This is The Goldman Sachs Project

November 18, 2011 9:28 AM

"By putting an [unelected] senior adviser at Goldman Sachs in charge of a Western nation, it has taken to new heights the political power of an investment bank that you might have thought was prohibitively politically toxic." This is The Goldman Sachs Project

In Greece and Italy, Lucas Papademos, of the European Central Bank and Mario Monti, a senior adviser at Goldman Sachs have been sworn in as prime ministers. These moves have been labeled as undemocratic, a bankers coup, and have raised questions about the dangers of putting undemocratically elected Technocrats in charge.

posted by rubyrudy (67 comments total)

This is pretty fucking scary. Especially as the US seems to be sliding more and more into a censored, third-world company, the Eurozone was supposed to be democracy's better half, but this is incredible.
posted by kurosawa's pal at 9:35 AM on November 18, 2011 [2 favorites]

hum! i'd sort of, quite dimly, hoped that Europe would find some saner way to manage the crisis than we in the states will.

no such luck. well. sigh.
fine then. i give up.
we lose.

forces of evil: just point me to the dotted line and i will sign.
posted by fetamelter at 9:35 AM on November 18, 2011

lol-- or, what kurosawa's pal said
posted by fetamelter at 9:36 AM on November 18, 2011

"Crisis caused by groupthink among economists best addressed by appointing economists to head governments, say all economists." - @ejhchess

Sums up my thoughts on the matter nicely. Got to love hegemony.
posted by knapah at 9:36 AM on November 18, 2011 [26 favorites]

In other, possibly related news, Antonio Borges, the head of the IMF's Europe Department, quit suddenly this week. Borges was a Vice Chairman of Goldman Sachs International from 2000-2008.
posted by chavenet at 9:38 AM on November 18, 2011 [1 favorite]

talk about failing upwards
posted by goethean at 9:40 AM on November 18, 2011

The first thing that rolled through my head was that Goldman Sachs is working their way towards becoming the marketing division of the Sirius Cybernetics Corporation.
posted by Mister Fabulous at 9:43 AM on November 18, 2011 [11 favorites]

Right now the rich can and are crashing asset prices by forcing countries into austerity through attacks on their currencies and control of their elites.
posted by T.D. Strange at 9:44 AM on November 18, 2011 [10 favorites]

Well the bright side is that Europe tends to be better at rioting than the US and it is easier to overthrow the government in a parliamentary system. I wish them luck.
posted by ChrisHartley at 9:44 AM on November 18, 2011 [12 favorites]

Didn't the last time this happened give us, like, the Medicis? This is not encouraging news. I was supposed to be fleeing to Europe as America collapsed around me, here.
posted by WidgetAlley at 9:45 AM on November 18, 2011 [1 favorite]

Too dangerous to be left alive.
posted by CautionToTheWind at 9:46 AM on November 18, 2011 [2 favorites]

Related: "[H]istory shows that fascists have always been favored by the 1-percenters to deliver the austerity medicine."
posted by fetamelter at 9:46 AM on November 18, 2011 [7 favorites]

Dang, and here I thought Italy would be better off with Berlusconi gone. I was pretty sure they couldn't do worse, that'll teach me to be optimistic.
posted by sotonohito at 9:49 AM on November 18, 2011

Maybe Goldman Sachs, like the University of Miami and its football program, just produces high-quality economists and politicians.

/humor as a coping mechanism to deal with a truly scary situation
posted by Terminal Verbosity at 9:50 AM on November 18, 2011 [3 favorites]

A tidy fascist coup - the exiled online.
posted by The Whelk at 9:51 AM on November 18, 2011 [3 favorites]

It's like the right are chanting "Capitalism can not be reformed." right along with the ultra left. Call the question already.
posted by Stagger Lee at 9:53 AM on November 18, 2011 [2 favorites]

