The Greek people have already paid highly for their own governments’ mistakes. Photo: Getty
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The Greek people have paid for their governments’ mistakes – and for the errors of the Troika

The meltdown in Athens and the mistakes of the IMF.

To make sense of the confrontation between the Syriza government in Greece and the Troika (the European Commission, the European Central Bank and the International Monetary Fund), it is vital to understand the one big mistake that each side made. The mistake on the Greek side is well known. In the years following the formation of the eurozone, the Greek government borrowed far more than it should, sometimes secretly. When the full extent of that fiscal profligacy became known, the financial markets realised that default was a distinct possibility, and the government was no longer able to borrow from them.

Over the next few years the Troika provided large sums of money to “bail out Greece”. The minor share of that provided new loans to the Greek government so that it could gradually balance its books. When Greece complains about the austerity imposed on it by the Troika, it is important to understand that without Troika assistance it would have had to endure something even worse and far more immediate. The government was spending much more than it received in taxes, and from the moment it stopped being able to borrow from the markets it would have had to end this. Almost certainly the banking system would have collapsed, and the government would not have had the resources to support its banks.

The Troika’s big mistake was what it did with the larger part of its rescue package. If it had done nothing, the Greek government would have been forced to default on its debt, and those who owned that debt (Greece’s creditors) would have received very little or nothing. Instead, the Troika partly bailed out these creditors, who included many of their own leading banks, in Germany and France in particular. In effect, what the Troika did was to buy much of the Greek government debt owned by these private-sector institutions, at discounted prices. From the Greek government’s point of view, this replaced private-sector debt with debt owned by the Troika.

Why was this partial bailout of Greece’s private-sector creditors a mistake? It meant that the remainder of the rescue package, designed to ease the Greek government’s transition to balance, was far too small. The Troika thought that the Greek government could quickly cut spending and raise taxes with little consequence for the rest of the Greek economy. It was completely and predictably wrong. Sharp and intense austerity played a great part in reducing GDP by 25 per cent and creating mass unemployment.

Imposing less austerity on Greece, producing a more modest decline in Greek output, would have required additional loans from European governments. If this had been available in addition to the existing package, it would have saddled Greece with a debt it surely could not have repaid, and may have been unacceptable to European voters. This is why the partial bailout of Greece’s original creditors was such an error. If it had not been done, and some of that money had been used to allow less austerity to be imposed on the Greek people, we would not be at the present impasse.

Over the past year the Greek government has managed to achieve approximate primary budget balance: its taxes cover all its spending, excluding interest payments. It is no longer asking for more money to cover spending, but simply additional loans to pay back interest and maturing loans. In short, it needs money from the Troika to repay the Troika. As the price of these loans, the Troika is demanding yet more austerity. The Syriza government wants to avoid this to give the economy a chance to recover.

From a macroeconomic viewpoint, this is reasonable, because it would probably be in the long-term interests of the Troika. The OECD estimates that Greece has unused resources worth at least 10 per cent of GDP. A pause in austerity would allow demand to increase, reducing unemployment and generating more taxes. The Greek government could use some of the additional revenue to start repaying its loans.

So why does the Troika insist on continuing with austerity? The Troika contains many different views and interests. Some may still not believe, despite all the evidence, that austerity hurts growth. Perhaps others are happy to see a left-wing government fail, because it does not accept the received wisdom from Brussels and Frankfurt on what good economic policy involves.

Another explanation is that eurozone governments have become victims of their media’s rhetoric. The impression the media conveys is that all of the Troika’s loans have gone to cover Greek government spending. In fact, most went to bail out Greece’s previous creditors and any further loans will just repay existing loans. But to people in the eurozone it seems as if the Troika is transferring more of their money to Greek citizens. In these circumstances, the politicians need to appear to be tough on Greece. They fear that to change policy now would lead their electorates to ask why previous policies have failed, which would expose the Troika’s big mistake.

The Greek people have already paid highly for their own governments’ mistakes before 2010. Now it seems they must suffer as a result of the Troika’s errors. That the governments of the eurozone continue to display a macroeconomic understanding of fiscal policy equivalent to that of Angela Merkel’s imagined Swabian housewife is perhaps not surprising – it has been a consistent pattern since the eurozone began. More surprising is the behaviour of the IMF, established to represent the international community and full of hundreds of economists. That it had the means to stop this happening but chose not to do so is equally tragic.

