland on Saturday. Voters will decide whether to give all Swiss residents a free lunch – a guaranteed annual income of about $30,000 a year [ed note: the initiative was...
  • French labour union workers and students attend a demonstration against the French labour law proposal in Marseille, France, as part of a nationwide labor reform protests and strikes, March 31, 2016. REUTERS/Jean-Paul Pelissier/File PhotoHow the Welfare State Dies
      Hollande Threatens to Ban Protests Brexit has diverted attention from another little drama playing out in Europe. As of the time of writing, if you Google “Hollande threatens to ban protests” or variations thereof, you will find Russian, South African and even Iranian press reports on the topic. Otherwise, it's basically crickets (sole exception: Politico).  Gee, we wonder why?   They don't like him anymore: 120.000 protesters recently turned Paris into a war zone. All...
  • offendFree Speech Under Attack
      Offending People Left and Right Bill Bonner, whose Diaries we republish here, is well-known for being an equal opportunity offender  - meaning that political affiliation, gender, age, or any other defining characteristics won't save worthy targets from getting offended. As far as we are concerned, we generally try not to be unnecessarily rude to people, but occasionally giving offense is not exactly beneath us either.   The motto of the equal opportunity...
  • cameron-doomedMoving Closer to BREXIT
      Polls Show Growing Support for a Break with the EU In the UK as elsewhere, the political elites may have underestimated the strength of the trend change in social mood across Europe. The most recent “You-Gov” and ICM pools show a widening lead in favor of a UK exit from the EU as the day of the vote comes closer.   Pro-BREXIT campaigners Boris Johnson (ex-mayor of London) and Michael Gove (UK Secretary of Justice) are in a good mood. Photo credit: Paul Grover /...
  • water houseA Market Ready to Blow and the Flag of the Conquerors
      Bold Prediction MICHAELS, Maryland – The flag in front of our hotel flies at half-mast. The little town of St. Michaels is a tourist and conference destination on the Chesapeake Bay. It is far from Orlando, and even farther from Daesh (a.k.a. ISIL) and the Mideast.   St. Michaels, Maryland – the town that fooled the British (they say, today). Photo credit: Fletcher6   Out on the river, a sleek sailboat, with lacquered wood trim, glides by, making hardly a...
  • The-answer-is-yesToward Freedom: Will The UK Write History?
      Mutating Promises We are less than one week away from the EU referendum, the moment when the British people will be called upon to make a historic decision – will they vote to “Brexit” or to “Bremain”? Both camps have been going at each other with fierce campaigns to tilt the vote in their direction, but according to the latest polls, with the “Leave” camp’s latest surge still within the margin of error, the outcome is too close to call.   The battle lines are...
  • MACAU, CHINA - JANUARY 28: Buildings of Macau Casino on January 28, 2013, Gambling tourism is Macau's biggest source of revenue, making up about fifty percent of the economy.What Could Possibly Go Wrong?
      A Convocation Of Gamblers The Wall Street Journal and BloombergView have just run articles on the shadow banking system in China.  This has put me in a nostalgic mood. About 35 years ago when I was living in Japan, I made a side trip to Hong Kong.   Asia's Sin City, Macau Photo credit: Nattee Chalermtiragool   I took the hydrofoil to Macau one afternoon and the same service back early the next morning.  On the morning trip, I am sure that I saw many of the...
  • tree removal permit-1The Real Reason We Have a Welfare State
      From Subject to Citizen BALTIMORE – June 5th, the Swiss cast their votes and registered their opinions: “No,” they said. We left off yesterday wondering why something for nothing never works. Not as monetary policy. Not as welfare or foreign aid. Not in commerce. Not never, no how. But something for nothing is what people most want.   The future Switzerland just managed to dodge... for now   The Swiss voted against awarding all citizens a “universal basic...
  • junkThe Problem with Corporate Debt
      Taking Off Like a Rocket There are actually two problems with corporate debt. One is that there is too much of it... the other is that a lot of it appears to be going sour.   Harvey had a good time in recent years...well, not so much between mid 2014 and early 2016, but happy days are here again! Cartoon by Frank Modell   As a brief report at Marketwatch last week (widely ignored as far as we are aware) informs us:   “Businesses racked up debt in the...
  • saupload_loves-me-loves-me-notA Darwin Award for Capital Allocation
      Beyond Human Capacity Distilling down and projecting out the economy’s limitless spectrum of interrelationships is near impossible to do with any regular accuracy.  The inputs are too vast.  The relationships are too erratic.   The economy - complex and ever-changing interrelations. Image credit: Andrea Dionne   Quite frankly, keeping tabs on it all is beyond human capacity.  This also goes for the federal government.  Even with all their data gatherers and...
  • nails-in-a-bed-of-nails-new-yorker-cartoonGoing... Going... Gone! The EU Begins to Splinter
      Dark Social Mood Tsunami Washes Ashore Early this morning one might have been forgiven for thinking that Japan had probably just been hit by another tsunami. The Nikkei was down 1,300 points, the yen briefly soared above par. Gold had intermittently gained 100 smackers – if memory serves, the biggest nominal intra-day gain ever recorded (with the possible exception of one or two days in early 1980). Here is a picture of Haruhiko Kuroda in front of his Bloomberg monitor this...
  • queen_gold-840x501Rule Britannia
      A Glorious Day What a glorious day for Britain and anyone among you who continues to believe in the ideas of liberty, freedom, and sovereign democratic rule. The British people have cast their vote and I have never ever felt so relieved about having been wrong. Against all expectations, the leave camp somehow managed to push the referendum across the center line, with 51.9% of voters counted electing to leave the European Union.   Waving good-bye to...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com