UNION POWER: THE WINGS OF AN EAGLE ATTACHED TO A PIGEON HEAD

I’ve “excavated” this essay of mine from the deep-end of my archive in view of the powerful CFMEU’s threatening decision to publish the names and addresses of building watchdog inspectors with the aim that their “kids will be ashamed of who their parents are.” This union as king-maker, whose power is unparalleled in the industrial history of the country, which can crown and dethrone leaders of the Labor Party, as it did by appointing Bill Shorten as the federal leader of the ALP, has not the slightest concern that by naming the families of these inspectors puts at high risk the safety of their spouses and children. Moreover, its impending amalgamation with another militant union, the Marine Union of Australia, MEU, will make the CFMEU the power-broker extraordinaire. And inrease more its forte to continue to break the rules and regulations of the Industrial Court with total impunity. I hope the readers of this blog will find it to be of a bit of an interest.

 

By Con George-Kotzabasis

The following article was written on April 2000. It’s republished here on this blog as I think it’s still relevant as unions continue to have a strong grip on the Labor Party. And with a possible impending recession in the US that would inevitably effect the Australian economy, a Rudd victory in the coming election will bring the unions exercising their pernicious behind the times influence on the front benches of a Labor government. And hence exacerbate the peril of the economy of the country in conditions of recession. Lest we forget, it was in the UK in the mid-sixties under Labor governments that ‘trade-union-led “wage push” was the driving force behind inflation and subsequent breakdown of Keynesian policy’. Richard Kahn, one of the closest disciples of Keynes, when he was asked about this breakdown of Keynesian policy, he answered, ‘we never thought the leaders of the trade unions could behave so stupidly’. This stupidity was coined at the time in the term of stagflation, the proud creation of the unions. And this doltishness of the unions is alive and well in our times as it’s still fueled by the false Marxist doctrine of class struggle. This is the danger that trade unions could inflict to the Australian economy under a Rudd government. As for Rudd’s “education revolution” by providing students with laptops, the mountain has brought forth a mouse. Australia is already among the top nations that provides computers to its students. But on the quintessence of education revolution which has to deal with its human capital, i.e., its teachers, who have to be selected on merit and ability and on their teaching methods, two burning issues on which the education unions will not budge, Rudd remains silent. He also claims that his government will be a government of “fresh ideas and new leadership”. But after his lustful embrace of me tooism of some major liberal policies during the electoral campaign, Rudd pellucidly reveals that his government will not be a government of “new leadership” but a government of mimicry. 

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The ascendancy of the Labor Party to the treasury benches in Victoria, has churned in its wake a billow of waves of industrial action by an amalgam of union power that threatens to shipwreck the economic vibrancy of the state. The outcome of such fatuous action by the unions will be to induce a flight of investment capital from Victoria to other states, as current and would-be employers of this state would feel too insecure to invest in an environment of industrial turmoil. This is especially so when the Labor government and its leader Steve Bracks are perceived to be irresolute and too weak-kneed to control and rein in this outdated aggression and belligerence of the unions against employers.

The excessive and irrational demands of the unions for a thirty-six hour working week and a 24 percent increase in wages, which if they were successful in obtaining initially in the construction industry and their inevitable flow into some other industries, would have the ineluctable result of throwing thousands of workers among the ranks of the unemployed. This would be a tragic repetition of what happened in the metal industry in the late 80s as a result of excessive union claims, under the then Federal Secretary of the Metal Trades Union, George Campbell—a political stallion of the Left and presently a Labor Senator who is going to be replaced by another stalwart left-winger Doug Cameron who has indisputable credentials of being in the past a real “communist under the bed”—whom the Treasurer Paul Keating accused of having a necklace of 100,000 dismissed metal workers around his neck.

It’s obvious that the unions are afflicted by an innate inability to learn from their past sloppy errors. And like a recurring malady they are bound to contaminate the economy of the country with the calamitous mistakes of the past. The consequences of a repeated mistake, however, are more tragic than the consequences of an initial one and therefore carry a greater responsibility. An action that is performed for the first time is experimental in regard to its consequences, as no one, without the gifts of Tiresias, can predict or foresee whether its results will be benign or malign.  (Not that the unions could be excused for their first error. There was ample evidence of a global scale at the time, and enough forewarnings by eminent economists, that excessive union claims within the confines of global competition would inexorably lead to the flight of capital from regions these claims were impacting upon, and hence to unemployment.) But an action that is repeated deliberately and wantonly in spite of knowledge of its harmful effects in the past is intellectually malevolent and morally culpable.

