Varoufakis is wrong

Austerity and class warfare

I like Yanis Varoufakis even if he has chosen to spell his name in an idiosyncratic way. I like his enthusiasm and his style. I like his motorbike and I am personally indebted to his party for giving me time when facing serious problems in Greece in the early part of this century. His party, certainly before they got power, understood their role then in and to society in a way that the established parties of Pasok and New Democracy did not.

Nevertheless, for all my respect, it does not mean I think he is right! And as Yanis would have to admit, there is a big difference between what might be done in theory and what must be done in practice.

A while back, Varoufakis was quoted in the Independent suggesting that “Austerity” is actually a form of class-warfare. While Varoufakis is actually quoting Noam Chomsky (unacknowledged incidentally, or are they really joined at the hip?), his claim remains simplistic and at best, it merely acknowledges that, as a crypto Marxist, Varoufakis thinks class-conflict ought to play a role in the way economic policy has been dictated simply because Marxism says it plays a role in the way history develops. If there is class conflict in recent Austerity programmes then I suspect that is entirely incidental. I think, though, that it is also a bit rich coming from a man with a degree of domestic comfort that makes Mr Corbyn’s tax return look modest.

The poor have suffered from Austerity. That is quite true, but that alone does not make Austerity itself a “class war”. It simply means that Austerity causes casualties and that, as a remedy to the current economic crisis, the Austerity package is not properly thought through. “Austerity” is probably badly named anyway – it is not about being frugal with the national or international economy; it is about reducing public expenditure at a time when we are spending more than we are making. High debt, in other words, is recognised as an impediment to growth and should be curtailed. One way to do this is to increase taxation and the other is to decrease public spending. In fact, while claiming to be pursuing a policy of Austerity until 2015, our Government did not actually reduce public spending by much at all. (and there is an argument that the Government simply abandoned Austerity in 2012 and that this led to our recovery whatever the rhetoric. It again, rather suggests that “Austerity” does not work.)

Greece

In the case of Greece, Austerity has pretty-well destroyed the country, (the debt has gone up rather than down so proving that Austerity was the wrong medicine for the illness) but arguably the greatest destruction has been to impose an Austerity programme from outside and so to compromise Greece’s sovereignty and National self-esteem. To make matters worse, it was imposed by Germany -a country that benefited from debt cancellations after the war. Her post-war growth can be directly attributed to that. More than that, Greece was among the countries that cancelled the debts Germany owed it (one can think of the Viannos and Kalavryta massacres or of the 218 men, women and children slaughtered in Distomo, for example, in 1944 or indeed of the demand, in 1942, for the Greek bank to give Germany an interest-free loan of 476 million Reichsmarks which was used to pay for the military occupation of Greece?) on the understanding that a conference would be held after the reunification of Germany. That conference never happened and the debt Germany owed Greece was never paid (though Germany paid Greek individuals about 115 million Deutschmarks. If repaid now, the total debt to Greece would amount to between $14-$95 billion depending on the way it is calculated. The Syriza government calculated the amount to be 341 billion euros). If Greece had been allowed to devalue its currency, and had been given some form of debt forgiveness, then it would not have had to reduce public spending so suddenly and relentlessly. In practice, this process was interpreted both within Greece and by the International community as a punishment and has stifled growth. No one wants to sit with the naughty boy in the corner.

“Austerity” alone was not the problem. It was the way Austerity was imposed and the failure to keep the government fully on board which explains the problem. In Greece, a series of governments, from PASOK, new democracy to Syriza, has always pandered to its core vote. In the case of Syriza, that is the retired and current civil servants- hence bizzare pension reforms, a reluctance to cut public expense as well as a rise in unreasonable taxes (for instance, while public employees have remained fairly secure, the Self-employed have been penalised- Insurance contributions today often exceed half the monthly earnings and all private businesses are now expected to pay 29% of next year’s earnings! There are instances where the self-employed have to pay up to 70% of their income in taxes and insurance. It is unfair and completely absurd as it simply encourages tax evasion, bankruptcy and prologued unemployment because smaller businesses can no longer afford to take on staff).

Question time

On Question time, Varoufakis identified a number of tax issues in the past that may have needed clarification but certainly do not point to a class war. “To be talking about reducing the state further when effectively what you are doing is reducing taxes like inheritance tax and at the same time you are cutting benefits – that is class war.” A reduction in both corporation and income tax stimulates investment.

keynes 2.jpgThis is, at heart, something proposed by Keynes, even if it is often quoted by people on the Right and even if what most people remember about Keynes is his third option that Governments should borrow money and spend it. President Bush told Congress years’ ago, “To create economic growth and opportunity, we must put money back into the hands of the people who buy goods and create jobs.” Even so, it is worth noting that while reducing the amount of tax paid at the higher end, the Coalition Government was responsible also for raising the tax threshold in 2011, (helping the poor) and I think on principle there are some very solid reasons why we should cut taxes overall -cutting tax for both the rich and the poor, a principle incidentally that is absolutely the sort of thing Mrs Thatcher advocated.

