By Victor Davis Hanson
Thursday, June 25, 2015
For almost six years Greece has been on the cusp of
financial disaster. Its Northern European and international creditors have
extended loans, suspended interest payments, and forgiven some debt.
But European lenders have also stubbornly kept to the
old-fashioned principle that debtors freely borrowed their money from lenders,
and therefore most borrowed money must be paid back, regardless of the current
financial status of the debtors.
Greece counters that after all sorts of austerity budgets,
it simply can no longer inflict the necessary pain on its relatively tiny
population to squeeze out enough cash to pay its well-off creditors. In other
words, borrowed money only sometimes must be paid back — depending on the
relative wealth of the respective borrower and lender.
Economists still bicker over what caused the crisis. Was
it Greek structural inefficiencies coupled with appetites for expensive foreign
imports that Greeks could not afford? In the last decade, high-priced Mercedes
cars became as common in Athens as the swimming pools that dotted the Aegean
landscape.
Was the Greek tragedy more due to endemic corruption,
rampant tax evasion, and cronyism? Longtime residents of Greece knew that it
was a national pastime to conduct business off the books, to give discounts for
non-reportable cash payments, and to cram bloated state bureaucracies with
friends and cronies.
Or maybe the borrow-and-spend spree could have continued
were it not for the 2008 financial meltdown on Wall Street that stopped the
merry-go-round of lending and borrowing?
Politicians likewise fight over the best ways to solve
the crisis.
Write off the Greek debt but make Greece abandon the euro
and perhaps the European Union as well? Or write off the debt but only in
exchange for radical reforms in the Greek economy that will preclude another
borrowing spree? Or write off the debt and just let Greece do as it pleases?
Behind all the acrimony is an unspoken Greek assumption
that has nothing to do with either economics or politics, but reflects a
growing trend around the world.
The thinking goes something like this. The rich Northern
Europeans have more money per capita than do the Greeks. They could write off
the entire Greek debt and not really miss what they lost. In the Greek
redistributionist mindset, why should one group of affluent Europeans grow even
wealthier off poorer Europeans?
Athens has adopted the equality-of-result mentality that
believes factors other than hard work, thrift, honesty, and competency make one
nation poor and another rich. Instead, sheer luck, a stacked deck, greed, or a
fickle inheritance better explain inequality. Fate or cosmic unfairness can
result in good but poor people owing money to bad but wealthy people.
Default, then, is sometimes morally justified. The Greeks
fault their most prominent creditor, Germany, for its cruel past Nazi
occupation of Greece, for its cold obsessions with the financial bottom line,
and for its ethnocentric manipulation of the euro and the EU itself.
Something similar to the Greek mindset arose during the
U.S. housing bubble and collapse of 2008.
Millions of Americans unwisely took out subprime
mortgages for houses they could not afford and then walked away from their debt
when the economy tanked. They understandably blamed Fannie Mae and Freddie Mac,
avaricious Wall Street speculators, rah-rah realtors, and dishonest banks that
pushed overpriced homes and mortgages onto the unsuspecting.
The current student-debt fiasco is also similar. Young
people who have little money owe lots of it — $1 trillion in aggregate — to
banks that already have lots of it.
It no longer matters how the debt was incurred, only that
poor students and ex-students are unlikely to pay most of it back.
Everybody but students is supposedly to blame. The
universities constantly upped tuition costs while pushing loan packages on
students. The weak economy offered few good jobs to the recently graduated and
indebted. The government foolishly guaranteed the loans and thus greenlighted
greedy campuses and banks to charge whatever they pleased.
Students are as likely to pay back their $1 trillion as
Greece is its $350 billion.
The Obama administration is sympathetic to the mindset of
debtors. Its sloganeering suggests that wealth creation is either not really
the work of the individual (“you didn’t build that”) or something that reflects
greed rather than thrift (“I do think at a certain point you’ve made enough
money”).
Greece will not pay because an increasing number of
nations in the Western world do not look at borrowed money as a contractual
agreement that is central to a modern economy. Instead, they see renouncing
debt as both a moral act and a reasonable method of wealth redistribution.
Payback depends not on who legally agreed to what with
whom — but on who has money and who doesn’t.
In short, debt has been redefined as equality and
fairness.
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