22 Jun 2016

Final Words Before the Referendum

I have written extensively on the issue of the EU referendum; the most detailed post is of course my essay, A Socialist’s Case for EU Membership, along with my more digestible post on the Jo Cox murder

This post will be the last before the referendum tomorrow. Incidentally, tomorrow I also have my transport economics exam—an apt coincidence if ever there was one.

Of course, this makes me very busy. I have a significant amount of practice and revision left to do for tomorrow’s exam. And, to top it off—tonight I will hopefully be getting feedback on the cover for the Necromancer! This is courtesy to the company that helped me find my editor, Reedsy. Reedsy is a marketplace dedicated to writers looking for editors, marketing people, and designers; as part of this goal, they are hosting a live video on Facebook with one of their professional cover designers. My own book should be on the list. Hopefully, I’ll get some good advice!

Anyway, since I am so busy this post will be brief. It will mainly focus on the BBC’s ‘Great Debate’ (haha) and on the points there made.

Logic is Not Leave’s Strongpoint

One of the claims made by our very own Gisela Stuart—a Labour MP (!)—is that the EU is responsible for Greece’s 50% youth unemployment, and for the economic problems of southern Europe more generally.

Of course, this is nonsense. In fact, Greece’s situation would be worse if it weren’t for the EU.

Why? The answer is simple: a lot of the Greek government’s debt belongs to foreign creditors. Among them are Italy, France and Germany (yes, Italy loaned Greece money) but a lot of money is owed to the IMF and other international creditors.

Now, Greece is in the euro. The euro is a much maligned currency, but Greece’s financial problems would be quite a bit worse if it wasn’t in the euro. This is because of a simple reason: if Greece still had the drachma, the drachma would have devalued hugely in the course of the crisis.

This would have been disastrous for Greece. Greece would have seen its debt multiply before its eyes; for the money it borrowed it borrowed in euros and dollars. If, before the crisis, 300 drachma = 1 dollar, and if, after the crisis, 1 dollar = 900 drachma, Greece would effectively have to pay 3 times as much to service the debt denominated in $.

So if Greece wasn’t in the euro, it would either have to pay vast amounts of money servicing the debt, or more likely it would default. Now: defaulting isn’t such a bad thing in the long-run, but there’s no doubt it causes a lot of short-term pain. Without the euro a default would have been inescapable. With the euro, Greece at least has a choice.

A large depreciation in the local currency—such as the one Iceland saw, and which Greece would have seen if it wasn’t in the euro—would also have terrible consequences for inflation. Economists lament Greece’s 1% deflation, but history shows us that 100% inflation is far, far worse. The Weimar Republic saw hyperinflation like that. They ended up burning money for fuel, unemployment was sky high, and they eventually elected Hitler. (Another little known fact.)

A Greek hyperinflation would have left Greeks freezing in their homes—foreign gas being too expensive to afford. It would have left cars unused, with no petrol to fill their tanks. Those who bought mortgages in foreign currency would lose their homes.

So you’ll excuse me if, when seeing a Labour MP so unwittingly suggest the destruction of a country’s economy, I feel my blood boiling.

You’ll also have to excuse me if I scoff at the notion that the euro caused the Greek crisis. Let me put it simply: a country whose government accrues debt for decades (even before joining the euro), whose politicians lie to its people and claim there’s plenty of money, and which has seen its largest employer and revenue stream (tourism) decimated by the global financial crash, is going to suffer—euro or no euro!

Sadly, blaming the European Union for the failures of national governments is a common tactic of the Leave campaign. The truth is often harder to swallow.

My Faustian Pact

I promised that this would be a short post. I aim to fulfill this promise. I have, incidentally, also made a promise to myself: if the UK leaves the EU, I will do two things. Firstly, I will leave the UK. Going to university in Amsterdam or Leuven suddenly seems like a much more attractive proposition than spending £9000 a year to study in a country that will soon become isolated by a wave of nationalism.

And secondly, I will read HL Mencken’s Notes on Democracy. As one of history’s more prominent (and perhaps most eloquent) critic of democracy, he believed that the masses would always be too ignorant to make good decisions; that they will always be manipulated by demagogues and populists for their own ends.

Eighty years on, Mencken’s argument has more than a ring of truth to it. Tomorrow he will be put to the test.

I hope he will be proven wrong. But I suspect his timeless words will prove correct.

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