The 10th Man

Socialism Is Like a Nude Beach—Sounds Like a Great Idea Until You Get There

January 29, 2015

I’ve been following the activities of Syriza for a long time. They started putting up big numbers in the polls in Greece three or four years ago.

Syriza has a message that’s very popular with Greeks: Screw Germany. The word they use to describe what’s happened to Greece during the period of time since the debt crisis is “humiliation.”

To be fair, if you owe a lot of money to someone, it can be tempting to give them the finger. When Greece’s debt was restructured, it was done in such a fashion that none of the debt was really forgiven, but the maturities were extended far out in the future. Since Greece doesn’t grow (for structural, demographic, and cultural reasons), this is known as extend and pretend. Everyone knew, even back then, that the only hope Greece would have to avoid default would be whatever ability they had to refinance.

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Greece has been struggling under the yoke of this debt over the last few years, and the Greeks are sick of being serfs. So Europe gets the bird, although deep down, Greece doesn’t really want to drop out of the euro. They get a lot of benefits from being part of the Eurozone, namely purchasing power and low interest rates.

So naturally, having and eating their cake simultaneously is the goal.

But Alexis Tsipras (the head of Syriza) will threaten to not pay to get what he wants, and it will be interesting to see if Germany will call his bluff. The German people have a pretty low opinion of Greece these days, so if it’s politically palatable to eject Greece from the euro, Merkel might do it.

But Tsipras at least has a credible bargaining chip: He says he can deliver higher tax revenues through better enforcement, as Greeks are notorious tax cheats. If he can pull it off, then Greece may not default.

That’s all a very nice story, but I don’t believe it for a second. There will be no increased tax revenue. It’s all talk.

I want to talk a little about Syriza and who they are, because the mainstream press likes to frame them as an “anti-austerity” party. But they are much more than that. In reality, they are just one step away from full communism.

If you don’t believe me, take a look at the Syriza Wikipedia page. SYRIZA, which is an acronym of the Greek words for Coalition of the Radical Left, until recently, wasn’t really a party at all—just a collection of parties cobbled together under the auspices of screwing creditors.

Here’s a list of the parties that coalesced under the umbrella of Syriza:

  • Active Citizens
     
  • Anticapitalist Political Group
     
  • Citizens’ Association of Riga
     
  • Communist Organization of Greece (KOE):
     
  • Communist Platform of Syriza: Greek section of the International Marxist Tendency
     
  • Democratic Social Movement (DIKKI)
     
  • Ecosocialists of Greece
     
  • Internationalist Workers’ Left (DEA)
     
  • Movement for the United in Action Left (KEDA)
     
  • New Fighter
     
  • Radical Left Group Roza
     
  • Radicals
     
  • Red
     
  • Renewing Communist Ecological Left (AKOA)
     
  • Synaspismós
     
  • Union of the Democratic Centre
     
  • Unitary Movement
     
  • And a number of independent leftist activists

Sounds like some nice folks you’d have over for dinner and a game of Trivial Pursuit.

In addition to debt forgiveness, Syriza wants a bunch of other stuff, including forgiveness of bank debt for people who are unable to meet their obligations. It’s no coincidence that the Greek stock market was down 13% when the snap election was announced, led by the banks.

In the entire post-World War II period, you’d be hard pressed to find a farther-left national government in Europe than what Greece has now.

In the interest of full disclosure, I think it’s important to point out that I’m a very free-market kind of guy, and if something is bad for markets, I oppose it. I think the Greek Syriza experiment will turn out very badly, and the Greeks will end up with a sharply lower standard of living, however that comes about.

If it comes about by exiting the euro, an immediate consequence will be that they can count on a very weak drachma and high interest rates, possibly followed by high inflation. There will be food and energy shortages. There will be pretty much everything you had in Cuba and Venezuela, just in a less extreme form. Economic misery will abound. And just as a reminder, it is very hard for such places to be governed democratically.

Every once in a while finance gives us these gifts—little controlled experiments where you can watch how two competing economic philosophies play out. East and West Germany. North and South Korea. Even among the 50 US states. As you go around the world, you can see what works and what doesn’t.

Many people think the Scandinavian countries are socialist, but they aren’t—they are very capitalist economies with high levels of redistribution. Sweden was socialist from 1968-1993, but not today. Don’t confuse that with what is going on in Greece. Greece’s economy already is dysfunctional, and it’s going to get worse. We are going to see what happens to this little Marxist archipelago, formerly a member in good standing of the European Economic Community.

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But I am getting ahead of myself. As of today, they’re still a member.

The trades here are very easy. It’s hard to have a stock market in a country where property rights barely exist. It’s hard to have bank loans or bonds where debt can be arbitrarily forgiven by the government. The nonexistence of capital markets is bad, contrary to what some folks think.

I don’t usually say things like this, but any Greek stock above zero is a potential short. Politics, like stocks, has a habit of trending—for a very long time.

P.S. Thanks to David Burge (@iowahawkblog) for the inspiration for this week’s title.

Jared Dillian
Jared Dillian

 

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Dallas Kennedy

Jan. 31, 2015, 4:12 p.m.

Great title—I was at a nude beach once. It was pretty nice, if you knew which part to stand in.

I’ve known a lot of Greeks over the years, so I hear a lot about these political factions. But anarchy is a Greek word, and a Greek concept.

Syriza represents the desire to have it both ways, and they’re not going to leave the euro voluntarily. They could be forced out by Germany, or by circumstances.

