Month: July 2015

As an economist who holds a Ph.D. in German History from the University of Chicago, I nearly fell over when I read this week’s National Review headline: “Bernie’s strange brew of nationalism and socialism.” Say what? But here’s what author Kevin D. Williamson has to say:

In the Bernieverse, there’s a whole lot of nationalism mixed up in the socialism. He is, in fact, leading a national-socialist movement, which is a queasy and uncomfortable thing to write about a man who is the son of Jewish immigrants from Poland and whose family was murdered in the Holocaust. But there is no other way to characterize his views and his politics (http://www.nationalreview.com/article/421369/bernie-sanders-national-socialism).

What is disturbing about the National Review’s characterization of Sanders is not their discomfort over his economic nationalism, over which I am also none too happy, but their explicit linkage of Sanders with mid-twentieth century German national socialism. For it not only shows a profound misunderstanding of how German national socialism worked and why. It also displays a disturbing misuse of the very propaganda that brought the Nazis to adopt this twisted name. For as anyone who is familiar with German National Socialism knows only too well, while Nazism was surely nationalist, it was in no stretch of the imagination socialist.

This, of course, is an old Hayekian double-switch. The Nazis were socialists. FDR and Clement Attlee (British Prime Minister) implemented socialist-like programs. Germany is a nation. England and the United States are nations.

And there you have it. FDR and Clement Attlee are national socialists. The “road to serfdom” Hayek called it.

Of course, most of Williamson’s article consists of strings of incoherent free association ad hominem.

Bernie’s politics, on the other hand, are the polar opposite of Scandinavian: He’s got a debilitating case of Tea Party envy. He promises not just confrontation but hostile, theatrical confrontation, demonizing not only his actual opponents but his perceived enemies as well, including the Walton family, whose members are not particularly active in politics these days, and some of whom are notably liberal. That doesn’t matter: If they have a great deal of wealth, they are the enemy. (What about Tom Steyer and George Soros? “False equivalency,” Bernie scoffs.) He knows who Them is: The Koch brothers, who make repeated appearances in every speech; scheming swarthy foreigners who are stealing our jobs; bankers, the traditional bogeymen of conspiracy theorists ranging from Father Coughlin and Henry Ford to Louis Farrakhan; Wall Street; etc.

The Scandinavians are socialist; Bernie is socialist; the Tea Party is anti-socialist; the Tea Party attracts large blue collar audiences; Bernie wishes to attract large blue collar audiences; Tea Party speakers are brash; Bernie is brash. Socialists don’t like wealth; the Waltons are wealthy; Bernie doesn’t like the Waltons. Who else criticized the rentier class? Father Coughlin and (Nazi sympathizing) Henry Ford and (antisemite) Louis Farrakhan.

Go ahead, find the argument here. I dare you.

Perhaps Williamson wishes to defend wage and benefit policies that force many of Walmart’s employees on the welfare rolls. Or perhaps he is perfectly OK with the Koch brothers buying elections. Or perhaps Williamson feels that criticizing employers who refuse to pay a living wage or billionaires who buy elections is prima facie evidence of national socialism. Say what?

It is only as you near the end of Williamson’s article that you will read the following admission. “There are many kinds of Us-and-Them politics, and Bernie Sanders, to be sure, is not a national socialist in the mode of Alfred Rosenberg or Julius Streicher. He is a national socialist in the mode of Hugo Chávez.” Well, thanks Kevin for letting us know. Because for several paragraphs it sounded like you were suggesting that Bernie Sanders might be the other kind of national socialist.

Just to be clear, the German National Socialists were never critical of industries whose owners were opposed to the Social Democrats and left-leaning trade unions. They made league with big German industrialists who, under the Nazis, were permitted to use non-organized Polish, Czech, and Hungarian workers in order to drive down production costs, increase productivity, and pull the German economy out of the Great Depression. Sound familiar?