Whose Culpability is Greater the Union’s or the Government’s

Two questions therefore arise. Is the intelligence of unions commensurate with their powers? Or is it the case that union power is more like the wings of an eagle attached to a pigeon head? If the answer to the second question is affirmative, then one further question is posed, i.e., why then was the political wing of the Labor Party, which is now in government and having the expertise of knowing better about the dire economic effects of industrial unrest to the country nonetheless was unwilling to intervene promptly and decisively to block the irrational and pernicious claims of its industrial wing, which as a government of all Victorians—Premier Brack’s slogan—was committed in doing? Furthermore, why was the government’s immediate reaction to blame the Federal government’s industrial legislation for the ongoing industrial unrest instead of doing something that would have stifled the industrial dispute in its initial stages, for which it had prior knowledge, and using the subterfuge of an excuse that it was constrained by the legislation and could do nothing effective toward its resolution? Both the deputy leader of the government John Twaites and the Minister of Industrial Relations Monica Gould, used this feeble argument, when in fact with the return of the Premier from Davos  the latter forced the union involved in the dispute of the Yallourn power station to return back to work by imposing hefty fines upon its members, hence demonstrating that the government had the power to do something effective to resolve the dispute? Wasn’t it rather, the attempt to shift the blame to the federal legislation, a poor ruse, indeed, a camouflage, to cover its lack of will to intervene timely and decisively and derail the union from its “crashing” course? Yet, the belated action was effective, even if it was done halfheartedly. But what other alternative the government had, at the end of its honeymoon with the electorate, other than to send the stalled fire engines out to extinguish the full blown fire, if it was not to be seen, and impugned, in the electorates eyes, as politically effete and incompetent?

This is a basic characteristic, however, and an irreversible syndrome of Labor governments. To intervene in industrial disputes only when political necessity dictates, i.e., only when these disputes have reached a high point with the potential of harming the economy, and hence would be politically damaging. For organizational and ideological reasons Labor governments are not prone to intervene in the wrangles of their comrade-in-arms with employers, but do so only as a last resort.

This general inaction of Labor governments in industrial disputes is a result first, of a common ideology shared with the unions whose core emanates from the principles of socialism, and secondly, from its constitutional organizational structures that tie the political and industrial wings of the Party into a powerful body and into a compact of consensus that determines the functions of each wing. In conference after conference of the Party, the common and often repeated refrain is that Labor occupies the treasury benches only for the purpose of implementing policies which are discussed and ratified in state and federal conferences in whose conception the unions and its sundry representatives, mainly academics, have a major input. The union’s dominance is illustrated not only in the generation and formation of policies (Its architects generally are academics from the Left, whose intellectual frustration is at a boiling point because their ideas and policies cannot pass muster among other academic luminaries, but who do find a paradisiacal outlet for their “time-stopped” ideas, as well as an adulatory audience among their comrades in the unions, who normally cannot separate the wheat from the chaff of these ideas), but also on the conference floor as sixty percent of its delegates must be union representatives according to the Party’s constitution.

The larger and, especially, the more militant unions have such a firm grip in the election of delegates to Party forums, that even ministers and would-be premiers often cannot be elected to these meetings. Many ministers , therefore, who are unable to be elected to conferences on their own authority, resort to “begging” less militant unions to be placed in their delegations as constitutionally the unions have the authority to do so. Hence only as supplicants to the unions are ministers able to participate in conferences. For example, Jim Kennan, the Attorney General in the Cain Government, for many years was a delegate of the Clothing Trades Union. Likewise too, Steven Bracks, the current premier, was a delegate of the same union, who had taken Kennan’s place with the latter’s departure from politics. Other ministers who are not as fortunate to be union delegates attend conferences as visitors and observers without the right to move, or vote for, resolutions of the conference. Hence, ministers and many of their advisers are left out from the formulation and ratification of the Party’s policies. Such is the power and influence of unions in the organizational procedures of the Party, that often they cal “lock-out” important ministers who are not close to their ideological positions, from the highest policymaking bodies of the Party.

Moreover, the grip of the unions is extended to the pre-selection procedures of the candidates of the Party as well as in the choosing and changes of the parliamentary leadership, both in the state and federal domains. Who can forget for instance the telephone call that Paul Keating made, during his challenge of Bob Hawke, to Wally Curren, secretary of the Meat Workers Union asking him for his support in the coming challenge to Hawke for the leadership of the government? And Curren obliging, by forcing those MP’s from Victoria who owed their position in parliament to his patronage, to vote for Keating? This irritated Bob Hawke so much asking who Wally Curren was pretending thus ironically that he himself who had ousted and replaced Bill Hayden with union support was not cognizant of the influence trade union leaders have in pre-selections. As for the branches of the Party they play a superficial role in the pre-selection of candidates as they too in turn are influenced in their decisions by the organizational power of the unions.

