In a slow motion train wreck that will result in the eventual failure of Greece and then the slow collapse of the EU, the West watches helplessly as Greece reaps the poison fruit that it has sown for many decades. Greece, like most EU countries is a social democracy—a prime example of the ultimate result of big government. Massive government pensions protect retirees, government funded universal health care drains tax revenues, strikes occur at the drop of a hat as public sector unions demand more and more, private unions follow their lead, demanding 6 or more weeks of vacation as productivity plummets, cradle to grave “benefits,” all paid by the government with money borrowed from European banks, make the populace happy. If this sounds familiar it's because the same system exists in countries like Spain, Italy, and Portugal, and all are in trouble.
But why not increase taxes on the rich? Or for that matter, on everybody? The top income tax rate in Greece is 45% (12 percent higher than ours) but that hasn't seemed to help.
As demands for more and more money occurred, continued government borrowing became close to impossible, and the money simply ran out. Internal attempts to implement “austerity” measures were met by protests and then riots. How dare the country try to salvage its economy? Demands by creditor nations to implement even more austere “austerity” measures were met with xenophobic derision and then more riots. And now, Greek politicians have decided to put the whole austerity thing to a vote. I wonder how that will turn out?
David Warren comments on the latest attempt to save Greece after creditor banks were convinced to take a 50 percent write-down (a.k.a. haircut) on Greek debt:
… Even after write-downs that begin to seriously limit the ability of European banks to finance the European economy (which is where the wealth comes from), Greece is left owing more than 100 per cent of GDP …
And once again, let me emphasize: no banks, no economy. No economy, no jobs; and incidentally, no tax revenue. The fatuous "Occupy Wall Street" movement is premised on the notion that this isn't true, that all bank lending should be taken for free money, if the borrowers aren't in a mood to repay … A substantial part of every western electorate nods approvingly towards them, without bothering to think through what they are approving.
It was upon such electorates the Nanny States were built; and in turn, within such Nanny States that incredibly irresponsible public attitudes were cultivated. The very impulse to blame everything that has gone wrong on the greed of "bankers" and "capitalists" betrays a world view that is essentially insane, and now shifting, under pressure, towards malice.
Which is hardly to say bankers and capitalists are without blame. They played along with fanciful regulatory regimes, from short-term self-interest. They knowingly accepted a dream world in which paper is backed by paper in infinite recession, and applied all their wits to devising the clever instruments by which they themselves were fooled.
Why is all of this important? After all, it’s a European problem. Or is it?
As we watch a perpetually campaigning President demagogue economic issues, propose programs “right now” that follow the Greek model, and at the same time sow the seeds a class warfare, it’s not difficult to envision an outcome for us that is not too far different than the inevitable outcome for Greece.
The class warriors who support Barack Obama live in a fantasy world in which “the rich” can be taxed at levels that will assuredly support the economy. Just tax at 50 or 60 or 70 or 80 percent, and everything will be okay. It simply isn’t possible for such a small number of people (“the rich’) to support the growing trillions that the same class warriors expect us to spend. But no matter, the class warriors believe it to be true. Just like the Greek people believe that their government is lying to them when it states that the money is gone and the creditors will lend no more.
If we follow the lead of the class warriors, your children, like Greek children today, will live in a time when the money is gone and our creditors will lend us no more. If we follow the lead of the class warriors, our future is assured—and it won’t be pretty.