Christine Lagarde "I think of little kids in Niger"
May 27, 2012 3:34 PM   Subscribe

"So when she studies the Greek balance sheet and demands measures she knows may mean women won't have access to a midwife when they give birth, and patients won't get life-saving drugs, and the elderly will die alone for lack of care – does she block all of that out and just look at the sums?"

""No, I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens." She breaks off for a pointedly meaningful pause, before leaning forward.

"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."

Even more than she thinks about all those now struggling to survive without jobs or public services? "I think of them equally. And I think they should also help themselves collectively." How? "By all paying their tax. Yeah."

It sounds as if she's essentially saying to the Greeks and others in Europe, you've had a nice time and now it's payback time.

"That's right." She nods calmly. "Yeah."

And what about their children, who can't conceivably be held responsible? "Well, hey, parents are responsible, right? So parents have to pay their tax.""

[via BBC - a shorter summary of the peice]
posted by marienbad (85 comments total) 7 users marked this as a favorite

 
I love how the women who represents the interests of the rich and powerful talks about the poverty of the poor in the third world without any irony. Tempted to add a batshitinsane tag.
posted by marienbad at 3:36 PM on May 27, 2012 [11 favorites]


Let them eat baklava
posted by fearfulsymmetry at 3:38 PM on May 27, 2012 [3 favorites]


Your third world example sucks
posted by chavenet at 3:38 PM on May 27, 2012


Don't you know about all the poor, starving people in Africa? We should enact policies that will make Greece look more like that.
posted by furiousxgeorge at 3:39 PM on May 27, 2012 [19 favorites]


My eyes widened when I read those comments yesterday. Could she a bit more condescending? This is up there with eating your vegetables because of all the starving children in China.
posted by Celsius1414 at 3:46 PM on May 27, 2012


This is like watching people divorce.
posted by humanfont at 4:01 PM on May 27, 2012 [5 favorites]


I thought this piece by Alex Andreou in the New Statesman was a good takedown. Example:
First, the insidious idea that the misery engulfing the people of any nation is to be ignored, on the basis that there is even worse misery elsewhere. That in some way helping Greece – a member of the European Union for thirty years – is a direct alternative to helping “little kids from a school in a little village in Niger”. There is no such proposed programme to help little kids in Niger, you understand. This is a fictional programme, part of the IMF’s varied portfolio of fictional charitable work, that could, possibly, maybe happen, if only Greeks stopped being so selfish.
posted by sevenyearlurk at 4:03 PM on May 27, 2012 [17 favorites]


Ugh. I try to resist it, but that tan irks me so.
posted by phaedon at 4:07 PM on May 27, 2012


This is like watching people divorce.

Yeah, from reality.
posted by hoskala at 4:11 PM on May 27, 2012 [11 favorites]


Heh, as if people avoiding tax is somehow a purely Greek problem.
posted by wierdo at 4:15 PM on May 27, 2012 [1 favorite]


It isn't, of course. But the scale of tax avoidance in Greece is not really comparable to many other Western nations.
posted by Justinian at 4:16 PM on May 27, 2012 [5 favorites]


part of the IMF’s varied portfolio of fictional charitable work, that could, possibly, maybe happen, if only Greeks stopped being so selfish.

Greece is unable to meet existing commitments over their first €110bn tranche of bailout money, is refusing to meet the new commitments it made mere months ago for another €130bn, and is still annoyed with the EU after they arranged a writeoff write off of 50% of Greece's private sector debt.

Greece has now been given €22,304 per person in bailout money, with more to come. That's pretty generous, IMO.

Greece borrowed heavily for the 2004 Olympic games, put up public sector pay by 50% in 8 years, and didn't bother collecting any taxes. It then submitted false accounts to Brussels for several years that (radically different from the internal numbers) that materially affected subsidies gained and interest rates paid on the financial market, something that would be outright criminal fraud if done by a private company.

In a democracy, why would that not involve consequences for both the government and population?
posted by jaduncan at 4:17 PM on May 27, 2012 [39 favorites]


Sounds like some banks gave out some really bad loans. Better let them collapse so they face the consequences.
posted by furiousxgeorge at 4:21 PM on May 27, 2012 [9 favorites]


Justinian: "It isn't, of course. But the scale of tax avoidance in Greece is not really comparable to many other Western nations."

Well, other than the hundreds of billions of dollars a year the US government gets cheated out of through various schemes. (I can't say about other countries)
posted by wierdo at 4:31 PM on May 27, 2012 [1 favorite]


as if people avoiding tax is somehow a purely Greek problem
It's not so much that people were avoiding tax. But that the government failed to levy tax.
A well know example is that Greece did not have a proper cadastre as required to levy property tax. The EU contributed millions of developmental aid over the last two decades to create one. Out of that developmental aid one billion was lost through financial mismanagement. And apparently it's still not functioning propertly.
posted by joost de vries at 4:35 PM on May 27, 2012 [1 favorite]


This woman made an appearance in "Inside Job". She seemed sane and shocked by the crisis. I was surprised and a little pleased when she was made head of the IMF because of the things she said in that film. There's only one possible explanation:

Brain Slugs.

(God save us all.)
posted by Trochanter at 4:36 PM on May 27, 2012 [2 favorites]


I keep going back to the Einstein quote: We cannot solve our problems with the same thinking we used when we created them. Yet, there is a considerable lack of imagination when it comes to thinking about the problems.