Simon Wren-Lewis is Professor of Economic Policy in the Blavatnik School of Government at the University of Oxford

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 01 July 2015 issue of the New Statesman, Crisis Europe

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White supremacists are embracing genetic testing - but they aren't always that keen on the results

Users of far-right site Stormfront are resorting to pseudo science and conspiracy theories when DNA tests show they aren't as "pure" as they hoped.

The field of genomics and genetics have undergone almost exponential growth in recent years. Ventures like the Human Genome Project have enabled t humanity to get a closer look at our building blocks. This has led to an explosion in genetic ancestry testingand as of 6 April 2017 23AndMe, one of the most popular commercial DNA testing websites, has genotyped roughly 2 million customers.

It is perhaps unsurprising that one of the markets for genetic testing can be found among white suprmacists desperate to prove their racial purity. But it turns out that many they may not be getting the results they want. 

Stormfront, the most prominent white nationalist website, has its own definition of those who are allowed to count themselves as white - “non-Jewish people of 100 per cent European ancestry.” But many supremacists who take genetic tests are finding out that rather than bearing "not a drop" of non-white blood, they are - like most of us a conglomerate of various kinds of DNA from all over the world including percentages from places such as sub Saharan Africa and Asia. Few are taking it well.

Dr. Aaron Panofsky and Joan Donovan, of UCLA’s Institute for Society and Genetics and the research institute Data and Society respectively, presented a research study (currently under peer review for publication) at the American Sociological Association a week ago, analysing discussion of GAT on Stormfront forums. Panofsky, Donovan and a team of researchers narrowed down the relevant threads to about 700, with 153 users who had chosen to publish their results online. While Panofsky emphasised that it is not possible to draw many quantitative inferences, the findings of their study offer a glimpse into the white nationalist movement's response to science that doesn't their self perception. 

“The bulk of the discussion was repair talk”, says Panofsky. “Though sometimes folks who posted a problematic result were told to leave Stormfront or “drink cyanide” or whatever else, 'don’t breed', most of the talk was discussion about how to interpret the results to make the bad news go away”.

Overwhelmingly, there were two main categories of reinterpretation. Many responses dismissed GAT as flimsy science – with statements such as a “person with true white nationalist consciousness can 'see race', even if their tests indicate 'impurity'".

Other commentators employed pseudo-scientific arguments. “They often resemble the critiques that professional geneticists, biological anthropologists and social scientists, make of GAT, but through a white nationalist lens", says Panofsky. 

For instance, some commentators would look at percentages of non-European DNA and put it down to the rape of white women by non-white men in the past, or a result of conquests by Vikings of savage lands (what the rest of us might call colonialism). Panofsky likens this to the responses from “many science opponents like climate deniers or anti-vaxxers, who are actually very informed about the science, even if they interpret and critique it in idiosyncratic and motivated ways".

Some white nationalists even looked at the GAT results and suggested that discussion of 100 per cent racial purity and the "one drop" rule might even be outdated – that it might be better to look for specific genetic markets that are “reliably European”, even though geneticists might call them by a different name.

Of course, in another not totally surprising development, many of the Stormfront commentators also insisted that GAT is part of a Jewish conspiracy, “to confuse whites by sprinkling false diversity into test results".

Many of the experts in the field have admitted to queasiness about the test themselves; both how they come to their results and what they imply. There are several technical issues with GAT, such as its use of contemporary populations to make inferences about those who previously lived in different places around the world, and concerns that the diversity of reference samples used to make inferences is not fully representative of the real world. 

There are other specific complications when it comes to the supramacist enthusiasm for GAT. Some already make a tortous argument that white people are the “true people of color" by dint of greater variation in hair and eye color. By breaking up DNA into percentages (e.g. 30 per cent Danish, 20 per cent German), Panofsky says GAT can provide a further opportunity to “appropriate and colonise the discourse of diversity and multiculturalism for their own purposes". There's is also, says Panofsky, the simple issue that “we can’t rely on genetic information to turn white nationalists away from their views."

“While I think it would be nice if the lesson people would take from GAT is that white nationalism is incoherent and wrong. I think white nationalists themselves often take the exact opposite conclusion."