Labor Politicians at the Mercy of Unions

Being therefore at the mercy of unions for their parliamentary positions and for the buttering of their bread, labor politicians, with some exceptions, are cast as toadies of the unions. Only the Federal Executive of the Party can intervene can intervene and save a ministerial or a backbencher’s scalp from the tomahawk of the unions. This occurred when John Halpenny, the Secretary of the Trades Hall Council in Victoria. were placed in the number one position on the senate ticket, with massive union support, in the 1988 federal election, relegating the leader of the Senate, John Button, to the second position. And in the election following the one in 1988, some of the left-wing unions were deliberating whether or not to place Gareth Evans, the Minister of Foreign Affairs, in the second position on the senate ticket. Only some sober heads at the last moment saved the glitterati Minister from the rusty and blood-stained tomahawk of the unions and from posthumous obloquy. (But the power of the Federal Executive is limited, as is illustrated in the present coming election of 2007 in the seat of Coreo, where the current seating member, Gavin O’Connor, is replaced by an assistant secretary of the ACTU (Australian Council of Trade Unions), against the wishes of the Executive.)

It’s for all the above reasons, this congeniality of interests between Labor governments and unions that prevents the former from acting timely and decisively in industrial disputes. And even when they do as a last resort they cannot be impartial in their involvement. The Brack government being captive to the unions has to cater to the latter’s voracious appetite on a number of issues: On the restoration of common law damages for injured workers, which has already being done by passing the relevant legislation in parliament, on the restitution of industrial policy back to the State Government, so the latter can abolish the industrial contracts of the Federal Government, whose aim is to eliminate union dominance in industry negotiations, and to replace them with collective bargaining, hence restoring union coercion and thuggery during negotiations with employers. On these issues and on many others, the Labor government is hamstrung by union power. Whether the former will be able to deliver on these issues will depend on the political climate of the day and on the degree of resonance such a delivery will have upon the electorate.

Steve Brack’s therefore, like a trapeze artist, has to walk on a tight rope whose one end is held by the unions and the other by the community, and perform his balancing act. While gratifying the union claims, with potentially destructive consequences to the economy of the State, at the same time he has to keep its economic robustness, inherited from his liberal predecessor, Jeff Kennet, intact, hence erasing any fears or consternations the community might have about the new industrial course of his government.

It’s with this purpose in mind to win the confidence of Victorians and of some naïve employers that Steve Bracks lately set up a new stage with an old play. His government lacking any originality or lateral thinking in policymaking ransacked the ram shackled spider web storehouse of past Labor policies to bring out the nostrums of “old age”. The summit of “Growing Victoria Together”, chaired by that scion of Labor power, Bob Hawke, was such a nostrum. Imbibing a strong dose of self-deception, Bracks was hopeful that by attracting some old and new celebrities from the industrial club and from business to the summit the public would be hoodwinked and believe that something substantial would come from the coupling of these celebrities. What in fact happened, was that each spokesperson of this divided house of unions and employers, voiced plaintively their complaints and grievances against each other with the result that they were not able to reach an agreement as to how and by what prudent set of actions, they would carry out the growth of Victoria. The rhetorical statement at the end of the summit, spun by the golden threads of the cerebral and literary qualities of Bob Hawke and his wife, respectively, could hardly hide the practical hollowness of the summit. What the latter did was to set up a number of committees to look at a number of issues.  Such as education and training, investment in training, industrial relations, health and wellbeing indicators to measure performance in meeting social goals, infrastructure, the impact of payroll tax on job and wealth creation , and the audit of government services in country communities. It also set up an advisory body to strengthen community input, oblivious of the fact, that while the latter is important it is not a substitute for political leadership. Forgetful also of the fact that the achievement of this laudable “prospectus”, is absolutely dependent on calm industrial relations. And therefore cannot be achieved while the agitated firebrand steam of the unions continues unabated.

Hence, the mountain (the summit) has brought forth a mouse which is at the mercy of the cat’s paws, the unions. Furthermore, as so many of the issues are to be shoved to committees, whose members are deeply divided on the central issue of industrial relations, they are inevitably going to be dealt with in a banal hackneyed manner, since their members will be unable to reach a mutual agreement on the key issue of industrial relations. Hence the summit’s “debris-deliberations” will be proven to be a barren exercise.

The Bracks’ government by its farcical and enervating stand toward the unions and by its populist stand toward the public threatens to throw Victoria into the doldrums as well as empty the coffers of the treasury. This is not a government of substance but a government of images—the images of a dead past. But funeral rites for dead images can be very expensive to the general community, both in terms of tax increases and unemployment.

I rest on my oars: Your turn now

Smart Politicians Stand Naked Before Labor’s Master: Ideological Stupidity

By Con George-Kotzabasis June 28, 2016

Since the economically profligate Whitlam era, the only Labor government that was bracketed off from Labor’s inveterate stupidity was the Hawke-Keating government. The present leadership of Shorten-Bowen taking a leftist turn in its politics, like the Rudd-Gillard administrations had done, as adumbrated in its pre-electoral commitments of “big-government,” is repudiating the prudent policies of Hawke-Keating and wilfully adopting, retrogressively, the stupid and disastrous paradigm of European socialism that had sunk Spain, Portugal, Ireland, Greece and Cyprus into the abyss of bankruptcy, economic crisis, and political instability. Moreover, it is doing so in the face when even the Scandinavian haven of the social democratic Welfare state is severely clipped of its largesse, as at last has been realised to be no longer economically viable. Anders Borg, the wunderkind as finance minister of Sweden, initiated the incremental dismantling of the Welfare state, lowered taxes in the private sector, which has galvanized the creation of new jobs.

