As a free-market, limited-government conservative, the total implosion of the Greek economy is the most stunning example of everything I’ve ever tried to warn about in regard to socialism. Despite the rest of Europe and the International Monetary Fund (IMF) promising last year to give Greece 110 billion euros over three years, the country remains in a death spiral, with its budget deficit at 13.5% of gross domestic product (GDP). By contrast, the last actual figure for America was at 8.8%.
So how did things get this bad for Greece? As IMF negotiator Poul Thomsen said of the country last year: “[Greece’s] revenues have declined significantly, while spending, especially on wages and entitlements, has risen sharply.” There you have it: the definitive formula for an economic meltdown.
One might think that would have been a wakeup call for Greece. Not so, apparently. This week, Prime Minister George Papandreou—a socialist, not surprisingly—faced revolts, resignations and defections from within his own party last week. What exactly is he supposed to do? Shake out the couch for spare change? The socialists broke the bank and there’s nothing left to spend. Meanwhile, the IMF and EU refuse to hand over the next bailout installment unless the Greeks can prove they’re making significant moves to get their house in order.
The IMF initially recommended the following measures, which have already been adopted: Cuts to Christmas, Easter and summer bonuses for workers in the public sector and state-owned enterprise. No raises in pensions or publicly funded wages for three years. Increased taxes on luxury items, tobacco and alcohol. And Greeks can no longer retire on a full pension at an average age of 61, and have to wait until they’re 63.
Now, the Greek government is set to raise sales tax by 2% to 3% and sell government assets. The result? Riots in the streets.
The world is witnessing, in real time, the total collapse of a socialist system to the point that the conservatives are now ahead in the country’s polls. But it’s now a case of too little and far too late.
The problem with socialism is that at some point you run out of other people’s money. Greece was spending beyond its means by injecting cash into a public-sector system that wasn’t in turn producing anything of real value on which it could then turn a substantial profit. When this system slid into the negative, they borrowed on credit until their credit rating tanked and they couldn’t get loans. So they turned to Europe and the IMF, which are made up of countries borrowing money themselves on credit to manage their own debts. Where in all of this is anyone actually producing anything that’s turning a significant profit? While in China, they have enough cash floating around to buy up the treasury bills of every other cash-strapped country, thereby stringing them up by the short and curlies and ensuring the red carpet treatment anywhere and everywhere they might wish to go on a round-the-world tour.
So where do defenders of freedom turn when they see how socialism has turned them into slaves of communism? To the free market and the private sector they’ve been up until now taxing into oblivion in the interest of spreading the wealth. You can’t make this stuff up. On Friday, French President Nicolas Sarkozy and German Chancellor Angela Merkel announced at a Berlin press conference that they’d like to offer the opportunity to private sector banks and investment funds to dole out some cash on a “volunteer basis” to bail out Greece, because those 110 billion euros they’re currently forking over in installments definitely won’t be enough, and none of the countries who might be expected to pony up this new injection of funds has any more money to flush down the toilet. Sarkozy adds that this all needs to happen before September, so the private sector better hurry up and jump on this most excellent opportunity to never see their money again.
Oh boy, let’s all hold our breath for the “Peugeot Parthenon.” “Citroen Coliseum” and the “Airbus Acropolis” Meanwhile, Nigerian scam e-mail writers are probably taking notes in the event this rip-off actually achieves lift-off: “Dear Mister CEO, Sir: I have city to sell in Greece! Please transfer $1,000,000,000 to account below and I will send keys in mail. Many blessings!”
Dark humor aside, the Greek case should serve as a reminder to Obama, America, and every other country led by someone trying to spend their way out of economic trouble that it will always lead to things getting much worse. And, as Sarkozy and Merkel have now effectively acknowledged, the free market is the best solution to economic difficulty.