I don’t know what to think about the economic situation in Europe. I am not an economic thinker (he says, stating the bleeding obvious), but I don’t understand how it’s possible for our economies to solve a problem of catastrophic levels of indebtedness by going more deeply into debt. Yet critics of austerity make a kind of sense to me. Take a look at this affecting letter from a Greek economist to a fictional colleague in Italy. It’s remarkable. Here he is speaking of a striking epistemic analogy, in answering the question of how it was global bankers and heads of state sat around in 1931 dithering while everything went to hell:

Well, many years passed since then and, at long last, I understood. Watching our government in Greece since the debt crisis erupted, observing Europe’s leadership dither and adopt one calamitous policy after the other, I finally got it. It is, come to think of it, not dissimilar to what happened in the United States in the late 1960s and early 1970s. Inside the Pentagon, smart generals understood perfectly well that America’s war in Vietnam could not be won. That sending more troops to fight in the jungles, unleashing more napalm bombs over Vietnamese towns, cranking up the war effort in general, was pointless. We know full well, courtesy of Daniel Ellsberg’s heroic efforts, that they knew individually, and in small groups, the error of their ways. And yet they found it impossible to coordinate with one another, to synthesise their views, so as to agree to a change of course. A change that would have saved thousands of American lives, hundreds of thousands of Vietnamese lives, not to mention a huge amount of money. Something similar is happening in Athens, in Rome, in Frankfurt, Berlin and Paris today. It is not that the members of our elites cannot see that Europe is like a train that is derailing in slow motion, with Greece being the first carriage to leave the tracks, Ireland and Portugal following, leading to the derailment of the larger carriages that follow: Spain, Italy, France and, finally, Germany itself. No, I believe that, in the eye of their mind, they can see it, at least as well as American generals could envision the final scenes in Saigon – with the helicopters airlifting the last Americans from the rooftop of the US Embassy. But, just like the American generals, they are finding it impossible to coordinate their viewpoints into a sensible policy response. None of them dare speak when they enter the conference rooms in which the important decisions are reached, lest they are accused of going ‘soft’ or of having ‘lost it’. So, they stay silent while Europe is burning, hoping against hope that the fire will put itself out, while knowing, in their heart of hearts, that it will do no such thing.

What is it about human beings? I don’t think I will ever solve to my own satisfaction the mystery of why so many Catholic bishops, who must have known that the abuse scandal could not go on forever, and who must have understood at some level how destructive it was, did not take decisive action to change course before disaster. Barbara Tuchman’s “The March of Folly” identifies “illusion of invulnerability” as one of the principal reasons for stupid and self-destructive actions by leaders (political, religious, military). Could European political and financial leaders today simply not be able to shake the idea that the Eurozone model, around which they’ve built their entire political lives and careers, is far more fragile than they imagined?

There’s more from the Greek economist:

However, what is going on in Greece is no recession! Here, everyone is going under. Efficient and inefficient alike. Productive and unproductive. Potentially profitable and loss making enterprises. I know of factories that export everything they make to satisfied customers, that have full order books, a long history of profitability; and, yet, they are on the brink of bankruptcy. Why? Because their foreign suppliers will not accept their bankers’ guarantees in order to provide them with the necessary raw materials, as no one trusts the Greek banks anymore. But with the credit circuits well and truly broken, this Crisis is sinking every ship, wrecking every boat, ensuring that the whole of society drowns. And the more we cut wages, the more we increase taxes, the more we reduce benefits to the unemployed, the deeper the hole into which everyone is drawn. If anyone wants to explain the concept of a vicious circle, today’s Greece is a perfect case study.

Between you and I, from one economics professor to another, I need to convey to you a deep sense of shame about our profession. You know that other academics often compare us economists to seismologists, jesting that we are equally useless in predicting the phenomenon at the heart of our discipline. This is quite right. As a profession, we have never warned the world ex ante of an impending ‘earthquake’. Some isolated economists may have done so but, then again, a broken watch tells the time correctly twice a day. No, as a body of ‘scientists’ we have proven just as bad as seismologists are in telling us where, when and with what force the next earthquake will strike. Only we are much, much worse than seismologists.

Come to think of it: Behind every toxic CDO, behind all lethal financial engineering, there lurked some pristine model of one of us. Behind every economic policy that was responsible for ponzi (that is ‘pretend’) growth prior to the Crash of 2008, one can find some celebrated, some well respected economist who provided the ‘ideological’ cover for that policy to be adopted. Behind every austerity measure today, that suffocates our societies, again there stands an academic colleague of ours, whose models and theories provide the powers that be with the audacity to inflict such policies onto our peoples. In short, you and I are guilty for what our fellow Greeks and Italians are suffering. Even if we did not believe in these particular economic models, we did not do enough to alert the world to their toxicity. We are, indeed, guilty.

I have not seen that kind of thing before. Again, I never have read economics knowledgeably or in depth, but I took it on trust that our economists were right about these things. Capitalism had triumphed, and the only real argument was between conservatives and neoliberals. Yes, social conservatives like me pointed out how an economic order that puts too much emphasis on the market undermines certain things social conservatives value, but most of us, I would say in retrospect, never really understood the depth of what it meant to say, as the Bible absolutely does, that wealth corrupts. I mean, we did not fully appreciate how the acquisition of money — which is to say, power — created a sense of invulnerability, and blinded us to the dangers inherent in the system we supported. We on the American Right may look at the Eurozone bigs today and think, “Well, of course; how could they not have seen that coming?” But very damn few of us — and not just on the Right (cough, cough, Robert Rubin) — saw our own epistemic corruption.

And as far as I can see, there has been absolutely no political accountability imposed on either the Republicans or the Democrats by the voters. In what sense is anything Mitt Romney says about economic and fiscal policy substantially different from things George W. Bush said when he took office? As for the Democrats: Tim Geithner, Larry Summers, et alia. More hardly needs saying.

Read the whole essay by the Greek economist, which is on The Browser. If you’re not reading The Browser every day, you’re really missing out.