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→  maggio 16, 2015

articolo collegato di Douglas Coupland

I look at apps like Grindr and Tinder and see how they’ve rewritten sex culture — by creating a sexual landscape filled with vast amounts of incredibly graphic site-specific data — and I can’t help but wonder why there isn’t an app out there that rewrites political culture in the same manner. I don’t think there is. Therefore I’m inventing an app to do so and I’m calling it Wonkr — which somehow seems appropriate for a politically geared app. I dropped the “e” to make it feel more appy.
What does Wonkr do? Primarily, you put Wonkr on your phone and it asks you a quick set of questions about your beliefs. Then, the moment there are more than a few people around you (who also have Wonkr), it tells you about the people you’re sharing the room with. You’ll be in a crowded restaurant in Nashville and you can tell that 73 per cent of the room is Republican. Go into the kitchen and you’ll see that it’s 84 per cent Democrat. You’ll be in an elevator in Manhattan and the higher you go, the percentage of Democrats shrinks. Go to Germany — or France or anywhere, really — and Wonkr adapts to local politics.
The thing to remember is: Wonkr only activates in crowds. If you’re at home alone, with the apps switched off, nobody can tell anything about you. (But then maybe you want to leave it on . . . Many political people are exhibitionists that way.)
Wonkr’s job is to tell you the political temperature of a busy space. “Am I among friends or enemies?” But then you can easily change the radius of testability. Instead of just the room you’re standing in, make it of the block or the whole city — or your country. Wonkr is a de facto polling app. Pollsters are suddenly out of a job: Wonkr tells you — with astonishing accuracy — who believes what, and where they do it.
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Here’s an interesting fact about politics: people with specific beliefs only want to meet and hang out with people who believe the same things as themselves. It’s like my parents and Fox News . . . it’s impossible for me to imagine my parents ever saying, “What? You mean there are liberal folk nearby us who have differing political opinions? Good Lord! Bring them to us now and let’s have a lively and impartial dialogue, after which we all agree to cheerfully disagree . . . maybe we’ll even have our beliefs changed!” When it comes to the sharing of an ethos, history shows us that the more irrational a shared belief is, the better. (The underpinning maths of cultism is that when two people with self-perceived marginalised views meet, they mutually reinforce these beliefs, ratcheting up the craziness until you have a pair of full-blown nutcases.)
So back to Wonkr . . . Wonkr is a free app but why not help it by paying say, 99 cents, to allow it to link you with people who think just like you. Remember, to sign on to Wonkr you have to take a relatively deep quiz. Maybe 155 questions, like the astonishingly successful eHarmony.com. Dating algorithms tell us that people who believe exactly the same things find each other highly attractive in the long run. So have a coffee with your Wonkr hook-up. For an extra 29 cents, you can watch your chosen party’s attack ads together . . . How does Wonkr ensure you’re not a trouble-seeking millennial posing as a Marxist at a Ukip rally? Answer: build some feedback into the app. If you get the impression there’s someone fishy nearby, just tell Wonkr. After a few notifications, geospecific algorithms will soon locate the imposter. It’s like Uber: you rate them; they rate you. Easily fixed.
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What we’re discussing here is the creation of data pools that, until recently, have been extraordinarily difficult and expensive to gather. However, sooner rather than later, we’ll all be drowning in this sort of data. It will be collected voluntarily in large doses (using the Wonkr, Tinder or Grindr model) — or involuntarily or in passing through other kinds of data: your visit to a Seattle pot store; your donation to the SPCA; the turnstile you went through at a football match. Almost anything can be converted into data — or metadata — which can then be processed by machine intelligence. Quite accurately, you could say, data + machine intelligence = Artificial Intuition.
Artificial Intuition happens when a computer and its software look at data and analyse it using computation that mimics human intuition at the deepest levels: language, hierarchical thinking — even spiritual and religious thinking. The machines doing the thinking are deliberately designed to replicate human neural networks, and connected together form even larger artificial neural networks. It sounds scary . . . and maybe it is (or maybe it isn’t). But it’s happening now. In fact, it is accelerating at an astonishing clip, and it’s the true and definite and undeniable human future.