Returning back home. The leftist political editor of The Sydney Morning Herald, Mark Kenny, is forecasting “dire trouble” for Labor on the debt and deficit front. Terry McCrann, of The Daily Telegraph, ominously declares “Shorten would plunge the country into greater debt”. And Henry Ergas, of The Australian, claims that even the latest backflips of Labor will not be sufficient to close the deficit gap and its “mythmakers” will be tempted “to conjure revenue increases out of thin air, just as the Rudd-Gillard governments did pointing to a golden future time when receipts would soar.”

But to believe in myths and tales of future increases in revenue, when The World Bank and the International Monetary Fund slash hopes of economic growth in the near future, is highly precarious, as it would lead the country into complacency and prevent it from taking the necessary measures to countervail a looming long recession. Furthermore, such a possibility is strengthened with the present event of Brexit, which could ominously beget both the dismemberment and the disintegration of the UK and the European Union, whose widespread ramifications upon the geopolitical and economic spheres of the world would devastate any prospects of economic growth for many years. And it is most unlikely that there will be, like in 2008, another China to save Australia from woeful economic distress.

Further, Labor with egregious lack of imagination and foresight is not factoring-in such imponderables as a precipitous fall in world prices of minerals in a context of world recession and the calamitous consequences that would follow, hitting public finances to smithereens and engendering a seriality of deficits with no hope of being reduced, with the outcome of plunging the country into the abyss of bottomless debt and insolvency. Is Bill Shorten going to be the “Maduro” of Australia, who, as the world price of oil dropped to lower depths, as a socialist president of Venezuela, continued the dissolute economic policies of his predecessor, Chavez, that turned the country from contrived prosperity to real poverty, once the government coffers were emptied, and indeed, into a hunting ground for dogs and cats to feed his people?

It goes without saying, of course, that this is an exaggeration and one could hardly imagine Australians shooting dogs and cats to feed themselves. It is merely used as an example to emphasize the dangers overshadowing an economy, when its Stewarts, the government, insouciantly do not take in consideration future possible events that could dramatically affect the economic course of a country and do not take prospective measures that would shield the country from such catastrophic effects.

One asks the question why the smart as they come politicians of Labor, such as Andrew Leigh, the assistant shadow treasurer of Labor, let their guard down and are reluctant to prepare themselves for these uncertainties of the future, believing that Australia somehow is protected by divine mandate from the ills of world recession and that Australia’s “economy is indestructible”, to quote Rex Connor, a minister in Whitlam’s government? For people who have studied the policies of Labor over a number of years the answer is simple and obvious. All their major policies are motivated by their passionate belief in the socialist utopia. And the implementation of these policies requires, according to this ideological schema, big and interventionist government and hence, high taxes; and the redistribution of wealth and not its greater increase are their priority. Despite the glaring evidence showing that augmenting the size of wealth is the only and sure way to enhance the standard of living of the ordinary people. The latter proposition has indisputable historical precedents, as it was the flourishing and ever increasing wealth of capitalism, that for the first time in history, pulled millions of people from the hovels of poverty onto peaks of prosperity. But Labor is blind before this historical fact. Like a drug addict Labor is fixed to its socialist doctrine and lives in a stupefied world of unreality and wishful thinking.

The matchsticks foundations of socialism are collapsing all over the world, especially in Europe, yet Bill Shorten’s Labor continues adamantly to believe that from this wreckage one could still build the just and equal society as envisaged by Labor’s quixotic visionaries. It is under this standard of socialist ideology that Shorten undermines and repudiates the prudent and pragmatic policies of the Hawke-Keating government, whose “Accord” between employers and workers engendered a congenial milieu for investments and the creation of new jobs with the consequence of increasing the living standard of Australians. Bill Shorten’s silence about these productive structural reforms and fiscal frugality of the Hawke-Keating era that had put Australia on a track of prosperity is a contemptuous affront to the two architects of these reforms. It was therefore rather surprising and amusing to have seen the two conductors of this inimitable political and economic performance sitting on the front-row of Shorten’s Launch of the Labor campaign, clapping at a leader who had mockingly renounced their wise policies. For Paul Keating, especially, standing next to Bill Shorten who had adopted and announced policies that would lead to a “Banana Republic,” it must have been an exceedingly painful occasion. Perhaps as painful as replacing Placedo Domingo with rock-and-roll.

