Several years ago, an economist put together a little tool to decide what Greece should do about its economic troubles. It was very detailed, with well over a hundred “blocks” that various responses to many questions led to. My approach to the problem was simple: Greece should leave the euro and deal with the suffering that would cause. My thinking wasn’t really that sophisticated. It was just that I felt an exit of Greece was a given and it was better to suffer the exit then rather than suffer for months or years and then suffer the exit.
Paul Krugman’s column this morning is, Mad as Hellas. And from it, I learned that after years of intense suffering, the Greek economy is still very bad and the people seem to have finally had enough. The current Greek government that is committed to austerity is trying to put off an election. According to Krugman, “And, if it fails, the likely winner in that election is Syriza, a party of the left that has demanded a renegotiation of the austerity program, which could lead to a confrontation with Germany and exit from the euro.”
Why would that mean that the Greece would exit the euro? Simply: Germany is filled with a bunch of jerks. I don’t see Germany yielding in this matter. Germany’s economy is doing fine. Germany is certain that if everyone just acted like them, they too would be doing fine. Germany has a century-long record of abusing its power on the rest of Europe. I suppose we should be happy that they no longer have to start a war. But it hardly matters when you can get everyone to do as you want without firing a shot.
The United States’ federal budget is $3.5 trillion. According to Krugman, Greece has been forced to cut its budget and raise taxes at a level that would be equivalent to us doing so to a tune of one trillion dollars per year. We are talking massive austerity. And the results? “Meanwhile, wages in the private sector have plunged. Yet a quarter of the Greek labor force, and half its young, remain unemployed… Meanwhile, the debt situation has if anything gotten worse, with the ratio of public debt to GDP at a record high — mainly because of falling GDP, not rising debt — and with the emergence of a big private debt problem, thanks to deflation and depression.”
So it is just as I thought four years ago: the Greek economy is not doing any better, but the Greek people are doing much worse. And there is no indication that Germany will think anything ought to change. After all, things are going quite well for them. And as with all ideologues, the reasoning will be very clear, “If austerity hasn’t worked so far, you need more austerity!” In other words: the beatings will continue until morale improves.
Krugman also noted that extremist political parties are on the rise in France, Italy, and the United Kingdom. You can only kick people when they are down for so long. And it is just that. It isn’t, as is generally claimed, that these countries need to “take their medicine.” In this case, the “medicine” is like blood letting an anemic patient. Krugman has it exactly right:
Being “very serious” in the world of economics is all about people being “hard” and “tough.” But the pain that must be accepted is never their own pain. We see it here in the United States where our budget deficit supposedly means we must lower taxes on the rich and cut benefits of the retired. But the best example of it is found with the way that Germany treats the rest of Europe. One of the reasons for forming the Eurozone was so that they wouldn’t have anymore wars. But this is just another kind of war and someone has to fight back against Germany.