- (July 2015)
The cost of Greek austerity
In 2008 i was shocked to read that
Lehman Brothers had accumulated a total debt of $613 billion: imagine what
the world could do with that much money, money that just one firm managed
to lose. At the time i was in Africa and i remember checking the GDP of
African countries: i was amazed to realize that (in 2008)
this amount was more than the GDP of any African country.
TM, ®, Copyright © 2015 Piero Scaruffi All rights reserved.
It is hard to believe, but in five years the money spent to save
Greece from bankruptcy amounts to 350 billion euros (as calculated by the Greek
statistics agency ELSTAT), which is about $400 billion.
I was, again, reading this while i was in Africa, where some towns don't have
electricity because they cannot find $100 thousand.
In 2015 there is only one African country whose GDP is higher (Nigeria, $650 billion).
I was in Zimbabwe that is suffering from a drought: farmers are losing their
crops because nobody can find a few million dollars to build irrigation canals.
International charities are happy when they can collect $1 billion in a year:
Greece, a country of 11 million people, got $70 billion a year.
Again, i am shocked to realize how much money the financial world can waste
on lost causes when so much could be done with much less to improve the
infrastructure that limits the opportunities of billions of people.
If you don't care about the number of people, put things in financial
perspective: Greece's economy is about $240 billion. If it were part of
the USA, it would rank 25th after Louisiana.
With all respect for the cradle of Western civilization, one has to wonder
why the international community felt that it was so important to bail out
this small economy.
The Greeks seem to have used some kind of guilt trip: "we're in this mess
because of the austerity that you creditors imposed on us".
I am not sure that this theory flies.
GDP rose by 0.7% in the third quarter of 2014, as Greece finally
exited recession for the first time in six years.
In november 2014 the Guardian (usually a critic of austerity) titled
"Greece growing again, Italy back in recession.
Germany has narrowly dodged recession." Yes, just a few months ago
Greece's economy was actually growing faster than Germany's (and Italy's).
In fact, Greece GDP ended the year with a 1.7% increase over the previous year:
by the standards of the eurozone this was not a bad number at all.
Two months later the populist Syriza party
won national elections
(it is usually labeled as "leftist" but it is
mostly just anti-austerity - its fans include right-wing French politician
Instead of blushing at
the amount already spent on his country, the new prime minister
set out to negotiate with the creditors in order to obtain more money.
It is interesting that so many people are telling the Greeks what they can
learn from Argentina 2001, Brazil 2002, Latvia 2008, Iceland 2008, Ireland 2009,
Portugal 2011, Cyprus 2012, Spain 2012, not to mention Poland (not a euro country) and Lithuania
(the two big success stories of European austerity),
but noone is telling the Greeks
to learn from their ancestors, who used to be the wisest west of India.
It is fascinating to speculate what Socrates, Aristoteles and Platon
would think of this mess.
One thing these philosophers might have pointed out,
because they were more objective and educated
than today's voters, is that "austerity" is a vague term. I can hear Socrates
ask: "which austerity?"
As Jeffrey Dorfman has shown, most
European countries who lament the effects of austerity have actually increased
their government spending. This is hardly the definition of "austerity".
Austerity is what a peasant family in Zimbabwe feels when a drought erases
their crop. Austerity is what millions of families feel when they don't have
electricity to turn on a light bulb at night (let alone to
run air conditioners in unbearable summer heat).
Socrates' last words, as reportedly spoken to Crito by Platon, were: "Don't forget to pay our debt."
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