The word "referendum" ended George Papandreou's career. I came out very strongly against the referendum because I saw it as a crass political maneuver to create "consent" by offering the people a choice that was too narrow to be meaningful. Does that mean I am afraid to hear what the Greek people have to say? No. I just want to make sure we ask the right question. And that, in turn, requires an honest presentation of the alternatives available.
Broadly speaking, the Greek people are faced with two sets of choices. The first is a narrow decision over default. At this stage, there are two options: a 50% haircut on privately held debt (which amounts to a ~30% haircut overall) or an instant and disorderly default. Perhaps there could have been other choices, but such is reality that these are the only ones available right now. The referendum, at least as it was conceived at first, was meant to pose this question: haircut or disorderly default? The problem is that this is not a very profound question. It is like asking whether you would like me to break your legs or kill you - you will likely say, yes, break my legs, but you hardly "consented" to that.
More fundamentally, this is not the difficult choice. The issue is not whether or not to default but rather, how far are you willing to go to avoid default? What kind of Greece do you want to see emerge from this crisis? Those are the only meaningful questions, and it seems to me that the Greek people have two options: they can press "undo" or they can press "format."
"Undo" is basically about going back to the status quo ante. Let's say you rewind back to 2007 or 2004 or even 2000. The "undo" option assumes that this crisis was the result of one or two bad turns and that it was exacerbated by Lehman Brothers and the global financial crisis. If it were possible to return to the "good old days," let's do it. This choice, in practice, means default and, most likely, exit from the Eurozone. After a period of immense upheaval, life would return to "normal." The Greek people would lose much of their wealth, but a sharp currency devaluation would stimulate growth. Call this the Argentina option.
"Format" is different. As with computers, you only press "format" when you run out of options and when it is the underlying structure, rather than one or two pieces, that are flawed. According to this view, Greece is rotten to the core and nothing sort of a complete wipe will work - anything less and you merely reset the clock for another crash a few years later. In practice, "format" means restructuring Greek politics, economics and society. It means shrinking the state, introducing competition in the private sector, and ending privileges; it means a transition from clientelism and protection to accountability, meritocracy and less shielding from the uncertainties of life. In short, it means a Greek revolution.
I would love to hear the people's answer to that question: undo or format. Of course, a referendum cannot ask such a question - only elections can do that. Except that is not really the choice being offered to the Greek people by the political class. Too bad because that is the only question that matters - everything else is just nonsense to pass the time.