When folks are linking the "fascist coup" thing, they are talking about the Greece Goldman Sachs guy's membership in an actual violent fascist student group during the eighties. It's not just hyperbole - he was a physically violent fascist who has now worked his way upstairs to run a country. When the left breaks windows, we're terrorists; when the right physically assaults the vulnerable, they get marked down for future greatness.
posted by Frowner at 9:59 AM on November 18, 2011 [10 favorites]

Cool. Time to go bury boxcars full of guns in the back 40.
posted by Stagger Lee at 10:04 AM on November 18, 2011

Back quarter! Back quarter!
God damn it edit window.
posted by Stagger Lee at 10:06 AM on November 18, 2011

That seems a fairly disingenuous description of a career civil service economist and eurocrat who spent a few years on a GS advisory board does it not?

When folks are linking the "fascist coup" thing, they are talking about the Greece Goldman Sachs guy's membership in an actual violent fascist student group during the eighties. It's not just hyperbole - he was a physically violent fascist who has now worked his way upstairs to run a country.

a) The fascist in the Greek cabinet is not Papademos, but Voridis. He's a deputy minister, not the prime minister. He's only in the cabinet because all parties were asked to join the government of national unity.
b) Papademos has no connection to Goldman Sachs.
c) Neither does Voridis.
posted by atrazine at 10:06 AM on November 18, 2011 [12 favorites]

That seems a fairly disingenuous description of a career civil service economist and eurocrat who spent a few years on a GS advisory board does it not?

Not to me.
posted by Trurl at 10:12 AM on November 18, 2011

....Okay, I knew that we were sort of in a re-tread of the 30's here, but I was hoping we could do it without showing signs of a re-tread of the 1940's as well.
posted by EmpressCallipygos at 10:13 AM on November 18, 2011 [5 favorites]

a) The fascist in the Greek cabinet is not Papademos, but Voridis. He's a deputy minister, not the prime minister. He's only in the cabinet because all parties were asked to join the government of national unity.
b) Papademos has no connection to Goldman Sachs.
c) Neither does Voridis.

Oooh, you are right. need to disarm the panic system here. Okay, disregard me totally, please I beg.
posted by Frowner at 10:15 AM on November 18, 2011 [2 favorites]

That seems a fairly disingenuous description of a career civil service economist and eurocrat who spent a few years on a GS advisory board does it not?

Yeah, skip right over the fact he wasn't elected. No problem.
posted by spicynuts at 10:17 AM on November 18, 2011

The new imperial anthem will be a piece by Bach: the Goldman Sachs variations.
posted by No Robots at 10:22 AM on November 18, 2011 [2 favorites]

Sheesh, could Islam actually end up offering something better to Europe than the US does?
posted by telstar at 10:24 AM on November 18, 2011 [2 favorites]

I was supposed to be fleeing to Europe as America collapsed around me, here.

I did that a few years ago, this year I moved from the EU to Africa.
posted by infini at 10:34 AM on November 18, 2011 [1 favorite]

Sheesh, could Islam actually end up offering something better to Europe than the US does?

LOL
posted by phaedon at 10:34 AM on November 18, 2011

Yeah, skip right over the fact he wasn't elected. No problem.

As long as he can command a parliamentary majority and win a vote of confidence, it isn't a problem necessarily.
posted by atrazine at 10:34 AM on November 18, 2011

All the comments to this point have been underwhelming and predictable.

Greece Goldman Sachs guy's membership in an actual violent fascist student group

Do you have a link or article?

I try not to use the word Fascism in the 21st century. It is too loaded a term.

Capital flows are inherently undemocratic and have demanded technocratic solutions to the European financial crises. They, the capital flows, have tabbed economists as prime ministers to the chagrin of Greeks, Italians and everyone who believes democracy is an infallible system of government.

The conversation should revolve around the bond market. Is it a fourth branch of government checking politicians' profligate spending, making the hard choices that electorates are unwilling to make, electorates that want free health care, unlimited education, fat pensions and robust public services? Or is it a gaggle of greedy, post-adolescent, coke snorting, prostitute screwing Ivy league graduates in New York, London, Hong Kong scrounging for yield, wherever it may be?

I think it's both.