The Guardian reporter really brings it to life that is worth reiterating:
For all Lagarde's charm, it's hard not to feel a sense of Alice In Wonderland bewilderment about the IMF's work. The Americans are recovering with a stimulus programme more familiar to Europe than Washington, while a Frenchwoman is trying to save the eurozone with austerity measures that would please the Tea Party. The whole point of the European project was to prevent the sort of conflict that once engulfed the continent, and yet the IMF's life support strategy has seen neo-Nazis elected in Athens, and now risks destabilising the marriage between Germany and France on which the European dream depends. When democratic elections produce politicians unwilling to play by the IMF's rules, they have been replaced by unelected technocrats – Mario Monti in Italy, Lucas Papademos in Greece – gifting Eurosceptics evidence for their charge that the EU is fundamentally anti-democratic.
That's the most interesting part of the piece; the author has hit on a large theme often missed in the tactical and sniping discourse of everyone from The Economist to The New York Times.
The Americans are recovering with a stimulus programme more familiar to Europe than Washington, while a Frenchwoman is trying to save the eurozone with austerity measures that would please the Tea Party.
This is the crux of the issue. That there is some kind of codified economic playbook from which strategies must be taken. American is using the centrally-led monetary policy which is some ways is at the root of Europe's problems. Europe is using heavy-handed fiscal techniques which destroyed the American industrial base and welfare state. It's very similar to the two-party system of elected officials; a narrow spectrum of choices, which in the end, aren't very different at all.
...the IMF's life support strategy has seen neo-Nazis elected in Athens, and now risks destabilising the marriage between Germany and France on which the European dream depends. When democratic elections produce politicians unwilling to play by the IMF's rules, they have been replaced by unelected technocrats...
Thus the law of unintended consequences. The Eurozone, which was designed to promote peace and economic freedom has become a suicidal noose. Rather than peace and economic freedom, the result is now conflict and economic enslavement; Europe's hard-earned democracies threaten to collapse under an untenable democratic ideal. That the continent could be a formal union of self-governed countries. There's a very strange relationship in Britain between the MPs (Ministers of Parliament) and the MEPs (Ministers of the European Parliament). It's well-said that a dog cannot have two masters, and the citizenry remains staunchly loyal to the MPs. No one's quite sure what an MEP does or why it's relevant.

The analogy would be a United States where the Federal Government was the weaker party to the States. America have quite a defined separation of powers and assignment of duties and roles that keep things clean – or at least functional. Europe tried to have cake (Continental Union) and eat it too (Sovereign Nations). American scholars watched the Euro forming and tut-tut'ed at the idea of having a monetary union without a fiscal union. And you're not going to have a fiscal union without a common identity. Americans are American first and Californian, Texan, New Yorkish, Mainer, or whatever second. Germans, French, Italians, etc. are national first, and European second. It's a disaster.

But the failure of imagination is not in identifying the problem. That's rather easy and she has it sorted quite well, but doesn't actually address it completely. Yes, Greeks don't pay taxes and are corrupt. But also, Germany has been the Big Winner out of the Euro experiment. First from the free trade area, and then from the exchange rate. Germany charged ahead economically with the advent of the Euro because, in essence, the Euro traded at a better rate than the DM. German stuff was super-expensive before. BMWs and Mercedes used to be elite; now they're relatively pedestrian mainstream luxury cars. And Germany did this at the expense of Greece, Italy, Spain, etc. Not that the latter are free and clear from responsibility, but rather, there needs to be some thought as to the beneficiaries, as well as chastising of the troublesome.

The Euro is a mini version of the problem between China and the United States. Pegging the Yuan to the Dollar, China has imported employment, thus exporting unemployment to the United States. Similarly with Germany; their strength has come at the cost of weakening Southern Europe. The Euro problem could easily be fixed if they would weaken the currency. But, if that happens, European exports become cheaper, which is fine for the service economies. It's not fine for Germany, for then their input costs will rise, wiping out their happily positive trade balance.

The Europeans are fascinated by the balance of payments between American states. Some states are always net givers; others are net receivers. Because that's what it takes to make a big, fat diverse family. "You mean, California always pays, and someone else always receives? Why do you do that?" Because that's the only way it works, yo.

But I digress. The problem with Europe is that the systems are too inflexible to accommodate for societal change. The REAL problems have to do with demographics, social mobility, creative destruction of technology, and a whole host of other real, serious problems. And those are exactly the problems that Europe is refusing to address right now. The same families have owned European businesses for generations. There's little opportunity within the societies because they have been de facto set up to promote that which is already in place.

And that is why I say the problem pulling solutions from the playbook. The playbook is broken. Imagine if you had high cholesterol and your doctor told you to quit smoking. And your answer i to smoke Ultralights. If quitting is off the table, you're not dealing with the real problem, rather, you're trying to create a more manageable version of it.

And this is where the IMF and the EU and the US, and all the rest are failing. The world has moved on from the economic tools currently being used. The world has moved on from de facto national identities. The attempts to 'fix' things with old tools are only ensuring that the problems become worse. I like Lagarde man, I think she's super-cool, but pretty much all of the leadership has a mental model problem in thinking that we're just not applying to tools correctly quite yet, when the real problem is the toolset itself.

She actually says it, "This affects The Mexican, The Australian, and the Brazilian." Woah, talk about old-school colonial thinking? All of those economies are doing relatively well in comparison to the EU and US economies. In fact, those economies are doing well despite the West trying to perpetuate the Wise Father – Dumb Child relationship. "The Mexican" doesn't need help from countries that can't sort themselves out. "The Mexican" needs America to grow its own cocaine; that's what "The Mexican" needs.

Europe cannot deal with its new relevance – which is substantially less than its old relevance – and this is a parlour game of the North trying to beat the South into shape. The problem is not in the North or in the South. It's the whole concept that the rest of the world still needs Europe and the United States to hold the purse strings. Those little African school kids would have been much better off without generations of European and American value extraction. The 'indebted' countries would not need structural reform if the global financial system was designed for resource allocation rather than wealth concentration.