I rest on my oars: You turn now

How the Good Intentions of a Left-Wing Economist Lead to Bad Results

By Con George-Kotzabasis May 19, 2016

The following is an unconsummated reply to professor Andrew Leigh’s lecture with the title, “Markets Monopolies and Moguls…” held at Melbourne University, on May 19, 2016. This was due to the chairman’s instruction that only a sprinkle of questions would follow the end of the presentation and there would be no debate

I’m overly distrustful of people who use scarecrows, in this case the “mogul” Richard Pratt, to make their argument. Moreover, it is a term associated with sinister practices and easily tantalizes and incites the feelings of the crowd to purge the evildoers. But more dismally it is wrong in your case, as it is an exercise in a fallacy of composition: Just because there are few rotten apples in the cart it does not mean that all apples are rotten. The unprecedented prosperity of capitalism was not engendered by rottenness but by the creative, innovative, and dynamic spirit of entrepreneurship.

The great economic historian, Fernand Braudel, depicts the shifts of capitalist centres and their entrepreneurial moguls, from Venice, Genoa, Antwerp, Amsterdam, London, to New York, spreading boundless prosperity to these metropolises and their environs by means of the ceaseless division of labour, international trade and the capitalist dynamic ethos of entrepreneurial creation. It was the sun-king of entrepreneurial capitalism that had pulled millions of people out of the sunless caves of poverty into the sunlit vistas of capitalist plenitude, heightening their standard of living, for the first time in history, on ever-higher plateaus.

(The scientific writer, Arthur Koestler, contends that the great discoveries of science were motivated by ambition, competition, and vanity, which happen also to be the inherent characteristics of capitalist moguls.)

You have mentioned a lot of negatives about “bigness” and market concentration but not the fact that they rather have a short life since there is no blockage of entry in a competitive economy to other entrepreneurs into these concentrated areas. One example, the entry of the innovative entrepreneur ALDI into the food-chain services and its reduction of the prices of its products in comparison to other chains, not only attracted many consumers to its stores but also forced the other two major super markets of COLES and WOOLWORTH to reduce their prices at the feel of the competitive pinch of the newcomer. Competition does not discriminate between big and small but it equally affects both.

But to deal with your argument that inequality should be a major consideration in competition policy, and regulating mergers and prices would be beneficial to the consumer. The competitive market in itself, without the need of regulation, spreads its cheaper products to an ever-greater number of consumers and therefore decreases inequality. The competition of Telstra and Optus is an example. The same applies to iPods. Ride a train, a bus, or a tram and you will see even the lower classes fully equipped with these cheaper gadgets of a competitive technology and once again the line of inequality is lowered down for the less wealthy consumer.

It is not the business of government to regulate mergers and pricing. This is the bailiwick of entrepreneurs who decide if such a merger will be profitable, whether it will be able to compete with an already established corporation producing the same product, and setting its price on such a level that it will attract consumers to buy its product en masse. Furthermore, as far as the regulation is close to the estimates and interests of the entrepreneurs it is superfluous; and as far as it is distanced from these estimates and interests, it is destructive. No businessman will invest his money in a venture where profit is unattainable. Hence, your regulation, that aborts the setting-up of a merger that would produce cheaper products for the consumer, by depriving the latter from having these goods, increases the inequality of the mass consumer. Not surprisingly, as often happens, good intentions lead to bad results.

Therefore, your proposal of government dirigisme as a panacea in regards to competition and regulation is inutile, fanciful, and fallacious, and more perniciously may turn out to be a destructive force.

I rest on my oars: Your turn now

 

 

 

The Search of Neuroscience for the Quintessence of Economics

By Con George-Kotzabasis—October 03, 2014

A reply to “of markets and minds” –by professor Peter Bossaerts

Melbourne University Magazine

Economics is the application of scarce means for the attainment of countless abundant ends. Since all ends cannot be fulfilled because of the scarcity of resources, human choice selects those ends that are more needful or pleasurable to man than those that are less so. The attainment of those more needful ends is a result of human action. These ends, however, are the fruits of the future and the inevitable uncertainty that is riveted upon it. Therefore human action is always speculation based, however, not upon the throw of the dice but upon ratiocination. Furthermore, actions are determined by the value judgments of individuals i.e., the ends they are eager to attain. These valuations differ among individuals due to the different circumstances and living conditions of these individuals and to the variable desires and wishes that emanate from the plethora of their personalities. There is no constant relationship between these valuations, as they emanate from the different wishes, desires and caprices of an umpteenth of individuals, and are therefore beyond the bailiwick of science to measure them; what scientific method could measure with precision the capricious longings of man and the uncertainty that surrounds his existence?

Professor Bossaerts’ attempt therefore, to identify and control the ‘cells’ of the economy and finance and the complex interactions that determine their course by the scientific method of neuroscience for the purpose of rationally directing the process of the economy to a more beneficial path, is in vain and is bound to fail. Science measures constant relationships in the controlled experimental environment of the lab but cannot measure uncontrolled innumerable variants that determine, in our case, the process of a free market economy. The search, therefore, of finding the inexorably elusive quintessence of the economic process by the tools of the hard sciences, though a laudable task, is purblind, as it cannot see nor understand that science is incapable of measuring the measureless.

