Economy & Budget

Greece On the Eve of Destruction

Things are not looking good for Greece.  It teeters on the edge of a catastrophic sovereign default on its $483 billion in government debt.  The analysts are all saying “hours or days” now, instead of “days or weeks.” Even the more optimistic estimates can only push doomsday back to mid-October.

Some of those analysts believe the financial collapse of Greece is inevitable.  Bloomberg Businessweek quotes former British central banker Howard Davies saying, “It’s too late for Greece… the Greek situation is tumbling out of hand, and I suspect Greece will not be able to avoid a substantial default.”

In order to bring its massive debt under control, the Greek government has implemented a number of “austerity measures,” which the New York Times describes as “the dismantling of a middle-class welfare state in real time – with nothing to replace it.”  Taxes have been increased, pensions and state salaries have been cut, and government employees have lost their jobs.

The Greek population has not taken these measures very well.  The Associated Press describes a rising tide of “austerity strikes” and ugly demonstrations:

Athens metro, tram and suburban rail workers held a 24-hour strike, while buses and trolleys were to stop operating for several hours. Airline passengers also faced delays as traffic controllers implemented work-to-rule action, refusing to work overtime. A 48-hour strike by all transport workers is expected later this week.

Greek police held their own protest, with the Special Guards unit hanging a giant black banner from the top of Lycabettus Hill in the capital reading “Pay day, day of mourning.”

[…] Hundreds of protesters gathered in the capital’s central Syntagma Square on Sunday night, scuffling briefly with police who pushed them back with truncheons and small amounts of tear gas.

When your problem is insufficient Gross Domestic Product growth to cover social costs, general strikes might not be the wisest means of expressing displeasure… but the hopelessly dependent population of Greece doubtless feels they have no other way to influence the government they have become entirely dependent on.

Here’s a little slice-of-life vignette of socialist collapse from the New York Times:

Sitting in the modest living room of the home she shares with her parents, husband and two teenage children, Stella Firigou fretted about how the family would cope with the uncertainties of an economy crashing all around them. But she was adamant about one thing: she would not pay a new property tax that was the centerpiece of a new austerity package announced this month by the Greek government.

“I’m not going to pay it,” Ms. Firigou, 50, said matter-of-factly, as she lighted a cigarette and checked her ringing cellphone to avoid calls from her bank about late payments on a loan. “I can’t afford to pay it. They can take me to jail.”

Ms. Firigou would probably consider it extremely impolite to ask how much she’s spending on cigarettes, and the cell phone she uses to dodge her bill collectors.  That’s how the spiritual degeneration of dependency works: you’re “entitled” to various things, which are completely off the table when it comes time to discuss “austerity.”  The money to pay your benefits is supposed to come from somebody else.  How dare the government ask you to chip in!

Later in the article, we learn that Firigou is a clerk at the local town hall, so it probably won’t be hard for the government that provides her salary to find her, after she makes good on her threat to refuse paying the tax they have dared to demand.  Of course, if enough people refuse to pay up, there might not be enough non-striking police left to arrest them.  Another tax is supposed to be implemented through electricity bills, with the power shut off for those who refuse to pay… but “the powerful union that represents the workers of the public power company has said it will refuse to cooperate, jeopardizing its implementation.” 

This is how rotted civilizations collapse.  The central premise of socialism is that the government can most wisely allocate resources to achieve the maximum social good.  Americans receive regular doses of this thinking from their current President and his party.  Greece is the inevitable final disintegration of that hollow promise, in which there is no longer any talk of “allocation.”  Instead, the air is filled with angry non-negotiable demands.  Greeks were told for generations that they “deserved” all sorts of things from their government.  They listened, and made it politically impossible to do anything about “austerity” back in the days when it wouldn’t have been quite as agonizing to implement it.

When the State controls the economy – hiring huge numbers of people, guaranteeing vast pensions, and promising elaborate welfare benefits – everything goes bankrupt at once.  There is no gradual process of individual companies realizing that their business models aren’t working, or their benefit plans are unsustainable.  There are no little failures that could warn of greater danger to come.  There are no small austerities to help the populace understand the true value of their labor, and undertake the difficult process of seeking out genuine opportunity, where labor can be sold to those who truly value it.  Lifestyles are not gradually adjusted when benefits are “guaranteed” in perpetuity.

One day, it all stops working, all at once.  Greece will stop working any day now, with consequences ranging from horrifying social unrest at home, to a series of financial dominoes falling throughout the Eurozone it has been plugged into… a gigantic international money machine that looks like it might stop working all at once. 

Greek finance minister Evangelos Venizelos said last week, “People justifiably think the crisis is what we’re living now: cuts in wages, pensions and incomes, fewer prospects for the young.  Unfortunately, this isn’t the crisis.  This is an attempt, a difficult attempt, to protect ourselves and avert a crisis.”  With all due respect to Mr. Venizelos, he’s wrong.  This is the crisis, and it’s been in progress for many years now.  What will arrive no later than mid-October is the climax of that crisis, and the death of a system that could not survive it.  A version of the same system holds sway over every Western nation, all of whom will go on believing they can never fail like Greece… until several years after they have passed the point of no return. 

Socialist governments never discuss their illness honestly until they have reached their deathbeds, because it involves using unpleasant medical terminology, such as “austerity.”  At this very moment, the Democrat Party in the United States is threatening to shut down the government because they don’t want to make offsetting spending cuts for disaster relief funding.  That would be horribly “austere,” wouldn’t it?


Sign Up