George Momferratos, on how best to promote the Modest Proposal

Extracts from an intervention, on the Modest Proposal and how best to avoid negative reactions to it (especially here in Greece) from George Momferratos. See also below for my response. What do readers think? Your input will be appreciated.

Dear Yanis,

I read your interview with UBS and it has made the Modest Proposal (MP) clearer to me.  I believe that it offers a wider solution, despite that the implementation details will be a nightmare – and how else could it be?

Allow me though to offer two comments/propositions of a “tactical” nature, that could widen your audience (in Greece, at least) without compromising the essence of the proposal.

(a) Shrinking of Greek Public sector.

Although it is a gigantic task which will also have some social impact, I believe that it is imperative for Greece to go forward with it.  Reducing the Public sector will also reduce bureaucracy and therefore corruption, and will allow the private sector to breath.  The Shrinking of the Public Sector is imperative irrespective of whether the MP is implemented sooner or later or not at all.  I believe that the majority of our population understands this and in a way it is the essence of what the Aganaktismenoi are asking too: they are fed up with our clientele driven political system and the only way to reduce this is by reducing the influence of the government in the economy, therefore a smaller state.

Irrespective of whether you agree with this or not, I understand it has nothing to do with the MP. Therefore it may help to take it out of your “rhetoric” as it enrages the millions, at least of the private sector, that spend hours and money to deal with the state and they want no more of it.  When these people, and believe me there are really millions of them, hear you suggesting that we can do nothing on this front, they stop listening to anything else that you say.

(b) Not taking any more debt now in order to force a solution.  Again I believe that this is the wrong way to approach the implementation of the MP.  The risks of a default and collapse should we stop taking new loans is immense.  When people hear that, again they do not want to listen to anything else you say.  And, again, I understand it is beyond the MP as it is a tactical move to energize European politicians faster.  However, things need their time – like the time the caterpillar needs to weave the koukouli.

(c) in summary, if you become less provocative (which is unnecessary to my view, as the provocative points are rather irrelevant with the essence of the MP) you may gain a wider audience that will be willing to listen.  Currently, your provocative points stop people from hearing anything else, which does not pay justice to the seriousness of the MP.  Most of the criticism I hear and read is about the two points above.  Perhaps, being provocative, has put you in the spot light, but now I believe you can down-play the above parts

Good luck and you have my sincere respect for getting exposed and putting all this energize into the cause, despite my strong disagreement with above points.

George Momferratos

YV’s reply

Dear George,

I take your main point, that alienating potential backers is a bad idea. But rest assured that my intention was never to be provocative in order to attract publicity. What I have said, right or wrong, was my considered judgment. Let me take the two good points you raised:

1. Size of the public sector

I have no quarrel with the proposition that the state sector, in relation to the private, is large. But I do think that concentrating on its size misses the main point: its gross, offensive inefficiency. Cutting it down will not, in itself, stop the Greek state from being the public’s enemy number one. While I am sure that the optimal size is lower than currently, the main issue ought to be the introduction of proper management, the eradication of the crushing bureaucracy and the petty (and not to petty corruption) etc.

Then, there is the question of timing. Canada reduced its public sector massively in the 1990s and in a very short space of time. It was painful but successful. But, it happened at a time when the economy was growing, courtesy of the fast growth in the world markets. In that environment, the reduction in public spending was replaced by private investment (and a replacement of public with private sector jobs). In contrast, in a recessionary environment, when private investment is negative, a spate of dismissals will add a massive drop in publically generated demand to a falling private sector demand. The result will be a parallel drop in investment/employment in both the private and the public sector. Once in that downward spiral, and with public debt increasing, the debt to GDP ratio will explode.

In short, this is not the time to fire hundreds of thousands of public sector workers (even if they are useless at what they do). First, we need to arrest the recession and only then to shepherd a shift from the public to the private sector. Having said that, this is precisely the moment when we must at all cost boost the efficiency of the public sector. See the attached document that was my recommendation to EBEA only a couple of months ago.

2. Loans

I never advocated a default. Which means that, like you, I recognise that in the very short run we will depend on the ‘kindness of strangers’, as T. Williams might have said. But this is not the same as to put our signatures on the dotted line of a massive loan (of tens of billions) that will, supposedly, see us through to 2014. A NO vote last week would not result in a default. The 5th instalment would be paid, the only difference is that our EU partners would be in conference all day and all night till they came up with a proper, rational solution. Now, they feel they bought time and are on way to their holidays – just as they lulled themselves in May 2010 to the false sense of  security that the crisis had been dealt with by means of the massive loan to Greece and the setting up of the EFSF. We gave them, with our YES, more rope to hang themselves (and us, of course). In short, I do not have a problem with loans in general. My position of voting against Memorandum Mk1 and Mk2 was that, unlike the dominant paradigm according to which these massive loans bought time, they deepened the crisis and gave the EU time to mess things up. If I am right, a decent solution could be found in weeks (with bridging loans averting default in the meantime). Our slavish behaviour allowed the EU to inflict permanent damage upon itself.