This is no ad hominem. This is the practice of US industry, much of which depends on undocumented and unorganized labor to keep costs down. But it is not Bernie who is opposed to organized labor or who is urging industrialists to take advantage of the low costs of hiring undocumented aliens. That would be Williamson’s buddies at the National Review. Moreover, it is not Bernie who is behind the well-funded propaganda machine of Fox News and Murdoch a lá Herr Goebbels. Again Williamson has Bernie confused with his friends at Fox News.

This leaves the matter of economic nationalism. Even here, however, Williamson — who evidently has never read a real book about real German economic history — has it upside down. Bernie would love to see Mexico, China, India, and Malaysia pass the same environmental protection and union organizing protections still enjoyed in the United States (no thanks to National Review). All else being equal, Bernie is as big a supporter of free trade as the next guy. But the truth is that industries in Europe and Japan enjoy the luxury of national health care, which relieves them of the cost of providing private health insurance for their employees. And industries in Mexico, China, India and Malaysia don’t suffer under the burden of labor protections that drive up costs or environmental protections that do the same.

All else being equal . . . but it never is. The folks at National Review would be happy if we removed those protections and eliminated the minimum wage entirely. Let workers find their own healthcare. Then America will once again be competitive. Sound familiar? It should. Under the German National Socialists workers lost all of the protections they enjoyed during Weimar. Under the Nazis all worker safety laws were eliminated. When Adolf Hitler wanted a scarce resource, he went and took it by force; you know, kind of Kuwait, Iraq, Afghanistan-like force.

Ad hominem? No. Just the real history of real national socialism in Germany, which bears a far closer resemblance to what the National Review does than to what Bernie advocates. So I have an idea. How about we nominate Kevin Williamson for the new post, the Minister of Propaganda, in a new Republican administration. It is a title and skill set that appears to suit him well.

http://www.wsj.com/articles/silicon-valley-doesnt-believe-u-s-productivity-is-down-1437100700

Some of you may have caught Timothy Aeppel’s piece in the July 16 WSJ, “Silicon Valley Doesn’t Believe US Productivity is Down.” The centerpiece of Aeppel’s piece is Hal Varian, chief economist at Google and, until he joined Google in 2002, a highly respected economist, specializing in microeconomics, at UC Berkeley, where I now teach.

So, let us say that I am able to attract $2M from investors although I have no product for which I am charging consumers. How productive am I? Well, if productivity measures the returns on capital for some unit of output, then I am, in this case, infinitely productive. Yes?

Here is what Hal is arguing. Google in particular and Silicon Valley as a whole is pumping out efficiency generating devices and applications at a breath-taking rate, and, yet, because these devices and applications are virtually free — no one is raking in the bucks for these free devices and applications — they are not counted in standard measures of productivity.

But, let us say that the buzz I generate from a device or application — and, more importantly, the advertising revenues and the investment capital I am raising ($66B per annum for Google) — is equal to or exceeds the cost for generating that buzz. Do you get my point? Once again, the conceit against which all economists must constantly struggle is that a commodity needs to be a physical thing in order for it to be counted. All of us, however, know that this is not the case; Mr Varian perhaps more than any of us.

Nor is a recent discovery. Indeed, recognition of these so-called intangibles was one of the leading features of the marginal revolution of the 1860s and 1870s, when, beginning with Karl Marx, forward leaning economists abandoned the mechanistic, monocausal analysis of value in favor of a multivariate approach.  Consider, for example, Alfred Marshall’s pages upon pages in Economic Principles (1890) focusing on the advantages producers gain from location or advertising or communication. Yes, it is true, my ability to tell Google maps to give me directions to this or that location, or to find some specific piece of information — both of which save me time and therefore increase my productivity — is not something I can write down. Yet, there is no question but that Google can and that Google does write this down. How?

Well, for one, consider all of the chatter and buzz surrounding Google’s endless innovative lines. Isn’t that what advertising revenue and capital investment is all about, including, of course, Timothy Aeppel’s piece? That too is buzz. (Front page, above the fold, WSJ. You can’t beat that.) And no one knows this better than that master of microeconomics, Hal Varian himself. But this also points up why this way of increasing productivity deserves news print. We, many of us, still want productivity to be about bricks and mortar commodities, not about buzz and information and venture capital. We want to see the product, see its costs, see its price, see its sales. Why?