What I don't understand is: If international capital flows, derivative instruments -- especially credit default swaps -- cause sovereign states all these problems. Why haven't the politicians without connections to the financial industry done anything to regulate them?
posted by Silo004 at 10:35 AM on November 18, 2011

I try not to use the word Fascism in the 21st century. It is too loaded a term.

Man, you have one world war, and nobody ever let's it go. ;)

... okay, well two.
posted by Stagger Lee at 10:40 AM on November 18, 2011

What's the big deal? Corporations have been putting puppets on thrones in third world countries for decades, and it's worked out pretty well for them.
posted by Nahum Tate at 10:42 AM on November 18, 2011

Silo 004: do you have a link or an article?

The Whelk:
A tidy fascist coup - the exiled online
posted by omnikron at 10:48 AM on November 18, 2011 [1 favorite]

Silo004, if you read the comments that the comment you linked to is referring, there is a link there.

Also, The Whelk's comment.
posted by the man of twists and turns at 10:48 AM on November 18, 2011

Related: "[H]istory shows that fascists have always been favored by the 1-percenters to deliver the austerity medicine."

Well, they do tend to provide more certainty and stability than those unstable democratic governments that always seem to change every few years--makes it difficult to plan for the future.
posted by MikeKD at 10:55 AM on November 18, 2011

Instead of being some sort of cabal out of a poorly written conspiracy theory, isn't it more likely that Goldman is simply a large financial institution that is the best in its field? Consequently, a large number of the best financiers, bankers and economists - the sort of people you need to resolve your debt crisis - are likely to have had some contact with it during their careers.

As far as I can tell, it's not the fault of any of the lenders that Greek *politicians* mismanaged their economy and created an unsustainable sovereign debt burden. It is the politicians that through their incompetence let down the people that elected them.
posted by emergent at 11:00 AM on November 18, 2011 [1 favorite]

I guess my first point is that no one would describe themselves as a fascist today. That does not make these guys less insidious. Right wing populist is the term the wiki uses and I think that's a decent term.

Second point: The Greeks were unwilling to make tough gov't spending choices and an undemocratic force negatively reinforced the Greek parliament to choose Vordis as PM. This is a suboptimal result for Greece and hopefully the electorate and its politicians will make the tough decisions and also regulate international capital flows.
posted by Silo004 at 11:03 AM on November 18, 2011

Yeah, skip right over the fact he wasn't elected.

It's possible to have a legitimately representative form of government that doesn't meet your expectations for how the head of the government should be chosen. Heck, even in the United States, the only votes that matter when picking a president are those of the Electoral College.
posted by Slothrup at 11:06 AM on November 18, 2011 [2 favorites]

Der Spiegel: How Goldman Sachs Helped Greece to Mask its True Debt (8 FEB 2010)

Vanity Fair: Beware of Greeks Bearing Bonds (1 OCT 2010) with previous MeFi discussion
posted by the man of twists and turns at 11:13 AM on November 18, 2011 [3 favorites]

Yeah, skip right over the fact he wasn't elected.

Prime Minister Mario Monti won an overwhelming vote of confidence on Friday. There is your election right there. Prime ministers are not chosen by direct popular vote.
posted by Authorized User at 11:42 AM on November 18, 2011 [1 favorite]

That Exiled article is scary. It makes it look like one of David Duke's cronies has acquired real governmental power.
posted by bukvich at 11:48 AM on November 18, 2011

I think the term "unelected" needs some unpacking in this context, becomes it usually comes from British "Euroskeptics" in this context.

You have to understand that everyone in the British cabinet is an MP, mostly from the House of Commons. So in British government, the Prime Minister and most ministers actually represent a particular British constituency which elects them directly.

This is pretty exceptional internationally, where it's common for ministers to be appointed by democratically elected representatives, without being elected themselves.

So, the term "unelected" is a usefully generic way to criticize European officials, such as the members of the European Commission, who are appointed by democratically elected bodies, but don't represent any particular constitution.