It's a big failure of imagination; but then again, that's why the leaders fall over. They look backward and think that if they keep doing that which made them successful before, that they will continue to find success. The context has changed, and until everyone can accept that, this is all re-arranging deck chairs on the Titanic.
posted by nickrussell at 4:40 PM on May 27, 2012 [69 favorites]


oh no
not brain slugs
posted by joost de vries at 4:41 PM on May 27, 2012


I think that New Statesman blogger's
criticism of Lagarde's interview is much too skewed. Lagarde's attitudes, however objectionable one might find them, aren't confined to the rich - you will find similar attitudes widespread amongst the German middle and working classes ( even though Germany has been doing very well economically recently and is historically the biggest winner from the Euro) recently . Also she isn't saying that tax evasion ( a serious widespread issue in Greece but if course there are many other European problems of greater importance - but she was asked specifically about Greece) is the sole or main issue of European economic problems (!! A strange conclusion to reach from that interview). Furthermore , the IMF does indeed have programs to support the economy in Niger ( and yes, intended to help the poor) - a country Lagarde has visited.

I think Lagarde's comments are a bit dangerous as they may make a Greek , disorderly or not exit slightly more likely by strengthening domestic Greek opposition to the Troika but it may be that she considers a Greek exit an inevitably , in which the IMF would likely have to help provide further emergency support. Lagarde's "tough talk" ( expressed in an interview with The Guardian (!) -surely she knew what was she was getting into ) may be a way of premptively rhetorically giving herself more room to maneuver ( for both easing the way for relief policy action as well as defensive fallout management ) when that situation arises. Her primary audience here may even be the Chinese - her remarks about the party being over Europe here are similar to common attitudes in China about the European crisis
posted by Bwithh at 4:54 PM on May 27, 2012 [3 favorites]


The Americans are recovering with a stimulus programme more familiar to Europe than Washington, while a Frenchwoman is trying to save the eurozone with austerity measures that would please the Tea Party.
The Tea Party is not known for its support of more aggressive taxation. That's why they use 'TEA' as a acronym for 'Taxed Enough Already.' The quote above sounds neat but makes no sense whatsoever.

The thing people are missing is that if Greece leaves the Euro and floats the drachma, as well as being massively disruptive, nobody will want the damn drachma and they['ll only be to get loans at crippling interest rates. People seem to believe that being able to float your currency just makes your fiscal problems disappear. It doesn't; what happens is that banks close, you're not allowed to take money out of the country, and corruption and the black market expand dramatically. It's highly unlikely to be better than the austerity regime, but rather an order of magnitude worse. A good historical example is the hyperinflation in Weimar Germany...which is why the Germans are insisting on some fiscal rectitude, because they've seen this movie before and know how it ends.
posted by anigbrowl at 4:55 PM on May 27, 2012 [4 favorites]


For those who don't "get" this, Christine Lagarde does need to choose between funding children in Niger or continuing the bailout of Greece. Simple as that - When one gets money, the other gets less.

Now, if you want to argue that children in Niger don't "deserve" money as much as the Greeks, well... I guess make your argument and we'll see how it sounds. But Ms Lagarde doesn't magically control infinite amounts of money that she can use however she sees fit.
posted by pla at 4:58 PM on May 27, 2012 [10 favorites]


anigbrowl: "The thing people are missing is that if Greece leaves the Euro and floats the drachma, as well as being massively disruptive, nobody will want the damn drachma and they['ll only be to get loans at crippling interest rates. People seem to believe that being able to float your currency just makes your fiscal problems disappear."

I suggest you do some reading on other countries that defaulted and then removed a currency peg. I can't think of one that wasn't able to get new loans within a year or two. Same reason it's usually pretty easy to get DIP financing for a bankruptcy. Once you've stiffed everybody else, it'll be a while before you have to stiff the new lender.
posted by wierdo at 5:02 PM on May 27, 2012 [2 favorites]


A good historical example is the hyperinflation in Weimar Germany...which is why the Germans are insisting on some fiscal rectitude, because they've seen this movie before and know how it ends.

I suggest a more relevant historical example would be Argentina's experience abandoning the dollar peg.
posted by kithrater at 5:03 PM on May 27, 2012 [4 favorites]


on not-preview, pla, wtf? The IMF funding to Niger has been around $25 million since early 2010. What is with people's opposition to actual facts lately? It's like we get into election season and all of a sudden we can just make shit up.
posted by wierdo at 5:05 PM on May 27, 2012 [5 favorites]


Quoting from the article, emphasis mine:
You could think of the IMF as a global payday loan company for countries who have got into trouble and can't meet their financial commitments – the difference being that instead of charging sky-high interest rates, it demands radical economic reforms.
What is in her mind, when she thinks of entire countries as a single human being who may have made a "debateble" (if not forced upon, suggested) single minded choice?

In doing so, she doesn't seem to remember that IMF is the expression of many of those countries, (who don't exactly all have the same voting power, btw) hence the IMF is only formally a supranational entity; unless of course one considers the IMF members not as political representatives, but rather as representatives of unelected interests, aka private interests, of a global "payday loan company".
posted by elpapacito at 5:07 PM on May 27, 2012


This is so much nonsense. Comparing the situation in any Euro nation with nearly any African nation like this is so much political horseshit.

And, making some argument about "finite resources" is also unmitigated horseshit. No one is talking about needing unlimited resources to solve all problems everywhere. It's a fucking logical fallacy to suggest this is the case.

Listen to the substance of words. She is saying that she'd rather have desperate populations with almost no access to public services pay user fees to private entities for the privilege of getting a marginal education in the faint hope that it will actually improve their situation in a global economy, than actually, you know, give someone something of value for their "taxes".

There is a /reason/ some countries have a poor tax turn-out. Those nations tend to be the sorts of nations that are just as "corrupt" as those African nations we love to go on about as being hotbeds of corruption.