The euro will disintegrate eventually, when France and Germany decide it’s no longer worth it. The question is then will be whether the EU itself survives.

cullenap@gmail.com

Jan. 29, 2015, 11:12 p.m.

Jared

Excellent article !  I used to work regularly with Greek professional s back in the late 1980s/early 1990s, and had plentiful trips down to Athens and elsewhere.

Truth be told, they are a very cultivated and well educated people and extremely proud (in a quiet understated way) of their civilisational/cultural history.

I had the opportunity to work for 4 months there during winter. When all the tourists had gone home. The locals demonstrably had a lifestyle fully adapted to the two realities: family-run hotels, bars, restaurants, etc from spring to end of summer; then back to construction work and husbanding the plots of land they owned in autumn and winter.

Of course, one way or another, they all had their hands in the purse of the public (local,national and EU) budgets for hand-outs, subventions and the like. Who wouldn’t ? The money was there for the taking, pushed out from Brussels by the socialist bureaucrats focused on redistributional goals for the “periphery” of Europe., defined for them by the European Commission. (Even back then, aerial photography of places like Greece/Italy were demonstrating that the hectares under cultivation for olives and other other agricultural commodities receiving price subventions from Brussels, were far far less than the hectares being paid out on with subventions).

So, with a process of gradual accretion over the years, the entrepreneurial instincts of the middle and working classes atrophied; overtaken by a “me too” approach to grabbing a share of the vast redistributional funds pouring into the country from the EU.

However, I am minded of the term “the organisation of the political means” to explain what has sunk Greece and the Greeks into this mire of debt deflation and catastrophic unemployment. There was/still is, an undoubted political game plan for Greece from the get go, by the EU political elites - bind them at any cost to the “United States of Europe” project. Starting with monetary union.

It is the euro that is the main source of Greece’s plight. Exit from the euro, which may indeed bring higher interest rates, is the only way out of this mess. Plus debt repudiation.

At this late stage in the debt deflation cycle, nearly all Greece’s debt is owned by the ECB and other EU-related debt vehicles - in other words, Europe’s other citizens are at risk of taking the hit - Euro 400 billion worth. That is why Merkel does NOT want the Greeks to leave. She will go from hero to zero once tax payers in Germany and elsewhere see that they are on the hook for the debt repudiation by the new Greek government.

The principles of free markets - including credit markets - that you firmly espouse Jared are indeed essential. But we are not dealing here with a free market system. It is a capitalist system that has been since 25 years fully taken over by “the organisation of the political means”. Such that all the German and French banks who had for many years been lending money a-go-go to the Greek government and buying up Greek banks, have all been spirited away to safety care of their de facto bail out back in 2012 by the ECB/IMF/EU.

So much for free capital markets operating in Greece and the EU !  The governments of nearly all EU countries are de facto bankrupt. Beholden to the EU banks to buy their sovereign bonds. From 2012, those banks wanted out from Greece. Merkel, Drahgi and company organised their departure and then bullied Samaras to toe the line (remember how all hell broke loose one week end when it leaked into the press that he would renege on the deal ? He was “beaten up”  politically speaking. That was the tipping point for Tsipras to come to the political forefront).

I agree with all you say about the political ideology of Syriza. But the Greeks are between “a rock and a hard place” . Abandoning the euro zone, sticking a finger to the EU elites, repudiating unpayable debt that creditors lent negligently - why not ! (Murray Rothbard was a strong advocate of debt repudiation, I note).

Let the Greeks have back their national independence and liberty; freed from the asphyxiating grip of the EU socialists. Let there then be an honest democratic debate within the country whereby the people see what Syriza is like in power. They will fail to deliver on all their promises.

The Greek people will then , in my opinion, return full circle to their innate entrepreneurial best; albeit spiced with that natural ingredient of eastern mediterreanian joie de vivre.

giancarlo-stone@hotmail.com

Jan. 29, 2015, 2:17 p.m.

Misleading analysis regarding the economic foundation of scandinavian countries: for example in Norway, which by several measures is among the most succesful countries in the world, the government controls 30% of the stocks values on the Oslo stock exchange, including petroleum, hydroelectric, aluminum, banking and telecommunications interests. This is the definition of socialism, which along with capitalism and the welfare state make up the hybrid economy of Norway.
So socialism in Norway is indeed like a nude beach, one with beautiful people.
http://en.wikipedia.org/wiki/Norway#Politics_and_government

Dan Nestlerode

Jan. 29, 2015, 1:50 p.m.

I certainly like your analogy.  Greece is a disaster as a country, economically, and it is not getting any better.  They just keep rearranging the deck chairs on their sinking ship.  I am not sure they will ever come to their senses, and I do no know why the Eurozone would continue supporting them.  Perhaps an extended dose to financial reality would solve the issue.  However they would find someone else to blame their hardship upon.

s@newscom.com

Jan. 29, 2015, 1:08 p.m.

Great column, Jared. The piece you missed (I think) is the geopolitical angle: Greece under Syriza now has two new best friends, both of whom are both ideological fellow-travelers with Syriza and who have major axes to grind with the EU and the US: Russia and China. You can think of the freely-elected Syriza folks as Putin’s favorite gift since the Crimea, and he will absolutely use Greece as the wedge between Europe and the US to lessen objections to his expansion to the west (think Ukraine, then The Baltics). With Europe’s attention ratcheted on Greece and with the EU’s inability to act unanimously on Russian sanctions, Putin will probably take more of Eastern Europe into his orbit. And the Chinese and Iranians will also use this global distraction to feather their own (rather) soiled nests as well. Think of Greece as Cuba circa 1959.
Scott Calder