Monday, June 4, 2012

Prof. Yanis Varoufakis recommends a vote for SYRIZA (and I do not)

Prof. Yanis Varoufakis makes a powerful argument why one should vote for SYRIZA without reading its Economic Manifesto before, which led to the following exchange:

Klaus Kastner
Please allow me to quote Nikos Tsafos from the Greek Default Watch blog: “Greece has changed from being a fat kid that was going on a diet to a fat kid that wants to sue the candy company. In the end, the fat kid may get a check – but will he get any thinner?”

And here is a Greek proverb which I picked up recently:

“Any fool can throw a stone into the sea, but once he does, a hundred wise men can’t pull it out!”

I rest my case.

Prof. Varoufakis
Don’t rest your case quite yet. Thinking of a country as one person, or kid, is unhelpful and dangerous (you would not like it if I thought of Germany as one person; for that person would probably be hideous to you, if verging on the ‘representative German agent’). I know lots of Greek children who found it damn hard to survive in Greece during the ‘good’ times. Who worked during the day in garages and restaurants and went to night school. Now, they have to pay the price of austerity. Be careful Klaus. I expected more from you.

Klaus Kastner
I would not have seen anything offensive in Nikos Tsafos’ quote (BTW, I consider his as one of the best blogs on Greece!) but if others did, I apologize. Actually, I was under the impression that economists like to use metaphors like “fat kid”, “minotaur”, etc. and I, for one, find metaphors useful. As per your request, I won’t rest my case there and since you expect more, I will deliver more.

Your statement that some children did not have a party during the party years triggers deep feelings on my part. Indeed, not all Greek society had a ball while seemingly all Greek society had a ball and, indeed, those who had less of a ball then (or none at all) have now been asked to participate unduly and unfairly in the repair cost of damage with which they had little or nothing to do!!! Yes, today misery is over segments of Greek society and financial stress and emotional strain over a large part thereof. BUT: there is, in my judgment (and remember that I spend close to half a year in Greece), quite a large part of society which even today is having a very, very good life. And I am not thinking of the ultra-rich Greek families. I am thinking of the “smart and clever ones”.

The Gran Masoutis nearby is packed with shoppers (and prices are no less than 3-4 years ago if not higher, and many are higher than in Austria). Whenever I stop by IKEA, I hardly need to move on my own. People traffic carries me with it. On weekends, the parking lot of Cosmos Mediterranean (the largest I have ever seen) is full and the place is packed with families paying the same prices for fast food as in Munich. As the weather gets better, the weekend convoy from Thessaloniki to Chalkidiki is getting under way again (I just returned in bumper-to-bumper traffic). I could go on.

And then I read that a young couple living on a teacher’s salary has to get by with 588 Euro net every month! Nice guys finish last? Well, there are a lot of nice guys in Greece but there are also a lot of fast movers who are not paying their traffic tolls. In my judgment, one part of Greek society has taken the other part for an unbelievable ride since the EU and particularly since the Euro.

And here is my case now: who can/should fix all of this unfairness in Greek society? The Troika? The EU? George Soros maybe? Only Greeks themselves can fix domestic issues within their own jurisdiction and exactly this is what Greek brainpower should be concentrating on. Leave the Eurozone’s problems to Eurocrats. They will fix them or not (I lean towards the latter). But take on Greece’s problems and suggest ways how they could be solved!

I could give you an endless list of issues which Greece could/should tackle on its own. My blog is full of them. Just take the decline in the Euro as one example. Here the Euro (including the Greek Euro) has declined versus the USD by about 25% in a reasonably short period of time. Presumably also versus other currencies. Now if that is not a window of opportunity for increasing exports to non-Euro countries then I don’t know what a window of opportunity is. I am not even sure if Greece’s policy makers have noticed that exports have increased but they certainly have not done anything to “make a killing” out of such a window of opportunity. Attracting tourists from non-Euro countries might have been a smart idea at a time where Eurozone tourism is tanking. Etc., etc.

Now to Alexis Tsipras and SYRIZA. I have sent you links privately. Here is my post after I read the Economic Manifesto.

To recommend not to read a party’s manifesto but recommend to still vote for the party is not my idea of responsible voting recommendations. I would very much recommend to read the manifesto because I think it is a very interesting document which deserves a lot of credit for certain things.

