Tsipras et al are theorising a Greek tragedy

At least one thing can be agreed about the Greek Crisis, and that is that the outcome is not going to be good. Either there will be a Grexit – now or down the line – or there will be a messy return to ‘austerity’, as the efforts of governments to balance their books is put.

Much has been said now on the economics, but rather less has been written about the social science – the ideological – aspects, which is perhaps surprising, as surely it is here that the real lessons need to be learned.

The crisis has been seen as a battle between left and right, North and South, even East and West. But one of the aspects that has been less remarked upon is that it is also a battle between theory and practice.

If academics are often to be found lamenting that they are not consulted on policy-related issues, here is a Greek government led by academics trying their hand at just that.

When International Monetary Fund, or IMF, Managing Director Christine Lagarde told a news conference that "we can only arrive at a resolution if there is a dialogue, and for the moment we are short of the dialogue, so the key emergency in my view is to restore the dialogue with adults in the room", she was relegating the academics to the status of children.

The Guardian newspaper, which has a confused editorial policy of being ‘pro-Europe’, but ‘anti-Euro’, said that it was not clear who she was referring to, and that perhaps it was a criticism of the European Commission. But everyone else knew exactly who she had in mind: the youthful figures of the Greek Finance Minister, Yanis Varoufakis* – he of the black motorcycle jacket – and the Greek Prime Minister Alexis Tsipras.

Theory into practice

Tsipras, first, is a politician with little practical experience, but instead draws on his academic roots, including postgraduate studies in urban and regional planning following an MPhil at the School of Architecture of the National Technical University of Athens.

Alongside his postgraduate studies, he wrote several studies and projects on the theme of ‘The City of Athens’ and his inaugural speech (on becoming the Greek number one) promised a new economy based on Green Growth, Social Economy, New Networked Systems and ‘Clusters’ – all fine terms and all deeply unrealistic.

Under him, early offerings to the Eurozone creditors struck an oddly irrelevant note, offering whiteboard-style wheezes like deckchair attendants and ice cream sellers being monitored using wireless internet technology as a way to generate higher VAT receipts instead of boring things like changing regulations and rebalancing budgets.

Similarly, one of Tsipras’ key allies, Stathis Kouvelakis, a member of Syriza’s central committee, also has little time for boring detail, but instead sees “a dilemma which can be formulated in an abruptly simple way: capitulation or a break, surrender or an open wager with the future”. But then he teaches political theory at King’s College London.

And when Eucleides Tsakalotos, the Greek chief economics spokesman, is a professor of economics at Athens, it is hardly surprising to find him rejecting the institutional mindset itself, saying: “I will not hide from you that this it is very depressing – especially for an academic that moved into politics – to see that arguments are often not met with arguments, but by them saying that they do not care about arguments, telling us that ‘rules are rules’.”

However, it is Yanis Varoufakis who has been steering the rickety Greek foreign policy tandem. Varoufakis, as well as being the author of several academic texts on economics and game theory, is a professor of economic theory at the University of Athens. And although he denies it, Greek policy towards the Eurozone has adopted a very similar line to that he describes in his academic writings.

Game theory

Game theory is a social science notion that appears in various contexts. It is the stuff of the Prisoner’s Dilemma, of a UK TV game show called Golden Balls – and of nuclear war. Has game theory been applied to the handling of the Eurozone crisis issues by the Greek government? If so, this foray of philosophical thinking into realpolitik has been proved disastrous.

Standard game theory applies to two equal players who have different, opposed interests. It is a zero-sum game. If, for the other Eurozone leaders, the search is on for a mutually beneficial solution to a common problem, for game theorists, the issue has to be seen in terms of conflict and losers and winners.

In one of his books, Game Theory: A Critical Introduction (2004), Varoufakis sets out the notion of the ‘incredible threat’, which is a “threat or promise which, if carried out, costs more to the agent than not carrying it out”. The threat of the Eurozone creditors to expel Greece from the single currency has repeatedly been presented as just such an empty threat.

In the final round of the UK TV game show, Golden Balls, the contestants must choose between two balls labelled ‘split’ or ‘steal’. If they choose different balls, one goes home with nothing. If they both choose ‘steal’, they both get nothing. If they both choose ‘split’, they split the prize money.

It seems that they should both choose ‘split’ – a win-win outcome guarantees both a payout. But the best outcome in game theory comes when your opponent tries to co-operate and you instead grab the prize.

If Varoufakis was persuaded that the threats of the Eurozone were empty, ‘incredible’ ones, it might seem – in theory – to be the smarter move for the Greeks to urge the Eurozone to ‘split’ while they themselves prepared to ‘steal’.

The chances of just such a successful ‘steal’ require increasing the fear of their opponents of the ‘disastrous’ results of non-cooperation and reducing meaningful communication to a minimum.

Recall that Varoufakis has remarked contentedly about creating fear in the Commission of Greek irrationality, while hardly a day has gone by without someone or other on the Greek side insisting that the failure of the Eurozone to resolve the issue would be ‘disastrous’, not only for the whole of Europe but for the world!

