Greece is currently in a bad way. After years of forced austerity measures imposed by the Troika (made up of the EU, International Monetary Fund, and European Central Bank), the Greek economy continues to sink, and is facing potential catastrophe if a cash-for-reform debt deal cannot be struck between the left-wing coalition Syriza government, and the neoliberal Troika, which wants further budget cuts for more loans. Without a deal, the Greek government will default on debt repayments to the IMF by the end of June, and it is quite possible that Greece could eventually exit the eurozone, which would almost certainly result in a harsh depression.
The Greek Prime Minister, Alexis Tsipras, has stood firmly to his ideals in the negotiations, and recently said that “further cuts to pensions after five years of looting under the bailouts can only be viewed as serving political expediency. We will patiently wait until creditors turn to realism. We have no right to bury the European democracy in the land where it was born.” He has also used the term ‘humanitarian crisis’ to describe post-austerity Greece, which is not hyperbole. Greece has a 25% unemployment rate, a third of the people live below the poverty line, 300,000 are living with no electricity, and infant mortality rates have jumped over the years. These problems are largely due to forced budget cuts of the past five years. Between 2009 and 2011, hospital budgets were cut by 25 percent, while pharmaceutical spending was cut in half, leaving 800,000 people lacking health services.
Now, it is quite clear that the further budget cuts that the Troika is currently demanding will only deepen this humanitarian crisis; but at the same time, a default would be similarly catastrophic in the short term (and probably the long). Greece is in an extremely precarious and dangerous situation, as is the eurozone and its creditors. But how did they get there? How did Greece fall into such an economic disaster?
If you were to ask someone on the right, the answer would be obvious; it’s because of Greece’s socialist economy. This is what John Hayward of Breitbart believes, writing:
“Americans who haven’t been paying much attention to the collapse of Greek socialism have been missing a very instructive lesson in where their own country may be heading, for Greece is the end stage of Obama-style debt-fueled dependency politics.”
Bill O’Reilly has similarly concluded: “In Europe, Greece is bankrupt because of their socialistic policies, and it all comes back to the same thing, private enterprise being strangled by big government spending and regulations. Entitlements, free stuff, giving people the means to live – giving it to them, rather than having them earn their way.”
So, is Greece a case of failed socialism, as the right wing consensus believes? Not even close.
First things first, Greece is not a socialistic country — though it did recently elect the left-wing Syriza party to office, which explains the current standoff between Greece and the neoliberal Troika. The reality is, compared to other European countries, its social expenditure-to-GDP level does not even make in the top ten list. France, Finland, and Belgium spend the highest social expenditure-to-GDP levels, according to the OECD, while even Germany, which has been the foremost advocate of austerity, had a higher social expenditure-to-GDP level than Greece in 2014, as well as in 2009. Furthermore, many of these high social expenditure countries, such as Denmark, Norway, and Sweden, have significantly lower debt-to-GDP rates than the United States.
High social expenditure, or what O’Reilly calls “socialistic policies,” cannot be blamed for what is happening in Greece, because countries with more comprehensive welfare programs and higher social expenditure, like in Scandinavia, are fiscally healthy.
The true problem with Greece is as much cultural as it is economic, and the problem of corruption runs deep. Greece has a very long history of corruption and tax evasion, going back to its four century rule under the Ottoman Empire. In a Boston Globe article, Thanassis Cambanis writes:
“The Ottomans ruled through a combination of neglect and stifling bureaucracy, which gave rise to a system of institutionalized bribes. The sultan milked his provincial governors, who in turn squeezed the citizenry. Taxes were just another negotiable kickback. That Ottoman legacy is still alive, nearly two centuries after the first parts of Greece won independence. The Greek elites mirror the predatory habits of the sultanate, while the citizens act as if evading taxes is a heroic act of revolt against the occupier.”
This unfortunate culture of distrust and dishonesty in Greece has greatly contributed to the current catastrophe. According to surveys, 80 percent of Greeks believe it is okay to claim government benefits which they are not entitled to, while only 20 percent do not. This is almost completely opposite the European average. Additionally, about one-third of Greeks are self-employed, which is about twice the European average, and these individuals, usually high income workers, significantly underreport their income. In five Greek sectors, including doctors & medicine, accounting & financial services, and lodging & restaurants, data shows that people in these sectors on average report paying more on debt repayments each month than what they actually earn — a clear sign of unreported income.
Beyond this culture of corruption, significant blame for the current crisis in Greece also rests on the shoulders of creditor nations; the largest being Germany. As Martin Wolf once put it, “Since the world cannot trade with Mars, creditors are joined at the hip to the debtors. The former must accumulate claims on the latter. This puts them in a trap of their own making.” Germany has been the foremost advocate of austerity measures, and is usually painted as the responsible country. But there is nothing responsible about irresponsible lending; without the creditors, there would be no debtors. Germany wants everyone to be like them, but this is silly and could never happen; for one country to run a constant surplus, others must run deficits.
Finally, another major factor is the single currency of the eurozone, which, as the euro crisis has clearly shown us, empowers certain countries, while holding others captive. In the United States, when a recession comes, our government and central bank can create more money through expansionary policies such as lowering interest rates. In the Eurozone, countries like Greece are subjected to the policies of the European Central Bank, and therefore Greece cannot print itself out of trouble.
Within the same segment of the earlier quoted O’Reilly factor, the host says, “[Spain, Portugal, Greece, and Italy are] big entitlement societies. In the freer societies, like Germany…the unemployment rates 4.7…Denmark 6.2. So it seems to me, that the more socialistic you are, Greece being the best example, the weaker the economy is for everyone, am I wrong?” O’Reilly seems to be unaware that both Germany and Denmark spend more social expenditure-to-GDP than Greece does. He also seems unaware, or more likely doesn’t care, that in the Scandinavian countries, which are certainly more socialistic (in the sense that he believes) than Greece and other southern european countries, they rank very high in areas like prosperity, global innovation, global competitiveness, and ease of doing business. Additionally, the “freer” society of Germany has universal healthcare, strong labor laws, and people work an average of 35.3 hours per week. Can you guess which country has the longest average work week in Europe? Surprise, it’s those lazy socialists in Greece!.
Greece is currently in a bad situation, everyone agrees there. But it is clearly not because of some kind of failure of socialistic policies that the right wing claims. Unfortunately, it is very complex, and is easily sold to many Americans without any knowledge of the situation as a case of failed socialism; but this is simply untrue. Draconian austerity measures, monetary dependence, irresponsible lending, and a culture of mistrust and corruption have all contributed to the current situation. Now, this reality is not very convenient for those on the right, and therefore it will be ignored, just as the success of Scandinavia is ignored. But as President Obama said of climate change, you can ignore the facts, [but] you can’t deny the facts.
Conor Lynch is a writer and journalist living in New York City. His work has appeared at Salon, The Hill, Alternet, and openDemocracy. Follow him on Twitter: https://twitter.com/dilgentbureauct.