Human agency and the Euro crisis

Social systems, unlike natural systems, involve human agents who act with particular intentions. The current Euro drama illustrates this nicely. Paul Mason's 'tankist view of the Euro crisis' uses a brilliant physical analogy to clearly explain the deal that was struck a week ago:

In search of a metaphor in this crisis, I repeatedly come back to tank armour. An ultra-modern tank is almost impossible to kill because it is covered with a mixture of ceramic, textile and metal plating that is designed to disperse the incoming energy of an anti-tank projectile: laterally.

After it's done its job the armour does not look pretty, but it works - as long as you don't get hit again.

For all the criticism of the eurozone - the greyness of the political elite, the indecision, the bunga bunga etc - their strategy is not just "kicking the can down the road". It is about dispersing the energy of the debt explosion. For velocity itself is important in the kind of collision we are talking about: over-accumulated debt impacting on real world growth. If you can slow it down, a debt explosion looks like just a long, dreary recession as people pay down their borrowings.

Now to the design of the armour: the complex system being - I will not say designed, but improvised - is composed of layers.

Layer one is the Greek debt write-off. This disperses the stress away from the Greek treasury - which can no longer control its ballooning deficits - and into the EU banking system. ....

The second layer of armour is the 108bn euro bank recapitalisation programme: money from states, Far Eastern investors and the EFSF bailout fund (see below) will be used to shore up the balance sheets of the affected banks. To visualise this, again, imagine a uranium dart hitting a surface that spreads the impact - in this case across a complex fabric of financial entities stretching from Dubai to Shanghai. ...

The deepest layer of armour Europe is trying to clad itself with is the EFSF. There is 726bn euros of taxpayers money committed, which translates into 440bn euros lendable. What they are trying to do is turn that into 1.4tn euros lendable - and the Brits want even larger - by getting, again, global lenders - including China, Brazil, the IMF and Middle East Money - to lend against the 440bn: once again spreading the impact laterally. ...

At each level then, the EU response consists in taking a concentrated impact and spreading it out - across Europe, across the world, and over time.

Given that the post was written a couple days before Greece's decision to hold a referendum on the European Union aid package intended to resolve the country's debt crisis (a decision that has now been withdrawn), Mason was prescient in his observation on the limits of his physical analogy.

However, in economics as opposed to inert matter, there is the problem of people not wanting to take the hit. Right now nobody wants to admit they are even putting themselves in line to take the hit: the German parliament, the kebab-shop phobic Italian right, the IMF, the Greek people. Everybody wants someone else to take the hit.