So the term "unelected" doesn't necessarily mean anything like "unconstitional" or "illegal" or even "unusual".

What's odd is that I've noticed Americans start to pick up on this language too. However, everyone in their own US cabinet is also "unelected" by the same criterion. Arguably, the President is "unelected" by this standard too, since he's elected by the Electoral College, and represents no particular US constituency.
posted by TheophileEscargot at 11:52 AM on November 18, 2011 [4 favorites]

Not that I'm discounting the role that the continuing inbred nature of political bodies and major corporations has in the current crisis and all other decision-making in the western world, but saying that parliamentally validated cabinet is unelected, while perhaps technically accurate, is not constructive.
posted by Authorized User at 11:56 AM on November 18, 2011

Sometimes you're going to end up with a leader who was not directly elected -- in this case, because the elected leaders resigned. In many Parliamentary systems, the leader is never directly elected.

Anyway you guys can call for a return to Berlusconi, but if you think this is anything other than progress you're crazy.
posted by grobstein at 12:00 PM on November 18, 2011 [1 favorite]

To be clear that right wing guy with the axe is not the Prime Minister. He's only a Minister of Infrastructure.
posted by Silo004 at 12:03 PM on November 18, 2011 [1 favorite]

I believe that there may indeed be a case for the tentacles of one firm or another entangling business and governments (and lobbying and defence etc - see also oil) McKinsey is also wellknown for this sort of thing

however, in the case of Mr Monti, I recall he was extremely well respected and his only association, as the links in the FPP show, were as an external advisor to GS.

Remember EU vs Microsoft? Or GE's merger with Honeywell? Monti was Jack Welch's nemesis on that one, with a reputation for saying political pressure would not work to sway him.

One doesn't change overnight.

He might actually be someone the whole EU would rally behind.
posted by infini at 12:04 PM on November 18, 2011 [1 favorite]

From the article:

The Project is to create such a deep exchange of people and ideas and money that it is impossible to tell the difference between the public interest and the Goldman Sachs interest.

Are you trying to tell me there is a difference?

No no no. These economists and financiers with ties to Goldman simply want to help the countries in question live within their means! Just as Goldman has advocated all along! Unless there were fees to be collected.
posted by kgasmart at 12:05 PM on November 18, 2011 [1 favorite]

Okay, the issue isn't, per se, the economic advisor-ness of these guys. Because the European economy is coming apart, regular people are being hurt by austerity programs without recourse anyway, Greece and Italy have a long term history of actual literal fascism. There's probably no way to have a good, ie for average people and not for the banks, government short of an actual revolution, which would bring its own troubles.

The thing of these appointments is that they are the fin on the shark. You're on the ocean and you know that there's this THING down there, something you're afraid of and hoping you can ignore. Something big and terrible and hungry. It's there, but you hope you can avoid facing it. Then the fin is visible and you know you can't. A shark fin without the shark is just soup (how's that for a vegan's metaphor?) and a dodgy financial adviser in government is just one person. But the trouble is that the shark is there. You can talk about how the fins themselves aren't dangerous all you like, and you're quite right.

These appointments are bad because they show how deeply wrong things have gone in Europe that they can be made in the first place (and that Monti can win a vote of confidence from a bunch of politicians who are probably mostly in Berlusconi's pocket).
posted by Frowner at 12:08 PM on November 18, 2011 [2 favorites]

He's only a Minister of Infrastructure.

Presumably he is in charge of making the trains run on time.
posted by Authorized User at 12:08 PM on November 18, 2011 [11 favorites]

Bear in mind that the best case scenario for the banks profitwise would have been Greece not entering into a crisis - they're the ones who will be (eventually, once the restructuring process concludes) be paid back less than Greece borrowed from them. If you're a bank, CDS protection costs money to buy, holding Greek debt pushes you towards risk limits, spikes your funding costs and agitates your shareholders. The narrative of "pushing a country towards crisis" for corporate gain doesn't really make much sense.
posted by emergent at 12:20 PM on November 18, 2011 [3 favorites]

The narrative of "pushing a country towards crisis" for corporate gain doesn't really make much sense.