Putting this into practice, though, is tough and events often get in the way of ideology and principles.

Ideal business policy

There are two ways to run a business. To employ as few people as necessary and pay them as much as you can or to employ as many people as possible and pay them each as little as is legally necessary. I much prefer the first model and I have seen the second model in action in both Greece and Russia. It is strikingly obvious that people who are not paid what they are worth, or who are not inspired or encouraged to do the most they can, are frustrated and unhappy. Yet exactly this second model has been rolled out with tremendous success recently in Turkey. A call went out to small businesses to employ more people and, so far, over 1 million workers have moved from welfare to work at minimum wage, with the Government topping up insurance contributions and tax. Once again, one size does not fit all. What might work in Turkey is unlikely to work here, but we should admire Erdogan’s direct appeal to a sense of National Responsibility.

Ideal taxation

Austerity is about a choice between increasing taxation or reducing public spending. I think there is a third way: I think we can reform public spending and also, at the same time, reduce tax.

We should look at what Turkey is doing and be inspired- because we also need our own sense of National Responsibility: specifically, we need to address the ways we collect tax and how we spend the money we get.

So, firstly, we need to recognise the principle that people of all backgrounds should keep as much of the money they earn. As I mentioned, that is something that was dear to the heart of Mrs T and I think it remains a worthy goal. (I was recently told that as a foreigner working in a State university in Russia, I should be taxed at a higher rate than nationals; indeed, I should pay twice the tax. Astonishing! It was made much worse to learn this after a very small amount was paid into my bank account. “I thought you knew” is not really an adequate explanation.) It still seems to be the case that individuals use money more wisely than large institutions and the higher the taxes, the less investment there seems to be, the less incentive there is. We need to look again at incentives to invest in public works.

I think Varoufakis is confused, because there are a number of models that support the principle of reducing tax, mostly to the rich- the laffer curve, beloved of Reagan, which suggests that taxable income changes in response to the percentage taxed, and so allows for the possibility that the less percentage we tax, the more people earn and so in theory, the amount the Government receives would be pretty much the same while the trickle down theory (which suggests favouring the rich ultimately benefits the poor) sounds patronising. In the end, the only moral approach is to reduce taxation overall. But part of that approach must involve a reduction in VAT. VAT is about not class-warfare. It is indifferent to class but it hurts the poor more.

By offering tax cuts to both rich and poor, George Osborne was not quite following the principles of Austerity, but rather reviving Thatcher’s moral vision- to reduce taxation as a whole. He was finally applauded by M. Lagarde who said, “At the IMF we have learned that there is no single best way to reduce the fiscal deficit. We clearly underestimated the growth of the UK economy in our forecasts a year ago.”

Secondly, we need to look at both the health service and social security because both systems are spiralling out of control; as we live longer, both long-term health-care as well as welfare dependency cannot be sustained in the present form. We know that is a problem with the current system, but there is also a problem with the way the system deals with those who fall outside the norm- I think it is appalling that we can see homelessness in Britain today, and it is appalling that many people struggle to access a proper doctor outside office hours. We have been seduced into thinking that one size fits all: it does not. We need to have a number of parallel systems -where one system might pick up what the other leaves behind. So, as we need to look again at welfare and health, both currently failing, we are not to embracing class warfare. Quite the reverse and we have a limited time to get this right. We must do more of this, not less.

Bureaucracy

The quick fixes of the last twenty years have, in effect, increased the number of bureaucrats who have managed a form of hybrid care that is neither genuinely private nor fully public. Bureaucracy is an attractive way to put a problem on hold because it is about passing the buck, but every new department that is created adds to the overall bill we must still pay. And in the end, the problem still needs to be addressed.

bureaucracy by TIM.jpg

We need to reign back the Bureaucrats. And what an opportunity we have: just once in a lifetime, there is an event that will actually decrease the numbers of bureaucrats- because Brexit will cull their numbers in Brussels, so we should be careful not to create yet another class of bureaucrats to replace the ones we are “letting go”.

