In case you missed it, Greece is on the news again. I wasn't going to write anything about it, because the situation seems so clear to me that I thought that anyone who disagrees with me on this one is either literally crazy or just doesn't know the facts. I genuinely thought that intelligence or political ideology had nothing to do with it anymore.
But I was wrong. A friend, who is neither stupid, nor uninformed, nor (I think) literally insane, told me today that she hates the IMF's approach towards Greece. Now. Everyone who knows me knows that I am not empathetic. I am rarely able to really put myself in someone else's shoes and experience their feelings. But I genuinely (as in, not just saying so for dramatic effect) feel empathy for the IMF staff. Even before this discussion with my friend I had played this scenario in my head, and felt the frustration, bewilderment and total confusion I am sure the IMF analysts are experiencing:
I imagine I am an IMFagent analyst. I look at the following data:
But I was wrong. A friend, who is neither stupid, nor uninformed, nor (I think) literally insane, told me today that she hates the IMF's approach towards Greece. Now. Everyone who knows me knows that I am not empathetic. I am rarely able to really put myself in someone else's shoes and experience their feelings. But I genuinely (as in, not just saying so for dramatic effect) feel empathy for the IMF staff. Even before this discussion with my friend I had played this scenario in my head, and felt the frustration, bewilderment and total confusion I am sure the IMF analysts are experiencing:
I imagine I am an IMF
- GDP declining year on year since 2008.
- Debt % of GDP at 177%.
- Unemployment rate at 25.6%
- Declining tax revenue since 2008
- 35% increase in suicides in 2015.
So I go to my meeting with the EU and Greece, and I say "hi guys. Sorry to say this, but things aren't looking very good. I think things aren't really working out". I expect agreement on this, and so without pause I get ready to discuss possible solutions, but before I have a chance to move on, I am interrupted by the EU:
"What are you talking about? Greece is making tremendous progress. I really feel the turnaround is just around the corner".
I am taken aback. "But where do you see that? Because Greece is doing worse in literally every single statistic I could dig - from its economy to corruption levels."
"That may be," Greece jumps in, "but Greece has had it up to here with being the scapegoat for Europe."
I am even more confused at this non-sequitur, but I answer, "I am not trying to make Greece the scapegoat. I am trying to say your debt is unsustainable, which you guys have been saying for years. So now that I agree with you, you are saying I am the bad guy?!"
"Yes, because you at the IMF want us to make further cuts."
"No, we do not! We have very clearly said that we do not want more austerity! In fact, we have said time and again that we want less austerity than the EU, we want a surplus target of 1.5%, not 3.5%."
"But you ask for more measures."
"First, what we are saying is that if you and the EU agree to a 3.5% target, we want to see what measures will get you there. Second, our main point is that you need to re-balance your economy, make Greece a business-friendly environment. Stop driving away companies; stop randomly changing contract terms you have already agreed on; increase your retirement age, it's insane that 75% of people retire early."
And here the scenario ends, because I can genuinely not imagine what possible response could be given to this. "No, we changed our mind, the debt is suddenly manageable"? "No, we are anti-austerity, but insist on a 3.5% target"? "No, we are suddenly pro-austerity and a 3.5% target is fine, but we don't want to explain how we'll achieve it"? I mean, what?!
I think one of the reasons for the acrimonious debate in Greece is that the word "austerity" is too vague to describe policy. Austerity in general means to cut spending. But not all spending is the same. Spending on doctors and nurses and teachers is essential; paying 2 public company "executives" 200,000 each before privatising it? Funding another public entity with 1 million EUR even though it was no purpose? Less so.
This is what really drives me insane - that you have pundits and experts and Krugman talking about things they (self-admittedly) do not understand. It seems that the common sense we employ in our daily lives goes out of the window when we talk politics. When my boss tells me to cut costs, she expects me to use judgement: if I went to her and said "I had a great idea for cutting costs - I fired all the engineers! The downside is we can't make anything, but costs have definitely gone down dramatically", she would, in turn, fire me. No-one would turn and say "aha! cutting costs is a bad business practice".
