What Happened in Greece?

By Napoleon Linardatos Wednesday, May 16, 2012

In Jonah Goldberg’s The Tyranny of Clichés, liberals in the United States try to conceal their ideological bias by pretending to be objective, pragmatic, and moderate. The Greek Left, on the other hand, operating in a center-left country, has no such preoccupations.

In the May 6 parliamentary elections, for the first time in recent history, a party of the far Left came in second. It is composed of various subgroups such as the eco-socialists, the Anti-Capitalist Group, the Communist Organization of Greece, and the Trotskyist Communists of the group known as Red. Just in case you found all those names too pragmatic or moderate, the party itself is called the Coalition of the Radical Left.

The Coalition of the Radical Left is led by Alexis Tsipras, who is not actually the official party leader, but merely the leader of the party’s parliamentary team — previously, the Coalition of the Radical Left was not able to come to an agreement as to how it would elect a party leader, let alone who that leader would be. In the May 6 elections no party gained a majority, and no coalition of parties has managed to build a majority, and therefore there will be another election in mid-June. In that election, the betting now is that the unreconstructed leftists and Communists of the Coalition of the Radical Left will come in first, and will come pretty close to gaining a majority.

The Coalition reassures Greeks that there is nothing wrong with the Greek economic model. It actually plans to hire at least 100,000 more people in the public sector, to restore all the budget cuts made over the past two years, and to offer free health care and social services to all illegal immigrants. Mr. Tsipras and his party think that Mrs. Merkel and other European leaders are just bluffing and that they will be willing to accept any price in order to avoid a Greek exit from the euro zone.

Such a supposition is not farfetched considering what the record of the Greek bailout has been. Since May 2010, when the Greek rescue was initiated, nothing much in the way of actual reform has happened. There were some across-the-board cuts in salaries and pensions, but not a single privatization has taken place. There have been no important changes in the sclerotic labor market, no opening up of closed shops, no simplification of the Byzantine tax system. Instead, the recent Greek governments and their European partners have put nearly all their energy into squeezing more taxes out of the anemic and overregulated Greek private sector. Seventy-five new or increased taxes have been imposed in the name of reform.

It is not surprising, then, that the Greek economy is in free fall. The unemployment rate is now over 21 percent, the economy is in its fifth year of contraction, half of all young people are unemployed, the suicide rate is going up by double digits every year, and hundreds of thousands of people working in the private sector have not been paid for months.

There are various reasons why the Greek crisis has been such an unmitigated disaster. First of all there is the leadership of the European Union, which doesn’t know what it wants and how to get it. Even when Greece’s European partners are right in what they want, they are completely clueless and tone-deaf about how they communicate and demand things. Then there is the Greek political class, which is not used to the art of politics. In the last three decades competence and persuasiveness were not the skills required for a successful political career. Greece substituted borrowing and subsidies from the European Union for wealth creation, and its politicians are experts only at throwing money at problems. That’s all they know, and that’s all they hope for right now. They expect that salvation will come in the form of eurobonds and more wealth transfers from the European north.

Greece is the prime example of the dysfunctional politics created by high levels of debt. The chief obstacle to Greece’s recovery right now is not strictly speaking the amount of debt she owes, but the complex labyrinth of social expectations, beliefs, and interdependencies that make a reasonable resolution of her present crisis all but impossible. Debt for the Western world is what oil has been to the Arab world, a grave impediment to good governance and politics, and an engine of continuous societal decline.