The crisis in Greece may have lessons for the analysis of conditions in other countries, including our own.
With a population smaller than that of the New York City metropolitan area and a GDP smaller than that of Dade County, Greece is not obviously of great significance in the grand scheme of things. But in economic terms, it may be important as the trigger for a chain reaction involving much larger countries, and as a state with a remarkably unstable political history, matters that are veiled elsewhere are quite out in the open in, say, Constitutional Square in Athens.
First, some reminders about the recent history of this beautiful country in the lower right hand corner of Europe.
Greece has been governed by an absolute monarchy (under a German dynasty imposed by the nineteenth-century European powers); a constitutional monarchy (two or three times); a civilian dictatorship (three or four times); foreign occupiers (twice) and by a parliamentary democracy with a civilian president as head of state. At the moment of writing it has no government at all, simply technocrats charged with keeping the departments of state ticking over. Just below the surface, the passions of the extraordinarily cruel civil war that began in 1944 continue to influence attitudes and events.
The periods of more or less democratic government have been characterized by a trading of power between clubs of politicians in Athens, most recently the left-of-center Socialist Party and the right-of-center New Democracy Party, each led by a representative of a family dynasty. This system is viewed with much cynicism by ordinary Greeks, who speak of it as a method for ensuring that the spoils of office are more or less equally shared by the members of the political class. That corruption at the top of the system, where, it is said, no contract is signed without a bribe and no politician leaves office poor, serves as a pattern for economic relations throughout Greek society. Taxes are evaded as a matter of course; jobs are often purely nominal; promotions are doled out by means of favoritism and kick-backs. Or so one is told by any taxi driver, businessman, teacher or professor one talks with for more than five minutes.
In other words, there is a crisis of governmental legitimacy similar to that which occurred in Italy in the 1990s. In Greece, it appears as a repudiation of the two traditional ruling parties, support for both of which has flowed away to such an extent that even together they could not command a majority in Parliament. But it is much deeper than that. It is a repudiation of government itself as each family struggles on its own for survival amidst the economic catastrophe.
The European financial crisis takes different forms in each country. In Britain and Spain it can be traced to the collapse of a construction bubble. In Iceland and Ireland it is difficult to see it as anything other than the result of massive theft by bankers. Overall, the answer to cui bono? appears to be the banks and investors of Germany, the Netherlands and—curiously—Finland. This is very clear in relation to Greece.
During the boom years under the last Socialist government, German and other banks carelessly loaned large amounts of Euros to Greek banks and other entities, in much the same way that American banks operated in the subprime housing loan market. Being Greece, much of these funds went into the pockets of politicians (or so one is told), but, in any case, much more was loaned out than can now be repaid. Just the other day it was reported that all, or nearly all, the new money from the creditors is going to pay the interest on earlier loans. In other words, the Germans, Dutch and Finns are paying themselves with the funds they claim are provided to assist the Greeks, and then complaining that Greek indebtedness continues to rise. And just as in a similar crisis before the First World War, a group of creditor nations are proposing to take control of the Greek financial system so as to ensure payments to the banks and others—if they have not already done so. This is the way in which countries like India and Egypt were incorporated into the European empires in the nineteenth century.
Perhaps the profits to be made from this situation have something to do with the curious episode last winter when then-Prime Minister Papandreou, who had called for a referendum on the euro, was called to Berchtesgaden and ordered to cancel it and resign.
In Greece, there is no obvious separation between the economy and politics. As the economy shrinks, its retreating tide reveals the isolation of the political class from any direct connection with most of the people. There are historical precedents in that part of the world for what happens next and they are not pretty.
Well, that is a small country, far away, of which we know little. What do its troubles have to do with us? Our political offices are not up for purchase by the highest bidder, despite the Citizens United decision. Our economy is not dominated by speculators, casino banking and hedge funds. The voices of the man and woman in the street are heard in the corridors of power. That is, still, true, is it not?
The political lesson we can derive from the Greek situation has to do with the importance of political decisions being taken with a view to the well-being of the 99%. The economic lesson has to do with the importance of privileging public well-being over private profit. As the American political system approaches the Greek model—family dynasties, laws written by lobbyists, pay-offs to high officials disguised as fees for speeches and seats on the boards of corporations—political decisions are increasingly business decisions and governmental economic decisions are increasingly . . . business decisions.
Adam Smith was wrong. The pursuit of private profit does not always result in increased well-being for all. Sometimes it results in the destruction of the commonweal. That time is at hand in Greece. Perhaps we have time to avert a similar outcome.