SYRIZA’s painful trilemma – 24/9/2014

The world in which our desires materialize provided we strongly want it is a perfect world. It has only one weakness: it exists in our imagination – and in bad literature. Students of politics prefer to focus not on the power of will, but on the impact of external constraints. Practitioners of politics and policymakers naturally tend to blame outside obstacles for the failure of their purportedly good intentions. Unless they are in opposition that is, which gives them license to roam freely in the kingdom of voluntarism.

Like the two government coalition parties in the past, SYRIZA claims that it can have it all together: a budget surplus, and more spending, and the abolition of the new progressive property tax (also known as ENFIA). The main opposition leftist party promises to overcome those contradictions by eliminating tax evasion “within a few months”, which reveals a rather strange sense of political humor. SYRIZA also pledges to strengthen Greece’s position in the euro area by putting forth the undoubtedly popular demand that the country’s public debt be written off at the expense of its partners. Just like that, without any special terms, memorandums, obligations or conditions.

Very few things in real world governance, if any, can be hoped to be achieved without some compromises and concessions. To secure one thing you need to sacrifice another. “There are no solutions, only trade-offs”, as economist Thomas Sowell has put it.

The eurozone is presently swept by a debate on such trade-offs: strict compliance with the rules vs flexibility in their implementation. National responsibility vs European solidarity. You wish to have more of one, you need to sacrifice a bit of the other.

The challenge of democratic politics is for policies to be “packaged” in such way that losses in one area can be offset by gains in another. Then everybody will have something to gain, though not necessarily to the same degree. Those who score the biggest gains are not just the stronger players but those who know how to promote their interests by cultivating effective coalitions, by building trust and credibility, by pursuing mutually beneficial compromises. There should be no room for intransigence, rigidity, and spectacular denunciations.

Occasionally, external limitations present themselves in the form of a “trilemma”, or an “impossible trinity”: Faced with three desired objectives, one can only have two. It is impossible to have all three at the same time. One must give in.

The euro debt crisis brought one such trilemma to the fore. Pre-crisis, the EMU had nurtured hopes of a triad that turned out to be impossible: no bailout of member states, no euro exit, no default. In order to secure the last two, Europe gave way on the first.

A similar “impossible trinity” regarding the current function of the Eurozone is pointed out by Jean Pisani-Ferry, formerly of Bruegel. All three of the following cannot coexist for long: no co-responsibility over public debt, no monetary financing by the ECB, and banking systems retaining their national character. One of the three will have to give. The trilemma is leading to closer integration – fiscal as well as financial.

At the background lurks the fundamental trilemma of globalization, as stated by Dani Rodrik. You cannot have market globalization, democratic accountability, and national determination all at the same time.

European integration is the answer to the trilemma of globalization: Open markets coexist with democracy inside an EU where national sovereignty is mutually pooled to overarching European institutions. Markets demand adjustment, but their pressure is mitigated by the EU. The tension is, of course, greater in “program” nations. The euro crisis has pushed national democracies towards breaking point. There have been painful compromises in the operation of national parliaments (voting legislation without sufficient debate) and in the exercise of national sovereignty (as the weakness of borrower countries shifted power balances in Europe in favor of creditors). Sacrifices were not exclusive to the South however –ask an average German how they feel about the fact that their country has had to shoulder other countries’ liabilities. Weakening national democracy is tantamount to its strengthening in the face of globalization, if the transfer of national control ends up reinforcing the common European roof.

If the response to the trilemmas is closer integration in the eurozone, then it is not hard to notice the contradictions of SYRIZA’s economic policy, a policy European in name but nationalist in substance. Where adaptation to the realities of open markets is glaringly absent. Where assuming national responsibilities towards Europe is residual. And where the pursuit of transfers by the eurozone partners is not matched by credible national commitments.

Should SYRIZA win the next election, it would soon have to face a trilemma of its own: governing, sticking to its pledges, and Greece remaining in the euro. It is impossible for all three to happen at the same time. One will have to give in. Take your pick.