Attracting clever people to generate clever solutions

If we want to improve social equality, then we also have to find both the money to pay for it and the people to run our schemes more imaginatively. We need to do that through an efficient tax system. Our progressive tax system, as it stands, incidentally already taxes the rich more than the poor, but VAT remains a scourge: it is a fairly inflexible tax that hits everyone and hits the poor more than the rich; it is something that we inherited from the EU, even if a rudimentary version of VAT was once introduced here during the war.

We need to attract top business brains to get us out of this mess. We cannot do that if they know they will be penalised themselves by a punitive tax system. (How would they react when they look at their first month’s pay? “I thought you knew” is no way to command confidence) We need to reduce tax overall not increase it, and that is an aim we should nurture across the board. Lower tax means an incentive to invest. Lower tax means attracting the right people who will devise systems that work!

Whether we like it or not, the coming Brexit will create a Government spending spree that would make both Keynes and Michał Kalecki smirk. But that should really be where it stops. Kalecki has emerged from the shadows of post war Poland to be cited both as an inspiration for Keynes and Varoufakis as well as a solution to our current woes. It is from Kalecki that we get the perfidious idea that a tax on the rich might help us. It will simply drive the rich away. The French have tried it. It does not work!

Brexit is change. And change is a chance for new ideas to emerge. It is no time to drive people away, but to invite them to contribute to the new reality of a post-Brexit Britain.

Part of the process of inviting people into Britain to help us and keeping the best people here is getting our taxation system right.

Some clarification:

  1. Rather than a crypto Marxist, Varoufakis calls himself an “erratic” Marxist. So I am being a bit coy here. I should be more direct.
  2. I think the point of this article is a bit lost. (a) Austerity is a fairly aggressive treatment and like chemotherapy, it can cause damage and is often not effective. It does not seem to have been effective in Britain and it has been deeply destructive in Greece and Brazil. But the principle of reducing debt is perfectly sound. It is simply about how it is done. (b) Varoufakis’ claim that “Austerity is class warfare” has become a mantra of the left. In fact, austerity budgets in France and Italy have imposed surcharges on those with incomes over 500,000 and 300,000 euros. Hardly an attack on the poor, but I think equally not a very effective source of revenue.
  3.  I did not address the issue of “retribution”: a theory that says the rich should be taxed more as a punishment for causing the banking crisis. In fact, over 40% of British do not pay any income tax (23 million people) so the burden of taxation has already shifted towards the richer Brits and the top 3,000 earners here (that is 0.01% of the total paying income tax in the UK) contribute 4.2% to total Government revenue as calculated in 2013. At the time the Treasury said, “The rich pay more under this Government than under Labour. The people who pay zero tax are the millions of low earners who have been taken out of paying income tax altogether due to George Osborne increasing the tax free personal allowance.” Across the Atlantic, the richest 1% of Americans pay 1/4 federal tax and nearly 40% income tax. So much for taxation. As spending cuts, however, hit the poor more than they hit the rich, the aim should be to restructure public spending rather than to cut it.
  4. Varoufakis, incidentally, I understand, also wants to reduce VAT. We agree on that of course! He is not so wrong after all.

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Xavier Bettel and Gauthier Destenay

XavierBettel marriage

Firstly, congratulations to the Prime Minister of Luxembourg who was married yesterday. It is a few months later than planned, but well done anyway. I hope he and Gauthier will be very happy.

meanwhile…

Nikolopoulos, the Homophobic twitter

A little while ago, I ran a story about Nikolopoulos who criticised the Prime Minister in Greek on twitter which I am reprinting below.

What is he up to now

He is still in the Greek parliament (and actually part of the Governing coalition) and was voting a few days for educational reform. His basic point here, if I understand correctly, is that German should no longer be taught in Greek schools. This is what he says-

“The German language, for the past 20 years, has unreasonably been promoted and supported by the Greek state to an excessive degree in relation to others, equally if not more important languages at a global level such as Spanish, Russian, Arabic and Italian,” he writes.

“We must not continually complain of the burgeoning of one member state of the EU when we ourselves, without it being imposed on us, make the choice to support the transmission of the language, the culture, and the traditions of a people, who in general lines, have been proven to systematically harm our country and have opposed our legal sovereign rights.”

Parallels

This is a man who represents the equivalent party in Greece to what UKIP stands for in the UK, the Conservative Independent Greeks, or ANEL (remember the correct vowel here). He is a bully who takes swipes at whoever he thinks his audience might enjoy seeing done down. He plays deliberately to the crowd and does not think of the consequences of what he says.

Bullies

Like all bullies, when he goes too far, he is the first to cry foul. In October 2014, days after having upset the Minister for transport, (who defiantly said he was not a “wuss” and would not be so “threatened”), Nikoloupoulos sought public solace by claiming himself to have been threatened in an SMS that someone would cut off his leg with a chainsaw. So far, he appears to still have both legs.

