A country delivered into desperate straits—by greed

We cannot go on living in a country in this condition. Soon Greece will be like an African country.
— Athanasopoulos Periklis, a mechanical engineer

Things are really, really bad in Greece. The Daily Mail paints a portrait of a nation plunged into a misery worse than anything it has experienced since the Nazi occupation.

And what was it that brought this disaster about?

The crisis was partly caused by politicians hugely increasing the size of the public sector after the country joined the euro.

In 12 years, the wage bill of the Greek state sector doubled—and this excludes ‘fakelaki’, the notorious cash-filled envelopes needed when dealing with officials. It was decreed that those in ‘arduous’ jobs could start receiving pensions from the age of 50—and hairdressers and waiters were among 600 jobs classified as arduous.

A poor state school system employed four times the number of teachers as Finland, the country with the best education system in Europe.

And, famously, a finance minister complained the railways were costing the country so much money, it would be cheaper to pay taxis to take the travelling public wherever they wanted to go.

But despite the cutbacks in the state sector, it is the private sector that has borne the brunt of the pain. By the end of last year, nearly half a million people had lost their jobs in three years—but not one of them in the public services.

So it was two factors: the euro, plus the usual desire of statist politicians to spend as much as they can. In normal circumstances, that desire is restrained—minimally—by the fear of public bankruptcy. But after the EU had adopted the single currency, the Greek political class no longer felt bound by that limit. They felt they could put the country into much debt as they liked. Why? Because now that the EU had become a monetary union, a loan default by any member would disastrously affect the whole in a manner that would not happen if each country still had its own currency. Therefore the whole could be counted on to keep paying the debts of any member such as Greece, and thus the usual desire of leftist Greek politicians to keep expanding the public sector was liberated. Statism with all its vices is a constant. The euro spawned statism on steroids.

The Greek catastrophe is filled with lessons for the U.S. Like their counterparts in Greece, Democratic politicians are driven by a simple, irreducible desire, the desire to keep expanding the public sector no matter what, whether for the sake of their pet ideologies, their client groups, their friends, or themselves. They’ve demonstrated this in the last three years more clearly than ever before. Despite the financial crisis, they are coldly, shockingly unrepentant about wasting inconceivable amounts of taxpayers’ money, as seen for example with the stimulus and the Solyndra fiasco, and they want—greedily, passionately want—to do more of the same. Consider their recently revealed requirement under Obamacare that the government provide totally free birth control to every woman in the country who wants it, and their notion, never heard before in this country, that “access” to birth control, by which they mean totally free birth control, is an essential principle that no one may question. The Democrats have thus revealed the essence of their political being, which is that they will accept no limit on public spending, including the most wasteful, ruinous, and ideologically driven public spending, so long as they are not forced against their will to accept a limit by some power greater than themselves. Left to their own devices, leftist politicians will never behave rationally. Their ideology—and their greed—forbids it.

- end of initial entry -

Jeff W. writes:

In cataloguing the names of the greedy, we should not forget the bankers. They made billions in interest and commissions from the loans they made to Greece. They bankrolled the politicians’ election campaigns and encouraged them to spend to excess in the interest of creating demand for more loans.

Spendthrift politicians and bankers work as symbiotic team. The politician gets borrowed money to use to buy votes; the banker gets the lending business. It is wrong that the bankers should escape the blame.

LA replies:

A fact-free denunciation of bankers for their “greed”? Or rather, a denunciation of bankers for their “greed” in—gasp—being in the business of making interest on loans?

You know, the name of this website is not “Occupy Traditionalism.”

February 19

Alexis Zarkov writes:

I have put Mr. Auster’s final paragraph into my personal EverNote database with the tags “politics” and “liberalism,” as it provides the most succinct statement I ever read about our march towards an all encompassing administrative state. The Greek nation provides an almost laboratory example of what happens in the final phase of modern liberalism: chaos and bankruptcy. The Greeks are now wholly dependent on the charity of Germany. If the Greek government withdraws from the euro, and defaults on its bonds, the Greeks will be unable to buy critical necessities as their economy cannot export enough to afford the imports it needs. I fear that the U.S. will feel obligated to rescue them. After all Obama has a magic checkbook, ultimately backed up the Federal Reserve’s capacity to create money from nothing in infinite amounts.

LA replies:

Coming from Mr. Zarkov, that is high praise.

From what he says, he seems to disagree with the columnists at The Telegraph, such as Daniel Hannan, who say that withdrawing from the euro is only way out of the mess. But if returning to the drachma followed by devaluation is not the way out, what is?

LA writes:

Reader Thomas F. was excluded from VFR some time ago. I make an exception and post the below comment by him, as I think it’s instructive as to a certain mentality. He is replying to my reply to Jeff W.:

This comment shows again that your philosophy is not coherent, that you really have no clue how and why this age of destruction came about. And it means that when this empire of debt by usury finally crumbles you and other fake “traditionalists” and sadly enough a lot of people you influence will find themselves on the wrong side as tools of the enemy.