I myself could not vote for SYRIZA because a vision where the predominant role of the state provides for happiness of the people is not mine, but I can see why others would have a different vision. But I am getting to the point where I think that it may indeed be best if the next Prime Minister with a stable majority would be Alexis Tsipras.

Best for the Eurozone because it would force EU-elites to either fish or cut bait. And best for Greece because it will tell Greeks how much the Eurozone likes them (or not). At least, all this meandering of the last 2-3 years would be over. But then again, who am I to say that, with Alexis Tsipras, the meandering would be over???

If there are more instalments to this exchange, I will insert them here.


  1. You have to tell him also that people from Germany, Austria and many other countries working in garages and going to night schools

  2. A point well put: we are (still) spending more than we are producing (and importing more than it is exporting). Public debate in Greece should have been focused on what we can do (on our own) to bridge this gap - euro or no euro. Sadly "noise" is predominating.

    Thank you for your thoughtful account. An "outside" perspective is always valuable and welcome.

    1. Anonymous, A very very good point. The real issues are sadly missing from the Greek domestic debate on economic policy. Foreign observers that know this place understand this all too well, regrettably....

  3. Prof. Yanis Varoufakis' argument are political, not scientific. His whole "Modest Proposal" is trying to fool the readers.
    Somebody who suggests to transfer (part of) the debt of countries he himself calls "insolvent" to the ECB is not serious, but trying to play tricks on other poeple (other countries' taxpayers in this case).
    And even if the politicized investment he has in mind would work (which of course it won't), there would still be quite a time-gap during which Greece etc. would need (or claim to need) outside money.
    An economist who does not address this problem in his proposed "solution" is nothing but a politcal trickster.

  4. Prof. Varoufakis is certainly knowledgeable and I do appreciate the daily updates of his blog. I also respect him for allowing dissenting opinions among commentators.

    But when it comes to the Euro crisis I think he has a very one-sided view and tend to dismiss anything not in line with his Modest Propoasal as 'idiocy'. Unfortunately, that makes the overall tone of his blog rather arrogant and unlikable. As for his proposal, I believe it's one of several ways of solving the European part of the crisis. However, the fact that he doesn't address the Greek part of the crisis is just inconceivable in my opinion. In fact, he doesn't even seem to acknowledge that there exist a Greek problem. He ignores Greece's huge structural current account deficit as a problem and in the blog post you link to he even claims that structural reforms are irrelevant for the crisis. To me, that's just a very strange view.

    1. Anders you are exactly right and you focused on the reasons that people with real-life economics experience tend to ignore his bluster, {Greece is just a small problem for Europe, its all their (EZ) structural design flaws taking us down," etc etc.

  5. The good professor is an intellectual lightweight. Wish him far its really foreign journalists who don't know economics very well who seem to work with him. Real economists can see his limitations very quickly....

    1. Maybe, but he does have almost 31.000 followers on Twitter and some of the followers of his blog act like a sect --- great world-wide conspiracies, driven by Germany, against Greece. I regularly read his comments pages and I find it amazing if not worrisome what kind of views are expressed there with almost fanatic verve. It often reminds me of the old ELAS/EDES lines.

    2. Academic impact is normally measured by the number of citations in peer-reviewed articles, not appearances on RT or the number of followers on twitter ;)

      And Varoufakis is certainly not widely cited. For example, he has less than 1 percent of the citations of Ken Rogoff, which perhaps is the foremost expert on banking and sovereign debt crises.

    3. Greece is a small country. People appearing on tv become very quickly "stars". Prof. Varoufakis is actually one of the probably few economist professors in Greece that don't get carried away by their political beliefs too much.

      Although i do think that in some of his plans (for example the "we don't take another tranche from the EU and sit and wait for the EU to solve the crisis in european level), he underestimates the psychological impact on the greek pubblic. My bet is that after 5 minutes, there would be a massive bank run all across Greece, by people that will associate that to a greek exit from the euro, followed by "supermarket run" and freezing of all non essential economic activity so that each protects his euros "under the pillow". And so, Greece won't be able to "sit and wait" for the EU to solve the crisis, it will have collapsed from the inside in matter of hours. But that's just me.

      Otherwise, i do like his "modest proposal".