Austerity for Prosperity: are we all Greeks?

Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind -Homer, The Illiad

In these first few busy weeks of an especially busy new year, there is much domestic news to occupy our attention. The Giants won the Superbowl, a big-time celebrity passed away, the Republican primary season is getting less weird but much more contentious, and as I write this the Grammy’s are still being awarded to musicians whose collective ego and star quality has its own gravitational pull. How can we afford to look away from these things?

But it bears keeping in mind there are other events in the wider world that have implications everywhere, even in the United States. If you have been watching the international news or visiting any major news website then you will have seen the pictures of an Athens aflame, streets full of protesters (some media estimating 80,000 people in Athens alone) and vandals taking out their anger against the newly-passed austerity measures. Some of these measures include cutting 15,000 jobs and lowering the minimum wage for workers in the public sector 20% to 600 Euro per month. You can find more details about the figures the Greek people are upset about here.

Greek lawmakers have threatened their country with austerity measures for the last couple of years, suggesting it as a fix to a financial crisis that has hit Greece harder than any other European nation except for Iceland. The Greeks are deep in debt, to the tune of some 330 billion Euro, which is over 10% of its gross domestic product. That’s a lot of gyros to pay back, my friend. In order to receive additional bailouts and keep Greece afloat for a little while longer so that it can make changes in its economy, the eurozone bloc banks have demanded that parliament enact some kind of measures to ensure that these loans can be repaid. But Greece’s solution to this demand is a negative sum game; cutting programs that support workers and unemployed citizens—the lifeblood and treasure of all nations—will not spur growth, which will be the only actual solution to Greece’s problem.

The sad economic state of affairs in this small European country is made worse by the fact that citizens are well used to minimum standards of social services. I can see that if you have internalized your given wage as a right and not a contingent benefit, you would be as enraged as a petulant Greek deity if the government, in one fell swoop, came and took that right away from you. Such feelings of entitlement make spending cuts tricky because a large portion of taxes go towards social welfare and standards policies. And when the citizens of Greece turn around and see that there are still many among them, including lawmakers, who enjoy great wealth and luxury despite the purported lack of funds, perhaps throwing a Molotov cocktail at a movie theatre seems like something you should put on your CV.

Adding more fuel to the fire (pun intended) is the fact that the country must also cut 325 million Euro in “structural expenditure”. As if infrastructure weren’t crumbling enough, now there seems little hope for any kinds of massive projects of the sort that could spur on the economic growth that the nation needs to get out of the slump.

Because the stakes here are very high (if Greece doesn’t take these measures and defaults on the debt owed to eurozone banks, they risk being ousted from the monetary union, potentially going back to using Drachmas instead of Euros) the lawmakers are not happy with taking such measures. But there seems to be a lack of creativity here as well. Maybe the inertia is due to this panicked situation, where we just freeze like deer in the headlights and fail to make a radical decision because it seems “too risky”. Maybe it has just been too long since this European nation had to kick-start its economy with so little gas left in the tank. Maybe there are no ideas to implement because there are no resources to implement them.

Greece’s decision to make such austerity cuts does have an impact in the U.S. and around the world. It is not so much that Greece’s economic woes will affect the globe, but that their method of dealing with inflated debt-to-GDP ratio will invite similar kinds of cuts in other, much more productive countries. Some politicians in America fear inflation like the plague (cue the Ron Paul circus calliope) and maybe for good reason. The U.S. actually has a higher debt-to-GDP ratio than Greece at around 10.6%! However, the status of America on the world stage, the extremely high level of productivity and the potential for future recovery and stabilization sets it apart from Greece. It pays to be a behemoth when negotiating loan repayments. (By the way, you can find a lot of information about the differences between the U.S. and European/Greek situations on this excellent website.)

At any rate, the key to getting back in the game, to competing with growing Asian markets and with the world does not lie in cutting programs. Although they cost money, social programs (many of the ones that are perennially on the chopping block for some members of Congress) allow citizens to continue functioning financially so that they can contribute to the economy. Endowments and grants for the Arts and for education are crucial to allowing those creative individuals with new and innovative ideas to build something and change the market, a market that often has little room for radical change because of the undue leverage they currently wield in the political sphere, and frankly because of their enormity. Cutting health care or, god forbid, social security would just leave hospitals to foot the bill and any preventive care, which is much cheaper to implement, would be replaced with emergency procedures because patients didn’t have to money to see a doctor. These costs will be incumbent on the taxpayers.

The markets are wonderful and lead to growth through competition in normal times. But we are in difficult times, deep down in that valley of despair. When you have bitten off much more than you can chew, the solution is to drink something, not to pull out some of your teeth. If you will pardon that bizarre metaphor, I’m saying that austerity measures, unless absolutely necessary (as perhaps they are now in the case of under-the-gun Greece), are no anodyne for the economic problems we face. We need more jobs. What about government projects like bridges, roads and railways? We need those things badly and the auxiliary benefits, the centrifugal effects on growth and innovation, are probably more than we imagine.

How might we afford to begin some of those projects? Well, if we can juuuuust inch our way past that stubborn wall of opposition to taxes and limiting military expenditure; if we can show how public services and government-funded projects—not to mention socialized healthcare and controversial measures like free birth control for women and free sterilized needles for drug users (not to equate the two in any way, hehe)—are inherently rational from a practical perspective, will be wholly in our best interest and will achieve the results we seek if by non-conventional means; if we can show that using moral and religious platitudes to inform public policy has not been beneficial to a people since the time of Moses; if we can use data in all the forms available to appeal to people’s minds, not condescend or neglect all opposition that is raised, then we can perhaps have the kind of debate that will lead us in the direction to making such faraway dreams a reality.

Of course, it’s hard to be optimistic in this environment. Mitt Romney and Newt Gingrich and Rick Santorum quibble amongst themselves while constantly using liberals as a foil. The leading candidates for the highest office in the nation are so preoccupied with appealing to the lowest common denominator in America that they don’t feel the need to really qualify some crazy claims that they have made about our current President, Barrack Obama. (The food-stamps President remark comes to mind.) And so many people fall in with simplistic theories and with candidates because of poisonous political memes that have no basis in fact. The solution to this much deeper problem of finding the truth, of separating fact from horse crap…well, that could take some doing.

In the meantime there is always the present. They say there’s no time like it. We can at least use the present to throw around ideas for what’s wrong and how to fix it. And at the very least we can enjoy what we have in life because, as the Greeks are showing us—nothing is for certain; nothing good is free.