The endeavour to supplant and redress, on the one hand, the imperfections of the free market economy, and on the other, the failures of government dirigisme to regulate and direct the economic process of the free market to a more optimal state, by the powerful algorithmic tools of science, will be found to be another futile attempt to direct the economy from a central command post, this time by the methods of neuroscience and not by an omniscient cabal of socialist planners.

In an imperfect and uncertain world, the free market economy will proceed and move by trial and error and continue to spread its benefits to mankind. But the intervention of man’s reason and understanding will substantially diminish the errors by increasing their correction in time by the power of man’s imagination and ratiocination.

The Gravitational Force that Pulled European Nations into a Black Hole

As the superb and strong statesmanship of Antonis Samaras is pulling decisively Greece out of its economic crisis, I’m republishing this piece that was written in the midst of 2012, for the readers of this blog.

Government intervention always wills the good and works the bad.

By Con George-Kotzabasis

The European Union’s sovereign debt crisis was neither an act of fate nor an act of a free self-dependent man but an act of deluded ideology whose sails were blown by the long-lasting winds of government dirigisme, i.e., intervention, and welfare dependency. Once again it was the work, the social engineering, of the bien pensants in the form of a state directory of planning that would put a floor of security for the masses and protect them from falling into abject economic privation that was always, according to their thinking, the omnipresent and inevitable result of the unjust, harsh, and unequal regime of the capitalist competitive free market. The trouble was that this floor was made out of straw and at the first jump of an economic crisis–whose seeds were planted by government intervention,  loose monetary policy and low interest rates–would open a gaping hole through which this security would disappear and drown in a massive pool of unemployment and poverty.

The Eurozone’s one dimensional foundation of monetary union without banking and fiscal union could not sustain the European edifice in the long run with the differentiating regime of taxes, social benefits, and pensions that existed among its constituent states. The proliferation and prodigality of unsustainable Entitlement Economies, which have been the characteristics of the welfare states of Europe especially in the south, could not have been continued without cracking the economic underpinnings of the Eurozone. Also, the European Central Bank’s enabling of low risk premiums on interest rates of government debt, encouraged Greece, Portugal, Spain, Italy, and Ireland to go on an orgy of borrowing and overspending. The inevitable outcome was a stampede of budget deficits that were unsustainable and the eventual loss of all credibility in the financial markets that the afflicted States would be able to pay back their debts and thus the shutting out of the latter from the global financial lending pool.

Since no private person would hazard to lend money to states lassoed in sovereign debt the only alternative left was for the richest countries in the Eurozone, such as Germany, to become the lenders and continue to finance the former for their economic survival. But such help would be given under very severe terms encapsulated in strict Memoranda to the receiving countries with the stipulation that the latter would adopt and implement stringent austerity measures that would decrease substantially government expenditure, would restructure and reform their economies making them more competitive, and privatizing public enterprises, whose inefficiency and lack of a diligent working ethos can only be sustained by a continuous expensive staple of government subsidies.

These austerity measures, however, whose formulators have been the European Commission, the European Central Bank, and the International Monetary Fund, the so called Troika, are forcefully rejected by the people of those countries who for decades have been inured to the social and economic comforts and benefits engendered by the reckless spending of their governments, and are refusing to accept any cuts to these benefits even when some are aware that the latter can no longer be provided since the governments’ coffers are empty and the convenience of funding these benefits by borrowing, as they have done in the past, is no longer available due to their nation’s sovereign debt. Moreover, these austerity measures initially had not being complemented with policies of economic development and thus led to the worsening of the economic conditions of those countries that adopted them, such as Greece, leading to unprecedented massive unemployment by the closure of large and small business enterprises and to the smashing of the middle class which is the cornerstone of free societies.

This situation is dangerously engendering the fragmentation of social cohesion in those countries and giving rise to political parties of the extreme right and left, coming out of the foam of waves of violent demonstrations that imminently threaten democracy. A latest illustration of this danger are the attacks by petrol bombs and other incendiary devices by hooded youths of anarchists and extreme leftists in Greece against the homes of outspoken journalists, offices of the governing coalition of New Democracy, Pasok, and the Democratic Left, and the burning of Bank’s ATMs. And of particular significance are the attacks on journalists, which are a blatant violation of free speech and a sinister attempt to intimidate them from expressing their opinion about events and criticizing politicians of Syriza, the official opposition, of whom obviously the fire carrying mobs are its ardent supporters.