There’s a clue to the answer to this question buried in Aeppel’s piece. Here it is:

Silicon Valley’s complaints echo earlier eras. The introduction in the last century of indoor plumbing and household appliances drastically increased the efficiency of performing domestic chores. But since domestic labor isn’t counted in GDP either, the time saved hauling water or washing clothes by hand didn’t show up in productivity numbers.

However, these timesaving technologies—among other factors—eventually led to the flood of women into the workforce starting in the 1960s, which, in turn, sent U.S. output soaring.

Get it? Like many economists who focus on the micro- side, Aeppel completely overlooks the social, historical, and political context of investment — in a manner that Alfred Marshall would have found crass and low-brow. So, what were the “among other factors” that Mr Aeppel elides? For one, the huge demand-side pull created by war-time production, that pulled an unprecedented number of women into the work force a lá Rosie the Riveter circa 1934-1945. For another, the complete destruction of the productive capacities of our leading competitors, Germany and Japan (not to mention Great Britain and France). But also like many microeconomics gurus, Mr Aeppel gets the causality all wrong. Investors pumped out labour-saving devices not in order to give women the freedom to liberate themselves from their kitchens. As is the case with any commodity, the household appliance revolution was investor-driven. With piles of underutilized capital circulating following WWII, investors needed to convince consumers to part with their money so that they could maintain the kind of growth to which they had grown accustomed in the 1930s and 1940s, when huge government outlays for industry funded the largest demand side expansion in history. How to maintain those rates of growth in the 1950s was no small problem.

One solution was the Marshall Plan, which had to be sold to a skeptical public by raising the specter of world-wide communism. In fact, US manufacturers desperately needed markets to unload their new labour-saving products. But Europe’s economies lay in shambles. With what would they purchase these goods? Answer? We needed to rebuild these economies, and fast. And the effect on women of these so-called “labour-saving” devices?

They actually saved women not one second. For their effect was to pull women into the workforce, at the bottom, for wages far below the wages corporations would have been expected to pay men. Talk about productivity. If I can pay an equally competent worker half the wage I once paid a man, that is a fifty percent increase in productivity. Yes, this heightened productivity has something to do with toaster ovens, mixers, dishwashers, and automated laundry; but the causal direction is the opposite to what is thought. Producing and consuming more of these devices at lower per unit costs generates a huge boost to productivity. Just as our addiction to eDevices and Google, while it may add to our own personal productivity, is really beside the point. These devices liberate us from our offices so we can work from wherever and whenever we are. But the real product is the unprecedented expansion of  the consumer electronics sector. But what about Google and Mr Varian? Well, you just can’t beat $66B in revenue per annum in advertising revenues.

Now that’s productivity! And not to worry Hal. We won’t blow your cover.

A response to Paul Mason (http://www.theguardian.com/books/2015/jul/17/postcapitalism-end-of-capitalism-begun?CMP=share_btn_fb)

Every decade or so, usually but not always on the heals of a severe economic downturn, someone writes a book or influential article predicting the end of capitalism. And, so, I have to admit that I approach articles announcing the end of capitalism with great skepticism. The latest announcement comes from the pen of Guardian contributor Paul Mason (17 July 2015 “The end of capitalism has begun”). As post-capitalist sooth-saying goes, Mason’s is not a bad piece. And, yet, it gets enough of the parts wrong to cast serious doubt on his conclusion. Capitalism is not coming to an end, at least not soon, and not for the reasons Mason suggests.

