It’s Not Our Job to Greece the Wheels
Posted on June 27, 2011 at 12.29 pm
Q. What is your views on Greece given all the hubub? Would it be better for them to fail and hopefully rise from the ashes, all the while keeping the Euro and staying a full member of the EU or would it be better to at least reinstate the Drachma and break off from the Eurozone…? — nowahklrk, from tumblr.
A. Pardon the title pun — it’s just way too obvious to pass up.
I haven’t closely followed the situation in Greece, though I know it’s been growing steadily worse for quite a while now. Like most Americans, I am unfortunately ignorant of the politics of most other countries (but hey, at least I’m aware of it, right? And I hope to remedy that sooner than later). It’s not that I don’t care; it’s just that reading, writing, and working in American politics kind of takes all the capacity for politics which I have at this point.
That said, my main thought on the subject is that the citizens of other countries in general, but especially America (I mean, we’re not even in Europe — geez), should not be forced to pay for the Greek government’s failure and apparently rampant corruption. That’s just not our job. Daniel Mitchell at Cato makes this argument better than I can:
It appears that American taxpayers are about to subsidize another Greek bailout (via the Keystone Cops at the IMF). This is way beyond economically foolish. It is also morally offensive.
To turn Winston Churchill’s famous quote upside down, “Never have so many paid so much to subsidize such an undeserving few.” Let’s start with a few facts:
- Greece’s GDP is roughly equal to the GDP of Maryland.
- Greece’s population is roughly equal to the population of Ohio.
- Despite that small size, in both terms of population and economic output, Greece already has received a bailout of about $150 billion (actual amount fluctuates with the exchange rate).
- Don’t forget the indirect bailout resulting from purchases of Greek government bonds by the European Central Bank.
- Now Greece is angling for another bailout of about $150 billion.
Is there any possible justification for throwing good money after bad with another bailout? Well, if you’re a politician from Germany or France and your big banks (i.e., some of your major campaign contributors) foolishly bought lots of government bonds from Greece, the answer might be yes. After all, screwing taxpayers to benefit insiders is a longstanding tradition in Europe.
But from a taxpayer perspective, either in Europe or the United States, the answer is no. Or, to be more technical and scientific, the answer is “Heck no, are you friggin’ out of your mind?!”
You can examine his entire argument here. As far as what Greece itself should do, I suspect I’ve already made clear that I’m in no position to give specific advice. I don’t pretend to understand the details of what would happen in the various scenarios you mentioned. I can say, as a general rule, that to continue to subsidize failure will only prolong the misery; the correction will happen — it’s just a question of when. Dr. Thomas Woods explains it well:
The recession or depression is the necessary, if unfortunate, correction process by which the malinvestments of the boom period, having at last been brought to light, are finally liquidated….When things do go bad, pumping more money into the banking system, thereby lowering interest rates once again, only exacerbates the problem, because it encourages the continued wasteful deployment of capital in unsustainable lines that will eventually have to be abandoned anyway, and it forces healthy, wealth-generating firms to have to go on competing with bubble firms for labor and capital.
For more reading on the woes of Greece, I found this article by Taki Theodoracopulos, himself Greek, to be interesting. Extra bonus: It also has a punny title.