This will be the tragic legacy of European big government and its ill-considered, indeed, destructive intervention in the processes of the free market that for at least two centuries have delivered prosperity and an unprecedented increase in the standard of living of the masses; as the socialist politicians from Francois Mitterand to Jaques Delors–the architects and enforcers of the European Monetary Union that forced Germany to succumb and pay the price of the unity of west and east Germany as demanded by France–and their present disciples of  etatisme are in the process of killing the goose that laid the golden egg, i.e., the unimpeded free market, and by doing so unconsciously and unwillingly are generating and  unleashing the brutal forces of fascism and leftist directorates of totalitarianism on the landscape of Europe.

To avoid this slide to the hell of totalitarianism only the rise of statesmen who “can act beneath heaven as if they were placed above it” is consummated. The fiscal and balance of payments crisis can only be remedied by substantial cuts in government spending and the euthanasia of big government, and by the privatization of debt ridden public enterprises–that are the last strongholds of obtuse and doctrinaire unions– and by the freeing of private enterprise to pursue profit by competition and entrepreneurial creativity and dynamism, respectively. These ‘bitter’ remedies can only be administered by statesmen of the calibre of Lee Kuan Yeu and Antonis Samaras. The latter, indeed, might not only be the progenitor of the Greek Renaissance but also the paradigmatic leader of other European politicians to imitate for their own European Renaissance. The Newtonian apple that will stop the European ‘discord’ that currently threatens the demise of the EU will fall to the gravitational force of such statesmanship.

Hic Rhodus hic salta

 

The Gravitational Force that Pulled European Nations into a Black Hole

Government intervention always wills the good and works the bad.

By Con George-Kotzabasis

The European Union’s sovereign debt crisis was neither an act of fate nor an act of a free self-dependent man but an act of deluded ideology whose sails were blown by the long-lasting winds of government dirigisme, i.e., intervention, and welfare dependency. Once again it was the work, the social engineering, of the bien pensants in the form of a state directory of planning that would put a floor of security for the masses and protect them from falling into abject economic privation that was always, according to their thinking, the omnipresent and inevitable result of the unjust, harsh, and unequal regime of the capitalist competitive free market. The trouble was that this floor was made out of straw and at the first jump of an economic crisis–whose seeds were planted by government intervention,  loose monetary policy and low interest rates–would open a gaping hole through which this security would disappear and drown in a massive pool of unemployment and poverty.

The Eurozone’s one dimensional foundation of monetary union without banking and fiscal union could not sustain the European edifice in the long run with the differentiating regime of taxes, social benefits, and pensions that existed among its constituent states. The proliferation and prodigality of unsustainable Entitlement Economies, which have been the characteristics of the welfare states of Europe especially in the south, could not have been continued without cracking the economic underpinnings of the Eurozone. Also, the European Central Bank’s enabling of low risk premiums on interest rates of government debt, encouraged Greece, Portugal, Spain, Italy, and Ireland to go on an orgy of borrowing and overspending. The inevitable outcome was a stampede of budget deficits that were unsustainable and the eventual loss of all credibility in the financial markets that the afflicted States would be able to pay back their debts and thus the shutting out of the latter from the global financial lending pool.

Since no private person would hazard to lend money to states lassoed in sovereign debt the only alternative left was for the richest countries in the Eurozone, such as Germany, to become the lenders and continue to finance the former for their economic survival. But such help would be given under very severe terms encapsulated in strict Memoranda to the receiving countries with the stipulation that the latter would adopt and implement stringent austerity measures that would decrease substantially government expenditure, would restructure and reform their economies making them more competitive, and privatizing public enterprises, whose inefficiency and lack of a diligent working ethos can only be sustained by a continuous expensive staple of government subsidies.

These austerity measures, however, whose formulators have been the European Commission, the European Central Bank, and the International Monetary Fund, the so called Troika, are forcefully rejected by the people of those countries who for decades have been inured to the social and economic comforts and benefits engendered by the reckless spending of their governments, and are refusing to accept any cuts to these benefits even when some are aware that the latter can no longer be provided since the governments’ coffers are empty and the convenience of funding these benefits by borrowing, as they have done in the past, is no longer available due to their nation’s sovereign debt. Moreover, these austerity measures initially had not being complemented with policies of economic development and thus led to the worsening of the economic conditions of those countries that adopted them, such as Greece, leading to unprecedented massive unemployment by the closure of large and small business enterprises and to the smashing of the middle class which is the cornerstone of free societies.

This situation is dangerously engendering the fragmentation of social cohesion in those countries and giving rise to political parties of the extreme right and left, coming out of the foam of waves of violent demonstrations that imminently threaten democracy. A latest illustration of this danger are the attacks by petrol bombs and other incendiary devices by hooded youths of anarchists and extreme leftists in Greece against the homes of outspoken journalists, offices of the governing coalition of New Democracy, Pasok, and the Democratic Left, and the burning of Bank’s ATMs. And of particular significance are the attacks on journalists, which are a blatant violation of free speech and a sinister attempt to intimidate them from expressing their opinion about events and criticizing politicians of Syriza, the official opposition, of whom obviously the fire carrying mobs are its ardent supporters.