Like many of its predecessors — GWF Hegel, Daniel Bell, Jean François Lyotard — it is knowledge or, more specifically, information that is leading the charge. That is because knowledge is felt to differ substantially (no pun intended) from its more substantial and therefore easily commodified counterpart. And, to an older and more traditional variety of Marxist, this distinction may indeed sound radical. After all, did not Marx turn both Hegel and Ludwig von Feuerbach on their heads, contrasting their “idealistic” approaches to his own “materialist” approach? But what if what we make and sell and purchase aren’t “things” at all? What if they are ideas, knowledge, information? Yet, to those of us who actually enjoy some familiarity with Marx’s writings, we will recall, very early on in volume one of Capital — in fact on page 1, paragraph 2 — the following lines: “The commodity is, first of all, an external object, a thing which through its qualities satisfies human needs of whatever kind. The nature of these needs, whether they arise, for example, from the stomach, or the imagination, makes no difference” (Marx 1982:125). The charism of a commodity does not consist of its material character, but of the capacity of investors to charge consumers for its use: bottled water is a commodity, but so too is a patented idea.

And, yet, Mason’s argument is not without foundation. The more we hand the production process over to machines, the less the manual labor required in the mechanized production, and, assuming that the maintenance of human beings costs more than the maintenance of machines, the lower the costs of mechanized production. Mason attributes this insight to late night revolutionary fantasies that seized Marx while exiled in England:

The scene is Kentish Town, London, February 1858, sometime around 4am. Marx is a wanted man in Germany and is hard at work scribbling thought-experiments and notes-to-self. When they finally get to see what Marx is writing on this night, the left intellectuals of the 1960s will admit that it “challenges every serious interpretation of Marx yet conceived”. It is called “The Fragment on Machines”. In the “Fragment” Marx imagines an economy in which the main role of machines is to produce, and the main role of people is to supervise them. He was clear that, in such an economy, the main productive force would be information. The productive power of such machines as the automated cotton-spinning machine, the telegraph and the steam locomotive did not depend on the amount of labour it took to produce them but on the state of social knowledge. Organisation and knowledge, in other words, made a bigger contribution to productive power than the work of making and running the machines (Mason).

In fact, Marx was here channelling a passage from Hegel’s Philosophy of Right with which every left-wing Hegelian was intimately familiar:

The universal and objective aspect of work consists, however, in that [process of] abstraction which confers a specific character on means and needs and hence also on production, so giving rise to the division of labour. Through this division, the work of the individual [des Einzelnen] becomes simpler, so that his skill at his abstract work becomes greater, as does the volume of his output. At the same time, this abstraction of skill and means makes the dependence and reciprocity of human beings in the satisfaction of their other needs complete and entirely necessary. Furthermore, the abstraction of production makes work increasingly mechanical, so that the human being is eventually able to step aside and let a machine take his place (Hegel 2012: 232-233; §198).

So, why did technological improvement not emancipate labour as Hegel had predicted? Technology failed to emancipate labour because technology is subject to another, far more fundamental, mechanism within the capitalist formation: the value form of the commodity. Again, an older, more traditional, reading of Marx finds in the value form nothing more than the alienated and expropriated labour of the worker. Therefore, on this traditional reading, the solution to alienated labour is for labour to reappropriate both the value and the means of production (past labour) that capital has seized from them. Mason rightly sneers at this orthodox interpretation. But from this he leaps to the conclusion that abstract value is arbitrary and unnecessary. “But what is all this information worth? You won’t find an answer in the accounts: intellectual property is valued in modern accounting standards by guesswork. A study for the SAS Institution in 2013 found that, in order to put a value on data, neither the cost of gathering it, nor the market value or the future income from it could be adequately calculated” (Mason). And then he leaps to the further conclusion that, because it is arbitrary, and because it is dependent on technological reproduction, the costs of producing and reproducing this knowledge form a downward sloping curve whose long-term equilibrium price is zero.

If a free market economy plus intellectual property leads to the ‘underutilisation of information’, then an economy based on the full utilisation of information cannot tolerate the free market or absolute intellectual property rights. The business models of all our our modern digital giants are designed to prevent the abundance of information. Yet information is abundant. Information goods are freely replicable. Once a thing is made, it can be copied/pasted infinitely. A music track or the giant database you use to build an airliner has a production cost; but its cost of reproduction falls towards zero. Therefore, if the normal price mechanism of capitalism prevails over time, its price will fall towards zero, too (Mason).