Joseph C. (who is a commercial banker) writes:

The problem is not the bankers lending the money per se. They are in the business of doing so. But I will also agree with Jeff W. when he says the bankers and politicians work as a symbiotic team.

A good example is Mexico. Bankers lent money to Mexico in large sums throughout the 1980s and early 1990s, even though many knew that Mexico was a poor country with limited means to repay. Then, when the loans went south, the bankers did not simply shut their mouths, eat their losses and turn off the spigot. They lobbied Congress—i.e., the U.S. taxpayer—to bail out Mexico. The upshot was that banks made high rates based on perceived risk, when in reality the risk was minimal because the U.S. was effectively the guarantor.

I remember Pat Buchanan said it very well:

“Banks privatize the profits they make by loan sharking in the Third World, then socialize the risk by dumping them in the laps of the U.S. taxpayers. These guys are great at preaching the benefits of the “global free market.” Now, let them swim in its bracing waters in mid January.”

LA replies:

Very interesting. What you are showing is that it is not simply the case (a) that banks are in the business of making loans, (b) that they make loans to any credit-worthy person or entity that approaches them for a loan, and (c) that they are not responsible for a government’s decision to borrow money and cannot be blamed for such a decision. What you are showing is that the banks themselves are active agents—and, in the case you discuss, highly irresponsible agents—in generating government demand for loans. First, they made loans to Mexico that they should have known Mexico would have difficulty repaying. Second, they pushed the U.S. government to bail out Mexico so that the banks would not lose their money there. Third, the money the U.S. government gave or loaned to Mexico had to be borrowed from banks.

You are showing that the banks are part and parcel of the system of uncontrolled greed that I described in the initial entry.

Jeff W. was just tossing accusations around, and I rejected what he said. Joseph C. presented telling facts and arguments, and he persuaded me.

Jeff W. writes:

The assertion that spendthrift politicians and bankers work together symbiotically can be backed up with an enormous collection of unassailable facts.

Here is Exhibit A for you. We know that Obama is the biggest deficit (debt-creating) spender of all U.S. presidents.

Who are his contributors?

The biggest banks that profit the most from government lending are listed right here.

Kathlene M. writes:

Just for your information, Mitt Romney’s top donors are also banks. Many of the banks which supported Obama in 2008 are now supporting Romney.

Newsmax had a good story in January about Romney’s bank support:

Romney Backed by Goldman Sachs, Bailout Banks

.. .Goldman backed Obama for election in 2008, and the firm, like many Wall Street institutions, is now backing Mitt Romney for president.

Jonathan W. writes:

It may be true that the bankers are active agents in the sovereign debt crisis, but the fact is, without the statist governments that bail out everyone who acts irresponsibly, the bankers’ actions would not be an issue for anyone but themselves.

LA replies:

I agree.

As a further example of the same idea, consider how the sub-prime mortgages led to the finance crisis. The government started that, by pushing, intimidating and forcing banks into issuing sub-prime loans. Once the sub-prime loans got started in a big way, the banks found ways to reduce the risk they were exposed to and make money out of the situation by creating mortgage-backed bonds and other, ever-more bizarre and irresponsible forms of investment that had sub-prime loans at their core. The banks became part of the problem. But the problem would not have existed without the government policy, pushed on the banks by Clinton, then Bush, that all racial groups in America must have equal rates of home ownership, and therefore mortgages must be given to people whose credit rating or ability to pay would normally disqualify them for a home mortgage.

Now, left-liberals like Clinton and Bush (and of course Bush is a left-liberal with regard to this issue, since he supported, not just equality of procedure for individuals, but guaranteed equality of outcome for groups) think that the demand for racial equality of home ownership is based on fairness. In reality, the demand that people who lack the means and ability to buy their own home must be provided with their own home, with that ownership ultimately backed by the taxpayers, is not an expression of fairness, it is an expression of GREED. What is greed? Wanting something that is not rightfully yours. Wanting more than it is good and right for you to have. Now it is one thing to provide for people’s essential needs, the safety net of which Ronald Reagan spoke. It is another to say that people must be given their own privately owned homes, and, further, to say blacks and Hispanics must be assured the same rate of home-ownership as whites. To demand that millions of blacks and Hispanics should have privately owned homes which they could not afford on their own, simply because they’re black and Hispanic, is not just, it is greedy. But the main greed was not that of the minorities who were given sub-prime mortgages. The main greed was that of the liberal politicians who in their greedy desire for the grand liberal object of racial group equality of outcome in this country—an equality that is not right but wrong, not just but unjust—brought on the finance catastrophe.

Posted by Lawrence Auster at February 18, 2012 04:06 PM | Send

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