Greece, Where Everybody’s Right and Nobody’s Wrong

That Greece has been an economic basket case for years (officially since 2009) is hardly news to anyone by now. But (and admittedly I’m painting with a broad brush), depending on where one’s political and economic priors lie, different crises narratives may dominate perceptions of just what exactly went wrong. In one telling, greedy bankers, “the rich”, Goldman Sachs, hate-filled Germans (really just pick your bete noir) have imposed immoral austerity policies on Greece for reasons which remain unclear.* In another telling, Greece has no choice but to drastically cut its spending, and if the ensuing economic crisis creates a few opportunities for hedge funds to profit, well that’s just how markets work. Last Thursday illustrated this duality in miniature: here with a story from Bloomberg on Greeks illegally reconnecting to the electricity grid, and here with a link from Dealbreaker on a Greek-focused hedge fund which has returned 107% in the last year.**

The problem is, it’s not a case of one or the other; in some ways both narratives are true. The suffering that inspires the first claim is real and profound; an entire generation has seen its prospects at a normal life with stable employment go up in flames as the country has come crashing down around them. On an individual basis it is all too easy to find people who have done nothing wrong, paid their taxes, contributed to society, and still found themselves in dire circumstances due to austerity. But the hole in the country’s finances that created the need for austerity in the first place was undeniably enormous, hedge funds profiting on the collapse is how markets work, and collectively society was almost laughably guilty in its indulgent overspending.

In fact, it’s the tension between these two accounts of the crisis that illustrates its genesis. Greece today is the result of an enormous collective action problem. For decades society treated the government as an ATM and regulations as nothing more than the rules of a game to be won (certainly not things to abide by); on an individual basis you would have been foolish not to.*** In a Lockean vacuum it is ridiculous to suggest categorically that only a sucker pays his taxes. But in a country where nobody pays taxes, it becomes true. What you wind up with is a state of affairs in which, when the things that cannot go on forever stop (in this case, lavish government spending combined with near-pathological tax avoidance), the people who played by the rules and get screwed are legitimately furious, and so are the people who didn’t.****

 

*When it comes to serious reporting on the subject this is claim is perhaps a bit of a straw man, but on the other hand just look at what Syriza campaigns on. At least Krugman’s got a theory on his side when he argues against austerity. They’re just pissed because the money is gone
**And here is a story from today saying the power will be turned back on after all
***I don’t want to speculate here on how this came to be, but the Greece chapters in Balkan Ghosts offer an interesting and, if you’ve spent time with Greeks, intuitive explanation
****I don’t mean to suggest it is actually excusable to cheat on one’s taxes, but we are also not moral agents independent of our circumstances, and in an environment of rampant tax evasion and rule-avoidance…how much tax would you pay out of a sense of civic duty?