The idea that Greece's economy can be healed via swingeing cuts is a fanciful one
The real Greek tragedy of the moment is that Europe’s bankers are insisting on an austerity program that, far from reviving Greece’s economy, is driving it down so deep it will soon be flat-lining with Atlantis in the murky depths of the ocean.
But maybe the Greeks brought it upon themselves. The word ‘economics’, derived from a Greek term for a household, originally referred to the craft of running a frugal house. Two millennia later, decision-makers believe the infinite complexities of seven billion humans’ interactions can be encompassed in a cozy domestic analogy. They even think economics is a science. But ‘perfect market theory’ is a mathematical construct without connection to the real world.
Real science involves real-world experiments, where a set of actions produces consistently predictable results. To be fair, some economists – and one instinctively genuflects toward John Maynard Keynes – do occasionally get it right in foretelling the consequences of economic actions. But the European prescription for Greece is a repudiation of any scientific rationale. It is a failed real-time experiment with consequences beyond the rocky arid peninsula in the Mediterranean. It is as if medicine had been taken over by a coterie of phrenologists with a sideline in voodoo.
The eurozone economists have the strength of faith. Like medieval leeches, they bleed the patient dry and, as it gets weaker and weaker, they open even more veins. At least the leeches decanted the blood into the rose garden or wherever; Greece’s liquidity is gurgling straight into the maws of the European bankers who were largely responsible for the initial illness.
However insouciant one might be about the fate of impoverished young Greeks, the rest of us should be worried. The ideologues dictating faith-based economic solutions to Athens run many of the world’s advanced economies and companies. There is a very real risk of contagion and the world economy is not in robust enough a state to fight a crisis: it is an overvalued bubble waiting to burst.
The world’s capital markets are in the hands of people who have no contrition whatsoever for their part in the 2008 crisis. From their point of view, the crash was a triumphant success. None of the perpetrators suffered any significant penalty, civil or criminal. Bernie Madoff may have gone to prison but bankers operated an even larger and more catastrophic Ponzi scheme and deftly offloaded their losses on the world’s taxpayers.
The end result of the crisis was not the destruction of wealth the Great Depression saw. Rather, it was a massive redistribution of wealth into the hands of the perpetrators. The self-perpetuating kleptocracy can buy governments to do what its members want: the ability to carry on amassing more money unhindered by regulation or taxes. This is as true of corporate executives as it is of bankers: their power and emoluments keep rising, so the deal breaker for a recent proposed merger was whether the CEO could keep his job, not what was good for the shareholders who nominally own the company.
Maybe it is time to pick some of those Greek brains. The Athenians ostracized unpopular and disruptive leaders by writing their names on potsherds, thus sending them into exile. Maybe we should do the same for bankers and venal politicians. Let us have a public ballot and send the most obnoxious with a small subsistence allowance to an arid Greek island, preferably volcanic, or to Iceland – where they know how to deal with bankers.