So to conclude: I suspect that most people dislike the IMF because they associate it with "austerity" and they associate "austerity" with the poverty and desolation in Greece. But Greece has not endorsed in spirit the steps the IMF has advocated. It has haphazardly cut vital services without liberalising its economy. It has failed to curb tax evasion, and based on what I see when I go back, has probably driven people to it even more. Saying austerity is a bad concept (and by implication, the IMF is a bad institution) because Greece is in a bad way is sort of like saying the original Star Wars were terrible because of Jar Jar Binks.
EDIT: My friend says she hates the IMF because they are not really trying to help Greece, because by their own admission their past recommendations haven't worked out, because their assessment of the debt is all over the place, because their "experts" are not really that expert &c.
I am not an economist, and she is, so I am happy to take her word that the IMF doesn't have a great track record, or that their experts are overpaid and not very good at their jobs (then again, most people say the same about all economists).
But none of this addresses my specific concerns in this case. Even if all that's true, it's undoubtable that Greece is not making progress, that the debt is not sustainable, and that cutting infrastructure spending while maintaining insane pensions, privileges and tax evasion and discouraging investment are not sustainable policies.
"Yes, because you at the IMF want us to make further cuts."
"No, we do not! We have very clearly said that we do not want more austerity! In fact, we have said time and again that we want less austerity than the EU, we want a surplus target of 1.5%, not 3.5%."
"But you ask for more measures."
"First, what we are saying is that if you and the EU agree to a 3.5% target, we want to see what measures will get you there. Second, our main point is that you need to re-balance your economy, make Greece a business-friendly environment. Stop driving away companies; stop randomly changing contract terms you have already agreed on; increase your retirement age, it's insane that 75% of people retire early."
And here the scenario ends, because I can genuinely not imagine what possible response could be given to this. "No, we changed our mind, the debt is suddenly manageable"? "No, we are anti-austerity, but insist on a 3.5% target"? "No, we are suddenly pro-austerity and a 3.5% target is fine, but we don't want to explain how we'll achieve it"? I mean, what?!
~ ~ ~ ~
I think one of the reasons for the acrimonious debate in Greece is that the word "austerity" is too vague to describe policy. Austerity in general means to cut spending. But not all spending is the same. Spending on doctors and nurses and teachers is essential; paying 2 public company "executives" 200,000 each before privatising it? Funding another public entity with 1 million EUR even though it was no purpose? Less so.
This is what really drives me insane - that you have pundits and experts and Krugman talking about things they (self-admittedly) do not understand. It seems that the common sense we employ in our daily lives goes out of the window when we talk politics. When my boss tells me to cut costs, she expects me to use judgement: if I went to her and said "I had a great idea for cutting costs - I fired all the engineers! The downside is we can't make anything, but costs have definitely gone down dramatically", she would, in turn, fire me. No-one would turn and say "aha! cutting costs is a bad business practice".
So to conclude: I suspect that most people dislike the IMF because they associate it with "austerity" and they associate "austerity" with the poverty and desolation in Greece. But Greece has not endorsed in spirit the steps the IMF has advocated. It has haphazardly cut vital services without liberalising its economy. It has failed to curb tax evasion, and based on what I see when I go back, has probably driven people to it even more. Saying austerity is a bad concept (and by implication, the IMF is a bad institution) because Greece is in a bad way is sort of like saying the original Star Wars were terrible because of Jar Jar Binks.
EDIT: My friend says she hates the IMF because they are not really trying to help Greece, because by their own admission their past recommendations haven't worked out, because their assessment of the debt is all over the place, because their "experts" are not really that expert &c.
I am not an economist, and she is, so I am happy to take her word that the IMF doesn't have a great track record, or that their experts are overpaid and not very good at their jobs (then again, most people say the same about all economists).
But none of this addresses my specific concerns in this case. Even if all that's true, it's undoubtable that Greece is not making progress, that the debt is not sustainable, and that cutting infrastructure spending while maintaining insane pensions, privileges and tax evasion and discouraging investment are not sustainable policies.
No comments:
Post a Comment