There seems to be some confusion here at myfdl regarding what happened to Argentina after it defaulted on its debt and stopped pegging its currency to the U.S. dollar. This is important because Greece is in a nearly analogous debt/Euro situation, and I think should definitely be considering ‘doing an Argentina.’ Three paragraphs written by Mark Weisbrot back on May 11 clear things up. In fact, Argentina did extraordinarily well after renouncing its debt and escaping an over-valued currency (emphasis added):
The experience of Argentina at the end of 2001 is instructive. For more than three and a half years Argentina had suffered through one of the deepest recessions of the 20th century. Its peso was pegged to the dollar, which is similar to Greece having the euro as its national currency. The Argentines took loans from the International Monetary Fund, and cut spending as poverty and unemployment soared. It was all in vain as the recession deepened.
Then Argentina defaulted on its foreign debt and cut loose from the dollar. Most economists and the business press predicted that years of disaster would ensue. But the economy shrank for just one more quarter after the devaluation and default; it then grew 63 percent over the next six years. More than 11 million people, in a nation of 39 million, were pulled out of poverty.
Within three years Argentina was back to its pre-recession level of output, despite losing more than twice as much of its gross domestic product as Greece has lost in its current recession. By contrast, in Greece, even if things go well, the I.M.F. projects that the economy will take eight years to reach its pre-crisis G.D.P. But this is likely optimistic — the I.M.F. has repeatedly lowered its near-term growth projections for Greece since the crisis began.
Weisbrot’s article is another must read, as it points out the insanity and inhumanity of negative growth as, unbelievably, the actual economic strategy being employed now by the ECB/EU for creditors and against its debtor nations:
There is also the idea that Greece — as well as Ireland, Spain and Portugal — can recover by means of an “internal devaluation.” This means increasing unemployment so much that wages fall enough to make the country more internationally competitive. The social costs of such a move, however, are extremely high and it rarely if ever works. Unemployment has doubled in Greece (to 14.7 percent), more than doubled in Spain (to 20.7 percent) and more than tripled in Ireland (to 14.7 percent). But recovery is still elusive.
Greek unemployment is now up to 16%, and I bet the other figures have grown too. Bottom line should be, either the EU/ECB offers Greece and others in the same boat economic _growth_ or those countries should renounce their debts and leave the Euro. (Weisbrot also explains in the article why those twin moves necessarily would need to be done together if the escaping country wants to generate economic growth.)
What I get from Weisbrot is that it is not sovereignty that should be the bottom line, but this: if we’re going to lose our economic sovereignty to the multi-state entity called the EU, then that entity’s main priority _must_ be economic growth rather than paying off gambles made by investment bankers and similar. ‘Creditors’ rule must end or we do an Argentina’ sounds like a plan.
(By the way, as we can see from any sample of the business press, the Greek government is currently taking the opposite, screw us please but not so hard posture, toward the European bankers. It’s not time for Greece to ’turn on the charm’ for the European central and private bankers, it’s time for real threats and ultimatums.)



21 Comments

Another great piece.
Thank you for keeping at least up to date on such.
And thank you for the details on Argentina.
Greece youth unemployment is 35-40% (forgot exact figure) and this is one of the real pushes leading to the protesting.
Obviously the idea of austerity and “becoming competitive” by crushing the non-rich to be at the level of those who work for 60 cent/hour is insane, does NOT!!! work, and is beyond humane.
But they will still do it. Ideology over reality. And it’s not like the banksters benefit from the destruction of the Greeks and buying their public assets for cheap, right?
It’s a no-brainer. Greece needs to tell the IMF to eat shit and die, default, eschew the euro (as Howard would have said, if he were still alive), and return to its fiat currency, the drachma.
Also Ireland could and should return to the Punt, or the Irish pound.
Thanks for this article.
Found the title of the diary misleading.
“Greece” never said any such thing.
And the tools of the oligarchs that are running the Greek government are working their asses off to complete their alloted task of selling the property of Greece to the bandits (at fire sale prices) and the people of Greece into slavery (for nothing at all)
Please – man! – could you at least suggest that Greece is in a completely different situation than Argentina because Argentina just had to ‘divorce’ itself from the Dollar and it was pretty much a isolated incident while Greeces example could mean the same destiny for Spain, Portugal and Italy -(I guess you are one of these ‘provocateurs who would love to ‘blow’ up the Euro!) – and as another commenter recognized ‘the Greeks don’t want to do an Argentina at all’ – They DON’T want to have their ‘wealth’ suddenly cut in half or that -(like in Argentina right after the collapse) – the cost of living was ‘unpayable’ for the majority of the people and as another commenter told you before millions descended into poverty. What Greece wants is to get rid of their debt WITHOUT killing the Euro and hopefully ‘sane’ Europeans will find a resolution and let’s try the scorched earth concept in the US!
