Illustration by Tim Denee – www.timdenee.com
Evidently, the recent attempt by EMA boss Alisdair Thompson to justify the gender pay gap has been just the tip of the iceberg. In the Dom-Post yesterday, columnist Richard Long used similarly immutable stereotypes to analyse the Eurozone’s bailout package for Greece:
….The hard-working Germans, funders for most of this, are getting increasingly bolshie. And that gets us to the question of who designed this euro zone single-currency crock. It was a great idea in theory but how did they imagine for one moment the Latins and Greeks would have the same work ethic as those sturdy Teutons?
Right. Somehow, Long forgot to mention the Irish and their appetite for booze and fisticuffs, also clearly incompatible with Eurozone fiscal discipline. Maybe he’s saving that for when the austerity programme really begins to bite on the streets of Dublin. Some Greeks with long memories may feel somewhat annoyed of course, at being compared unfavourably with the allegedly superior moral fibre of the German race. Been there, fought that.
Only last week, Long was appointed a trustee of the Asia New Zealand Foundation. Lets hope we don’t see the same economic analysis extended to encompass the Chinese need to save face, the suicidal tendencies of the inscrutable Japanese (whose debt to GDP ratio exceeds that even, of Greece) and the unpredictable qualities of the gentle Malay – who despite their excellent peanut sauce, have been known to greet poor economic indicators by running amok with sharp objects.
Long, of course, has not been the only commentator to depict the crisis in Greece in terms of lazy Greeks lying around in the sun, while hardworking Germans and Finns fume at their indolence. A few months ago in the Financial Times Martin Wolf used the old story of the grasshopper and the ant to make much the same comparison. The way this ‘analysis’ goes, the whole problem with Greece can be sheeted home to the bloated public service. (To that end Long recycles some Vanity Fair figures on high average earnings in the Greek railways.) As if all those low income and middle income rioters in Athens are really just wanting to hang onto to their public service sinecures. And are not feeling really pissed off at being made to bear the pain for poor economic management, corruption, tax evasion and bad lending by banks – none of which was their personal doing.
Those same Greek public servants after all, happen to pay income tax – PAYE tax – week after week. Which helps explain the rage on the streets that the austerity package of job cuts and wage cuts and tax increases and privatization of public assets and services will be directed at the same citizens who have been dutifully paying their taxes, and NOT engaged in the tax evasion that is reportedly rampant among the wealthy, and the self employed. By and large, the poor and middle income earners were also not the main beneficiaries of the bad lending practices encouraged by banks that are now joining the chorus for discipline and austerity, in order to salvage their own positions.
The lazy stereotype doesn’t fit. In 2008, Greece was rated by the OECD as being the 2nd hardest working nation on earth in a survey of hours spent on the job, which hardly fits the stereotype of ouzo-soaked sloth in the sunshine. (True, worker productivity in Greece is low, due in part to a lack of re-investment in R&D and technology – factors that also abet tax evasion, since many transactions can readily be carried out within the large black economy.) Many Greek workers also – as this OECD analysis shows, already faced an unusually high tax burden, even before the current crisis:
Greece is one of the OECD countries with the highest tax burden on labour income for families with children. Compared to the OECD average, the average tax wedge (ie, the average income taxes plus employee and employer social security contributions minus cash transfers as a percentage of total labour costs) is particularly high for lone parents with 2 children at 67% of the average wage and for married couples with children. For single taxpayers either at low, average or high earnings, the tax wedge is closer but remains about 4 to 5 percentage points above the OECD average.
Since that analysis was done, the only “improvement” in the tax wedge in Greece has been because of the marked decrease in the average wage, thanks to the previous austerity round. On top of the existing tax burden on income, the latest austerity programme will include a massive and socially regressive GST tax hike on consumption – with sales tax on many items going up from 13% to 23% – and a range of price hikes (public transport increases of up to 40%) that will hit hardest those least able to bear the brunt. Much of the anger on the Athens street is also directed at what is seen to be a virtual coup d-etat by the European Union, European Central Bank and IMF via the wholesale plunder of state assets. The planned privatisations include the sale of the ports of Piraeus and Thessaloniki, the national lottery, Greek Telecom; the postal bank and the national railway system.
Keep in mind – if you’re still primarily worried about those poor German and Finnish lenders – that that this ‘bailout’ is not a gift. It is a loan that will be expected to be eventually repaid by the Greeks. The bailout funds are being offered at what look like extortionately high rates – 4.5% and 5% have been variously cited – when your typical triple-A rated country has been reportedly able of late to borrow funds at around 1.5%.
At the end of the day, will the bailout work? The conservative Greek Opposition leader Antonis Samaras doesn’t think it will, and is therefore refusing to join any bi-partisan stance of national unity on the bailout. Samaras supports the privatizations of course – but he is gambling that a package of tax increases and spending cuts carried out in the midst of a recession will succeed only in driving the Greek economy even further downwards.
At some point, the current government will then fall – leaving Samaras as the only game left in town for the EU/ECB/IMF technocrats to deal with. (They will probably be more than happy to keep Samaras on the sidelines while the current Socialist government takes all the political blame for the bailout.) The Samaras solution? Tax cuts across the board: for corporates, and on income tax, fuel, tourism etc. A stimulatory package, Samaras argues, has more chance of bridging the deficit than the grim austerity being promoted by the IMF/EU/ECB troika, which he argues will succeed only in killing off investment and the supply side of the economy. As the Wall Street Journal concludes:
Mr. Samaras’s problem is that few outside Greece buy his theory. The so-called troika of European Union, IMF and European Central Bank officials that are supervising Greece’s reforms say Mr. Samaras’s proposed tax cuts would make the country’s budget shortfall worse….
Mr. Samaras stood his ground, by his own and other participants’ accounts. He said he told the German chancellor that his program offers the only solution for Greece, and by extension for the stability of the euro zone. “I told Merkel: Look, if your plan works, then I am wrong,” Mr. Samaras said. “But if it doesn’t work, then you are going to need a new plan and I’m the one who can bring that about.”
New Zealand of course, has tried both methods at once: the combo of tax cuts for the wealthy plus the attack on the jobs and spending power of public servants, right in the middle of a recession. Neither seems to have worked.