Yanis Varoufakis has an interesting post in which he wonders why those who espouse a faith in the ideas of Frederick von Hayek do not follow them through when it comes to the liquidation of public debt, that is the bank debt which has been socialised.
“On the one hand they are keen to spread Hayek’s message that, within Bailoutistan (with Greece being the most prominent province of this new ‘nation’), there is no alternative to liquidating stocks, farming values, real estate prices, most government departments and much of still employed labour. However, in sharp contrast, the only one thing that they are not prepared to see liquidated is Greece’s public debt to the banks which, according to Hayek himself, created the problem in the first place! Why the exemption of Greek public debt from the list of bad debts/assets to be liquidated?”
In his conclusion though he tries to guess why this double standard seems to be applied in the case of Greece:
“A Faustian Bargain seems to have been struck between Bailoutistan’s Hayekian neoliberals (with Greece’s variety the most striking example) and the statist ECB-EC-IMF bailout approach. This explains partly what I shall term the European Periphery’s Neoliberal Anomaly: neoliberals that are happy with the idea of huge new taxpayer-funded loans on insolvent state entities. However, this explanation is only partial as it fails to explain an important observation. Recalling Sherlock Holmes infamous ‘dog that did not bark’ inference, the question arises (regarding Greek but also Irish Hayekians): Why have they said nothing about the need to liquidate the nation’s bankers? (Or Irish bank bondholders for that matter?)
My point here is that, even if we accept the Faustian Bargain hypothesis above (namely that local elites have lost faith in themselves and want the troika to supervise their own odd ‘Road to Serfdom’), there is nothing in the neoliberal manual that can explain their total silence on the national (e.g. Greek or Irish) banks which played a huge, and hugely negative, role in causing the boom that led to the bust. Whereas Hayek would recommend that these bankers are liquidated forthwith (in order to teach all a lesson about the consequences of excessive credit creation), Greece’s and Ireland’s neoliberals are utterly silent on this. Why is that? In the case of Greece the answer is evident: Because of the extremely cosy relationship between the said neoliberals and the bankers. Period.”
To help things along a bit I’d like to provide the answer in the case of Ireland: ditto.
Latest posts by Donagh (see all)
- The policy of transferring incomes to capital and the rich - September 6, 2012
- ILR Will Not Blink While Facing Down the Jaws of Excessive CPU Usage - September 6, 2012
- Dan Froomkin | The Jobs Crisis Obama, Romney and the Low-Wage Future of America - August 29, 2012
- Money as a Social Construct – Talk Given by Mary Mellor - August 27, 2012
- - August 23, 2012