This is more liberalized market wet-dreams being sold to Europe as some sort of "austerity" or common-sense package which, when one scratches the surface, is made up of no sense at all.

Let's ask the simple questions, shall we? Would Germany, the so-called power-house of industry and capital in the Eurozone, accept the so-called austerity measures? Given that part of the reason some nations are doing so fucking well these days is because they have preferential access to markets and incredibly strong labour unions working in lockstep with international banking to ensure that the preferential treatment continues, let's just say "probably not."

Yeah. This chick ain't gonna say shit about Germany, is she?
posted by clvrmnky at 5:11 PM on May 27, 2012


The IMF funding to Niger has been around $25 million since early 2010. What is with people's opposition to actual facts lately?

I think you're focusing a little too much on Niger specifically, but it's just standing as an example of a highly impoverished nation. Lagarde is just saying that, in a world of limited resources, every dollar the IMF sends Greece (if they aren't paid back) is a dollar that cannot go to other, often more dire, causes. She's right.
posted by dsfan at 5:13 PM on May 27, 2012 [5 favorites]


wierdo : on not-preview, pla, wtf? The IMF funding to Niger has been around $25 million since early 2010.

The world has a lot more places like Niger than like Greece.

For every Greek "women [without] access to a midwife", you can provide an awfully lot of kids with such "luxuries" as potable water, basic education, that sort of thing.

But hey, don't mind me, just spouting election year BS.

/ Oh, right... We have one of those this year?
// Do we have any real candidates yet, or just the proven-loser incumbent and the socialist from MA?
posted by pla at 5:13 PM on May 27, 2012


clvrmnky Yeah. This chick ain't gonna say shit about Germany, is she?

Nor, I would point out, should you. Mentioning a culture that embodies the very bootstrappyness so many of you loathe, as a counterexample of austerity measures? Not the most effective argument you could make, I think.
posted by pla at 5:16 PM on May 27, 2012 [1 favorite]


Mentioning a culture that embodies the very bootstrappyness so many of you loathe, as a counterexample of austerity measures? Not the most effective argument you could make, I think.

In fairness, many would point out West Germany and the Marshall plan as an example of increased wealth through international market borrowing and an unashamedly interventionist industrial policy.
posted by jaduncan at 5:22 PM on May 27, 2012 [3 favorites]


And all this is happening because Goldman Sachs helped Greece disguise its debt load so it could scam its way into the EU, something it had no business doing given the state of the country's taxation v. expenditure balance.

We seriously need to unwind that particular company out of existence. The damage they've inflicted on the global economy is far too huge (not restricted to this specific situation), and they need the corporate death penalty.
posted by hippybear at 5:57 PM on May 27, 2012 [5 favorites]


Lagarde is just saying that, in a world of limited resources, every dollar the IMF sends Greece (if they aren't paid back) is a dollar that cannot go to other, often more dire, causes. She's right.

Some IMF funds that go to Low Income Countries, such as Niger, come from the Poverty Reduction and Growth Trust. In March 2012, the IMF approved a three-year $US121m credit facility to Niger from the PRGT, via an Extended Credit Facility. The IMF funds the PRGT by seeking pledges from wealthier countries.

Greece has accessed IMF funds via its Extended Fund Facility, which comes from the general fund of the IMF, which in turn come from the quotas paid by member-countries of the IMF.

So no, it is not the case that Lagarde decides to split the funds of one bucket to all the causes in the world. One could make the argument that other countries will be less likely to contribute to the PRGT if they instead have to contribute more to the IMF general pool via quotas being raised to assist Greece.
posted by kithrater at 5:57 PM on May 27, 2012 [1 favorite]


I agree with her that IMF money should be aimed towards places like Niger, not Greece. We've had about two years with most economists saying they must exit the Euro, fair enough.

Is there any way Greece can remain in the Euro without repaying the debts their creditors refuse to forgive? Imagine the extreme case where all Greece's debts were forgiven, perhaps in exchange for one time state asset transfers, *but* European nations, pension plans, consumer banks, etc. were forbidden by law from buying Greek bonds. Could Greece function?
posted by jeffburdges at 5:59 PM on May 27, 2012


Could Greece function?

Short term, yeah, probably. Medium to long term, structural problems with the economy and a general lack of competitiveness would probably get them back in the same situation.

The German plan for enterprise zones (with labour protections) in crisis countries is so-so, but ultimately they need to change on the structural level. At the moment they have an unproductive workforce and inefficient companies that are almost always going to be outcompeted by French and German competitors. They do have a great shipping industry, but it's very easy to change a flag of convience if required so it's (allegedly) hard to tax.

Bothering to have a land registry for tax purposes might be a good idea.
posted by jaduncan at 6:11 PM on May 27, 2012 [1 favorite]


I'd agree that America engages in staggering levels of tax avoidance, wierdo, well that's universal amongst corporations and very common amongst rich people. America's middle class pays their taxes however.

I'd agree that effective property taxation sounds like an exceedingly good approach, avoids austerity's idiotic crippling effects while offering money long term.
posted by jeffburdges at 6:20 PM on May 27, 2012


Just bothering to actually collect taxes would be a good idea. Outstanding taxes from just the past decade in Greece amount to over 60 billion euros, which is more than the government is seeking to raise by selling public property to private interests (50 billion euros).
posted by hippybear at 6:21 PM on May 27, 2012 [1 favorite]


strengthening domestic Greek opposition to the Troika

haaaay
posted by troika at 6:21 PM on May 27, 2012 [2 favorites]


kithrater-

You're right that I was oversimplifying the funding mechanism (although I think these sort of internal divisions are often overrated due to the general fungibility of money), but I still think Lagarde's basic point is sound--whenever the IMF is deciding whether or not to disperse funds, they have to assess not merely whether it would do good in the country receiving funds, but whether or not there is a better use of the money. The IMF in fact has lots of funds dispersed to countries with more compelling "humanitarian" cases than Greece.