This will be the tragic legacy of European big government and its ill-considered, indeed, destructive intervention in the processes of the free market that for at least two centuries have delivered prosperity and an unprecedented increase in the standard of living of the masses; as the socialist politicians from Francois Mitterand to Jaques Delors–the architects and enforcers of the European Monetary Union that forced Germany to succumb and pay the price of the unity of west and east Germany as demanded by France–and their present disciples of  etatisme are in the process of killing the goose that laid the golden egg, i.e., the unimpeded free market, and by doing so unconsciously and unwillingly are generating and  unleashing the brutal forces of fascism and leftist directorates of totalitarianism on the landscape of Europe.

To avoid this slide to the hell of totalitarianism only the rise of statesmen who “can act beneath heaven as if they were placed above it” is consummated. The fiscal and balance of payments crisis can only be remedied by substantial cuts in government spending and the euthanasia of big government, and by the privatization of debt ridden public enterprises–that are the last strongholds of obtuse and doctrinaire unions– and by the freeing of private enterprise to pursue profit by competition and entrepreneurial creativity and dynamism, respectively. These ‘bitter’ remedies can only be administered by statesmen of the calibre of Lee Kuan Yew and Antonis Samaras. The latter, indeed, might not only be the progenitor of the Greek Renaissance but also the paradigmatic leader of other European politicians to imitate for their own European Renaissance. The Newtonian apple that will stop the European ‘discord’ that currently threatens the demise of the EU will fall to the gravitational force of such statesmanship.

Hic Rhodus hic salta

A Response to Professor Varoufakis’s Thesis that the Greek Crisis is not Home-made

By Con George-Kotzabasis

Professor Varoufakis, we have crossed swords before several times on your website but no blood was spilt. Your thesis delivered with panache was highly interesting, provocative, fascinating, and alluring, but from a negative point of view. Like an exotically seductive woman flaunting dissolutely her charms but refuses to be seduced. You likewise refuse to see or acknowledge that your proposition is made-up from a selectivity of facts and by leaving other facts out you let down your guard as these neglected facts will release the Aeolian winds to demolish your argument in one wind gust. The fact is that  there are many countries within  Europe that are not in crisis, such as Sweden, Denmark, Holland, Luxemburg, Austria, and Finland, not to mention others. My question therefore is why the European and global crisis did not also embroil these countries in it as well, as it did with Greece and other southern European countries? Why the general predatory capitalist practices of the dominant countries of the Eurozone affected only some countries of the EU and not others?

The reality is that government dirigisme and its ill-fated profligacy of over spending on borrowed funds was the cause of the crisis that engulfed those countries of the south, and especially Greece, within the whirlpool of sovereign debt. The virus of the malaise did not have exogenous origins, as you wrongly suggest, but originated from the mal-practices of socialist governments and followed inevitably by conservative ones—how else could they have a chance to be elected in government?—with their fatal predilection for big government, and Greece was the example par excellence.

But as we all know a crisis is a developmental process and during its course the remedies applied to it particularly when they are wrong can exacerbate it instead of curing it. And as you correctly point out austerity without economic growth, especially in conditions of continued recession, is a recipe of disaster, as the statesman Antonis Samaras also pointed out two years ago. But it is a grave mistake to confuse the cause with the remedy and to build one’s case on the wrongness of the cures, as encapsulated in some of the policies of the two Memoranda imposed by the European lenders upon Greece, as the cause of the crisis in Greece.

In my judgement therefore your thesis that the crisis in Greece has exogenous origins and not endogenous ones is totally wrong and highly misleading. You are peddling shoddy goods wrapt-up in the dignified robes of academe hoping to make an easy but intellectually disrespectful sale. And the strength of your argument can be measured by the kind of opponents you have had in your debates up till now. None of them were real opponents and all of them were fellow travellers sailing with the compass of your ideological position. I remember when you met a real opponent to your thesis you banned him from your website, and I was rather surprised at the time that with your Kazantzakian character you would have debarred someone expressing opposing views to your own. But it is easy to be right when you hear only your own voice.

Also, your recycling theory from countries with surpluses to countries with deficits is in my opinion fundamentally flawed. What prudent investor would invest on a seat in the Titanic? Most of these countries that have incurred those bottomless deficits were and are economically uncompetitive and this was the primal reason why they were embroiled in this abysmal “balance of payments crisis,” as the eminent financial commentator Martin Woolf argues.

The crisis is profoundly complex to be fixed by tailor-made academic economic nostrums as your Modest Proposal suggests. It will be resolved by the method of science, i.e., by trial and error, and that is why, moreover, will not be without pain for the majority of people, after the grave and fatal errors committed by their past governments. The Schumpetarian principle of “creative destruction” will be the pivotal characteristic in this process of economic restructuring, and statesmen of the calibre of Antonis Samaras will play a decisive role toward its resolution.