In a 2011 article, he wrote: “The Greek crisis cannot be quarantined... A Greek default will start a mighty bushfire that will rage through the Eurozone’s heartland!”

Lack of communication

Another striking feature of the negotiations has been the studied efforts to reduce communication. Specialist technical teams, researching the issue on behalf of the Eurozone, have been denied access to government offices in Greece and their movements pre-announced so that crowds could assemble to jeer at them.

In Brussels, Varoufakis and Tspiras arrive late for meetings and without concrete proposals. When proposals are delivered, they have been followed hours later by a different set which is said to be ‘the correct one’ – all sowing confusion and making it impossible to effectively negotiate.

When we read that key ‘crisis’ meetings have broken up after only half an hour with nothing decided, we should not be so sure that this is not part of a carefully worked out strategy on the Greek side – backed by one of those excellent theories.

Academics and researchers in general are prone to several unfortunate biases. One is that future events are judged by past experiences – the so-called rear-view mirror syndrome. We all know that the IMF wrecked perfectly good economies in the 1970s and 1980s by endless prescriptions of austerity – but these days the Fund has moved on.

Another bias is to downplay – or even ignore – inconvenient facts that don’t fit into the paradigm. Like that the Greek crisis has little to do with the greed of ‘the creditors’ – as it is being represented – because repayments never amounted to more than 3% of Greek gross domestic product or GDP – whereas the Greek pension system is Europe’s most lavish and was heading towards consuming a staggering 25% of GDP by 2050, until it was reined in by the bailouts.

Or that Greece is a country at the top of indexes of both corruption and inefficiency, and weighed down by the disproportionate influence of its armed forces, the state and hereditary business elites and the privileged position of the (untaxed) Orthodox Church.

Since many of the reforms the Theorists are blocking are actually in many ordinary citizens’ everyday, practical interests, the victory that the Greek government seeks would be Pyrrhic indeed.

*Varoufakis resigned on 6 July, after the Greek people voted "No" in the referendum on whether to accept the terms of the bailout proposed by the creditors. He said his exit would make it easier for Tsipras to negotiate a way out of the crisis, because the creditors wanted him gone.

Martin Cohen is editor of The Philosopher and author of numerous books in philosophy and social science. He has taught and researched philosophy in the UK and Australia.


COMMENTS

An interesting read. Also I liked the article Nicola Sturgeon wrote in the Guardian. Basically overdoing it on austerity is a very poor idea for long-term planning. There is no point in Greece solving short-term problems through excessive austerity measures if they are to collapse in the future due to those very same austerity measures. At the same time, cuts must be made in certain areas; the challenge is working out which ones.

Christopher Haggarty-Weir on the University World News Facebook page


Cohen says "Standard game theory applies to two equal players who have different, opposed interests. It is a zero-sum game." This is false. Bargaining theory, which allows for players with different levels of power and interests that are only partially opposed - so, not zero-sum - is as much part of "standard" game theory as any other part. Game theory isn't some speculative generalisation about how people will behave, but merely a rigorous logic for disciplining thinking about, among other things, bargaining. There's no reason at all that Varoufakis shouldn't be thinking about his and Greece's problems using this logic, and the implication that he doesn't understand the need to take real political contingencies into account along with abstract theory is patronising and not plausible.

Don Ross on the University World News Facebook page


Since I wrote the piece, I discovered that Yanis Varoufakis, then the Greek foreign minister, also took part-time work as a consultant to Valve, an online videogames company! He wrote several blogs on the origins of money and of exchanges - all of which leaned heavily (as one commentator remarked) on one textbook by David Graeber: Debt the First 5000 Years! (The book was not cited in his texts...) You couldn't make it up. Re. whether standard game theory is zero-sum or not, what I meant - and I think was clear - was that there is a standard game theory that is zero sum; and this model was being used by Yanis to plot negotiations. Indeed there are other games that are not zero-sum. Thank you, Don, for clarifying that for readers who may have misread my intentions.

Perhaps we should, at least mentally, add the word 'One' before the sentence starting 'Standard Game Theory...'

Doc Cohen [Martin Cohen] on the University World News Facebook page


There is a humanitarian disaster in Greece and the claim that the pension system is a lavish one is total rot. There are currently 1.5 million unemployed in the country out of a workforce of 4 million, and 65% among the younger generation.

The Greek people are well versed in saying ‘no’. They did so in 1940 against all odds, and eventually Europe and the whole world lived to be grateful. They did it again on 5 July against overwhelming odds, under ruthless and relentless black propaganda and political interference of the worst kind by EU officials who should have been honourbound to remain impartial.

Although the question of the referendum was not one of exit from the EU or the Euro, these officials, their domestic supporters and the opposition political parties inside the country interpreted it as such and bombarded the electorate with the supposed consequences.

The Greek people knew that ‘yes’ or ‘no’ would mean more austerity measures. But ‘yes’ meant that the measures would be imposed by a bunch of highly paid, unsuccessful, and mostly corrupt politicians, who had failed in their own countries in Europe but also in Greece.

The result of the referendum will shape the future of Europe one way or another: either it will be democratised or it will break up. Either way it is not going to be the same Europe as we knew it from now on.

Makki Marseilles, Athens, via email