The IMF was never intended to be simply a funding mechanism for giving money to the poor, so there are relatively wealthy countries (e.g. Ireland) who have received a lot of money, but that doesn't really change things in the case of Greece vs. some other indebted country.
posted by dsfan at 6:31 PM on May 27, 2012


Brain Slugs.

(God save us all.)



Just switch to a garlic shampoo and you'll be fine.
posted by TheWhiteSkull at 6:34 PM on May 27, 2012 [1 favorite]


dsfan, the fungibility of money breaks down when money is pledged for particular purposes, as is the case with the majority of funds within the PRGT.

If you wish to make the argument that giving money to Greece somehow diminishes the funds available to give to Niger or similar countries from the PGRT (as shown by your link, most of the more compelling humanitarian cases only have outstanding loans against the PRGT), then you need to explain how loaning money from the general fund impacts the amount of funds available in the PRGT.
posted by kithrater at 6:43 PM on May 27, 2012


If you wish to make the argument that giving money to Greece somehow diminishes the funds available to give to Niger or similar countries from the PGRT (as shown by your link, most of the more compelling humanitarian cases only have outstanding loans against the PRGT), then you need to explain how loaning money from the general fund impacts the amount of funds available in the PRGT.

This is my last post on this, since I'm headed out, but I can't quite agree with this, because I think it's contrary to the way economists generally look at the world. Lagarde and her team are making decisions at the margin--should the IMF fund cause X, cause Y, or cause Z? There are many different criteria they can use--the poverty of the recipient country, whether structural reforms are possible, etc.--so it's not appropriate to solely look at poverty, and I'm sure Lagarde would agree. But, assume the IMF discovers it has, say, $1B to spend that it didn't expect. Lagarde is saying in effect, "Hey, I genuinely feel bad for Greek children (per capita income $28,400, 18.9B SDR outstanding from general fund). But, I feel worse about, for example, Pakistani children (per capita income $2,700, 5.0B SDR outstanding from general fund)." Whether most of the humanitarian cases only have funds from PRGT is interesting, but does not demonstrate the appropriate marginal decision about Greece.
posted by dsfan at 6:56 PM on May 27, 2012 [1 favorite]


How an economist may look at the world does not have much to do with the question at hand, which is "if the IMF gives more money to Greece (balance-of-payment problems), does it necessarily give less money to Niger (humanitarian purposes)?"

As the IMF has a dedicated fund for balance-of-payment problems, the GRA, and a dedicated fund for humanitarian purposes, the PGRT, and money does not usually cross between these two reserves and is sourced differently from member-countries, then no, giving more money to Greece from the GRA does not necessarily mean giving less money to Niger from the PGRT.

With regards to how the IMF makes decisions regarding the amounts of loans to give from the GRA, those loans are not made for humanitarian purposes and are not usually given at concessional rates. The primary purpose of this lending is to assist countries with balance of payment problems. The hypothetical surplus $billion in the GRA is not going to be made available for humanitarian purposes, unless you wish to argue it is intrinsically more humanitarian to provided a non-concessional loan to Pakistan instead of Greece.
posted by kithrater at 7:19 PM on May 27, 2012 [6 favorites]


How an economist may look at the world does not have much to do with the question at hand...

psssst- It's called the 'Dismal Science'...
posted by TheWhiteSkull at 7:56 PM on May 27, 2012


Christine Lagarde does need to choose between funding children in Niger or continuing the bailout of Greece. Simple as that - When one gets money, the other gets less.


But Christine Legarde gets the same.

Good work, if you can get it.
posted by ChurchHatesTucker at 7:57 PM on May 27, 2012 [2 favorites]


Could someone help me parse this part of the article, quoted above:

When democratic elections produce politicians unwilling to play by the IMF's rules, they have been replaced by unelected technocrats

Who is doing the replacing? The politicians unwilling to play by the rules? Or are they being replaced. I'm lost.
posted by not_that_epiphanius at 8:14 PM on May 27, 2012


You are never wrong when you have voted because you've acted in accordance with your conscience and your beliefs, and you've exercised your democratic right, which is, you know, perfectly legitimate in our democracies.
Falser words were never spoken.
posted by Jonathan Livengood at 8:32 PM on May 27, 2012


Madeleine Albright must have been one of her role models.
posted by carping demon at 8:39 PM on May 27, 2012


But Christine Legarde gets the same. Good work, if you can get it.

I'm assuming you volunteer all your time and don't receive a salary?
posted by Justinian at 9:01 PM on May 27, 2012 [1 favorite]


I'm assuming you volunteer all your time and don't receive a salary?

At this point, yeah.

Are you implying Christine does?
posted by ChurchHatesTucker at 9:11 PM on May 27, 2012


Let them eat value added tax cake.
posted by BrotherCaine at 9:42 PM on May 27, 2012


Why is it that people always seem to need to buckle down and do without education and health care instead of yachts and electronics and summer homes?
posted by gracedissolved at 9:51 PM on May 27, 2012 [8 favorites]


Are you implying Christine does?

No, I'm just saying that it doesn't strike me as a problem for people to get paid to do their jobs.
posted by Justinian at 9:56 PM on May 27, 2012 [1 favorite]


hippybear: " The damage they've inflicted on the global economy is far too huge (not restricted to this specific situation), and they need the corporate death penalty."

I think throwing their management and the management of every single large financial institution around the world would suffice.

jeffburdges: "Is there any way Greece can remain in the Euro without repaying the debts their creditors refuse to forgive?"

