Greece & Germany: Things tend to get worse before they get more worse

Cutting your nose off to incentivise your face to implement much needed structural reforms.

The young man stood up.
“Mrs. Bylaxis came in this morning,” he said. “She said the proverb you did for her last week has stopped working.”
Didactylos scratched his head.
“Which one was that?” he said.
“You gave her ‘It's always darkest before dawn.’ ”
“Nothing wrong with that. Damn good philosophy.”
“She said she didn’t feel any better. Anyway, she said she'd stayed up all night because of her bad leg and it was actually quite light just before dawn, so it wasn’t true. And her leg still dropped off. So I gave her part exchange on ‘Still, it does you good to laugh.’ ”

Terry Pratchett – Small Gods

Noah Smith points out that there’s an oft overlooked argument in favour of austerity. It’s a stupid one, but that doesn’t mean we shouldn’t take it seriously. The claim is that stimulus will work, but that is bad because it will delay “necessary” reform. This idea has a long heritage and it’s always been a good idea to mock it. I’ll try to provide some constructive examples against it.

First of all, let me say, I am a dedicated can kicker. Karl Smith is right: do you realise that everyone you know someday will die? The future is uncertain, so simply making a bad thing happen later is valuable because we might not be here. Problems sometimes solve themselves, and erstwhile solutions sometimes become problems. Pretending to have the foresight necessary to know when to say “you now must suffer now so that they then do not” is insulting.

I also think the idea is bad on its own terms. Crap policy begets crap policy for a number of reasons: most mundanely, I’d posit a correlation between following good short-term and good long-term policy. If a government is adopting crippling austerity now, it is more likely, not less, that they’ll be adopting bad long term policies.

But most importantly, this “butter tomorrow, sawdust today” policy has been tried before and sown disaster. Here are a few examples:

  • Hayek thought the depression would force down wages by brute force and trigger the end of unionised workers. He thus resisted efforts to end it. The result? Starvation! Smoot-Hawley! Nazis! Bet he felt pretty silly about that one.
  • He's in good company. Lenin in the 1900s argued that mitigation of the worker’s condition would delay the inevitable revolution and that nothing should be done to mitigate it. He actually got that one right. This time it was the Tsarist industrialists who must have felt silly (as much as dead people feel silly).
  • The little depression seriously derailed efforts to tackle climate change. Short-term suffering crowds out the long-term thinking needed to make policy effectively. Extending austerity makes it harder to talk about long-term sensible sacrifices because you’ve less to sacrifice.
  • As Ben Friedman argues “History suggests that, in the past, a rising standard of living has promoted tolerance for others, commitment to economic opportunity, and democracy. But stagnating incomes due to inequality can lead to the opposite outcomes.” Suffering makes people worse human beings and worse human beings make worse long-term policy.

To underline the point: the worst case scenario is Nazis. It is such a bad idea you can legitimately say “no because Nazi.” I can think of at least one positive counterexample too, also from Germany. As Scott Sumner points out, their labour market reforms of the mid-2000s took place against the most benign global and domestic macroeconomic circumstances imaginable. They were so successful that German unemployment continued to sink lower even as Europe was mired in depression.

Coincidentally, just as Noah Smith laid out the argument hypothetically, Steven Pearlstein comes along and positively endorses it. Only austerity and suffering can save Greece apparently. By embracing  short term suffering interest-groups can be defeated and illogical and burdensome regulations can be removed. Only brave short-term sacrifice can engender long term growth.

So how is Steven’s strategy paying off? Yep, same as last time, fucking Nazis again.

Even so, Greece is one of the few countries which spent the late 20th century moving from a middle-income to a high-income country. A round of applause please before you lecture them. Their politics and economy are dysfunctional and that will make them poorer, but it doesn’t need them to be in a depression. Being poor is bad, but being unemployed is evil.

Of course if unemployment is an evil, using unemployment as a punishment for being poorer than optimal is really evil. If the Greek economy is dysfunctional they should have higher inflation and lower real incomes, not suffer a manufactured unemployment crisis. It’s not just stupid and evil, it’s perverse.

It is a bad idea that policy should be actively destructive in the short-term to act as a bargaining tool or cudgel to implement a certain pet project. Suffering is bad, it makes us worse people and worse people make worse policy. If your leg does fall off, laughing isn’t the worst thing you could do; you could listen to these bozos.

