AN OPEN LETTER
by Nicos Christodoulakis
Athens, 17 November 2019
Dear Mr. Stiglitz,
It was an unpleasant surprise to hear that you participated along with other US academics in preparing a plan for Greece to exit the euro in 2015. The feeling was even harder, since you still believe that it was “carefully set” and seem rather disappointed for not finally implemented.
As the overwhelming majority of the Greek people, most of Greece’s European partners, and a series of wise American politicians —such as Barack Obama— believed that such a development would have been a disaster even greater than the crisis itself, I would like to bring forward certain issues that —with your experience and knowledge— might be further illuminated:
1. In 2001, you received the Nobel Prize for setting-up the foundations of the theory of “Asymmetric Information’. A key finding is that if certain players possess more information than the plethora of market participants, the latter may suffer a serious blow on the event of sudden changes, while those timely informed will richly benefit.
The Grexit plan obviously was common knowledge to the inner circle in which you participated, while hordes of speculators in the forex markets were gleefully dreaming of it. And for good reason, no doubt. By exchanging the funds already taken off the Greek banking system at the vastly devalued rates prevailing in the post-Grexit chaos, they were expecting to appropriate national assets at a fire sale.
On the other hand, salaried employees, pensioners and small depositors with their savings kept in Greece would suffer a total disaster, as they were not entitled to the precious information. How exactly would you characterize this prospect in your theory, as being fraudulent, unethical, amounting to a criminal speculation, or simply an organized pillaging of the asymmetrically informed?
2. Since you were not at all alerted on such ethical details, it must be obvious that you believed that Grexit would be beneficial for the people. In that case, why didn’t you enthusiastically inform those affected, and instead you chose to work in the dark? Competent authorities remained ignorant too and was widely known that both the President of the Republic and the Governor of the Bank of Greece would fiercely oppose such an eventuality. Even the then PM repeatedly claimed that he never approved nor acknowledged of any plan for Greece to exit the euro.
If that is really the case, then your team was tailoring a series of decisions in stark opposition to those who themselves alone had the authority to take and implement them! One wonders if there has been any single country in history with a currency change accomplished outside the auspices of the competent authorities. Even foreign invaders, before printing a new currency to appropriate the seigniorage, somehow inform the monetary authorities of the occupied country.
3. Your academic colleagues from Texas who also participated in the Grexit plan admitted coming to Greece and calling army units and hospitals about fuel reserves and medical supplies, in an (otherwise laughable) attempt to organize some emergencies after the exit. By whose authorization were they empowered to assume the right to intervene so offensively in the daily functions of a foreign country?
In your books, you often criticize fellow Professors from US universities who —after General Pinochet’s coup in 1973— went, along with the Chicago boys, to Chile to dictate the economic policy without the consent, and at the expense, of the people. Are you somewhat shocked by the disturbing similarities to the Texas boys who also made their plans without the consent, and at the expense, of the Greek people?
It will be illuminating –and pedagogical too— for someone to see what your own reaction would have been in case that a team of French and/or Russian Professors were coming to the US and started making calls to check the oil stocks in Pentagon or the chirurgical stores in the Memorial Hospital of New York. Let us further assume that they also had a plan to replace the US dollar with another currency without the consent of the President, the Fed, or the Senate. Could you guess, in which institution they were more likely to end up explaining the plan in some more detail?
4. You appear to justify your participation in the Grexit plan by arguing that Europe wanted to punish Greece, not helping it. That is partly true and explains why its most ardent critics insisted on Greece leaving the euro, for the punishment to be harsh and lasting. Recently, it became clear that there indeed was such a plan, visualizing the preferences of the German finance minister at that time. The plan recognized that there would be serious shortages and chaos, and advised for humanitarian aid at a scale similar to situations of massive refugees flows in war-torn countries.
How could one explain the paradox that your team —under the convenient delusion of allegedly saving the country— put the same prescription forward? Could it be that in actuality you had no concern whatsoever for the citizens’ plight, and Greece was just a guinea pig against the euro that you constantly regarded as a perennial failure? Now that the Chinese consider the US dollar to be a failure, would you offer your experience to them and mediate to ensure that they have a similar opportunity in your country?
5. There is one last thing: One of your best books was ‘The Price of Inequality’, for which I had the honor to write an extensive presentation on the Greek edition in 2013. Perhaps now you have an opportunity for writing another book on ‘The Price of Frivolity’, thus not letting an opportunistic meddling with the fortunes of a European country becoming a stigma in an otherwise brilliant career of ideas and progressive thinking.
Professor at the Athens University
of Economics & Business, and former
minister of Finance in Greece 2001-2004