The Missed Lesson of Greece’s Financial Crisis

On Sunday, 61% of Greek voters rejected the European bailout referendum. The Greek financial situation has led many American conservatives (and neoliberals) to point to Greece as an object lesson in the failures of socialism. Focusing only on Greece’s spending habits, however, misses the underlying issue, and American conservatives need to understand this if they ever want to address the fundamental problem that besets ours and the world’s economy. For the record, I’m not sure the problem is solvable at this point, but we need to at least understand what it is if we hope to fix it, and the problem will not be fixed by just spending less and “living within our means.”

There are no good guys in the Greek situation. Conservative critics of Greece’s socialistic ways are correct that it is not realistic for a country and its citizens to expect to continually live beyond their collective means. Excessive portions of the Greek workforce are employed by the government, and Greece allegedly cooked the books initially to make their economic situation appear better than it really was.

However, what too many of Greece’s critics are failing to point out is that the world monetary system encourages debt because debt is how new money comes into the system. Every new Euro/Dollar requires debt. So the system wants manageable debt, rather than unmanageable debt, but it most certainly does not want no debt or large scale “living within our means.” Such would grind the system to a halt. So the system essentially wants the debt can kicked down the road at a slower pace than Greece is kicking it, but you still can’t avoid the ultimate day of reckoning.

It is a bit rich for U.S. conservatives to finger wag at Greece for living beyond her means. While American conservatives say they want to cut spending and balance the budget, they act indignant when Democrats suggest they want to cut this or that popular entitlement or spending program, and they want to perpetually increase spending on defense because they apparently think it is the God-ordained duty of the United States to make the whole globe safe for democracy. The reason the U.S. isn’t where Greece is is because we have our own central bank, but the printing press is the 800 lb economic gorilla in the room and our time is surely coming. A wag might conclude that the superficial lesson from the Greek crisis is to have your own central bank and printing presses.

The take home point is that it is not enough to lecture the Greeks for being profligate Socialists, while ignoring the fact that our unsustainable monetary system actually encourages debt (national and otherwise) and can’t run without it. This is a built-in feature of the modern banking establishment, but the last major candidate who attempted to make this an issue got labeled a kook by a lot of mainstream conservatives for his troubles. So please spare me the morally superior posturing regarding the Greeks’ spendthrift ways. Our time is coming, and no one will be able to say we weren’t warned.