“All mainstream economics proceeds from a condition of scarcity, yet the most dynamic force in our modern world is abundant and, as hippy genius Steward Brand once put it, ‘wants to be free’” (Mason).

Let’s take this one step at a time. Yes, back in the 1860s — well before the SAS Institute study — some economists (though not Marx) embraced a rather mechanical view of value: value is literally the labor time it took to produce any commodity, plus materials, plus the work of the investor, plus rent. You get the idea. Yet this mechanistic interpretation of value began to give way in the 1860s to a new, far more dynamic understanding of value. Value actually had nothing to do with the time spent on producing any product. Value was a social average. The example Marx gives is of the machine loom, which vastly decreased the amount of time it took to produce fabric. The shop that adopted the loom could create several times the volume of fabric as the shop that still depended on manual labour, allowing that shop to charge the same amount for the same quantity, but at a far reduced cost; or allowing that shop to drop its price substantially, bringing it in line with its costs. In either case, those shops that still manufactured by hand were compelled to manufacture at a relative loss. When eventually all shops adopted the same technology, sector-wide prices once again reached equilibrium. Clearly, value has little to do with the amount of labour time spent making any given commodity. But that’s not all.

Marx also called attention to the fact that consumers are inevitably choosing among several competing items and this meant, in effect, since the quantity of money a consumer is ready to spend is not unlimited, if a manufacturer wants to attract consumers away from, say, Whisky and toward fabric, she must so place the price of that product to make the trade-off attractive. Finally, value is also related to aggregate quantity of any product available. If shelves of product remain unused after all consumer desires have been sated, the value of those products — and so the labour that went into producing them — is substantially reduced, no matter the “material wealth” laying dormant on the warehouse shelves. Neoclassical economists such as Leon Walras, William Stanley Jevons, Alfred Marshall, and Carl Menger, all of whom wrote in the 1870s and 1880s, viewed the world of commodities as a dynamic interconnected world in which all factors shaped and were in turn shaped by all other factors. To grasp the complexity of value, these economists developed multivariate regression formulas which showed, as they anticipated they would, that all factors were intimately, structurally, related. Moreover, they showed how these factors were shaped by history, weather, technology, and information flows, wars, treaties, and unanticipated fatalities and inventions.

In many ways, of course, their economic theories only confirmed what Marx had observed a decade earlier; that capitalism was not so much an economic system as a dynamic, living, highly differentiated social formation being borne along by the abstract value form of capital. If machines had not in fact emancipated workers, as Hegel had anticipated, this was because the aim or object of capitalism was not to produce material goods. Material goods were merely a by-product. The real object of capitalism was the production of abstract value.

Here is a thought experiment. Imagine in your head the number of pairs of shoes you want. Picture that pile of shoes. Now, imagine the number of zeros you want to add to your paycheck. How many zeros is enough? When will you know that you have enough zeros? Marx’s point was that there is no point at which investors will suddenly say, “Ok. That was fun. I have enough.” Because there is no metric, no principle, no guideline or internal compass, no gauge that reads “Full” when you have accumulated enough zeros. So, no matter how much you produce — information, knowledge, shoes, computers, it makes no difference — you will never produce enough zeros. And this means that there will always be enough work. Always.

Which is why Marx argued in volume three of Capital — which no true Marxist ever reads because they are out on the streets (or coffee shops) fomenting revolution — toward the very end of volume three, that the real end of capitalism would depend on actively legislating the shortening of the work day.

The realm of freedom really begins only where labour determined by necessity and external expediency ends; it lies by its very nature beyond the sphere of material production proper. . . . Freedom, in this sphere, can consist only in this, that socialized communities, the associated producers, govern the human metabolism with nature in a rational way, bringing it under their collective control instead of being dominated by it as a blind power; accomplishing it with the least expenditure of energy and in conditions most worthy and appropriate for their human nature. But this always remains a realm of necessity. The true realm of freedom, the development of human powers as ends in themselves, begins beyond it, though it can only flourish with this realm of necessity as its basis. The reduction of the working day is the basic prerequisite (Marx 1991: 959).

