By Paul
Krugman
New York
Times columnist
The Greek
fiscal crisis erupted five years ago, and its side effects continue to inflict
immense damage on Europe and the world. But I'm not talking about the side
effects you may have in mind - spillovers from Greece's Great Depression-level
slump or financial contagion to other debtors. No, the truly disastrous effect
of the Greek crisis was the way it distorted economic policy, as supposedly
serious people around the world rushed to learn the wrong lessons.
What happened last time, you may recall, was
the exploitation of Greece's woes to change the economic subject. Suddenly, we
were supposed to obsess over budget deficits, even if borrowing costs were at
historic lows, and slash government spending, even in the face of mass
unemployment. Because if we didn't, you see, we could turn into Greece any day
now. "Greece stands as a warning of what happens to countries that lose
their credibility," intoned David Cameron, Britain's prime minister, as he
announced austerity policies in 2010. "We are on the same path as
Greece," declared Rep. Paul Ryan, who was soon to become the chairman of
the House Budget Committee, that same year.
In reality, Britain and the United States,
which borrow in their own currencies, were and are nothing like Greece. If you
thought otherwise in 2010, by now year after year of incredibly low interest
rates and low inflation should have convinced you. And the experience of Greece
and other European countries that were forced into harsh austerity measures
should also have convinced you that slashing spending in a depressed economy is
a really bad idea if you can avoid it. This is true even in the supposed
success stories - Ireland, for example, is finally growing again, but it still
has almost 11 percent unemployment and twice that rate among young people.
Many still unemployed
And the
devastation in Greece is awesome to behold. Some press reports I've seen seem
to suggest that the country has been a malingerer, balking at the harsh
measures its situation demands. In reality, it has made huge adjustments -
slashing public employment and compensation, cutting back social programs,
raising taxes. If you want a sense of the scale of austerity, it would be as if
the United States had introduced spending cuts and tax increases amounting to
more than $1 trillion a year. 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. There are some
positives; the economy is growing a bit, finally, largely thanks to a revival
of tourism. But, overall, it has been many years of suffering for very little
reward.
The remarkable thing, given all that, has
been the willingness of the Greek public to take it, to accept the claims of
the political establishment that the pain is necessary and will eventually lead
to recovery. The news that has roiled Europe these past few days is that the
Greeks may have reached their limit. The details are complex, but basically the
current government is trying a fairly desperate political maneuver to put off a
general election. 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.
Mad as Hellas
The
important point here is that it's not just the Greeks who are mad as Hellas
(their own name for their country) and aren't going to take it anymore. Look at
France, where Marine Le Pen, the leader of the anti-immigrant National Front,
outpolls mainstream candidates of both right and left. Look at Italy, where
about half of voters support radical parties like the Northern League and the
Five-Star Movement. Look at Britain, where both anti-immigrant politicians and
Scottish separatists are threatening the political order.
It would be a terrible thing if any of these
groups - with the exception, surprisingly, of Syriza, which seems relatively
benign - were to come to power. But there's a reason they're on the rise. This
is what happens when an elite claims the right to rule based on its supposed
expertise, its understanding of what must be done - then demonstrates both that
it does not, in fact, know what it is doing and that it is too ideologically
rigid to learn from its mistakes.
I have no idea how events in Greece are
about to turn out. But there's a real lesson in its political turmoil that's
much more important than the false lesson too many took from its special fiscal
woes.
(Πηγή: chron.com)