I agree, but that's not quite the narrative. The narrative is pushing a country towards crisis for personal gain, which is something a bit different. Ultimately the corporation is a shield for the individual and various groups, who can move losses from one division to another, all the while buying up assets on the cheap and semi-permanently reducing long-term labor costs.
posted by cell divide at 12:23 PM on November 18, 2011 [1 favorite]

Greece is just the road show tryout of the larger plan by our finance lords to bring as many western nations under their overt control.
1. Break the economy
2. Subject nations to withering austerity, including the dismantling of as many social safety nets as reasonably possible.
3. Profit!

/new world order tin foil chapeau
posted by Thorzdad at 12:24 PM on November 18, 2011 [5 favorites]

Ultimately the corporation is a shield for the individual and various groups, who can move losses from one division to another, all the while buying up assets on the cheap and semi-permanently reducing long-term labor costs.

I'd be really interested to read up on this perspective because it's very unfamiliar to me. Is there anywhere you might suggest I start? (I'm paranoid that that sentence sounds snarky - if it does, it's unintentional)

2. Subject nations to withering austerity, including the dismantling of as many social safety nets as reasonably possible.
3. Profit!

What's the mechanism linking 2 and 3? I'd contend that if you want to make money, there are far easier ways to do it
posted by emergent at 12:32 PM on November 18, 2011

What's the mechanism linking 2 and 3? I'd contend that if you want to make money, there are far easier ways to do it

Short the hell out of the country's bonds, buy shares in the companies most likely to profit from privatisation of essential services.

There's no other way to make such a stupid amount of money in a short amount of time. You just need the capital necessary to play chicken long enough to bankrupt an entire god damned country and a central bank that doesn't give a damn.

Greece was child's play. Italy was bigger but still a pushover. Now they're going after France. Can the Eurozone weather this one? Probably not.
posted by Talez at 12:40 PM on November 18, 2011 [1 favorite]

Ryan Avent at The Economist has a great post about these issues:

The idea that having an unaccountable technocracy "orchestrate the fall of elected leaders" in order to eliminate threats to the euro zone is a good thing for the future of that union is bizarre and dangerous, in my view, and highly likely to backfire...Central banks are independent so that they can take the unpopular steps necessary to prevent financial and economic disaster, not so that they can manipulate a stubborn citizenry.
posted by euphorb at 12:43 PM on November 18, 2011

The tin foil hat theory might even be that these are those who think Armageddon is next tuesday at 11 so why not loot until then.
posted by infini at 12:44 PM on November 18, 2011

What's the mechanism linking 2 and 3? I'd contend that if you want to make money, there are far easier ways to do it

The goal is not to make money. The goal is to gain power.
posted by vibrotronica at 12:50 PM on November 18, 2011

A big problem with the so-called technocrats is that they aren't actually governing in a technocratic way. Rather then looking at models and making decisions based on them, they're running things via biases pre-conceived notions.

What's odd is that I've noticed Americans start to pick up on this language too. However, everyone in their own US cabinet is also "unelected" by the same criterion. Arguably, the President is "unelected" by this standard too, since he's elected by the Electoral College, and represents no particular US constituency.

Sure, but while the president isn't technically elected directed elected in practice he obviously is. And in the same way, when you vote for a party in the UK you're basically voting for who you want to PM right? If you prefer Gordon Brown over Cameron you're not going to vote for a conservative MP.

So the problem is that Monti was never elected by anyone. Not even as a member of any parliament. Instead he was given something like the UK equivalent of a seat on the house of lords and then made PM. I think most people would be able to see that as pretty undemocratic.

That said, from the perspective of an outside observer, he seems like a huge improvement over Berlesconi. But I don't know why people in Chicago would keep voting for people like the Daleys or Rahm Emmanuel.
posted by delmoi at 12:53 PM on November 18, 2011

The goal is not to make money. The goal is to gain power.

