Germany’s Morality Play

If you want to understand the meta-politics of the Greek financial crisis, and why that country’s European creditors are probably winning the spin war over responsibility for it, you need go no further than Kevin Drum’s post on the subject today:

Greece bears plenty of blame in this whole debacle. They borrowed way too much when their economy was booming; they refused to modernize their infamously sloppy tax collection, especially toward the rich; they lied through their teeth about their finances for years; and governments of both right and left have doggedly supported an insanely bloated public sector that would make even a Russian blush.

On the German (i.e., Northern European) side of things, the story of blame is a little more….technocratic. Banks made bets on interest rate convergences between north and south when the euro was introduced. This paid off, and for years they happily shoveled money into Greece at great profit. Greece’s economy overheated, but the ECB kept monetary policy loose because that benefited Germany twice over: first by providing Germans with a good place to invest their money and second by providing Greeks with enough money to import German goods. Eventually, this hot money flow produced inflation, but monetary policy stayed loose anyway because the German economy was kind of sluggish at the time and needed the boost. Inevitably, this produced a capital account surplus in Greece and therefore a current account deficit. When the Great Recession hit, everything went to hell. Due to the hot money flows, Greek banks had become dependent on wholesale funding, and when that suddenly dried up a banking crisis got added to the rest of the mix. It’s been downhill ever since.

Now: read those two paragraphs carefully. It’s plain there’s fault on both sides. But the fault of the Greek side is easy to understand and easy to put in moralistic terms. They lived high, they lied about their finances, and they coddled their government workers. It’s easy to paint the Greeks as irresponsible wastrels who are just getting what they deserve.

Kevin’s insight has implications far beyond the situation in Europe. It also explains, say, the standard conservative reaction to this country’s financial crisis and Great Recession, blaming the misery of people losing homes and other assets, along with jobs and credit, on their decisions to take advantage of borrowing opportunities they had no way of knowing were about to turn toxic. The great temptation to blame the victims of financial disasters is that it not only discharges the perpetrators along with bystanders of any responsibility to do anything to help them, but also makes those who escaped damage virtuous instead of just lucky. And as that fellow named Jesus Christ made pretty plain, there’s no more deadly sin to which human beings are prone than self-righteousness.

UPDATE: Continued best wishes and prayers for Kevin’s health.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.