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Greece and Goldman: Sowing the Wind

On Saturday night the New York Times posted an interesting piece on Goldman Sachs' connection to the unfolding Greek tragedy.

For those who have missed it, for the past week or two capital markets have been fretting over what they cheekily call "the PIIGS"—Portugal, Italy, Ireland, Greece, and Spain. The operative concern is too much debt. The theory is that these smaller countries will require bailouts on the AIG scale, which will pull down the more important (to bankers) countries of Europe, since they all share the same currency.

So Greece is up first, with a foreign debt load now exceeding 1.25 times its GDP. (The U.S., even with the current pile-on, is only at about even with annual GDP.) A bankrupt nation means crisis for not only its own people, but—and here we should be careful—for all the folks who lent money to it. The problem, again, seems to be derivatives. The Times reports:

The

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Times

gets in some good licks here, and casts a Biblical pall on the affair, noting that "Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds."

The reference to Hosea ("With their silver and gold they have made idols for themselves. . . For they sow the wind, and they reap the whirlwind.") is unmistakable. But Greece's apostasy is not to God, it is to neoliberalism, which commands that no ordinary worker—especially one employed by the government—shall be afforded an increasing wage.

The Washington Post

in its Feb. 10 story on the crisis:

The WaPo doesn't put Greek wages, public or private, into any kind of global perspective (The per-capita income there is $32,000, or 25th in the world). The paper did not try to assess the degree to which fat wages contributed to the mess, versus tax evasion and corruption—both of which are seldom subjects for U.S. news stories unless the nation in question is led by someone out of favor with U.S. policy makers. One awaits in vain the comprehensive analysis of how the

, from street hustlers to Swiss bankers, drains the public's coffers and to whose benefit. (Curiously, Greece's per capita income ranks behind such global money laundering and tax-evasion capitals as Luxembourg, Guernsey, Jersey, Bermuda, Hong Kong, and the Cayman Islands.) But anyway.

The

Times

' story is worth a read, but should not be considered a last word on the subject. The cloak and dagger tone feels all wrong. The piece emphasizes the "secretive" and "off the books" nature of the loans Greece took from Goldman, but also acknowledges that the deals were considered "controversial" by the European press.

Many critics, indeed. It was Enron accounting as usual.

For about the past 20 years, governments large and small have been selling or

public assets—toll roads, transit systems, even sewers—for one-time cash infusions. Ideologically, the deals are similar to the "shock therapy" Harvard's Jeffrey Sachs* imposed on the disintegrating Soviet Union in the early 1990s: they fit with and advance the reflexive anti-socialist agenda that drives western economic policy still. Practically, just as in Russia, the deals result in poverty for many and wealth for a very few.

Greece's crime, apparently, was in trying to bolster public sector wages with its borrowed boodle.

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That's why, in Wall Street's terms, Greece is one of the PIIGS.

*Professor Sachs, now of Columbia University, contacted me to protest my characterization of his work. In an exchange of emails Prof. Sachs said that he hates the term "shock therapy" and was not responsible for the Russia debacle, having quit advising that nation in 1993. He has maintained his claim of non-responsibility for many years, despite several published reports to the contrary. He blames Russia's troubles on the IMF and U.S. government—and Dick Cheney specifically, when he was Bush 41's Secretary of Defense—for not taking his best advice. "I have been misunderstood in that for 17 years," Sachs wrote. I hope to have more regarding Prof. Sachs in a future post.

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