Pavlos's Thoughts

Here’s an update as to what is happening with Greece. First, some numbers from the 2011 Greek budget:

• Total revenue: €128 billion

• Real revenues from taxes etc. €55 billion
• Aid from the EU €3 billion
• Borrowing from the market, including rollover €70 billion

• Real expenses such as pensions, health etc. €63 billion
• Debt rollover and interest payments €65 billion

And another pair of interesting numbers

• Interest rate charged by the market for German bonds, 2 year maturity: 2%
• And for Greek bonds: Around 25%, rising

So, what does all this mean?

Real deficit

In summary the Greek state is like a business that takes in €55 bn in sales but pays €63 bn in salaries and what have you, so it makes a real loss of €8 bn, or 14%. To recover, the state needs to increase revenue by extracting more taxes or running profitable businesses, or it must cut the amount that it pays to the Greek people, or some combination thereof. If it doesn’t the Greek state will run bankrupt anyway, abruptly cut expenses to €55 bn, and go on living in a hand-to-mouth way.

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Why WikiLeaks is important
The WikiLeaks intelligence documents have started appearing in the papers. There’s no earth-shattering revelation, yet this disclosure to the public is extremely important because it brings to light our two alternative conceptions of democracy. In the classic idea of democracy, the one you learn at school and the one reflected in the structure of electoral institutions, participatory democracy is the ideal and representation is merely a device to make democracy practical at large scale. In classic democracy, the public is at all times the source of authority and arbiter of decisions. Openness is essential, and the role of the media is to keep the representatives in line with the wishes of the public. In classic democracy there is no question that the information recently released by WikiLeaks should be routinely open. While that might make the work of government at times inconvenient, this type of democracy is the safest and least oppressive form of government we have so far discovered.

The alternative view of democracy, now prevalent de facto, is the democracy of the management firm. The state is governed like a large public firm. Political parties are management consultancies bidding for contracts to run the firm for a number of years. Elections are the general meeting, where citizens vote one share but large investors (businesses) vote according to their share of the economy. The role of the media, if it’s not the firm’s own newsletter, is to carry advertising. In this kind of democracy, the management firm, once hired, is allowed and expected to work behind closed doors. Their performance is judged only by aggregates, such as economic growth. Citizens are certainly not routinely informed, and have no say unless some investor lobby (large business interest) feels that the management performs poorly and calls for an early general meeting. If that is the democracy we have, WikiLeaks is wholly irresponsible and out of place.

Which type of democracy do you think we should have?

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Where’s the pressure on Thailand?
Thailand is a relatively modern developing country. It’s a coherent state, rather than a colonial mash-up of the type found in Africa or the Middle East, with a rich history and reasonably friendly to the West. There’s no indication that Thailand may be heading towards a different ideology, such as totalitarian communism or an islamic theocracy. Thailand is much more open and closer to the West than China. Why, then, do we sit idle while its government is using its army to shoot and kill protesters who are occupying the streets of central Bangkok asking for democracy? It’s a clear enough and understandable (to us) demand. The protesters feel that the ruling regime is illegitimate and want open elections whose outcome is honored. What could they ask for that’s more in line with our highest values, in the West, when it comes to governance? Why aren’t our governments sanctioning the Thai regime already? Why aren’t American and European leaders making it absolutely clear to the Thai elite that from our point of view their time is up, and they must accept a UN-run election if they want constructive engagement with the world?

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Where’s the $100 million a day fine?
BP makes about $250 billion in sales per year, of which $25-$35 billion is profit before tax. Currently it spends $10 million a day trying to contain the oil spill in the Gulf of Mexico. For some reason it’s not achieving very quick results. Obama said that they would “pay the price” but so far the price is at least an order of magnitude too low! If BP were fined $100 million a day, minus whatever they actually spend on containment of course, then you might see some action. That amount would wipe out the year’s profits if they did nothing at all to fix the spill for about a year, so it’s a very conservative number. Fines should be high enough to make BP consider options that seal the well permanently, forfeiting its value.

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