The problem isn't the creditors as much as the trillion or more dollars worth of CDS on Greek sovereign debt that will amplify any losses, should any restructuring be considered "default."
posted by wierdo at 11:15 PM on May 27, 2012


Greece has now been given €22,304 per person in bailout money, with more to come. That's pretty generous, IMO.

"In the end less than 19 cents of the bailout are going to allow Greece to continue its overspending. About 23 cents goes to Greek institutions, though at this point, all of that is held by the ECB, so it is not fully benefiting Greece.

18 cents are going to the ECB directly and 40 cents are going to banks and insurance companies outside of Greece. So at least 58 cents of every bailout Euro is going outside of Greece, and depending on how you treat the repo agreements, that number could easily be 70 cents."

Where Does The Greek Bailout Money Go?
posted by Abiezer at 2:02 AM on May 28, 2012


The bailout money has gone to bail out the banks that lent money to Greece.

The Greeks have massive internal problems that they have papered over for a decade or more by borrowing from foreign banks, using accounting shenanigans enabled by investment banks like Goldman Sachs to cover up their internal deficits & keep the credit rating that enabled them to borrow during the boom years from banks that only really cared whether the securities in question were AAA-rated or not.

Once the flow of easy money dried up, which it was bound to do eventually, there was no way out for the Greeks. A country with it's own currency has other options, but the Greeks were trapped in the €. Their only real option is to either default on all their debts & deflate their costs until they match their income, whether they stay in the € or not, unless they can find some willing donor willing to gift them enough capital to cover their expenditure.

Unfortunately, the EU appears hell-bent on insisting that the fiction that the Greeks must continue to pay for most of their debts (the forgiveness on their private debts doesn't include any of their borrowings from the ECB or other sovereign EU nations) whilst cutting their expenditure at the same time is a feasible course of action. This is simply impossible, as anyone with an ounce of economic sense would realise, but the EU appears collectively unwilling to recognise this & as a consequence is pushing Greece into a catastrophic hard default and chaotic exit from the €.

What I find particularly galling is that there appears to be very little acknowledgment of the culpability of the banks for all this lending in the first place: they're being bailed out with tax-payers money (promises to tax EU citizens in the future mostly) but the executives in charge of those banks get to keep their highly paid jobs with the huge bonuses and all the rest: regulatory capture on a massive scale. The same has happened in the US of course; it's hardly unique to the EU. The banks are intent on bleeding the economy of the EU dry until there's nothing left & the politicians appear to be completely captured by their wordview that believes this to be the moral and right thing to do.

As David Graeber points out in 'Debt, the first 5000 years', this is a credit crisis in a debt based economy where the creditors have been bailed out instead of the borrowers: this never works.
posted by pharm at 2:54 AM on May 28, 2012 [8 favorites]


Well yeah. It's bailout money to pay creditors; one would rather hope most of it was going to creditors, no? The money has already been spent.

That doesn't mean Greece gets to blame the EU and ECB for their own history of not bothering to collect taxes and directly defrauding creditors. Part of the WTF is that nobody expected that an EU government would just lie and lie and lie about their financial state.

Nobody is suggesting it's all going on internal spending, just that Greece keeps on borrowing more, promising to make savings through structural reforms, promising to collect back taxes...and then it surprisingly turns out they were lying about their willingness to do that too. Why should the rest of the Eurozone and/or IMF keep on providing new funding when Greece has shown no particular desire to make the structural reforms required and is almost certainly about to elect a government that will proudly reject the need for structural reform and openly states it doesn't want to pay the renegotiated debt?

I mean, at what point do the country and population bear some responsibility?
posted by jaduncan at 2:55 AM on May 28, 2012 [2 favorites]


jaduncan: "I mean, at what point do the country and population bear some responsibility?"

It's a tough one. It's not as if the average Greek teacher (say) has lived the life of Riley for the last decade. Individual Greeks work long hours. The problem is that the system they're embedded in is at least partially broken. It's corrupt and kleptocratic from the top down & appears incapable of running itself competently. Nobody with significant income that isn't PAYE pays tax on it (to a first approximation) & the state itself is so badly run as a whole that it takes two to three times as many hours of labour to generate the equivalent GDP as Germany on a per-head basis.

There's no easy way out of this hole unfortunately.
posted by pharm at 3:05 AM on May 28, 2012


It was mainly a reaction to the phrasing like your original comment, with notional amounts going to each Greek citizen, which to my mind provides a false picture of what's going on and seems to have decided the responsibility question in advance. On, preview, pharm fleshes that point out.
posted by Abiezer at 3:09 AM on May 28, 2012


For those who don't "get" this, Christine Lagarde does need to choose between funding children in Niger or continuing the bailout of Greece. Simple as that - When one gets money, the other gets less.

And I am sure that IMF is rushing, just rushing, to pour their money into schemes that benefit the poor people of the world, as opposed to sending money to schemes with strings attached which frequently benefit big business and Western interests more than said poor people.

This situation is far more complicated than 'if we give money to Greece, that poor child in this picture will never be educated and have to share a seat with five other students'; it's about preventing a country's utter collapse and protecting other European countries in the process. One of those countries is Ireland; if Greece goes, we're not going to be far behind once the raiders have picked over their corpse. Apart from the moral question, it is in the interest of the global community not to watch Greece burn. And if the best the European Union can do is simply stand by the sidelines and watch Greece go down the tubes as we celebrate the miracle of Germany (itself bolstered by the low rate that the Euro is at now, a rate that is much lower than any national German currency would be), then it is a failed project even if we get to keep the Euro.

Part of the WTF is that nobody expected that an EU government would just lie and lie and lie about their financial state.

If they didn't then weren't paying very clear attention to the issues endemic in various countries, not all of which are currently in trouble. I just don't think the EU is very good at caring about these things until disaster strikes; in fact, I would say that it really doesn't have any appetite for clearing up corruption unless it suits them to use that rhetoric. FFS Ireland sent to the European Court of Auditors a man who had made an almost 4 billion accounting error while a chief civil servant at the Department of Finance.Our gumption is impressive, but the fact that the EU just accepted it instead of pushing back against the Irish government shows that it really is not all that concerned with fixing larger issues of cronyism and corruption in Europe. Cutting Greece off is not going to fix those larger, endemic issues. (And noticeably no one in Europe is calling for much reform in Ireland because we are more or less paying our debts, although we badly need it. That's dumb, because the sort of fuckery that got us into this trouble in the first place is only going to continue.)
posted by lesbiassparrow at 3:10 AM on May 28, 2012 [4 favorites]


It was mainly a reaction to the phrasing like your original comment, with notional amounts going to each Greek citizen, which to my mind provides a false picture of what's going on and seems to have decided the responsibility question in advance. On, preview, pharm fleshes that point out.

Ah. I apologise, that wasn't my intent and I wouldn't want to mislead. It was just meant to be a more easy to grasp conception of the figures involved versus the size of the economy.

I'm not suggesting that individuals benefitted to that extent; part of what is so frustrating about Greece is that a lot of the money strayed at the top and Greece isn't effectively reclaiming avoided tax from business leaders.

Frankly my opinion is that Greece was and is a country with extremely immature political leadership that ran into trouble as soon add bills came due that they couldn't devalue their way of (and have a resultant boost in tourism revenue); it wasn't even kind to them to let them in the Euro. It's just that the moral hazard involved in letting unstable Eurozone states walk away from that much debt is horrific.

They'll have to default rather than just devalue this time too; devaluation isn't a panacea as the debts are owed in Euros and I doubt many Germans would want to holiday in Greece much. My mind boggles at how much crap they will bring down on themselves; it is a net importer who depends on tourism and has a structural need to borrow. Russia and Argentina could borrow because fundamentally they were profitable. Greece isn't.

It makes them look rather like a drowning man who keeps throwing away lifebelts and ignoring advice on how to swim.
posted by jaduncan at 3:40 AM on May 28, 2012 [2 favorites]


Russia and Argentina could borrow quickly after default, to be clear.
posted by jaduncan at 3:43 AM on May 28, 2012


"My mind boggles at how much crap they will bring down on themselves; it is a net importer who depends on tourism and has a structural need to borrow"

This sentence illustrates a point for me: so much of this discussion is referring to 'Greece' as though it is a single entity that has gotten itself into this mess, whereas the reality is that a small, corrupt minority have caused these problems and now the whole of Greece is on the hook for repaying that debt, apparently through the stripping of essential social services from the poorest people in the country.

I'm not sure exactly how we reached a point in our global society where depriving people access to a midwife or life saving drugs is an acceptable outcome to recovering debt. Ethics be dammed - this debt needs to be paid!
posted by rubyrudy at 4:09 AM on May 28, 2012 [3 favorites]


Greece as a whole is voting for default, according to the polls. They are perfectly free not to pay, but the whole point is that their current situation is quite possibly a picnic compared to a default.
posted by jaduncan at 4:15 AM on May 28, 2012


There will be fewer midwives and life-saving drugs if Greece defaults than if they face austerity. So it's not exactly a choice between the poor and the rich: it's a choice between better and worse for the poor.

That said, some Greeks I know seem to think this is a perfect opportunity to finish the civil war that was abruptly won by the right wing with the support of the US and UK. They seem to think that the communists will fare better this time.

I'd rather see the EU create a permanent fiscal union with regular transfer payments from the rich to the poor countries, like the US has, but I don't hear anyone really pushing for that.
posted by anotherpanacea at 5:40 AM on May 28, 2012


The Greeks who can will just move to other countries. Much like the Spanish who can are moving their money to other countries' banks. It'll be interesting to see how the common market survives selective imposed austerity and labour mobility.
posted by srboisvert at 5:52 AM on May 28, 2012


She should have just said that yes, she does block all that out and just focuses on the sums. Her actual comments just make her sound more callous.

The Greek tax cheats and duplicitous bureaucrats have much to answer for, but they are also irrelevant in a discussion of how the poor in Greece are now suffering.

-----

On a related note, this is an interesting German documentary of the situation in Greece. A rough translation can be found in the comments. There's a segment where they talk to a woman who earns 20 euros a day. In order to get her three kids food she put them in an orphanage. She can visit them once every five weeks.
posted by BigSky at 7:37 AM on May 28, 2012


Every time somebody says the Greeks should pay and collect taxes, they will be called out as evil Nazis who insult Greek history, Greek pride and Greek independence.
posted by iviken at 7:42 AM on May 28, 2012 [1 favorite]


I mean, at what point do the country and population bear some responsibility?

I should think that 'now' is a good time for them to bear responsibility. Never a better time than 'now.' Each individual. As usual, the situation in Greece won't change until each citizen changes their own life.

I wonder about where the personal moral and fiscal leadership is? Is there a 'Occupy' style movement anywhere? Anything? Or is it the Tea Party wetdream of a lazy liberal populace wanting a government bailout?
posted by sfts2 at 7:46 AM on May 28, 2012


Or is it the Tea Party wetdream of a lazy liberal populace wanting a government bailout?

I am guessing that you don't watch news very much, because if you did you'd know the answer to this. Whether you think they're right in protesting you can't call the Greeks lazy about it.

The problem is that if you use this reasoning that until a country does exactly what we want it to we're not going to help it any, you're going to cut off aid to many, many countries with corrupt leadership (and leadership many degrees worse than you will find in Greece). You can reiterate that we give those countries less, and that here unless you have structural reform there's no point throwing good money after bad, but giving money to countries to corrupt governments happens every single day. Usually, however, they're useful corrupt governments, so that's okay.

