While Greek communists and their prime minister were railing against capitalism and blaming it for the appalling state of the country’s finances, others pointed to how the mess was created in the first place – socialist economics and massive interference in the market by politicians incapable of running a household budget, let alone a national one.
“If you only grow tomatoes, you cannot afford a BMW”, pretty much sums it up.
To judge from those sympathising with the Greeks, it is all the fault of institutions that loaned various Greek governments more money than they could ever repay. They seem to think this means they should continue to pour money into the Greek pit.
Tax evasion
Naturally, the Greeks think so too. Stripped of politics, what the Greeks demand is to be allowed to watch grapes and olives grow, retire at 40, and indulge in the national pastime of tax evasion. This never-ending wonderful lifestyle is to be paid for by regular injections of hard-earned money by Germans, Dutch, Danes, Belgians, and to a lesser extent, the French.
This wonderful national racket began when, with the help of US financial consultants, the then Greek government doctored the national accounts to show that Greece qualified to join the European Union as its tenth member.
Becoming part of a monetary union with a common currency glued the Greek siphon more securely to the EU money stream. The other end of the pipe ran into the national treasury and the Greek banks. This enabled politicians to award benefits that are ever more generous to civil servants, and make ever more generous promises to keep the electorate sweet, and themselves in power.
What Greeks became were poor relations living way above their means by sponging off their hard-working cousins in the EU club. It is not the Greek people who are to blame. It is, as it always is, the fault of economically illiterate politicians. They are the ones who borrowed a fortune knowing it would never be repaid.
They banked (sorry) on infinite extensions of time to pay, and ever lower interest rates. They believed that having barged into the EU by the back door, lying themselves silly in the process, and joining a common currency, there was no way that the party would end.
They may yet get away with it.
A Greek academic and economist by the name of Aristides Hatzis, who is associate professor of Law & Economics and Legal Theory at the University of Athens, carefully noted in detail how the confidence trick began.
Awful warning
Hatzis describes a slippery slope to national financial ruin. All politicians running developing economies should take heed. His is an awful warning adding to the mountain of evidence that socialism simply does not work. First a little history.
Greece was a Turkish colony for hundreds of years until it won independence from Turkey in 1830. Since then it experienced much social, economic, and political turbulence. It flirted with monarchism, fascism, and narrowly averted joining Eastern Europe after WW2 when anti-communists won a Russia-instigated civil war.
Despite these upheavals, the Greek people became steadily richer as their economy grew. They did not become as rich as Germans or Danes, but then they started their climb out of poverty a century later than their northern fellow Europeans.
By 1974, democracy appeared to be triumphant. The Greek economy remained largely free. Greece was now a constitutional liberal democracy, much as South Africa became soon after the Codesa negotiations had concluded. That was when Greek politicians of all stripes hit upon a clever wheeze – deliver a welfare state on the Swedish model in return for votes.
Hatzis again: “… short-term pursuit of political advantage through statist policies generated corruption, indebtedness, and political collapse. Modern Greece has become a symbol of economic and political bankruptcy, a natural experiment in institutional failure. Economic policies were catastrophic; they created a deadly mix of a bloated and inefficient welfare state with stifling intervention and overregulation of the private sector.”
They governed (if that is the right word) by populism, cronyism, statism, nepotism, protectionism, and paternalism. It was popular, because people see money coming from the government as free and not coming from their own pockets.
The New York Times has put it beautifully when it said that Greece became a Middle East petro state but instead of crude oil, it had Brussels.
Bloated welfare
It is no wonder then that Greece’s creditors want reforms in return for the next handout, and they are not going to change their minds because of a referendum. They are going to insist that their money is no longer dished out to all and sundry in the name of “social solidarity” and “fairness”, as Hatzis so eloquently puts it.
Greece’s bloated welfare state convinced many that their benefits had the status of “social rights “and came, not from a private sector which paid its taxes, but from a benign and generous state.
Civil servants were treated especially well. Their wages rose and rose. In the five years before the first debt crisis, they almost doubled. No one but Greece’s creditors noticed a linkage.
If another tranche of Brussels cash (actually it is from the people of northern Europe) is given, Greeks will have to learn that their prosperity will have to come from trade and manufacturing, not from a giant bureaucracy doling out unsustainable entitlements, nor from a system of theft, corruption, privilege, and dishonesty.
Otherwise, the Greeks will find themselves even further up the creek in a barbed wire canoe without a paddle – to paraphrase a well-known Australian description.
* Keith Bryer is a retired communications consultant.
** The views expressed here do not necessarily represent those of Independent Media.
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