Oh – and I know a few Greeks – if they would have the chance to blow up ‘the Dollar’ – they would be ready for fare more sacrifices… if you know what I mean…?
but what’s about ‘running’ an experiment?
Let’s be ALL Greek for a moment and for devils sake – let’s look to the Argentinian experience…
Okay – the default has happened and everything you own is now worth 60 to 70 percent less than before and that doesn’t worry you much – because you live INSIDE your country and it seems to be more or less an ‘abstract loss’ because food -(you produce yourself) has become comparable cheaper too etc. etc. etc. – you catch my drift – and it’s kind of ‘cool’ until… yeah – until you have to buy a f… Toyota truck to do your farming – but Toyota trucks don’t grow on Argentinian trees and so you have to save SIX years before you can buy one – and SURE – the whole time your economy is growing and growingen – BUT from what f… level??
POVERTY 101 ???! –
or in the case of Greece – the country suddenly becomes the ‘cheapest’ European tourist destination and these German tourists would love to pay just a fourth of the price for a hotelroom than what they have paid before.
Now the question for the ‘Lets-burn-down-the place-dudes?
What’s YOUR POISON?
Would you like to embrace the Peso? (in a matter of speaking?)
Or would you like to keep your dollars and accept cuts in Dollar?
Uuuuh I hear you: ‘NO THAT IS NOT THE F… POINT – because ‘the Banks’ – ‘the Banks’!!!
SCREW the Banks -(I’m ALL for it concerning PRIVATE American Banks!) but SEE here is the f… European dilemma: A lot of the money – for example from Germany is NOT from private banks’ – It comes from the f… gubernment and THUS it comes from THE PEOPLE and THUS it pins PEOPLE against PEOPLE and soo you have an’average’ German workmen yelling at Greek because the German don’t want to accept that the Greek makes more dough than he does – and then you have the average Greek pointing to the fact that Germany sold them some useless submarines and thus Greeks pay the salaries of German workmen – and on and on…. to the impression that underneath it might not be a ‘class-war’ at all –
It might be a ‘cultural conflict’ between the ethics of the Northern Europeans against the ethics of the south.
And – HEY! I’m all for ‘the South’!
As a “half” German I can’t stand the “Schaffe-Schaffe Haeusle baue” mentality. But as much as I fight against it – I’m still a ‘sucker’ for German austerity. And as a member of the cult of less I’m all for
giving the international banksters and the greedmasters a taste
of their OWN medicine – If they want ‘austerity’ – WE should give them f… austerity and NOT consume at all anymore – And THAT would teach them a much stronger lesson than ALL the resolutions you suggest.
And please – the last time – If you write about such ‘stuff’ try to look at it from all sides and not only from a restricted ideological one.
OR!!! – like always -
Jon (Stewart) said it better than I ever could:
‘One day a god named Zeus looked down upon the earth from the Olymp and thought I turn myself into a bull… Then as a bull he went down amongst the humans and… fucked a spider… and that is why today we have… coconuts’!!!
“I’m all for
giving the international banksters and the greedmasters a taste
of their OWN medicine – If they want ‘austerity’ – WE should give them f… austerity and NOT consume at all anymore – And THAT would teach them a much stronger lesson than ALL the resolutions you suggest.”
pieceofcake:
righteous rant! in your dull little way you may have stumbled upon the one thing that will cause a paradigm shift in this global class war that most pretend does not exist. Consumption is the fuel that drives the global killing machine. Buy locally, keep your stuff for about 5 years without buying the new and improved upgrade and maybe the Gods of finance can be brought to their knees? But wait you say: we will loose our jobs as well! Be a man, like the people of Argentinian someone has to put something on the line to win! You people sound like brats who want to “play” at revolution without encountering any of the consequences! One more thing, lay off “fairleft” he is a good man who is basically on your side.
I just wanted to get ‘Greece’ into the title and couldn’t think of a better way. Sorry.
Greece and Argentina are in a very analogous situation, not just according to me but also according to economists Weisbrot, Baker, and Hudson, who I respect a lot. And it’s also true, according to me and those economists, that Spain and Portugal and probly Ireland are in similar positions.
If you read the article or grokked its title, you’ll note that I explictly, just like Weisbrot, recommend hard negotiations, not necessarily leaving the Euro:
I admit that ‘killing the Euro’ is neither here nor there for me, and I don’t think it should be for Europeans either. What matters is economic policy that is people-and-growth oriented rather than bank-and-creditor oriented. Whether that comes from the EU or a newly sovereign state shouldn’t matter.
Finally, let’s not get too apocalyptic about the Euro. If the peripheral countries leave and a central core remains, that doesn’t mean the Euro is killed. It may actually strengthen the Euro, but probably only if its central bosses start to enact non-neoliberal, Keynesian, growth-with-good-jobs economic policy in the remaining nations. It’s sane policy that matters, not the color of your money.