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So let’s go back to Wonkr.
Wonkr may, in some simple senses, already exist. Amazon can tell if you’re straight or gay within seven purchases. A few simple algorithms applied to your everyday data (internet data alone, really) could obviously discern your politics. From a political pollster’s perspective, once you’ve been pegged, then you’re, well, pegged. At that point the only interest politicians might have in you is if you’re a swing voter.
Political data is valuable data, and at the moment it’s poorly gathered and not necessarily well understood, and there’s not much out there that isn’t quickly obsolete. But with Wonkr, the centuries-long, highly expensive political polling drought would be over and now there would be LOADS of data. So then, why limit the app to politics? What’s to prevent Wonkr users from overlapping their data with, for example, a religious group-sourcing app called Believr? With Believr, the machine intelligence would be quite simple. What does a person believe in, if anything, and how intensely do they do so? And again, what if you had an app that discerns a person’s hunger for power within an organisation, let’s call it Hungr — behavioural data that can be cross-correlated with Wonkr and Believr and Grindr and Tinder? Taken to its extreme, the entire family of belief apps becomes the ultimate demographic Klondike of all time. What began as a cluster of mildly fun apps becomes the future of crowd behaviour and individual behaviour.
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Wonkr (and Believr and Hungr et al) are just imagined examples of how Artificial Intuition can be enhanced and accelerated to a degree that’s scientifically and medically shocking. Yet this machine intelligence is already morphing, and it’s not just something simple like Amazon suggesting books you’d probably like based on the one you just bought (suggestions that are often far better than the book you just bought). Artificial Intuition systems already gently sway us in whatever way they are programmed to do. Flying in coach not business? You’re tall. Why not spend $29 on extra legroom? Guess what — Jimmy Buffett has a cool new single out, and you should see the Tommy Bahama shirt he wears on his avatar photo. I’m sorry but that’s the third time you’ve entered an incorrect password; I’m going to have to block your IP address from now on — but to upgrade to a Dell-friendly security system, just click on the smiley face to the right . . . And none of what you just read comes as any sort of surprise. But 20 years ago it would have seemed futuristic, implausible and in some way surmountable, because you, having character, would see these nudges as the trivial commerce they are, and would be able to disregard them accordingly. What they never could have told you 20 years ago, though, is how boring and intense and unrelenting this sort of capitalist micro-assault is, from all directions at all waking moments, and how, 20 years later, it only shows signs of getting much more intense, focused, targeted, unyielding and galactically more boring. That’s the future and pausing to think about it makes us curl our toes into fists within our shoes. It is going to happen. We are about to enter the Golden Age of Intuition and it is dreadful.
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I sometimes wonder, How much data am I generating? Meaning: how much data do I generate just sitting there in a chair, doing nothing except exist as a cell within any number of global spreadsheets and also as a mineable nugget lodged within global memory storage systems — inside the Cloud, I suppose. (Yay Cloud!)
Did I buy a plane ticket online today? Did I get a speeding ticket? Did my passport quietly expire? Am I unwittingly reading a statistically disproportionate number of articles on cancer? Is my favourite shirt getting frayed and is it in possible need of replacement? Do I have a thing for short blondes? Is my grammar deteriorating in a way that suggests certain subcategories of dementia?
In 1998, I wrote a book in which a character working for the Trojan Nuclear Power Plant in Oregon is located using a “misspellcheck” programme that learnt how users misspell words. It could tell my character if she needed to trim her fingernails or when she was having her period, but it was also used down the road to track her down when she was typing online at a café. I had an argument with an editor over that one: “This kind of program is simply not possible. You can’t use it. You’ll just look stupid!” In 2015 you can probably buy a misspellcheck as a 49-cent app from iTunes . . . or upgrade to Misspellcheck Pro for another 99 cents.
