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“It’s all Greek to me” – a new perspective for understanding the Greek financial crisis

Thu, 28 Jul 2011 | By Dr. Christopher Houghton Budd


The aid package agreed by eurozone leaders to support Greece has led to a collective sigh of relief as another debt crisis has been averted – at least for the time being. Stock markets rose and banking shares, too, were up after last week’s agreement. Greece, of course, is not the only eurozone country to have needed help with its debt problems in the wake of the financial and banking crisis of 2008.    

In this first of a series of articles focusing on Greece, finance and banking expert Christopher Houghton Budd takes Greece as a starting point to take a wider view of the debt crisis, drawing on the ideas of the thinker and founder of anthroposophy Rudolf Steiner and his associative economics, and suggests that we need to jettison received thinking if there is ever to be a fundamental solution to the problem.

LONDON (NNA) - In terms of Rudolf Steiner’s socio-economic analysis (generally known as associative economics), the so-called Greek debt crisis is simply a predictable event. Indeed he would argue that it does not in reality exist in that it is a wrong description of the forces and circumstances that underlie it.

At its simplest, Steiner’s view was that, as of the First Word War, there could be no talk any longer of national economies. National sovereignty belonged henceforth to the rights life; economic life had gone global. So there can also be no talk of national currencies, meaning also none of central banks, at least not as issuers of national currencies. Nor can also be no idea of ‘sovereign debt’.

There can also be no talk of the International Monetary Fund (IMF) in the sense that that institution has come to have, or of the World Trade Organisation (WTO), or a host of organisations that now provide the lens through which a Greece is seen. Nor, of course, can there be a European Union with a Central Bank. Or bond markets holding countries to ransom. Or private equity funds piling into food now that real estate (in the West) has tanked. Or of people borrowing cheap money then using it to create a mortgage nightmare, all based on the idea that real estate has primary economic reality.

In short, most commentary about the Greek crisis is couched in terms of the theories, policies and institutions that have been instituted, as it were, in direct contradiction of Steiner’s ideas.

A return to the real economy

To see things in Steiner’s terms as applied in this case to Greece, the Greeks, like everybody else, need to ground their economy on personal not real credit. That is to say, on new values born of initiative not fictitious values born of working the real estate market with easy credit, all on the assumption of ever-rising asset prices. Not only that, modern economics assumes it to be normal that huge amounts of “official” money are printed to prop up the status quo, and no one has the energy (because they do not have the insights) to say “boo” to the bond markets.

Greece is part of the continuing global financial crisis, which occurred, in the jargon, because the efficient market hypothesis, on which all modern finance is predicated, became a “train wreck”. It no longer holds true (if ever it did). The problem is that the next hypothesis has to be Rudolf Steiner’s “true price formula”. But who is going to take that on board, given that everything that is wrong with modern finance – from the thoughts that underlie it to the institutions that give it effect – has been created in order not to pay true prices.

Not that all the paraphernalia of today’s economic life has to be thrown out in the abstract. Steiner’s great clue is that these things are masked relationships, not errors or things to be got rid of, but mis-described symptoms. Described differently, modern economic life would then also be different. Described correctly it would soon become healthy because thoughts are as things in modern economics.

The bond markets can hardly behave other than they do because the modern financial system takes money out of the economy then “sells” it back again. It is like a blood transfusion, but one which removes the blood only to sell it back to the patient, at interest and on condition that his future ability to generate blood belongs to the doctor henceforth.

Yet it would be easy enough to create a bond designed to lose some of today’s excess liquidity (too much loan money per Steiner) in educational buildings, for example. Or to skim the froth off the markets not by market corrections or begrudged write-downs, but by transfers to revolving, interest free funds for students so that we no longer need hear the cry in Syntagma Square (or Spain with its 45% youth unemployment) of “Graduates without a future”.

There will be no such change, however, until individuals, and it has to be individuals, start to create and use instruments of this kind that allow the bond markets to relax and that deliberately prevent the amassing of excess liquidity in the first place. But where are those individuals? Where are the kind of instruments described above?

There are concrete examples, such as Kiva.com and any number of arrangements where individuals directly deal with individuals, whether by way of purchasing, lending or giving. And there are things, coming from anthroposophists, such as shared gifting in the US and the Swiss CoOpera pension fund, reported on by NNA recently.

Even so, for the most part the behaviour of the anthroposophical movement on a financial level is not distinguishable from that of the world in which a Greece has a debt crisis. Why? Because the anthroposophical movement by and large interprets Steiner’s financial thoughts in terms of banking, even though banking as we know it is not part of his image. His expectation is of direct financing.

I mention CoOpera specifically because as far as I know it is the only anthroposophical pension fund that adheres to associative principles, for which reason also it is recognised as the most performant of Swiss pensions funds generally. The way it invests its monies allows it to be forgiven the usual conditions when funds are simply put into the markets. And this because the founders of CoOpera were determined to give practical effect to Steiner’s warming about real credit. Imagine, too, how different it would have been if the Greeks had built their recent economy on the principles of associative economics.

Taking a lead

Greece is an event at the estuary of economic life and it is an illusion to think that the estuary can be changed. Change has to begin at the source, and for that first movers are needed, without whom the world at large cannot shift. But who and where are they? Many say the problem of Greece and the way I respond to such things (as here) is “all Greek to me”, but that is the argument of someone determined not to be a first mover.

If Greece is to solve its problems in an associative way it has to delink from the euro, reground its borrowings on something economically real, especially the potential of its youth, and relink its currency to that. This is not an anti-euro argument in any political sense. It is straight economics. Per Rudolf Steiner, we would by now be well into a world with only one currency (but without a central bank emitting it!).

Technically understood, a world currency exists today as accounting. When free of (geo)political interference, the international accounting system gives us sound ground – both in terms of what “the City” understands and what Steiner said. For accounting is a no-man’s land in this whole story. It belongs to no ideology. It just is. When not used to avoid tax or please shareholders, accounting simply exists as an instrument of perception. Indeed, it is the only means we have to get ourselves from the old bank of the river to the new. Moreover, in accounting one can also find very precisely expressed the fact that money has three qualities – whether or not Steiner said they did!

Given that the real concerns of those who are bearing the brunt of bankers’ playing with national destinies are ignored or disregarded as “of the left”, most people’s questions about Greece are about securing their pensions – for which the survival of the bond market is code. Or they are about whether Greece will continue to be an affordable holiday destination. This is all so much egoism, leading to the fiction of an economy based on real credit.

The Greeks could do a lot worse than remember the words of Aristotle: “A liberal man is a man who knows how to give the right amount of money to the right person in the right way at the right time.” Indeed, a mantra of this kind serves well any soul that is intent on regaining its sovereignty in human affairs. As the well-known if controversial economic historian, Niall Ferguson, puts it: “Financial markets are like the mirror of mankind, revealing every hour of every working day the way we value ourselves and the resources of the world around us [so that] it is not the fault of the mirror if it reflects our blemishes as clearly as our beauty.”

END/nna/cva

Christopher Houghton Budd has a doctorate in finance and banking. A life-long student of Rudolf Steiner’s socio-economic ideas, he is a Visiting Lecturer at City University, London. The background to this article is his recent book, “Finance at the Threshold, rethinking the real and financial economies” (Gower 2011), for which the brief given to him was to describe the global financial crisis through the lens of Rudolf Steiner’s ideas.

Item: 110728-01EN Date: 28 July 2011

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