It would be nice if there were some automatic mechanism — knowledge or information or technology or the historical dialectic — that was destined to bring an end to capitalism. But there isn’t. Instead there is tireless and usually thankless political organizing, legislative drafting, and, if we work hard and are lucky, the gradual shortening of the work day.

Yes, I subscribe to the Wall Street Journal; or, rather, the Wall Street Journal dutifully appears on my doorstep every morning, gratis, because I teach economics at UC Berkeley. And today I read the headline: “Police-Misconduct Costs Soar” (http://on.wsj.com/1e1DEJf) and you just know that this article is not about the human costs of police misconduct. Its about the dollars and cents. But, here’s the rub. Why is it about “dollars and cents” when it begins to eat into my margins, but not about dollars and cents when, for pennies on the dollar, I could have decided (1) to increase funding for public schools; (2) implement single payer universal healthcare; (3) implement a living wage; and (4) attract investors back to high wage, labor intensive industries?

But that’s beside the point. The margin on private capital is everything. And the WSJ’s point is that municipalities are walking dangerously close to the margin when it comes to the costs of municipal policing.

The 10 cities with the largest police departments paid out $248.7 million last year in settlements and court judgments in police-misconduct cases, up 48% from $168.3 million in 2010, according to data gathered by The Wall Street Journal through public-records requests.

Those cities collectively paid out $1.02 billion over those five years in such cases, which include alleged beatings, shootings and wrongful imprisonment. When claims related to car collisions, property damage and other police incidents are included, the total rose to more than $1.4 billion.

And here’s what that looks like in WSJ blue and white:

At some point, these costs are going to require municipalities to float bonds to cover their increased liability. And so the metric would seem to be fairly straightforward: at what point do the costs of police misconduct outpace the costs of ensuring police compliance?

But, let us suppose that irrespective of the amount municipalities spend on police compliance, we instead consider litigation/settlement costs and compliance costs part of a single bundle of goods — let’s call them “security” goods. And let us further suppose that this bundle costs municipalities some measurable amount more than another bundle — let us call this other bundle “public” goods. In this alternative model, the amount a municipality spends on “public” goods more than covers the amounts it is projected to spend on “security” goods, up to a specific, determinable margin. (At this margin, no additional amount spent on public goods will diminish the costs of litigation/settlement/compliance.)

Although it is still prohibitively high, let us take fifty percent of the security bundle of 2010 as our equilibrium. That is to say, no matter how much we spend on public goods, security goods for these 10 municipalities will be $84M. Now let us suppose that our 10 municipalities infuse an additional $84M into their public goods markets — for schools, healthcare, living wage, and investment in manufacturing. In that case, the question would be whether our demand for security goods would decline by $84M, bringing the total costs back down to 2010 levels. Although we would need to run the numbers — I have pulled these out of my theoretical hat — I am reasonably confident that the current mix of security and public goods is inefficient (on the “beatings will continue until morale improves” assumption) and that every dollar spent on security goods is far less efficient than every dollar spent on public goods.

So, why is there not so much of a peep in the WSJ considering this alternative model? Let us suppose, for the moment, that we developed legislation under the assumption that every dollar spent on public goods was doubled by the benefits arising from a better educated, more skilled, healthier, and more productively occupied public. But let us also suppose that the only mechanism for increasing revenues spent on public goods was to increase tax rates on wealth. Finally, let us suppose that increasing these tax rates would decrease marginal returns on wealth in an amount equivalent to but not less than these tax revenues; a reasonable assumption since municipal taxation policy is overwhelmingly regressive. So, while it is true that a greater focus on public goods would significantly improve municipal budgets, it would also cut into the margins currently enjoyed by private capital.

Or, another way to put the same question would be: why might private capital not want a healthy, wealthy, wise, and secure public? You do the math.