What a strange world. It makes one long for the world before DNA and the internet, a world in which people could genuinely vanish. The Unabomber — Theodore “Ted” Kaczynski — seems like a poster boy for this strain of yearning. He had literally no data stream, save for his bombs and his manifesto, which ended up being his undoing. How? He promised The New York Times and Washington Post that he’d stop sending bombs if they would print his manifesto, which they did. Then his brother recognised his writing style and turned him in to the FBI. Machine intelligence — Artificial Intuition — steeped in deeply rooted language structures, would have found Kaczynski’s writing style in under one-10th of a second.
Kaczynski really worked hard at vanishing but he got nabbed in the 1990s before data exploded. If he existed today, could he still exist? Could he unexist himself in 2015? You can still live in a windowless cabin these days but you can’t do it anonymously any more. Even the path to your shack would be on Google Maps. (Look, you can see a stack of red plastic kerosene cans from satellite view.) Your metadata stream might be tiny but it would still exist in a way it never did in the past. And don’t we all know vanished family members or former friends who work hard so as to have no online presence? That mode of self-concealment will be doomed soon enough. Thank you, machine intelligence.
But wait. Why are we approaching data and metadata as negative? Maybe metadata is good, and maybe it somehow leads to a more focused existence. Maybe, in future, mega-metadata will be our new frequent flyer points system. Endless linking and embedding can be disguised as fun or practicality. Or loyalty. Or servitude.
Last winter, at a dinner, I sat across the table from the VP of North America’s second-largest loyalty management firm (explain that term to Karl Marx), the head of their airline loyalty division. I asked him what the best way to use points was. He said, “The one thing you never ever use points for is for flying. Only a loser uses their miles on trips. It costs the company essentially nothing while it burns off swathes of points. Use your points to buy stuff, and if there isn’t any stuff to buy,” (and there often isn’t: it’s just barbecues, leather bags and crap jewellery) “then redeem miles for gift cards at stores where they might sell stuff you want. But for God’s sake, don’t use them to fly. You might as well flush those points down the toilet.”
Glad I asked.
And what will future loyalty data deliver to its donors, if not barbecues and Maui holidays? Access to the business-class internet? Prescription medicines made in Europe not in China? Maybe points could count towards community service duty?
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Who would these new near-future entities be that want all of your metadata anyway? You could say corporations. We’ve now all learnt to reflexively think of corporations when thinking of anything sinister but the term “corporation” now feels slightly Adbustery and unequipped to handle 21st-century corporate weirdness. Let’s use the term “Cheney” instead of “corporation”. There are lots of Cheneys out there and they are all going to want your data, whatever their use for it. Assuming these Cheneys don’t have the heart to actually kill or incarcerate you in order to garner your data, how will they collect it, even if only semi-voluntarily? How might a Cheney make people jump on to your loyalty programme (data aggregation in disguise) instead of viewing it with suspicion?
Here’s an idea: what if metadata collection was changed from something spooky into something actually desirable and voluntary? How could you do that and what would it be? So right here I’m inventing the metadata version of Wonkr, and I’m going to give it an idiotic name: Freedom Points. What are Freedom Points? Every time you generate data, in whatever form, you accrue more Freedom Points. Some data is more valuable than other, so points would be ranked accordingly: a trip to Moscow, say, would be worth a million times more points than your trip to the 7-Eleven.
Well then, what do Freedom Points allow you to do? They would allow you to exercise your freedom, your rights and your citizenship in fresh modern ways: points could allow you to bring extra assault rifles to dinner at your local Olive Garden restaurant. A certain number of Freedom Points would allow you to erase portions of your criminal record — or you could use Freedom Points to remove hours from your community service. And as Freedom Points are about mega-capitalism, everyone is involved, even the corn industry — especially the corn industry. Big Corn. Big Genetically Modified corn. Use your Freedom Points that earn discount visits to Type 2 diabetes management retreats.
The thing about Freedom Points is that if you think about them for more than 12 seconds, you realise they have the magic ring of inevitability. The idea is basically too dumb to fail. The larger picture is that you have to keep generating more and more and more data in order to embed yourself ever more deeply into the global community. In a bold new equation, more data would convert into more personal freedom.