George Soros would like to have a word with you. A billion dollars in a day isn't exactly a bad wage.
posted by Talez at 12:53 PM on November 18, 2011

Short the hell out of the country's bonds, buy shares in the companies most likely to profit from privatisation of essential services.

Privatisation in Greece so far has been a farce. The "essential services" on the Greek government's For Sale list include large swathes of old Olympic land and stadia, a large nickel miner and Europe's largest betting company - and even then, they have been excruciatingly slow to make the disposals.

Greece was child's play. Italy was bigger but still a pushover. Now they're going after France. Can the Eurozone weather this one? Probably not.

Maybe this is just me, I don't think metaphors of attack are particularly useful analytic devices when it comes to markets. Practically no-one will come out well if the collapse of the Eurozone occurs.
posted by emergent at 1:08 PM on November 18, 2011 [1 favorite]

The collapse of the Euro would be a welcome relief from globalist fantasy, and the beginning of sane national policies.
posted by No Robots at 1:17 PM on November 18, 2011

Practically no-one will come out well if the collapse of the Eurozone occurs.

Indeed, only a tiny number (say 1%) will benefit.
posted by bitmage at 1:22 PM on November 18, 2011 [9 favorites]

Instead of being some sort of cabal out of a poorly written conspiracy theory, isn't it more likely that Goldman is simply a large financial institution that is the best in its field?

Yes and what is best at seems to be manipulating markets and governments, privatizing gains and socializing gains without regard for the people who are effected by the quest for profits.
posted by psycho-alchemy at 1:37 PM on November 18, 2011 [2 favorites]

I think the term "unelected" needs some unpacking in this context, becomes it usually comes from British "Euroskeptics" in this context.

Take it away, Nigel Farage!

"Watch Nigel Farage dance on the Euro's grave"
posted by longdaysjourney at 2:16 PM on November 18, 2011 [2 favorites]

The Goldman Sachs Vampire Squid has become the new Land Octopus.
posted by homunculus at 11:37 PM on November 18, 2011

Privatisation in Greece so far has been a farce. The "essential services" on the Greek government's For Sale list include large swathes of old Olympic land and stadia, a large nickel miner and Europe's largest betting company - and even then, they have been excruciatingly slow to make the disposals.

Having a fire sale of public assets for an underwhelming price (cf. USSR, E. Germany) doesn't make a lot of economic sense. Not to mention that it's usually the profitable bits and bobs that are sold off (OTE back then, Greek Post, OPAP).
posted by ersatz at 1:02 PM on November 19, 2011

This is not a derivative problem.

This is not downward pressure applied to government debt by the investment banking community to whimsically bring good, strong, otherwise healthy nations to their knees.

This is, quite simply, a dearth of confidence brought about by a group of countries who willingly maxed out their credit cards. That lack of confidence has also spread to their next door neighbours who, it seems, were owed a lot of money by those profligate countries and will suffer a cashflow problem themselves if the spenders next door don't pay off their cards.

This has nothing to do with CDOs or CDSs. Why? Because Eurozone officials have already demonstrated the contempt they hold for the Credit Derivative markets. When they were trying to push a 50% devaluation of Greek debt onto bond holders, it was with the condition that it would not be a credit event, ie that it wouldn't trigger the legal definition of default, which the payout from a credit derivative contract relies on.

Fully agreed that a technocratic government is a step back, democratically speaking. Fully agreed that the increasing number of GS execs who are in control of the Levers That Matter in the EZ is worrying to say the least. In anything approaching normal times this

Pragmatically speaking however:

1. Democratic process and incumbant heads of state were not showing anywhere near the sort of progress at the pace required to avert a major liquidity or banking crisis. Experts are needed, and needed fast. Berlusconi was far from an expert in many things.

2. If you're a good, cynical, realistic, pragmatic economist chances are you've worked for a major investment bank in the past. Indeed it would be a little bit worrying if you hadn't.

Maybe Goldman Sachs, like the University of Miami and its football program, just produces high-quality economists and politicians.

Quite.
posted by 5imon at 8:10 AM on November 25, 2011