And so far, regrettably, this nasty man remains part of the committee that oversees the detailed bailout terms and what to do with bad debt. The only positive thing is that Nikolopoulos’ position in the Greek Government is tenuous because of Syriza’s contempt for his homophobic attack last yera on Xavier Bettel. Accordingly, while he remains the leader of ANEL, it is Panagiotis Sgouridis who got the Cabinet position as Vice Minister for Production Reconstruction, Environment and Energy.

Just a final point- while the Prime Minister and cabinet from Syriza were sworn in during a civil ceremony, the ANEL members insisted on the traditional religious ceremony which I know well from visiting the office of a ridiculous Pasok MP who had offered to see me, and when she realised who I was, pretended to be her own secretary. Around the walls behind her were dozens of photos of the religious ceremony that marked the beginning of a Greek parliament and there she was in picture after picture, fingers poised in the sign of the cross, very pleased with herself.

Religious imagery is not going to whitewash rogues. She should have known that and so should the people in ANEL. Poor Greece.

The older story about the Homophobic tweet -2014

Nikolopoulos twit

an ANEL MP, Nikos Nikolopoulos, has tweeted a nasty message about the Prime Minister of Luxembourg who has just announced his plans to marry his gay partner. The twit or tweet seems fairly innocuous in English: “From the Europe of nations, to the Europe of queers. The Prime minister of Luxembourg has been engaged with his special one!” In Greek however, “Από την Ευρώπη των εθνών στην Ευρώπη των πουσταριών. Ο πρωθυπουργός του Λοξεμβούργου αρραβωνιάστηκε τον αγαπημένο του!” The word “των πουσταριών” is particularly offensive, a derivative of the word, Pousti, street-language in Greek for “gay”.  

The Prime Minister somehow heard of this tweet but, though he had studied maritime law and religion in Thessaloniki, did not speak enough Greek to know what was being said and contacted the MP, “Hello, I heard you want to tell me something, but I don’t speak Greek. Sorry” – now for the juicy bit that exposes the full rump of this silly man, Nikolopoulos. He said the message had been written by Kyriakos Tobras. He then modified his original tweet. What a twit!

Here are the two tweets. The understated graciousness of the second is such a contrast to the nastiness of the first.

homophobic rant in Greek

gracious reply in english

Here is Nikolopoulos’s replacement twit (it is almost as bad but does not sound as “chavish” perhaps):

the replacement text

My own experience in Greece

I remember when I tried to register as self-employed in Athens back in 2001. I had been working for a company called Grivas which refused to pay me until I changed my employment status. Apparently, it was then impossible to do more than one particular type of job for any single company, and Grivas had me writing editorial, illustrating and recording vocals for their various English teaching materials, their decision, not mine. It was a horrible experience and a week of going from office to office in the then-labyrinthine bureaucracy was soul-destroyed. On the final day, with minutes to go before the tax office shut, I was asked for yet another pointless bit of paper. I am afraid I began to cry. At this point, the thug of a tax-manager started to assail me in Greek from across the room, saying that all english were “pousti”, and then listing (improbably but I remember this precisely) Thatcher, Blair, Clinton, as examples of gays in public office. This was about the time of the Monica Lewinsky affair. Incidentally, I knew that the man was the boss because he was overweight and had nothing on his desk save for a cup of coffee and a glass of water. Also, I knew enough Greek to understand what he meant, but I turned to the official next to me whose desk was heaving beneath paperwork and asked him what the word “pousti” might mean. “For example,” I added in my best Greek and as loudly as I could. “is that nice gentleman there who has so much to say about the english, also a pousti?” It shut the man up, and I got my papers quite quickly. I cannot recall if Grivas ever paid me what they owed. Probably not. Some of the other people working there seemed to have been driven to insanity and visits to an asylum in Dafni; others attempted suicide, taking a kitchen knife to their wrists. I know. I had to call the ambulance!  It was tough living in Greece back then! But also rather exciting.

I think I had found myself in the “wrong crowd”. There is certainly a “right crowd” in Greece. There was then and there clearly is now, and that crowd would wholly condemn Mr Nikolopoulos and all his fascist cronies, clerical and lay. I am very proud that I made good friends in Greece and that we remain in contact. Like me, they believe passionately that the “wrong crowd” is firmly on the way out, but like cockroaches, that wrong crowd takes its time going.