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At the moment, Artificial Intuition is just you and the Cloud doing a little dance with a few simple algorithms. But everyone’s dance with the Cloud will shortly be happening together in a cosmic cyber ballroom, and everyone’s data stream will be communicating with everyone else’s and they’ll be talking about you: what did you buy today? What did you drink, ingest, excrete, inhale, view, unfriend, read, lean towards, reject, talk to, smile at, get nostalgic about, get angry about, link to, like or get off on? Tie these quotidian data hits within the longer time framework matrices of Wonkr, Believr, Grindr, Tinder et al, and suddenly you as a person, and you as a group of people, become something that’s humblingly easy to predict, please, anticipate, forecast and replicate. Tie this new machine intelligence realm in with some smart 3D graphics that have captured your body metrics and likeness, and a few years down the road you become sort of beside the point. There will, at some point, be a dematerialised, duplicate you. While this seems sort of horrifying in a Stepford Wife-y kind of way, the difference is that instead of killing you, your replicant meta-entity, your synthetic doppelgänger will merely try to convince you to buy a piqué-knit polo shirt in tones flattering to your skin at Abercrombie & Fitch.
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This all presupposes the rise of machine intelligence wholly under the aegis of capitalism. But what if the rise of Artificial Intuition instead blossoms under the aegis of theology or political ideology? With politics we can see an interesting scenario developing in Europe, where Google is by far the dominant search engine. What is interesting there is that people are perfectly free to use Yahoo or Bing yet they choose to stick with Google and then they get worried about Google having too much power — which is an unusual relationship dynamic, like an old married couple. Maybe Google could be carved up into baby Googles? But no. How do you break apart a search engine? AT&T was broken into seven more or less regional entities in 1982 but you can’t really do that with a search engine. Germany gets gaming? France gets porn? Holland gets commerce? It’s not a pie that can be sliced.
The time to fix this data search inequity isn’t right now, either. The time to fix this problem was 20 years ago, and the only country that got it right was China, which now has its own search engine and social networking systems. But were the British or Spanish governments — or any other government — to say, “OK, we’re making our own proprietary national search engine”, that would somehow be far scarier than having a private company running things. (If you want paranoia, let your government control what you can and can’t access — which is what you basically have in China. Irony!)
The tendency in theocracies would almost invariably be one of intense censorship, extreme limitations of access, as well as machine intelligence endlessly scouring its system in search of apostasy and dissent. The Americans, on the other hand, are desperately trying to implement a two-tiered system to monetise information in the same way they’ve monetised medicine, agriculture, food and criminality. One almost gets misty-eyed looking at North Koreans who, if nothing else, have yet to have their neurons reconfigured, thus turning them into a nation of click junkies. But even if they did have an internet, it would have only one site to visit, and its name would be gloriousleader.nk.
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To summarise. Everyone, basically, wants access to and control over what you will become, both as a physical and metadata entity. We are also on our way to a world of concrete walls surrounding any number of niche beliefs. On our journey, we get to watch machine intelligence become profoundly more intelligent while, as a society, we get to watch one labour category after another be systematically burped out of the labour pool. (Doug’s Law: An app is only successful if it puts a lot of people out of work.)
The darkest thought of all may be this: no matter how much politics is applied to the internet and its attendant technologies, it may simply be far too late in the game to change the future. The internet is going to do to us whatever it is going to do, and the same end state will be achieved regardless of human will. Gulp.
Do we at least want to have free access to anything on the internet? Well yes, of course. But it’s important to remember that once a freedom is removed from your internet menu, it will never come back. The political system only deletes online options — it does not add them. The amount of internet freedom we have right now is the most we’re ever going to get.
If our lives are a movie, this is the point where the future audience is shouting at the screen, “For God’s sake, load up on as much porn and gore and medical advice, and blogs and film and TV and everything as you possibly can! It’s not going to last much longer!”
And it isn’t.