This piece was originally posted on Left Outside, and is republished here with permission.

Members of Greek neo-Nazi party Golden Dawn sing the country's national anthem. Photograph: Getty Images
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Empty highs: why throwaway plastic goes hand in hand with bankrupt consumerism

We are in the throes of a terrible addiction to stuff.

A University of California study revealed this week that mankind has produced more than nine billion tonnes of plastic since the 1950s, with almost all of it ending up in landfill or the ocean. With the terrible effects of our decades-long addiction to throwaway packaging becoming increasingly apparent, it’s clear that a fresh approach is needed.

In April 2010, David Cameron set out his vision for Britain in the Conservative Party’s manifesto. Keen to show that the Tories had turned away from the "I’m Alright Jack" individualism of the 1980s, Cameron sought to fashion a softer, more inclusive brand.

The good society, Cameron argued, embraced much higher levels of personal, professional, civic and corporate responsibility. There was such a thing as society, and we’d all do well to talk to our neighbours a bit more. The Big Society, however, was roundly derided as a smokescreen for an aggressive tightening of the Government purse strings. And on the advice of his 2015 election fixer Lynton Crosby, Cameron later dropped it in favour of well-worn lines about economic security and jobs.   

While most would argue that the Big Society failed to amount to much, Cameron was at least right about one thing. We are happiest when we are part of something bigger than ourselves. No matter how much the credit card companies try to convince us otherwise, mindless individualism won’t make us nearly as contented as we’re led to believe by big conglomerates.

By any measure, we are in the throes of a terrible addiction to stuff. As a nation, we have run up unsecured debts of more than £350bn, which works out at £13,000 per household. Fuelled by a toxic mix of readily available credit and interest rates at historic lows, we cripple ourselves financially to feel the empty high derived from acquiring yet more stuff.

Purchasing has become a leisure pursuit, ensuring the rate at which we acquire new stuff exceeds the rate at which we can find somewhere to put it. Burdened with ever increasing amounts of stuff, consumers are forced to outsource their storage. The UK didn’t have a self-storage industry 30 years ago, but now it is the largest in Europe.

With the personal debt mountain soaring, we’d all do well to realise that we will never have enough of something we don’t need.

The growth of rampant consumerism has coincided with an explosion in demand for single-use plastic. Like the superfluous possessions we acquire, throwaway plastic packaging helps satisfy our desire to get exactly what we want without having any thought for the long-term consequences. Plastic packaging is easy and convenient, but ultimately, will do us immense harm.

In 1950, close to 1.5 million tonnes of plastic was produced globally. Today, the figure stands at more than 320 million tonnes. The vast majority of our plastic waste either ends up in landfill or the ocean, and our failure to kick the plastic habit has put is in the ludicrous position where there is set to be more plastic than fish in global seas by 2050.

There is also growing evidence that our penchant for endless throwaway plastic might be storing up serious health problems for our children later down the line. According to a University of Ghent study published earlier this year, British seafood eaters risk ingesting up to 11,000 pieces of plastic each year. The report followed UN warnings last year that cancer-causing chemicals from plastic are becoming increasingly present in the food chain.

Something must give. Unsustainable as our reliance on fast credit to finance ever more stuff, our addiction to plastic packaging is storing up serious problems for future generations. The instant gratification society, high on the dopamine rush that fades so quickly after acquiring yet another material asset, is doomed unless decisive action is forthcoming.

So what is to be done? The 2016 US documentary Minimalism points to a smarter way forward. Minimalism follows the lives of ordinary people who have shunned the rat race in favour of a simpler life with less stuff and less stress. The most poignant bit of the film features ex-broker AJ Leon recounting how he chose to forgo the glamour and riches of Wall Street for a simpler life. After a meteoric rise to the top of his profession, Leon decided to jack it all in for a more fulfilling existence.

While challenging the view that to be a citizen is to be a consumer is easier said than done, there are small changes that we can enact today that will make a huge difference. We simply have no choice but to dramatically reduce the amount of plastic that we can consume. If we don’t, we may soon have to contend with the ocean being home to more plastic than fish.

Like plastic, our bloated consumer culture is a disaster waiting to happen. There must be a better way.

Sian Sutherland is co-founder of campaign group A Plastic Planet which is campaigning for a plastic free-aisle in supermarkets.

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