How We Can Learn from Greece’s Big Mistakes

The Financial World According to Inya” Column by Inya Ivkovic, MA

It seems that Greece’s economic fiasco is of importance only to European egocentrics, who simply cannot abide anyone filing out of line so disgracefully. The embarrassment of airing the dirty laundry of one of Europe’s own before the entire world is in the poorest taste and beneath the Old World’s dignity, particularly having in mind how Greece got to this point.

Greece’s formula for failure revolves around the dysfunctional concept of ethical values and behavior and social programs that promote the lazy and entitled, government policies that hinder private enterprise at the expense of the society as a whole. Finally, when the smelly stuff hits the fan, it all revolves around finding someone else to blame for everything that has gone wrong. Certainly, Greece is not the only country in Europe on this path of self-destruction, already joined by Portugal, Spain, Italy and Ireland. Moreover, some of the ingredients in Greece’s recipe for disaster can be found outside Europe, too.

When global financial systems went through a meltdown in 2008 and 2009, the kneejerk reaction was to unleash the full power of the “big government.” That resulted in an unprecedented eruption of stimulus spending all over the world in unrehearsed, yet near absolute sync. It also resulted in diminishing revenues that pushed many countries’ debt-to-GDP ratios into the stratosphere. The fairytale of global prosperity ended up being — as all stories too good to be true usually are — a Faustian bargain with Faustus, yet again, not ready to pay Mephistopheles’ price.

It is not just the financial crisis — although it’s the worst in a generation — that is bringing the West to its knees. Our birth rates are declining, while our respective populations are aging. That means fewer workers contributing to governments’ treasuries and more citizens making demands on their respective purses. In other words, unless Western governments’ power to collect revenues through taxes isn’t restored soon, and their spending scaled to measure, many more countries will have found themselves on the edge of a cliff, just like Greece.

The abyss into which Greece has fallen is not only of the economic variety. When government union demonstrators hit the streets of Athens, many shop windows got broken, while workers left state hospitals empty and trains unmanned nationwide to fight for their obscene compensation and benefits. Perhaps it does not seem like much and such demonstration of public discontent certainly could have been worse. But it was also deeply immoral. Private enterprises have had to pay a tough price to survive during the recession, while the union-protected public sector kept its jobs, flexible working hours and generous compensation. What’s the lesson here?

The way I see it, unions are a festering wound in many Western countries, not just in Greece. Many of them need to have their monopoly power shut down and their operations privatized. Unions have long achieved noble goals from their beginnings by passing them into important laws. But, these days, most are only about protecting unionized workers’ compensation and benefits that are over and above what an average worker in the private sector can even dream of. This is why unions would be wise not to prepare for battle this time around and not to push to what they believe they are entitled to too far. The resentment earned during the good times is already deep enough.

Democracy is a beautiful thing. And it works for the most part, as long as people have an understanding of what makes a successful nation and what breaks it. Greeks have obviously learned little from their own history, but we risk having a Greek-like tragedy on our hands if we learn nothing from them.