→  maggio 15, 2015

AOL has 4,000 employees but only one Digital Prophet. That would be David Shing, or rather Shingy . He earns his six-figure salary by telling companies about branding and the internet, and has an elaborate mullet.

One of Shingy’s go-to platitudes is that mindshare (whatever that means) equals market share. In AOL ‘s case the two seem to diverge. The public perception of the company – among those who realise that it still exists – is associated with the dial-up modems of the 1990s. In terms of market share, AOL has carved out a niche in the advertising business. In online video advertising, it has the fourth-largest reach in the US, MoffettNathanson reckons. Its programmatic advertising sales – using automation to distribute ads across AOL-owned content and sites such as Facebook and Twitter – grew 80 per cent from a year ago in the most recent quarter.

Verizon ‘s $4.4bn acquisition of AOL is the latest in a string of ad-tech deals, which include Yahoo ‘s purchase of BrightRoll and Comcast ‘s of Freewheel. Set aside AOL’s content and dial-up businesses, and the price tag is slightly more than two times its trailing annual ad sales. That looks cheap next to the Freewheel deal, at 10 times, or the BrightRoll deal, at six. Verizon plans to integrate some of AOL’s video advertising technology into an à la carte mobile video offering to be launched this summer.

The big question is how much more Verizon will have to do to make its new ad business profitable; it makes no money at present. Few details have been disclosed. But licensing or creating content is costly (just ask Netflix ). Shingy approves of the deal, of course, saying that the world of context and content is replacing the age of social media.

For Verizon, buying an ad tech company is the first and easiest step towards creating a video business. Will the next steps will go as smoothly? Shingy’s confidence is not infectious.

→  aprile 15, 2015

No doubt, “if Greece does fall out of the euro, it will also fall out of Europe”, as Philip Stephens writes (“Europe faces more than a Greek tragedy”, April 10). No doubt, “the failure of the euro would mark the failure of Europe”. But there is no link between the two statements, namely that Greece falling out of the euro marks the failure of the euro. This would be the case should it happen for economic reasons: too high the cost, too vague the reforms, too big the risk. As a consequence the euro would not be perceived any more as a monetary union, but as a fixed exchange rate area, the markets would soon attack the weakest countries, the spread would rise, sooner or later there would be a second Greece.

leggi il resto ›

→  aprile 10, 2015

by Philip Stephens

The pilgrimage of Greek prime minister Alexis Tsipras to Moscow told a tale of two tragedies. One, perilously close to the denouement, is about Greece’s uncertain place in the family of European nations; the other, still unfolding but with a storyline that foretells a calamitous final act, is about the future not just of the euro but of European integration.
Predictably enough, the Greek prime minister was feted by Vladimir Putin. The Russian president’s revanchist aggression in Ukraine has left his regime more vulnerable than anyone in the Kremlin would dare admit. Mr Putin badly needs to weaken the EU sanctions regime. Shared Orthodox Christianity, an air of leftist nostalgia in Athens and, above all, Greece’s desperate isolation make it an ideal target for Moscow’s strategy of divide and rule.

It is harder to see what Mr Tsipras gains beyond a few warm words to cheer his supporters at home. The promise of a gas pipeline years hence? Any aid on offer from Moscow would be minuscule relative to funds from the EU and the International Monetary Fund. There is nothing Mr Putin could do that would make leaving the euro any less painful.

The other day I heard Yanis Varoufakis explain how Greece had ended up here. The finance minister’s is a story fluently told — of US backing for the colonels, of the havoc wreaked on industry by the free trade rules of the EU, of the Brussels funding that bankrolled clientelist politics in Athens and of how cheap euros created a ruinous bubble.

There are elements of truth in this; and Mr Varoufakis is right when he says the present debt burden is unsustain­able. Missing from the narrative, though, is any sense that Greece must make its own choices. That, whatever the sins of others, only Athens can decide whether Greece prospers as a modern democracy or whether it slips back into the shadows of the Balkans.

