It's time to end the Greek rescue farce
By YanisVaroufakis of Hellenes Online
Over the past two years, the economic crisis that has engulfed Greece has also thrust me in front of the microphones and note pads of the myriad journalists who descended upon Athens to report on the unfolding drama. In this sense, I have not only been witnessing the evolution of Greece’s (and the eurozone’s) meltdown but also the struggle of the world’s media to make sense of it. In this article I summarise what I think are three important lessons to be drawn from this experience on behalf of journalists attempting to strike the difficult balance between (a) the need to produce stories that resonate with their editors, readers, audiences, viewers and (b) the almost infinite complexity of the underlying story. The three lessons that I want to focus on I shall refer to, respectively, as the error of generalisation, the fallacy of aggregation, and the perils of compartmentalisation.
The error of generalisation
The Crash of 1929, and the subsequent Great Depression, ought to have taught us an important lesson: that a cascade of both private and public bankruptcies (which begins with the collapse of the big banks, then spreads to the public debt of the weaker nations and, later, infects the real economy with the virus of recession) ends up not only threatening the common currency of the era (the Gold Standard in 1929, the euro today) but also engendering a breakdown of the vision of shared prosperity. In the absence of some supra-national Leviathan (like the one Keynes proposed in 1944) to “keep us all in awe”, and thus maintain cross border cooperation in the aftermath of a crisis, a Hobbesian war of “all against all” looms.
The war of words starts the moment we utter sentences beginning with “The Greeks do this” or “The Germans think that”. In 1929, that war of words, the ‘blame game’ if you want, led to another type of war which, paradoxically, killed millions and the crisis itself. One might have hoped that, this time around, we will have learnt our lesson. For while the armoured brigades have not moved (and will hopefully remain in their barracks), the war of words is now alive and well in Germany and in Greece, in the Netherlands and in Spain, in Austria and in Ireland.
Our very own generation’s 1929, the Credit Crunch of 2008 and the subsequent Great Recession, has occasioned much talk in Europe about The Germans, The Greeks, The British even (especially after David Cameron decided to break ranks with the European Union on the issue of the recent Treaty changes). Our collective task, and in particular that of enlightened journalists, is to shout from the rooftops that there is no such thing as The Greeks or The Germans or, for that matter, The Brits. We are all individuals, as Brian famously struggled to convince his self appointed disciples. And we have more diversity among our people, both in terms of views and character, than we have differences across our nations.
So, when reporting from the frontlines of the economic collapse, journalists have a duty to highlight the breadth of opinion within Greece, within Germany, within Britain, rather than gloss over that diversity opting instead for the comforting, yet potentially destructive, familiarity of national stereotypes. Maintaining a healthy resistance to generalisation is not only the journalist’s humanist duty but, also, a prerequisite for accurate reporting of the crisis’ causes.
Take, once again, the case of Greece. Journalists need metaphors with which to help their audience get a handle on an economic collapse, its causes and nature. One such allegory that has been employed extensively in order to narrate the eurozone’s drama is Aesop’s fable of the Ant and the Grasshopper. The Germanic Ant is pitted against the Greek Grasshopper in the context of a morality tale that combines northern industry, southern sloth and some flimsy economic analysis of the monetary dislocation that follows.
The trouble with metaphors of this sort is that they are almost irresistible. So, journalists hard pressed to produce a story that resonates nicely with their constituency’s prejudices end up slavishly reproducing the metaphor’s logic; e.g. Germans are portrayed as hard workers that must bail out the spendthrift Greeks, just like the ants etc. etc. It is as if, the moment the metaphor was chosen, the story had already been written up with no serious thought given to its analytic value.
Now, I am all for metaphors. There is nothing like them for conveying complex stories to a readership, or an audience, that allocates a severely limited amount of time to them. Nevertheless, it is incumbent upon journalists to use the metaphor to approach reality, as opposed to being ‘used’ by their own metaphor in order, effectively, to distort reality. To succeed in this task, journalists must bend their chosen metaphor to the demands of truth-telling. Resisting the lure of generalisation is essential.
In the case examined here, of Greece and Germany, the fact is that the ants and the grasshoppers are distributed across the division separating surplus from deficit eurozone nations. Once we recognise that both Germany and Greece, indeed the whole of the eurozone, contain neglected ants and over-pampered grasshoppers, we suddenly have the makings of a more nuanced story. One that allows us to ask probing questions about the way in which both Germany’s and Greece’s hard working ants feel disgruntled and shortchanged by the Greek and German grasshoppers which, during the ‘good’ times lived parasitically off them while now, during the ‘lean years’, once more, they are again demanding, from the ants, bail out money and higher taxes.
In short, metaphors are crucial for storytelling and analytical purposes. But we must hone them in a manner that helps, rather than hinders, our grasp of the underlying causes. And this means escaping the error of generalisation.
The Fallacy of Aggregation
When visiting a country in economic meltdown (Greece being a useful case in point) it is important to come equipped with a simple, yet counter-intuitive, insight: Recipes for tackling debt do not add up! By this I mean that journalists must always interrogate their instinctual views on the causes of the crisis that they are covering and, in particular, of what ‘common sense’ dictates as the remedy.
