In his classic “Times are changing” Bob Dylan asked “How many times must a man look up before he can see the sky?” I highly doubt that Dylan was referring to economic policy, but you never know… However, you could indeed ask that very question when it comes the austerity policies that the EU is shoving down the throats of the Greek people. After five years of austerity, and on its sixth year of a depression, Greece is now ripe and ready for yet another dose of the same medicine that has made the patient mortally ill.
German finance minister Wolfgang Schaeuble on Monday (14 January) urged Greek opposition leader Alexis Tsipras to drop his opposition to bailout-linked austerity measures, saying there is “no alternative” if Greece wants to stay in the eurozone. It was the first time the veteran minister and ally of Chancellor Angela Merkel received the young leftist leader, who has blamed Germany for the hardships which Greek people are enduring.
There is so much wrong with this picture, it is hard to know where to start. But first and foremost, it is quite frankly very disturbing that the Eurocracy and its allies in Berlin have the stomach to continue to pressure for austerity, after the huge mea culpa on those same policies that the IMF published less than two weeks ago. Since I find it hard to believe that Mr. Schäuble is incompetent, I am forced to conclude that he is actually a very arrogant man. Knowing that his austerity policies…
a) have done a great deal of harm to Greece, and
b) have been scientifically refuted as the remedy for the Greek depression,
…Mr. Schäuble apparently puts more emphasis on the raw government power measures that go with austerity, than on the actual oucomes of the policies.
As the EU Observer story continues, there is more evidence of this:
According to one official, Schaeuble told Tsipras “unequivocally that there is no alternative to the path already taken, the implementation of an economic adjustment programme.” The German minister urged Tsipras to back the programme, which includes recently-passed changes on income tax which Tsipras’ party, Syriza, voted against. A recent upgrade by six notches in Standard & Poor’s rating of Greek debt is proof the reforms are working, Schaeuble said.
No, it is not showing that the policies are working. It is showing that analysts at Standard & Poor still believe that higher taxes are good for economic growth. It also means that the analysts at S & P have not understood the enormously important paper that IMF chief economist Olivier Blanchard released, describing how the Fund seriously under-estimated the devastation that austerity would cause in Greece.
Ultimately, it is up to the folks at S & P to decide what they want to do. I just feel a bit sorry for their clients. They are now being told that the same policies that led to down-gradings for Greece over the past couple of years will now help that economy grow and thrive.
Better then to become a regular here at The Liberty Bullhorn, where we have been dead on about austerity from day one!
Back to Mr. Schäuble the austerity hawk, Mr. Tsirpas the Chavez socialist, and the EU Observer story:
For Tsipras, what matters more are the legions of unemployed people and hospital patients with inadequate care, whose situation, he said, is getting tougher each day as government slashes expenditure to please creditors and markets. “Austerity is like a bad medicine for the patient. We have to stop austerity,” he told this website on the eve of the meeting.
Mr. Tsirpas is correct, of course, but he is looking at the austerity issue with his left eye only. His alternative for Greece is to stop austerity but then start converting the country into a so called Bolivarian socialist republic. Anyone who wants to know what that means can take a look at Venezuela, where Mr Tsirpas’ role model Hugo Chavez has brought about 30 percent inflation, destroyed property rights, scared away every serious foreign investor, allowed crime to skyrocket and created food shortages.
No, the only serious alternative to austerity is to structurally reform away the welfare state. Economic freedom, and only economic freedom, can restore prosperity in Greece.
That said, I am the first to recognize that if you reformed away the welfare state and eliminated most of the taxes in Greece today, there would not be a viable private sector there to step in and replace a crumbled government. It is going to take seriously hard work on behalf of both government and the private sector to rebuild Greece. The role of government will be to rebuild macroeconomic confidence. Once that is under way the private sector can flourish and provide for all the needs of the Greek people that the government had promised to cater to but walked away from.
I fear that won’t happen this side of a totalitarian coup, either by the radical left or, more likely, by the neo-Nazis. That would be a very high price to pay for the Greeks, and for Europe. Their suffering would be the final indictment of the reckless attempts by the EU, the ECB and the IMF to save the European welfare state by means of austerity.
And since the austerity policies have been put in place to save the welfare state, the collapse of Greece into a dictatorship would be the ultimate piece of evidence that the difference between the welfare state and the totalitarian state is a matter of time.