The omission, and the implicit rebuke to outsiders who do not feel bound by ballots cast by Greeks, is at the heart of what so frustrates Athens’ partners. This is not just about the Germans, even if Wolfgang Schäuble, Berlin’s finance minister, foolishly lends credibility to the idea. Mr Tsipras is isolated among fellow debtors as much as creditors. What unites them is a demand that Athens produce a plausible plan to reform the Greek state — to modernise its administration and politics as much as its economy. Such a plan would transform the mood of negotiations.

Mr Putin’s preference is otherwise. A collapse in Greek living standards would leave it ripe for the coercion and subversion that are Russia’s trademarks in an effort to expand its influence and control in southeastern Europe. The Russian president already has Hungary’s prime minister Viktor Orban in his breast pocket. His agents are working hard — exploiting Russia’s energy monopoly, buying politicians, bribing officials and taking stakes in financial institutions — to promote instability across the Balkans.

Yet talk to finance ministers and central bankers across the rest of Europe and the mood is one of fatalism. They will tell you that the eurozone would withstand Greece’s departure. This is not 2008, or even 2012, they say. Governments have put in place the mechanisms to deal with crises. Some sound as if they believe that, freed from the vicissitudes of Greek politics, the euro would be stronger in the long run.

In a narrow sense they may be right, though I would not bet on it. But Greece is a distorting prism. Its sequential crises have bred complacency by distracting from the profound structural flaws and political challenges that still imperil the euro. Making monetary union work demands more than proficient crisis management.

Spring has seen a burst of sunshine in the European economy. The European Central Bank’s quantitative easing is having an effect. Growth has picked up a little. Yet it is a delusion to think that the euro is in safe harbour. Fiscal and financial union are at best half-completed, and the political threat to the euro continues to grow.

National politicians refuse to admit the supranational imperatives of the project they are pledged to safeguard. And a return to growth rates of 1 or even 2 per cent will not be enough to restore the euro’s legitimacy among the angry voters who are turning to populist movements of right and left.

In 2012, European leaders defied the markets by summoning up the political resolve needed to save the single currency. They have since lost the will to sustain it. Greece may not bring down the euro; the existential threat lies in the more generalised failure of nerve and leadership.

So it is, too, in the relationship with Moscow. The biggest danger to Europe comes not from the forays of Mr Putin’s rusting aircraft carrier, or his cold war-vintage nuclear bombers, or from Soviet-style subversion in some of the darker corners of the continent.

No, the real weakness lies in a European mindset that prefers to temporise and equivocate than to confront Mr Putin head on. Mr Tsipras’s visit may have held up a mirror to Greece’s troubles. But it also offered a reflection of diffidence and division across Europe. If Greece does fall out of the euro it will also fall out of Europe. And the failure of the euro would mark the failure of Europe. What unites these twin tragedies is the stubborn reluctance of the authors to rewrite the endings.

