Greece and the Flight From Reality A People who want Wealth Without Work Will Have Neither: Bret Stephens ****
http://www.wsj.com/articles/SB12591449784175704089704581092022620289218
On Sunday, Greece became only the second country in history—Argentina was the first—to make the transition from membership in the developed world to membership in the developing one. Now the question is: Who’s next?
The question is worth asking since so many very serious people— Thomas Piketty, Paul Krugman, Jeffrey Sachs and Joseph Stiglitz among them—think Greeks did the right thing by voting down their creditors’ demands that they attempt to live within their means as a condition of further largess. Mr. Stiglitz, who doubles as a cheerleader for Argentina’s Kirchner government, says a “no” vote gives Greece the chance to “grasp its destiny in its own hands” even if it means a future “not as prosperous as the past.”
Destiny can seem so romantic—particularly to intellectuals wealthy enough to disparage the value of other people’s economic aspirations.
Destiny also has its uses for politically ambitious ideologues throughout Europe determined not to let the Greek crisis go to waste. France’s far-right National Front, Spain’s far-left Podemos Party, and Italy’s far-out Five-Star Movement all cheered Greece’s “no,” and they will emerge politically stronger should Athens now succeed in extorting better terms from its creditors. If nobody has the will to enforce the rules, nobody will have the desire to follow them.
But maybe rules isn’t quite the right word. The larger issue is reality—and Greece’s flight from it. Greece’s debt-to-GDP ratio is 177%, which sounds like an abstraction but means that this year Greece will produce barely half as much as it owes. This is what the Greek government and its fellow travelers call austerity.
As of 2008, on the eve of the meltdown, Greece had no fewer than 133 public-pension funds, each administered by its own little bureaucracy. (Under pressure from creditors, the number was supposed to come down to 13.) Greeks retire earlier and live longer than most of their eurozone peers, which means they spend close to 18% of GDP on public pensions, compared with about 7% in Ireland and 5% in the U.S. Pension fraud is pervasive, but nobody can put an exact figure on it because record-keeping is notoriously, and probably deliberately, spotty.
As it goes with pensions, so too with so much else. Creditors asked the Greeks to pare their military spending (currently among the highest in Europe as a percentage of GDP) by 10%, but the ruling Syriza party could only bring itself to make half the cuts. The Turks might invade any day.
Privatization of state-owned companies was supposed to bring in €50 billion. Five years into the crisis, successive governments have only sold off €2.5 billion of assets. Greece has more lawyers per capita than the United States. As of 2010, Greek labor costs were 25% higher than in Germany. A liter of milk in Greece costs 30% more than elsewhere in Europe, thanks to regulations that allow it to remain on the shelf for no more than a week. Pharmaceuticals are also more expensive, thanks to the cartelization of the economy.
These and other details give the lie to the claim that Athens’s woes are somehow the product of powerful and indifferent economic forces beyond its control: the value of the euro, or the machinations of high finance, or the mood swings of Angela Merkel. Greece wanted to be prosperous without being competitive. It wanted to run a five-star welfare state with a two-star economy. It wanted modernity without efficiency or transparency, and wealth without work. It wanted control over its own destiny—while someone else picked up the check.
What’s more remarkable is how Greece’s flight from reality persists. Since Athens defaulted on its IMF loan last week, the Greeks have gotten a taste of what their future holds: shuttered banks, ATM withdrawal limits, pensioners lining up for their €134 weekly allowance. And yet they voted overwhelmingly for a government that is leading them, almost inevitably, to a swift exit from the euro and possibly the European Union, their only lifelines. Pride goeth before destruction, goes the proverb. So does stupidity.
Perhaps in a few weeks, the Greeks may notice that their vote has put them at the mercy of Mrs. Merkel and other European overlords as never before. Or they might not. If the demagoguery of the Syriza government has worked, it’s because the Greeks were a people who wanted to be demagogued.
The conceit of democracy is that people will eventually learn from their mistakes—even if they must first make those mistakes—and that experience is the ultimate teacher. But suppose it is not? Argentina shows that people can get it wrong generation after generation; that illusions of grandeur can sustain a politics of failure.
Greece proves that Argentina isn’t alone. Spain and Italy could easily follow. And so could we. The lesson of Greece is that nobody is immune from making it their model.
Write to bstephens@wsj.com.
Comments are closed.
