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Comment by giraffe_lady | Hacker News Reader

> Many countries in Europe subsidize their wheat—a soft variety better suited for white flour—before exporting it, thereby lowering its price. Jordan, on the other hand, has been restricted for years by the conditions of loans from the International Monetary Fund and World Bank, and cannot subsidize its growers’ durum. Today, in the face of cheap imports, the former breadbasket now produces only 2 percent of its own wheat.

Wow that's brutal. Not news that the IMF is used in this way but it's rare to see the specific mechanisms and their side effects so clearly.

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The world bank and IMF have no concept of biosecurity or self reliance in food. Least cost and open market is all they have as guiding principle from what I see. If somebody has better info I'd love to know.

If my memory is correct both institutions and the European equivalent are overrun by Chicago school types.

Varoufakis is not brilliant but his critique of how international finance regimes treat national banks who step into another paradigm is brilliant, and worth reading. It may be self serving, but that does not (to me) undermine how duplicitous the world banking leadership can be. Regarding Greece their only concern was "save germany"

Lebanon's loss of their grain store should be a wake up call. There are domestic reasons why it happened and international consequences of why they wound up there.

To paraphrase Reagan, the most terrifying words are "I'm from the IMF and I'm here to help".

I think the same could be said of the European bank for reconstruction and development. Here, have money, but with these union busting, open market, no strategic national interest in food and other security strings.

Oh, and we're forcing a 20%+ cut across the board on pensions and welfare because you need more poor people.

I imagine they recruit similar pie-in-the-sky economic theorists.

Just sucks when it's your country we're testing our theories out on.

> no strategic national interest in food

Strange that they ended up there given that the entire rationale of the CAP was continent-wide security in food.

Why had German banks invested in Greek securities at all? They must have known that the criteria for the Euro had been only fulfilled on paper.

Or asked the other way round: Why do countries join the Euro when neither Sweden nor Great Britain do and (almost) all economists say that it doesn't work if you have a weak economy?

> Why do countries join the Euro when neither Sweden nor Great Britain do and (almost) all economists say that it doesn't work if you have a weak economy?

Politics. If you have a weak economy it's perceived by the population that switching to a strong currency will instantly increase their purchasing power.

If you have a weak economy and weak currency (which you have repeatedly printed in order to pay off debt, like Greece, Italy, etc) then your borrowing cost eventually becomes high as banks get wise to your behaviour. If you switch to the Euro then your borrowing cost magically becomes low (since you cant unilaterally just print money). If your economy still doesnt reform then eventually you cant pay your euro debt… and you have the Greek situation. Can’t print, no-longer have a low-cost, low wage, low tax, low regulation economy (since you conformed to the EU/Euro area regulations). The trick for politicians is getting out of there before the public realises this.

I class "they must have known" in the same bucket as "the Greeks lied about their economy" -both wrong, but the European banking system decided Greece must pay and Germany must not pay these consequences.

To me, that undermined the mutuality which is presumably why the EU exists.

Both Sweden and Great Britain looked at national specific economic things. GB I think in the main it was for city of London finance sector reasons and parochialism about the pound. Sweden, it was put to referendum.

Why should Germany pay for these consequences and not those German banks? And yet, there is payment happening in the form of Target2 [1], with current numbers [2] not being much different than the graph in the article.

However, who has to pay is not my point. That 'secret' €2.8 billion loan doesn't fundamentally change the analysis of the Greek economy. 'They must have known' cannot be ignored. The Greek situation fulfilled economic theories that are broadly known.

So why did banks willingly underestimate the risk? If you look at Piraeus [3], crushing Greece cannot be a long term strategic target.

*edit: The mutuality was crushed in the setup. There was no perspective for Greece to develop inside the Euro. Subsidies to compensate the strong Euro don't work because the economy aligns to those subsidies and not to market demands. The mutuality is that the richer countries keep paying subsidies and the 'lucky' individual receivers have a good life within their poor community. That's not a good outlook.

Question remains: Can something be done to allow for economic prosperity in Greece within this framework? How can the startups be selected that rebuild the Greek economy so that every citizen benefits?

[1] https://en.wikipedia.org/wiki/TARGET2

[2] https://gm-media-library.s3.eu-west-1.amazonaws.com/image_7f...

[3] https://en.wikipedia.org/wiki/Port_of_Piraeus#Ownership

New Zealand is, as far as I'm aware, one of the few Western countries that doesn't subsidise agriculture or protect it with tariffs on competing imports.

(We still subsidise it in other ways, like Crown funded R&D, although that's viewable as an investment, especially around methane emission reductions, but also implicitly subsidise it by not making polluting industries pay for their externalities, but these are minuscule in comparison to the market interventions present overseas).

The US, UK, and EU make heavy usage of both subsidies and tariffs. The IMF is renowned for their endorsement of "free market for thee, but not for me".

The remoteness of New Zealand is effectively already a tariff on many imported goods.

Yet when we removed tariffs, nearly all local manufacturing was immediately out-competed.

We haven't manufactured cars here since the early 80s when tariffs were dropped, although to be fair, by then it was Japanese companies manufacturing cars here, not Kiwis in particular, our automotive industry is ahem renowned for the Trekka[0], Duzgo[1], and of course, the Bob Semple "Tank"[2].

Likewise, our clothing manufacturing industry has shrunk to a few niche companies that focus on export.

When subsidies and tariffs were removed from the agricultural sector, it forced quite a few farmers into bankruptcy and there were some suicides. It caused very real pain, but it now means that our agricultural industry is strong enough to be competitive in markets where their domestic producer competitors are getting significant assistance from the government.

Our neoliberal phase did a lot of harm, but there was some good.

[0] https://en.wikipedia.org/wiki/Trekka

[1]: https://spiritmagazine.co.nz/2017/04/04/it-duzgo/

[2]: https://en.wikipedia.org/wiki/Bob_Semple_tank

The IMF destroying local economies like that was one of the major plot points of Zelensky TV show, servants of the people, which was how he became president in Ukraine. (He pivoted the show into getting elected).

It was ironic to watch his character even suggesting conspiracy theories that the IMF assassinates presidents opposing them, while the real world Zelensky is now under the biggest danger of assassination.

The IMF is really fucked up.

Putting pressure on certain essential markets so they aren’t entirely lost to foreign competitors in different situations is necessary for a healthy local economy. Balancing greed and necessity is hard, but the only people advocating for totally free markets are the winners in those arrangements.

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