→  febbraio 3, 2015

by Martin Wolf

Maximum austerity and minimum reform have been the outcome of the Greek crisis so far. The fiscal and external adjustments have been painful. But the changes to a polity and economy riddled with clientelism and corruption have been modest. This is the worst of both worlds. The Greek people have suffered, but in vain. They are poorer than they thought they were. But a more productive Greece has failed to emerge. Now, after the election of the Syriza government, a forced Greek exit from the eurozone seems more likely than a productive new deal. But it is not too late. Everybody needs to take a deep breath.
The beginning of the new government has been predictably bumpy. Many of its domestic announcements indicate backsliding on reforms, notably over labour market reform and public-sector employment. Alexis Tsipras, the prime minister, and Yanis Varoufakis, the finance minister, have ruffled feathers in the way they have made their case for a new approach. Telling their partners that they would no longer deal with the “troika” — the group representing the European Commission, the European Central Bank and International Monetary Fund — caused offence. It is also puzzling that the finance minister thought it wise to announce ideas for debt restructuring in London, the capital of a nation of bystanders.
More significant, however, is whether Greece will run out of money soon. Most observers believe that Greece could find the €1.4bn it needs to pay the IMF next month even if the current programme were to lapse at the end of February. A more plausible danger is that Greek banks, vulnerable to runs by nervous depositors, would be deprived of access to funds from the European Central Bank. If that were to happen, the country would have to choose between constraining depositors’ access to their money and creating a new currency.
As Karl Whelan, Irish economist, notes, the ECB is not obliged to cut off the Greek banks. It has vast discretion over whether and how to offer support. The fundamental issue, he adds, is not whether Greek government securities are judged in default, since Greek banks do not rely heavily upon them.
Far more important are bonds the banks themselves issue, which are guaranteed by the Greek government. The ECB has stated it will no longer accept such bonds after the end of February, the date of expiry of the EU programme. If the ECB were to stick to this, it would put pressure on the Greek government to sign a new deal. But this government might well refuse. In that case the ECB might cut off the Greek banks.
This game of chicken could drive the eurozone into an unnecessary crisis and Greece into meltdown before serious consideration of the alternatives. The government deserves the time to present its ideas for what it calls a new “contract” with its partners. Its partners surely despise and fear what Mr Tsipras stands for. But the EU is supposed to be a union of democracies, not an empire. The eurozone should negotiate in good faith.
Moreover, the ideas presented on the debt are worth considering. Mr Varoufakis recognises that partner countries will not write down the face value of the debt owed to them, however absurd the pretence may be. So he proposes swaps, instead.
A growth-linked bond (more precisely, one linked to nominal gross domestic product) would replace loans from the eurozone, while a perpetual loan would replace the ECB’s holdings of Greek bonds. One assumes the ECB would not accept the latter. But it might accept still longer-term bonds instead. GDP-linked bonds are an excellent idea, because they offer risk-sharing. A currency union that lacks a fiscal transfer mechanism needs a risk-sharing financial system. GDP-linked bonds would be a good step in that direction.
Many governments would oppose anything that looks like a sellout to extremists. The Spanish government is strongly opposed to legitimising the campaign of its new opposition party, Podemos, against austerity. Nevertheless, Greece and Spain are very different. Spain is not on a programme and owes much of its debt to its own people. It can justify much of its policy mix in its own terms, without having to oppose a new agreement for Greece.
Two crucial issues remain. The first is the size of the primary fiscal surplus, now supposed to be 4.5 per cent of GDP. The government proposes 1.0 to 1.5 per cent, instead. Given the depressed state of the Greek economy, this makes sense. But it also means Greece would pay trivial amounts of interest in the near term.
The second issue is structural reform. The IMF notes that the past government failed to deliver on 13 of the 14 reforms to which it was supposedly committed. Yet the need for radical reform of the state and private sector no doubt exists.
One indication of the abiding economic inefficiency is the failure of exports to grow in real terms, despite the depression.
Indeed, Greece faces far more than a challenge to reform. It has to achieve law-governed modernity. It is on these issues that negotiations must focus.
So this must be the deal: deep and radical reform in return for an escape from debt-bondage.
This new deal does not need to be reached this month. The Greeks are right to ask for time. But, in the end, they need to convince their partners they are serious about reforms.
What if it becomes obvious that they cannot or will not do so? The currency union is a partnership of states, not a federal union. Such a partnership can only work if it is a community of values. If Greece wants to be something quite different, that is its right. But it should leave. Yes, the damage would be considerable and the result undesirable. But an open sore would be worse.
So calm down and talk. Let us all then see whether the talk can become action.

→  gennaio 28, 2015

by Martin Wolf

Sometimes the right thing to do is the wise thing. That is the case now for Greece. Done correctly, debt reduction would benefit Greece and the rest of the eurozone. It would create difficulties. But these would be smaller than those created by throwing Greece to the wolves. Unfortunately, reaching such an agreement may be impossible. That is why the belief that the eurozone crisis is over is mistaken.
Nobody can be surprised by the victory of Greece’s leftwing Syriza party. In the midst of a “recovery”, unemployment is reported at 26 per cent of the labour force and youth unemployment at over 50 per cent. Gross domestic product is also 26 per cent below its pre-crisis peak. But GDP is a particularly inappropriate measure of the fall in economic welfare in this case. The current account balance was minus 15 per cent of GDP in the third quarter of 2008, but has been in surplus since the second half of 2013. So spending by Greeks on goods and services has in fact fallen by at least 40 per cent.