Here is a picture that was printed in the Greek newspaper eleftherotypia at the time- It shows what I looked like then!! (the article is about the shows that were on in the West End, and the closure of “Cats”)

eleftherotopia1091

I think Greece has changed

I had hoped that institutionalised homophobia was a thing of the past in Greece, but apparently not. It is a shame. The younger generation of Greeks, among whom I count many good friends, are shocked by the story of Niko Nikolopoulos. But he is a dinosaur and they need to make sure his political career is rendered extinct as soon as practically possible. I have a small cartoon for this story which I will post later: my computer is in general melt-down as I write this!

Meanwhile, my hearty congratulations to the Prime Minister Xavier Bettel and his partner, Destenay Gauthier who are to be married on January 1st. He is not the first openly gay Prime Minister in Europe. Iceland’s Johanna Siguroardottir and Belgium’s Elio Di Ruppo beat him to this!

A cartoon I did at the time

man up Nikolopoulos - take responsibility for your own words

I think my computer is reeling from the absurdity of this story: Niko (Νίκος Νικολόπουλος) wrote something nasty about Xavier (Ξαβιέ Μπετέλ) and then said that it was really written by his friend Kiriakos Tobras (Κυριάκος Τόμπρας). This is all about a particular group of powerful men in Greece who are running around saying something like Δεν δέχομαι να προσχωρήσω στη λογική της γκέι ατζέντας (“I do not believe I have to accept the European Gay agenda”). This is a country which was eager to join the European club and when I was there, the EU Commission in Greece got me to illustrate one of the more absurd books I ever put my name to: “You are in Europe- Learn about Europe!” Some people, like Nikolopoulos evidently did not learn very much.

eleftherotopia1093

Europe has a liberal social image that promotes equality, friendship and assistance with better-off parts of the continent helping the less-successful parts. I know Europe as it stands has problems but it still remains a great ideal and was always clear about these aims even if federalism has crept in through some unwatched back door. I don’t really understand how a country like Greece which still boasts an island called Lesbos, and celebrates the history of Alexander the Great as well as the writings of Plato can possibly allow anyone to be championing such a ridiculous cause as this “we think there is a gay agenda” thing, especially when promoted in part by Churchmen who are civil servants*, that is, funded by the State. Truth is, of course, all this shouting and “tweeting” is done by only a minority of silly men with a complex, stirred up by a pile of pernicious priests. All of them should have better things to do. And, moreover, this story demonstrates how feeble these men can be: even when they are caught out, they are not honest enough to admit what they have done, or take proper responsibility for their own actions.

Religion

This is what Nikolopoulos is doing this afternoon. He is in Patras surrounded by Churchmen, so my cartoon (which drew links between him and the Archbishop of Thessaloniki) seems all the more pertinent.

BwN6h7tIIAAcsUk

*much needs to be said about the problems of having a “State church” especially when it thinks it has a right to vocalise about modern issues. I will write more on this!!
interrupt
Modern Greece is not homophobic
Oh, and just to emphasise that modern Greece does not endorse this horrid racist thug, here are some responses from the days following the twitter incident:

Stefanos Livos said: “Not all Greeks are … morons like @NikNikolopoulos”.

Greek Deputy Foreign Minister, Dmitris Kourkoulas, tweeted: “@Xavier_Bettel Dear PM,thanks for helping us unveiling the dirty face of some of our ‘politicians’.”

Bettel himself replied by saying: “Relations between GR & LUX and with @PrimeministerGR are perfect and won’t be affected by the comments of an isolated politician”.

Nikolopoulos has spent much of the last year combatting a draft anti-hate law which will make the sort of attacks against homosexuality, that have been spearheaded by Golden Dawn, illegal.

Yannis Varoufakis

varoufakis

Very odd that everyone misrepresents what Varoufakis is actually offering or, as the TV claims, “threatening”.

The BBC says he refuses to talk to the Troika. In fact, he seems prepared to talk to anyone. The only thing he does not accept, it seems is to be bullied into a position by people who claim to know better.

varoufakis1

As a pretty distinguished  academic, Varoufakis seems perfectly positioned to comment on the last 5 years and Greece’s debt. He says, “The disease that we’re facing in Greece at the moment is that a problem of insolvency for five years has been dealt with as a problem of liquidity.” Thank God this is a man who can express himself perfectly well in both Greek and English. His appearances and explanations on the News’ channel Al Jazeera were excellent too! This is a man we can afford to take seriously.

merkel 1

Mrs Merkel meanwhile says she is not prepared to discuss anything and wants Greece nevertheless to stay in the Eurozone. I cannot see that she can have it both ways, poor lass. The fact that someone repeats herself does not make what she says any clearer or more certain- she is just repeating something.