Two fatalities — one Greek the other Bosnian — connect my family to this past week’s news. Exactly a year ago our family visited Srebrenica to pay our respects to the victims of genocide and their families. Shortly thereafter, we left on a road trip to Greece, where we vacationed on the Greek island of Skiathos. The vacation was much welcomed. And, yet, cracks were already beginning to appear in the Greek facade. But the relationship between Greece and Srebrenica clearly goes beyond my family’s travel plans. Talk to anyone from the former Yugoslavia. They will tell you. After two decades of borrowed time, time (and money) for Yugoslavia began to run out in the 1980s — and not just for Yugoslavia, but for the entire globe. The strikes and layoffs of the 1980s, whose hardships were felt in the United Kingdom, the United States, Japan, and Western Europe, brought war and genocide to the Balkans. The 1990s visited horrific misery on the former Yugoslavia and genocide on the refuges gathered for United Nations protection in Srebrenica-Potocari.

Which is why it is with no small amount of horror that I have followed the debates over Greek debt in the European Parliament and among the European Union’s finance ministers. “We will certainly not be able to rely on promises,” said Mr Schäuble. “In recent months, during the last few hours, the trust has been destroyed in incomprehensible ways. We are determined to not make calculations that everyone knows can’t be trusted. We will have exceptionally difficult negotiations. I don’t think we will reach an easy decision.” Perhaps the German Finance Minister was recalling Germany’s destruction of trust during the last century. Would he have advised the United States to withhold aid to post-war Germany, squeeze its institutions, strangle its growth potential? The aid then extended to Germany makes debt relief for the Greeks appear minuscule by comparison.

There are few alive today who recall the still widespread popularity of fascism in defeated Germany. And so few also recall how terribly important it was to make sure that Germany enjoyed strong centralized institutions of law and a social system that left no one behind. An unemployed family with sufficient education, healthcare, security, and a pension is called “grateful.” An unemployed family without hope, by contrast, is called a “recruit to fascism.”

Perhaps if Greece were an isolated case on an otherwise swelling sea of prosperity, there would be no cause for alarm. But besides Greece, there is Croatia, Estonia, Hungary, Lithuania, Poland, Slovenia, Portugal, Bulgaria, and the Czech Republic, all of which have suffered greatly since the Great Recession and in all of which neo-fascism presents a growing threat. Desperate people do desperate things. Holding a gun to Greece’s head does not make Greek citizens feel more secure, more healthy, more competent. It makes them feel more desperate.

Mr Schäuble and his cronies make it sound as though German institutions were entirely faultless in the spending and “investment” spree that captivated he and his fellow investors from the mid-1990s to 2006. During those ten years German investors could not find a bad investment anywhere. It was all good. And, much as the United States and Great Britain a decade earlier, German neoliberals were all agog with deregulation and tax-cut fever. What could go wrong. You can’t blame them for forgetting 1973, when US President Nixon took the Dollar off the Gold Standard and let its value float — downwards of course — releasing a flood of cheap dollars onto world markets.

But ask any former Yugoslavian. They will tell you. Among those who snapped up those cheap dollars was Jozip Broz Tito, partisan hero and president of the fiercely independent and crassly market socialist Yugoslavia. What could go wrong? What went wrong was stagflation. What went wrong was neoliberal economic policy. What went wrong was Ronald Reagan and Margaret Thatcher. When Paul Volker tightened the screws in 1979, he not only nailed a death notice to the chest of Yugoslavia. He may as well have erected the internment camps, dug the trenches, and unloaded the rounds into the bodies of unarmed Bosnian men and boys. For, nothing is more certain but that it was the inconceivable debt that Volker prompted and the austerity measures imposed upon the former Yugoslavia by neoliberal American and European negotiators that generated a decade of genocidal war in the Balkans.

Did Germany and the EU play any role in Greek debt. You betcha. But — and you can count on this — without serious debt relief, not simply for Greece, but for the entire seam running from the Baltics down through the Balkans and eastward to Turkey, the EU and US are sowing seeds that will fly up in their face and cost them Trillions more than the pittance now being requested. Just ask anyone from the former Yugoslavia. Or, for that matter, ask any Germans who remember the costs Europe paid for imposing unbearable reparations on an already defeated Germany. Its called the Holocaust.