Today’s Wall Street Journal has an astonishing column written by Hannes Swoboda, a member of the European Parliament.
Europe Can Spend Its Way to Growth
…The Merkel dogma “Yes to growth, but no to debt” can only be understood as a polemic, an ideological statement. Because it makes no sense for the economy or for society.
Should companies that seek to grow not be allowed to take out loans anymore? Should states, in order to fight recession and unemployment, not assume debt? If that is the line of argumentation, what can possibly be the result of Wednesday’s informal summit on European growth?
I’m no economist, but I can distinguish between a private company borrowing in order to grow and a government borrowing to spend.
Private enterprise creates wealth. Government spends wealth created by private enterprise.
When the government borrows to fund its deficits, it sucks up capital that could have created wealth.
(Yes, government spending can help business by becoming its customer, but long-term this is a perpetual motion machine — an unsustainable fantasy.)
In view of the rising levels of debt compared with gross domestic product in most European countries, we must take stock of the disastrous effects of the one-sided austerity politics and also recognize their antisocial character, proven by record unemployment figures. The collapse of some governments—notably in France and Greece—and the increasing strength of extremist parties further demonstrate the political danger. How many more facts does it take to end these austerity policies?
Austerity in France was defined by some as raising the retirement age from 60 to 62. Greece is another story altogether.
Here is Michael Lewis, author of The Blind Side, Moneyball and other good books, on the Greeks.
..As it turned out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piñata stuffed with fantastic sums and give as many citizens as possible a whack at it.
In just the past decade the wage bill of the Greek public sector has doubled, in real terms—and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a year. Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension,” Manos put it to me. “And yet there isn’t a single private company in Greece with that kind of average pay.”
The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest-ranked, Finland’s. Greeks who send their children to public schools simply assume that they will need to hire private tutors to make sure they actually learn something. There are three government-owned defense companies: together they have billions of euros in debts, and mounting losses.
The retirement age for Greek jobs classified as “arduous” is as early as 55 for men and 50 for women. As this is also the moment when the state begins to shovel out generous pensions, more than 600 Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on. The Greek public health-care system spends far more on supplies than the European average—and it is not uncommon, several Greeks tell me, to see nurses and doctors leaving the job with their arms filled with paper towels and diapers and whatever else they can plunder from the supply closets.