For example, what recipe does common sense recommend for getting out of financial trouble as a person, a family, a firm? The answer surely is to lower your expenses in order to rein in the red ink on your balance sheet. And to work harder and more intelligently. However, when this recipe is taken to a higher level of aggregation, it simply does not add up. To see this, suppose that, in a bid to reduce our individual and collective debt during a crisis (what financial economists refer to as deleveraging), each one of us follows this same recipe and at the same time. The result, I submit to you, may be quite the opposite of that intended. Indeed, aggregate real debt may rise!
To see why these individual recipes do not add up to a collectively efficacious strategy, consider the great difference between your family (or firm) and the economy at large. In the case of your family, if your income has declined, and you are facing a shortfall at the end of each month, cutting down on expenses is a sensible course of action for one simple reason: Your income is independent of your expenses. For instance, if you do not eat out tonight (and, instead, cook at home), your income has not suffered and, as you have reduced your expenses, your balance is healthier.
In sharp contrast, an aggregate economy’s income is not independent of its expenditure. Indeed, the two are one and the same thing! (The nation’s aggregate income equals exactly its aggregate expenditure.) To see why this matters, suppose that the whole country is tightening its proverbial belt, with families and firms ‘deleveraging’ at once. Private expenditure will be, naturally, falling (in aggregate). Now if, on top of that, the government also reduces its expenditure (in an effort to shrink its deficits), then the sum of private and public expenditure will decline. But what is that sum equal to? The answer is: National income! As national income shrinks, the state’s tax revenue falls, families have less money to pay down debt, and the nation’s overall capacity to repay its debts diminishes. Thus, we all fall collectively into the trap of ‘common sense’; of the fallacy of aggregation; of mistakenly thinking that a recipe which is good for families and firms must be good for an indebted country in aggregate.
For many months, since the eruption of the Greek debt saga, I was struggling to put this simple point across to the many journalists that I met. It was hard work. The fallacy of aggregation was deeply entrenched in their minds. When asking me questions about Greece’s ‘bail out’ loans, and the importance of the austerity conditions that were attached to these loans, my claim that the whole idea was flawed did not resonate with them. However hard I tried to explain the flawed logic, the journalists seemed wedded to the idea that when a country like Greece has a large deficit, and a huge debt, a substantial reduction in government spending, and a hike in taxation, must be the answer.
Months later, when the government spending cut backs and the tax rises caused the recession to deepen and the debt-to-national income ratio to balloon, I noticed that the mood amongst journalists changed. Alas, in the meantime, they had authored piece upon piece that misinformed their readers and misled their audiences.
With this in mind, and as the crisis continues to weave its poisonous web across countries and sectors, I hope that journalists will weave into their reporting a modicum of doubt that economic ‘recipes’ add up the way that ‘conventional wisdom’ has it.
The perils of compartmentalisation
During my ‘tenure’ as frequent interlocutor of the international press corps ‘flying by’ Athens, I noticed an interesting division of labour. Reporters and television or radio crews would fall in three more or less distinct categories: The hard news crew, the background briefing mission and, less frequently, the human interest angle.
The hard news folks’ approach was of the ‘hardnosed’, quick off the mark, no nonsense type. They wanted the ‘facts’ and the figures, the insider information, the instant prediction of what-the-government-would-do or the how-the-market-would-move kind of response. The background briefing lot were more relaxed, operated under longer deadlines and, thus, had the time and space to ask similar questions but in a manner that allowed us, the interviewees, more room to unravel some narrative on the background and the unseen aspects of the story. Lastly, journalists working on human interest pieces had no time for the ‘causes’ of the economic crises, next to no interest for the underlying tectonic plates whose movements caused ruptures in the social economy. What they sought out was tales of woe, images of suffering, sounds of desperation; the raw materials that would allow them to piece together some short piece that would, I suspect, play the role of balancing out the harshness of the facts and figures in some preceding report by one of the other crews.
This compartmentalisation of the storyline of an economic meltdown into three distinct types of report causes two failures: First, it weakens the journalist’s own analytical capacity to make sense of the crisis. Secondly, it diminishes the value of each of its parts. Let me explain both allegations in the context of the eurozone debacle. Any tale of the trials and tribulations of, say, a Greek family that lacks an analytical connection between their suffering and the anguish of an equivalent German family (whose living standards have been falling less but for much longer) will surely fail to account (as well as it might have) for both: (a) the depth of ill feeling that Greek and German families experience and (b) the crisis’ causes. Put simply, when the hardnosed analysis is kept separate from the human interest angle, then the analysis turns ‘soft-nosed’ and the human interest story swaps humanism for melodrama.
Epilogue
Language and its love affair with metaphor often lures us into the trap of generalising that which is best left un-generalised. Our tongue is prone to talking about a ‘foreign’ people as if capable of having a single character whose moral defects can explain their plight; as if, for instance, Margaret Thatcher and Harold Pinter were collapsible into one character whose failing might explain Britain’s economic woes. Then, as if that were not enough, our mind gives the resulting misunderstanding another twirl by moving in the opposite direction, confusing the particular with the general, e.g. assuming that what is prudent for one family must be prudent for an economy. Lastly, following a long standing error in the Western mindset, we are convinced that economic and financial ‘facts’ are sentiment-free zones.
These three failures come natural to us when we fly into a country that has suddenly melted down for the purposes of preparing, within tight constraints, a piece of journalism on what is happening, why it happened and how it feels to be caught up in it. They must be resisted. My argument has been that journalists will throw much more useful light on an economic crisis unfolding in a foreign land if they manage to avoid the error of generalisation, the fallacy of aggregation, and the perils of compartmentalisation.