My article is about Argentina prosperity after it abandoned the U.S. dollar and renounced its debts. I think the mainstream propaganda — leaving the Euro = sacrifices and austerity — has subtly infiltrated your thinking, even though you read the clear and optimistic facts about Argentina right at the start of this little article.
It’s better to just look at the data: after default one more quarter of negative growth and then 6 years of, in total, 63% growth. Yes, there are problems with devaluation, especially for those who own Toyota trucks and want to import another one, but the benefits are a huge increase in employment, which generates increased wages, and so on. So, yeah, nurse that imported car through a few more years, use your local mechanics more often … but numbers like Argentina’s don’t lie.
Most people are attracted to the notion of austerity, because it works well with our personal finances. But running national economic policy like you would your personal finances is both unecessary and brutally inhumane, as you can see in the Greek, Portuguese, Spanish, and Irish examples. The reason for the contrast starts with ‘fiat money,’ which I can’t coin but any sovereign state can …
I agree we all need to live less materialistic lives, but that less materialistic life can translate into lots of economic activity, just not very materialistic economic activity. Also, the transformation of the U.S. into a ‘green society’ with a ‘green’ transportation infrastructure and housing becoming more dense and urban, is potentially a helluva lot of work at good wages.
I just know that after Argentinia abandoned the Dollar the devaluation of the Peso reached about 80 percent – That’s a very pessimistic fact – and very tough ‘medicine’ – and the ‘optimistic’ ones – that you get growth after you hit such a desastrous bottom is… well… ‘very optimistic’. And I think ‘leaving the Euro = sacrifices and austerity’ isn’t ‘mainstream propaganda’ at all – It’s common knowledge – the real question is: Which type of ‘medicine’ or ‘poison’ is the worst. And that seems to be in the case of Greece such a complicated question – that Jon Stewarts answer applies!
Here I have to disagree – I think most people are NOT attracted to austerity -(especially in my American homeland) and that -(cultural?) ‘Non-attraction’ has infected a lot of people and ‘countries’ -(‘Greece’?) – and I won’t go as far as Jon Stewart and make fun of a country where you can retire in a very early age with 80 percent of your salary – because as a Italian Communist once defined: ‘Communism is if everybody drives a Ferrari’ – and that’s the only weakness I have – for a Ferrari I would give up my ‘austerity program and glady become a Communist!
Devaluation by far helped more people than it hurt, and the people it hurt were concentrated at the economic top. Over-valued currency: bad for jobs, bad for rising wages.
As everyone who read Mark Weisbrot knows, the bottom was hit while the currency vastly over-valued and in large part because the the currency vastly over-valued. That catastrophe lasted one more quarter after default, and then you had 6 years of cumulative 63% growth. As you can read in the Weisbrot article, Argentina recovered to its pre-crisis GNP two or three years (can’t remember, read the article!) after it devalued. Current IMF projections say Greece will take eight years, from now, to recover to pre-crisis GNP. And that’s the optimistic, history-of-lying for the creditor class IMF saying that.
The fact of Argentina indicates you and the investor/creditor/banker-submissive press are wrong, and that the pain will end MUCH more quickly if a country escapes the Euro, renounces its impossible-to-pay debts, or, other option, forces the EU/ECB to generate economic growth for Greece rather than perpetual punishment. Time for some hardball!
I thought this — “But as much as I fight against it – I’m still a ‘sucker’ for German austerity.” — indicated that classic and very disastrous way of thinking/feeling, that how nations manage economies should be similar to how we ideally think we should manage our personal finances. We see this feeling all the time in the media and on talk radio, you aren’t the first to be a sucker for ‘cut back on our expenses and tough it out’ talk during hard times.
we probably could discuss if ‘devaluation’ helps or hurts people for ever. The only thing I know is that the Greeks I talked to son’t want to have their wealth ‘devalued’ by 80 percent – Sure – they also don’t want to accept pay cuts by up to 50 percent – but really – forget Argentina -(as a example) –
for ‘growing’ again – GREECE IS A COMPLETELY DIFFERENT COUNTRY!
NO – the trick is to be into ‘austerity’ in good times.
(and you’re right – that kind of helps in bad ones!)
“The only thing I know is that the Greeks I talked to son’t want to have their wealth ‘devalued’ by 80 percent …”
That’s just such an inside-the-corporate-media frame. It’s ridiculously misleading to say breaking away from the Euro and then setting an advantageous drachma exchange rate is the same as “their wealth ‘devalued’ by 80 percent.” First, we’re talking about an exchange rate, not ‘wealth’. Second, any ‘wealth’ in the form of Euros would not lose any value at all. Third, the people mostly hurt by an undervalued exchange rate are those with a lot of wealth in property, and the people mostly benefited are those with little wealth in property, those whose ‘wealth’ (their human capital) is their ability to work productively. That second group has to be 80-90% of Greeks.