There is also the point that I find it hard to celebrate watching a country slip into third world status as providing a valuable and salutary lesson that needs to be learned. I suspect most people who say this have no idea how truly desperate the situation in Greece is; shouting loudly that they brought it on their own heads and thus should starve peacefully and without complaint seems to me to be neither helpful nor humane. And what happens when it's the next country? Do we let them go too? Are we planning on leaving the corpses of Spain, Portugal, Italy, and Ireland littering the EU landscape as a monument to European unity? Where does that leave Europe?
posted by lesbiassparrow at 7:58 AM on May 28, 2012 [2 favorites]


I suspect most people who say this have no idea how truly desperate the situation in Greece is; shouting loudly that they brought it on their own heads and thus should starve peacefully and without complaint seems to me to be neither helpful nor humane.

...who is saying that?
posted by jaduncan at 8:03 AM on May 28, 2012


The tax avoidance factor matters quite a bit, and has a lot to do with the moral condemnation being heaped on Greece. For quite a long time, they've been paying taxes like Alaskans and enjoying benefits like Germany; that was unsustainable.
posted by ThatFuzzyBastard at 10:29 AM on May 28, 2012 [1 favorite]


Large "Greek" businesses generally use German, UK or Cypriot banks. A few very large ones use US banks. These businesses conduct their business nearly entirely outside Greece ("law 67/89" companies).

These business are, in effect, no longer part of the Greek economy, and they haven't been for a long time.

I'm not sure what this means, but I can guess that A) this is emblematic of the problem and B) that the rest of the world is not nearly as immune to a Greek default as we'd like to think.
posted by digitalprimate at 1:53 PM on May 28, 2012


"Greece", "Germany", bollox. This is about the flow of capital and the very justification of such national entities to bear any authority at all when they are patently directed by private, corporate interest. There is not one "system". There are many, and the corporate and the public have collided infelicitously. And "money" broke.
posted by stonepharisee at 3:02 PM on May 28, 2012


"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."

It would be useful if she had specified exactly who is cheating on their taxes instead of painting all with the same brush. Most wage earners have their income taxes taken directly out of their paychecks before they even receive them. In particular, the public employees that everyone complains about having pensions, are the most tax compliant of all Greeks. The people cheating the most are the wealthy and businessmen like doctors and lawyers who insist on being paid with envelopes of cash.
posted by JackFlash at 4:45 PM on May 28, 2012 [1 favorite]


Most wage earners have their income taxes taken directly out of their paychecks before they even receive them. In particular, the public employees that everyone complains about having pensions, are the most tax compliant of all Greeks. The people cheating the most are the wealthy and businessmen like doctors and lawyers who insist on being paid with envelopes of cash.

This is true, but let's not forget about the corruption. From Michael Lewis' Vanity Fair article on Greece (prev. on MeFi):

"Where waste ends and theft begins almost doesn’t matter; the one masks and thus enables the other. It’s simply assumed, for instance, that anyone who is working for the government is meant to be bribed. People who go to public health clinics assume they will need to bribe doctors to actually take care of them. Government ministers who have spent their lives in public service emerge from office able to afford multi-million-dollar mansions and two or three country homes."

and as for the doctors:

"The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.”"
posted by BigSky at 5:07 PM on May 28, 2012 [1 favorite]


were Lagarde's controversial comments an attempt to help improve public support for the Greek pro-bailout parties?
posted by Bwithh at 6:17 PM on May 28, 2012


Every discussion of balance of payments in the Eurozone inevitably reminds me of the esteemed Mr. Adam Carolla, who asked "Are we done with Germany?"
posted by LiteOpera at 9:33 PM on May 28, 2012


That view is “a bit simplistic and stereotypical”, [French] government spokesperson Najat Vallaud-Belkacem told French television on Sunday, adding that no-one holds the high ground on budget deficits at the moment.
posted by ersatz at 6:45 AM on May 29, 2012


In case anyone has missed this in the news, as an employee of the IMF Lagarde is subject to an international agreement which means she does not have to pay income tax on her annual salary of US$467,940. She also receives additional annual benefits of US$83,760, also untaxed.
posted by biffa at 10:02 AM on May 29, 2012 [2 favorites]


Just came to say what biffa said

New Statesman Article about it.

Jesus, the brazen hypocrisy of the rich and powerful these days, it hearks back to a much earlier time. Even with the shared knowledge of the internet and the anger of millions, they know we are powerless to stop them. They have learnt well how to keep millions in wage and debt slavery, oppressed by overwork, propagandised by the media. No-one is gonna fight back, they are either too knackered or too busy watching x-factor, then reading about it in the papers on their breaks at work.

fuck, we are truly fucked.

Things are going to get worse and worse and never get better again
posted by marienbad at 12:40 PM on May 29, 2012


How about the irony of a woman who earns 395,000 usd plus a 75000 usd expense fund (to manage the hardship of living in DC) and who pays NO TAX WHATSOEVER on that income and income equivalent compensation calling out the Greeks?

Screw her.
posted by zia at 5:26 AM on June 2, 2012 [1 favorite]


oops got my numbers wrong. Sentiment still stands. This is about priviledge.
posted by zia at 5:27 AM on June 2, 2012


Actually it's probably about keeping the Chinese on board, as it's very similar to their line on things.
posted by jaduncan at 6:54 AM on June 2, 2012


As economic crisis bites, Greece's children pay the price
posted by homunculus at 4:32 PM on June 17, 2012 [2 favorites]


Paul Krugman: Greece as Victim
posted by homunculus at 7:40 PM on June 18, 2012 [1 favorite]


« Older One year after the apocalypse. What happened to Ha...  |  Naghol... Newer »


This thread has been archived and is closed to new comments