Given this catastrophe, it is hardly surprising that the voters have rejected the previous government and the policies that, at the behest of the creditors, it — somewhat halfheartedly — pursued. As Alexis Tsipras, the new prime minister, has said, Europe is founded on the principle of democracy. The people of Greece have spoken. At the very least, the powers that be need to listen. Yet everything one hears suggests that demands for a new deal on debt and austerity will be rejected more or less out of hand. Fuelling that response is a large amount of self-righteous nonsense. Two moralistic propositions in particular get in the way of a reasonable reply to Greek demands.
The first proposition is that the Greeks borrowed the money and so are duty bound to pay it back, how ever much it costs them. This was very much the attitude that sustained debtors’ prisons.
The truth, however, is that creditors have a moral responsibility to lend wisely. If they fail to do due diligence on their borrowers, they deserve what is going to happen. In the case of Greece, the scale of the external deficits, in particular, were obvious. So, too, was the way the Greek state was run.

The second proposition is that, since the crisis hit, the rest of the eurozone has been extraordinarily generous to Greece. This, too, is false. True, the loans supplied by the eurozone and the International Monetary Fund amount to the huge sum of €226.7bn (about 125 per cent of GDP), which is roughly two-thirds of total public debt of 175 per cent of GDP.
But this went overwhelmingly not to benefiting Greeks but to avoiding the writedown of bad loans to the Greek government and Greek banks. Just 11 per cent of the loans directly financed government activities. Another 16 per cent went on interest payments. The rest went on capital operations of various kinds: the money came in and then flowed out again. A more honest policy would have been to bail lenders out directly. But this would have been too embarrassing.

As the Greeks point out, debt relief is normal. Germany, a serial defaulter on its domestic and external debt in the 20th century, has been a beneficiary. What cannot be paid will not be paid. The idea that the Greeks will run large fiscal surpluses for a generation, to pay back money creditor governments used to rescue private lenders from their folly is a delusion.
So what should be done? The choice is between the right, the convenient and the dangerous.
As Reza Moghadam, former head of the International Monetary Fund’s European department, argues: “Europe should offer substantial debt relief — halving Greece’s debt and halving the required fiscal balance — in exchange for reform.” This, he adds, would be consistent with debt substantially below 110 per cent of GDP, which eurozone ministers agreed to in 2012. But such reductions should not be done unconditionally.
The best approach was set out in the “heavily indebted poor countries” initiative of the IMF and the World Bank, which began in 1996. Under this, debt relief is granted only after the country meets precise criteria for reform. Such a programme would be of benefit to Greece, which needs political and economic modernisation.

The politically convenient approach is to continue to “extend and pretend”. Undoubtedly, there are ways of pushing off the day of reckoning still further. There are also ways of lowering the present value of interest and repayments without lowering the face value.
All this would allow the eurozone to avoid confronting the moral case for debt relief for other crisis-hit countries, notably Ireland. Yet such an approach cannot deliver the honest and transparent outcome that is sorely needed.
The dangerous approach is to push Greece towards default. This is likely to create a situation in which the European Central Bank would no longer feel able to operate as Greece’s central bank. That then would force an exit. The result for Greece would certainly be catastrophic in the short term.

My guess is that it would also reverse any move towards modernity for a generation. But the damage would not just be to Greece. It would show that monetary union in the eurozone is not irreversible but merely a hard exchange-rate peg.
That would be the worst of both worlds: the rigidity of pegs, without the credibility of a monetary union. In every future crisis, the question would be whether this was the “exit moment”. Chronic instability would be the result.
Creating the eurozone is the second-worst monetary idea its members are ever likely to have. Breaking it up is the worst. Yet that is where pushing Greece into exit might lead. The right course is to recognise the case for debt relief, conditional on achievement of verifiable reforms. Politicians will reject the idea. Statesmen will seize upon it. We will soon know which of the two they are.