“Nescience”. What a lovely word. It means not knowing. Looking at reactions to the Greek crisis, outside Greece, before and after a somewhat puzzling referendum makes me wish more people would accept the state of nescience on some issues.
For me, the Greek tragedy presents a fascinating study of how politics and economics are inseparable. I find it impossible to make statements of fact about the Greek crisis without making value judgments about the actors. Even the word “crisis” can be questioned. For whom is it a crisis? Ordinary Greeks are undoubtedly suffering, but crisis suggests some impersonal force rather than deliberate action.
For some, Greece’s debt disaster results from malice and a kind of anti-Greek racism by members of the European Union. Germany, the most prosperous country in Europe and an opponent of easy terms for Greece, is seen as unsympathetic because Germans regard the Greeks as shiftless and lazy.
Equally, asking for repayment of the debt without considering the effect on Greeks could be seen as the callousness bred from technical approaches to human problems. Others blame capitalism and the reliance in modern economies on debt, but without ready alternatives this comes over as simplistic. For one commentator, “The Greek debt crisis signals the beginning of the end of the current debt-fuelled global financial system.”
Others point out that Greeks cannot be blameless. Business Day editor Songezo Zibi tweeted: “The way the Greek government talks sometimes you’d swear Greece had absolutely nothing to do with creating the situation.”
Indeed, Big Short author Michael Lewis, in writing about the situation before the great global financial crisis, has detailed the kind of excess ordinary individuals indulged in, thanks to easy money.
Yet others point out that monetary union should entail transfers of money from richer to poorer countries, as they do in provinces of countries. The Eurozone structure of monetary union without political union cannot work.
Behind some of the criticism is the idea that lenders can be as irresponsible as borrowers, and that the Greek debt should not be rescheduled but substantially forgiven.
“The quality of mercy is not strained,” said Portia in making judgment on Shylock’s unreasonable and literally murderous demands for repayment of debt. However, note that the debtor, Antonio, gets off completely in the play for making promises he could not keep. In real life, presumably no one on the Rialto would ever lend him money ever again.
I, for one, would not blame the Greek government for simply saying, “Look, we can never get our economy going while we are forced to pay back all this debt. Sorry.”
The consequences of Greek default are difficult to foresee, except that borrowing money for some time to come will be a complicated exercise, with all sorts of political and economic implications. Either you pay huge interest or political strings are attached.
Default is unlikely to be painless. I guess the fear of complete economic collapse motivated Greek citizens who did vote “Yes” in the recent referendum to accept creditors’ repayment terms.
All sorts of commentators have ventured to see their own meaning in the Greek debt crisis, often using the filters of their own local circumstances. Take the idea that European states were forcing an unnecessary “austerity” on the people of Greece. The idea of “austerity” is enraging to some groups in Britain, because it is the word used to justify rolling back the prized welfare state, something they accuse the Tory government of doing.
What does austerity mean? Specifically, it can mean running a neutral budget, where spending equals income, or running budget surpluses, that is spending less than tax brings in, despite poor economic growth.
For a household or individual, not spending what you don’t have is regarded as beneficial. Beware the fallacy of aggregation. For a country, balanced budgets may not only be unhelpful, they can worsen already bad situations. This was the lesson of the Great Depression, and a key principle of Keynesianism: for a government it is better to spend your way out of recession by borrowing to balance the budget than by cutting spending.
Borrowing has to have its limits too. Borrowing too much for too long leads to debt trap, and then the country will be forced to borrow from the lender of last resort, the IMF. The IMF will, one way or another, insist on being repaid, and that will entail government spending being cut. Is this austerity or the inevitable consequence of bad decisions?
And did Greece not make a bad decision by joining the Eurozone in the first place? Did the Eurozone make a bad decision by allowing Greece to join? Does laying blame help in any way?
More importantly, do Greece’s troubles actually give us any idea of what we as a country should do or not do? Or are they too specific to Greece?
I have my own views about what happened, but I am unwilling to blunder in with judgments based entirely on my own prejudice. I might be more certain of any insights had I been able to study the Greek situation more fully. I do think that as the situation unfolds some of us will have our prejudices confirmed. At the same time, let us not ignore any possibly uncomfortable lessons, however, in a rush to squash Greece into our own frame of reference. Let’s be careful about what we think we understand.
I am reminded of the graffiti scrawled on a wall in Northern Ireland in the 1980s: “If anyone here isn’t confused, they don’t know what is going on.”
Image – People read newspapers in central Athens on July 7, 2015. (AFP)