What If Germany Annexed Greece?

The obsession with Greek debt shadowed the whole point of borrowing—that is, helping Greece grow again. While the debt matters, it matters even more when it’s well spent on policies that would reverse the recession. And this genre is totally different from today’s media coverage.

What plans does Europe have for Greece?

Greece itself doesn’t stick to any long-term plan. That’s both good news and bad news. Having several years of economic decline in a row, people try to rotate the left and the right in power, and new elections introduce new policies. The Papandreou government prioritized the business climate. In the best-practice style, it committed itself to the 2012 bailout terms and Greece even earned 48 positions in the World Bank’s Doing Business ranking since 2010 (praise by St. Louis Fed’s economist). This is how GDP responded:

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Source

Getting rid of bureaucracy solved no urgent economic problem. Business can include red tape in the price, but it can’t escape the falling demand on its own. Eventually, Greece got a good business climate without business.

Syriza had tried to argue with the creditors, so in response, the ECB cut the Greek banks off liquidity. Surely, the ECB did so in compliance with the June 30 official deadline, but it could negotiate the extension. Such events shake the public opinion, and Greek governments change each other. So which plan of long-term growth should we assess?

The plan of the creditors, of course. They have a large impact on short-term economic stability, which is a lever for making long-term decisions. With a small abuse of democracy, the troika writes a detailed plan for Greece and waits till the Greek officials accept this plan as their own.

This plan escapes the debtor’s fluctuating politics, so the bottom line remains the same since 2012. It includes the “milestones” that unlock new tranches from the EU:

Source
Source

The full manual concerns just everything:

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(Along with some alternatives by academics, this plan tells something about the contribution of economic growth theory to the current affairs, or, rather, the lack of thereof. While growth theory speaks esoteric ideas, like creative destruction and rule of law, practitioners reduce recommendations to straightforward cost-cutting.)

But isn’t there a conflict of interest in this plan? A creditor’s planning horizon ends where his bonds mature. The debtor hopefully lives a little longer. So, their plans don’t coincide. If the troika wants its interest from the Greek bonds (that mature in 5−10 years), then its plan may be short-termed, compared to the recovery cycle. For example, the US stimulus was opting out of the economy for six years:

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Maybe Angela Merkel loves the Greek people as much as the German people who elected her. But if not, which system would provide a German plan consistent with the Greek interests? Perhaps, the one where the Greek and German people elect a single representative.

How would it happen if merely adopting a single European currency took fifty years? Through the crises like the current one. The troika pays Greece for being more like Germany. As the new agreement is getting closer, this crisis management team continues controlling Greece even after the ruling party has been replaced. Then, wouldn’t the Greek people have more power if they affected the German politics directly, in joint elections?

That would be possible if the Greeks couldn’t quit. But Germany can’t take over its neighbors like the Thirteen Colonies did. And there’s already much disagreement about voluntary unification:

PEW
PEW

Greece, Spain, and Italy don’t enjoy being a hostage of the euro, even if this allows them to borrow cheap. Whatever these countries get from being more like Germany, they get it after giving up independence. How much could they get? The local unifications of Italy and of Germany didn’t lead to the full convergence of the regions, so the prospects are unclear. Meanwhile, it’s not even clear what “being more like Germany” means because the north of Germany is poorer than some South European regions:

FT
Income per capita in European regions (FT)

If the Greek people could affect German politics, this would lead to more consistent plans, but not necessarily effective. Again, we know some general things about taming GDP fluctuations, but too little about the impact of structural reforms. And after the troika switched from macro to structural reforms, it must explain well why their experts think they know Greece better than the Greeks do.

Election Day that Decides Nothing

The New York Times publishes an op-ed about voting motives. The authors first say that voters make choices out of self-interest, but the piece basically ends stating that conservatives win “economic policies” and liberals take “social policies,” regardless of what self-interested voters think.

Looking carefully, “economic policies” stand for anything concerning affluent interests: taxes, government spending, social security, and healthcare. These issues are “more conservative.” “Social policies,” on another hand, are those top earners don’t care about, like immigration, gay marriages, and abortions. Policies here are “more liberal.”

Gilens and Page recently studied a natural explanation of this idea (gated article). After going through nearly 1800 policy issues, they find that

[…] economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.

That is, a policy works when it favors business interests or at least coincides with them.

It doesn’t happen through voting, of course. Elections are the outcome of what happens inside the electoral cycle, not a decisive moment when changes happen. This Election Day promises victory to the Reps. But regular elections shade a more important trend of the Dems becoming more conservative themselves. Regardless of the victors, effective policy becomes conservative.

Conservatives and liberals may agree to disagree with that. For each of the parties, the other is too radical. The difference between the two parties is scrutinized, despite being small. It happens when you don’t see the real radicals. The radicals of the Great Depression type, from both wings.

These radicals never came to power in the United States. However, they made moderates accept more left- or right-leaning policies. If you wanted to avoid expropriation in the 30s, you had to give up a smaller piece, like a social safety net for the poor. Or you could try to maintain the status quo. Say, the Russian Government tried it in 1917 and was replaced by extremist brutal left-wing dictatorship.

Evidences may show that business interests guide policy making. But business interests depend on what other people are doing around. Public opinion has de facto veto power over business lobbying—something you can see in comparison to 20st-century Latin America. And this veto power comes not from elections, but from everyday deeds.

Secret ballot and protest voting on Wikipedia

Ballots happen to be secret, unless the voter represents some constituency. So, US Congress elections are secret, but congresspeople’s voting records are open. One reason is to avoid untruthful voting. Telling everyone about your choice makes the choice dependent on other opinions, and the election results deviate from the optimal ones.

Secrecy sets the voter free to vote how she thinks is best for her. For example, social ratings are biased in favor of the top ratings because the voter prefers to keep her friends happy by not downvoting their content. That not necessarily distorts the ranking of content, which matters, but does change average ratings.

The alternative is the troll theory. Secret voting hurts responsibility because no one will find out what the voter did in the voting booth. Let’s check.

This is Wikipedia’s article feedback voting:

I used a sample of 12 million votes from a one-year dump (thanks to Matthias Mullie from the Wikimedia Foundation for pointing at this file). Here, zero means no vote at all, and anonymous voters tend to leave more gaps behind.

Registered users serve as a control group for anonymous (secret) voting. They are more responsible, because registration is time consuming and indicates deeper involvement in the community. Casted votes:

Compared to YouTube, the scale is more informative in general: voters use a larger fraction of mid-range ratings. Anonymous visitors set the lowest rating more frequently, but the difference is small.

Descriptive stats

In addition, summary statistics for the sample:

Variable Obs Mean Std. Dev. Min Max
trustworthy 2982561 2.956455 2.015107 0 5
objective 2982550 2.762515 2.073398 0 5
complete 2982551 2.591597 1.940069 0 5
well_written 2982552 3.177147 1.895086 0 5

And correlation across rating dimensions:

trustw~y object~e complete well_w~n
trustworthy 1
objective 0.6416 1
complete 0.5856 0.7031 1
well_written 0.3977 0.5515 0.5309 1

The average rating set in a particular day: