The headlines in the last week or ten days have covered the ongoing situation in Greece which now seems to be coming to a head. What will happen? Will Greece leave the Euro and go back to its own currency? Or will the European Union loan them more money? And if so, what we be the new terms? It’s even been suggested that Greece could go off the Euro, but remain in the European Union – or not. If Greece leaves the Euro, will that make the European economic situation worse? And what implications would that have for the U.S.? I don’t pretend to know what might happen, but I hope there are at least two results that come out of the current crisis.
Alexis de Tocqueville in his early 1800’s study of U. S. democracy opined that “[A democracy] can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.”
In this case, the Greeks seem to be trying to vote themselves benefits from the European Union treasury. Is it fair for Germany and France and the other users of the Euro who have adequately managed their fiscal policies to finance the Greek people who haven’t? Was de Tocqueville right? Will we see dictatorships back in the European community? I hope not, but what seems reasonably obvious is that the more freedom that people have, the more individual responsibility they need to take for their own welfare. It would seem that the Greek population has become dependent on the government for much of their wellbeing, with retirement pay starting at 50 years old and a large number of jobs provided by the government. The fiscal problems did not start yesterday, they started several years ago and have slowly gotten worse. I haven’t read anything in the last few weeks that suggests an easy solution that would be painless to much of the Greek population. But it would seem that the longer it goes, the more difficult will be the solution and the more pain will be involved. If the European Union continues to bail them out, it would seem that it would likely continue to get worse. But the good news is that if Greece goes under, it will not crater the rest of world’s economies at this point because Greece is a relatively small economy.
So the first thing I would like to see is for the Greek people to decide they need take the responsibility to fix their own problems – as painful as that may be in the short run. Can this be done without Greece leaving the Euro or the European Union? I don’t know the answer to that, but it would seem that if the EU throws them out, they would be forced to do that. But I would like to see them fix their problems without becoming a dictatorship, which would seem to be a higher possibility if they leve the EU.
The other danger is that there are other EU countries – notably Italy and Spain – that have fiscal problems that need to be addressed. If those countries don’t address these problems and they continue to deteriorate to the point that Greece has, the danger to the World’s economies is much greater because they are so much bigger. So the second thing I would like to see is for these other countries, and their voters, get a wake up call while still time to get their fiscal house in order. There doesn’t seem to be any way to address the Greek problem without some pain to the Greek people. If the people in those other countries get that message now, they may still have time to get their house in order before it gets too painful. Will it take Greece leaving the EU to get that point across? I don’t know the answer to that either. But I hope for the sake of all of us that recognition of the dangers of not having fiscal responsibility gets made now.
And by the way, I don’t think the U. S. is immune to this problem. Maybe we need a wake call as well?