Sunday, July 3, 2016

The Price of the Carthaginian Policy in Greece by James K. Galbraith

In the United States we do not consider that there is such a thing as a people of Florida or Rhode Island or even of Texas, who have specific and intrinsic rights to their houses and businesses; nor apart from “buy local” campaigns do we care whether a company is headquartered within or outside the state. We consider that you have a right, neither more nor less, to what you can afford. And yet in the US there are compensating buffers—Social Security, Medicare, Medicaid, food stamps, unemployment, disability and deposit insurance—all of which provide a baseline below which, in principle, one cannot fall.
Europe, however, struck a different bargain, basing social welfare policy at the national level while preserving distinct national identities within the European Union. And so the question: does national identity convey economic rights of any type? In a contest with creditors and contracts, do sovereignty and democracy have a role? In joining the European Union—a confederation of states and not a federation—most European peoples believed so. But the lesson of the Greek case, so far, is that from the perspective of Germany, the European commission, and the European Central Bank, the answer is that no national economic rights whatever remain.
Beginning in January 2015, the newly-elected Left government of Greece advanced four major economic policy arguments:
  • that the overall macroeconomic target, expressed as the primary surplus, should be realistic and achievable;
  • that labor standards of the International Labor Organization should apply;
  • that pensioners should not be reduced to destitution; and
  • that privatizations should not be on a fire sale basis, with no fiscal benefit or upside to the Greek state.
Nobody contested these points. Nobody argued that cutting pensions, for instance, would restore economic growth. But neither were any of these points conceded. Instead Greece was told to conform to instructions, not because it was good for Greece, but because change for Greece would entail concessions to other countries that the creditors did not choose to make. So the Greek welfare state, which was never strong to begin with, had to be destroyed.
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