Why Europe Can’t Fix Greece
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  • S Mesa

    The EU removed trade barriers within the EU. Germany’s industrial output is far greater than what Germany can consume. The EU provided a home for their goods which benefitted Germany and basically put many of the other countries out of business. Spending and dependency in search of a benefactor were clearly huge problems. But Germany is so good at producing things, the other countries could not compete. The EU cannot continue as structured.

    Historically, Greece built their economy on three legs.. shipbuilding, tourism, and extorting money from the US by threatening to befriend the USSR. Ships and the USSR are gone. Tourism does not have the scale to support Greece. In 20 yrs, Greece as we know it today will be no more.

  • rvastar

    [They need to find new ways of being Greek that work better in a liberal capitalist world…]

    Wrong. They need to suffer the consequences of their poor decision-making – i.e., 30% of the population working for the govt – and outdated governing philosophy until the pain of being poor and destitute outweighs the pleasure of being lazy and entitled.

    THEN they will make the necessary behavioral adjustments that serve to redefine their culture.

  • Bruce B


    They lost the ability to proceed at their own pace. They are broke.

  • Andrew Allison

    Re:”They need to suffer the consequences of their poor decision-making”

    As do the investors who made the loans. What’s been going on for the past two years is an effort to socialize as much as possible of those losses.

  • Kenny

    1. Europe should allow Greece to crash and burn, and from that rubble, reform itself if it can.

    2 SMesa at Post #1 is correct. Greece has supported itsef with money from the U.S. during the Cold War, and and after that from the EU.

    Those sources of funds are going, going, gone and along with them, the inflated Greek standard of living.

  • rvastar


    [As do the investors who made the loans.]

    That’s called “capitalism”. When it’s left alone, it works perfectly…every time.

  • Ed Snyder

    “The laws of economics may be true everywhere, but culture shapes the way people respond to these laws.”

    That comes pretty close to hitting the nail on the head. A more direct strike, IMHO, is the idea, put forth most directly by a blogger under the name of Monty who posts at Ace of Spades, that economics has much less to do with math than with human behavior. To which I would add this: What he is actually referring to is virtue. People and societies that govern themselves (the active voice is a deliberate choice here) by prudence and temperance tend towards life, liberty, and happiness. Those who do not govern themselves thus, don’t.

  • Karl

    Professor Mead, what you have basically said, without stating it in so many words, is that Greece cannot remain within the Euro monetary regime. That or any other monetary regime can only survive within a cultural milieu that responds effectively to “the laws of economics”, a milieu such as that of Northern Europe: Germany, Scandinavia, Holland, and, yes, we Anglo-Saxons. (The subtitle of “God and Gold” was, as you no doubt recall, “The Making of the Modern World”). I agree that a society’s culture must inevitably drive its response to the laws of economics, but if a society does not respond effectively to these laws, it has no place in the modern world. To pretend otherwise, as did the autocrats that allowed Greece into the Euro regime, is to expose oneself to a world of hurt. Such is the world that these autocrats now inhabit.

  • “Donadio is pointing to a theme I wrote about in God and Gold. The laws of economics may be true everywhere, but culture shapes the way people respond to these laws. Culture changes over time — China’s response to capitalism is very different than it was in the nineteenth century — but these changes come in their own way and in their own time. They cannot be whistled for, or imposed by decree . . .

    Thank you. Beautifully put. And while we’re at it, we might want to take a closer, more critical look at the American culture shaped and molded by US technocrats, both public and private sector, that took root here in the 1990’s and early 2000’s. With a special focus on the unique ideals, parameters and (apparently limitless) expectations they had for – what should we call him – Homo oeconomicus? Or better yet, “man without a culture”? And also how that buoyantly optimistic – and yet strangely callous and cynical – culture in turn shaped and fueled our economic performance right on up to Sept ’08 (and possibly beyond?).

    From where I stand, this post is easily one the best – among MANY good ones – that Via Meadia has produced on the various roots and branches of today’s economic crisis.

  • David

    “In California, the government of the technocratic governor, Edmund G. Brown, is proving powerless to transform an inefficient public administration that has long served as a power base for the same political leaders — including most of the current government’s ministers — who are now being asked to dismantle it.”

    Maybe it’s not just an Ottoman/Byzantine thing.

  • Eurydice

    Well, Aristotle did say that Nature doesn’t move in jumps.

    You’re quite right that cultural changes happen slowly and that some cultural aspects will never change, but there sre some things which are only masquerading as culture. One doesn’t have to look at Greek shipping magnates to see Greeks operating in an organized, logical, business-like and law-abiding way. One can see them every day in the Diaspora – Greeks who aren’t able to tolerate the chaos caused by a political class which exists only for its own survival.

    Greeks aren’t corrupt or spendthrifts by nature (at least, not any more than any other human). They don’t have a problem with the rule of law, as long as they know what the laws are, and that those laws are applied to all, and that those laws don’t change every other day. But, I would say that Greece is a like a country coming out from behind the Iron Curtain, with citizens who have learned to navigate a pseudo-socialist system of rewards and punishments.

    We Americans are enjoying our sneers at the Greeks, but we have the same collusion between politicians, big money, media and the unions. We have the same neglect of our institutions and infrastructure. Is this part of our “culture”? Is this something we’ll never be able to change?

  • Toni

    “They need to find new ways of being Greek that work better in a liberal capitalist world, but they need to do that at their own pace, not at one dictated by the ECB and the IMF.

    … Europe today is learning just how painful and expensive it is when culture isn’t given its due. More lessons are coming.”

    My view is pretty much 180 degrees opposite. Europe today is learning just how painful and expensive it is when you pretend for many years that everything is fine, just fine, and meanwhile some euro countries are taking advantage of low euro interest rates to overspend wildly.

    Greece’s culture may have made it the wildest overspender and thus first to come to everyone’s attention. But Spain, Italy and Portugal have their own cultures too, and the eurozone crisis is NOW. Europe can’t tailor a 17-country solution to Greece’s pace, which would be slow-to-never if it could get away with it. The crisis is already two years old.

    The true lesson is that denying economic reality never works. Not for long. Just like ignoring and enabling (thru low interest rates) the U.S. consumer borrowing binge that had to stop suddenly at the credit crisis. People are slowly paying down debt, but it’ll be years before consumer debt is at a prudent level.

    Now, as for U.S. federal borrowing and debt levels…we can’t deny reality forever. But, like Europe, the longer we try to, the worse the situation grows. Culture is irrelevant.

    “Technocrats everywhere like to ignore the importance of culture in human affairs.”

    Technocrats — and politicians and consumers — everywhere like to ignore the importance of financial prudence in human affairs. Until they’re forced to pay attention.

  • Jim.

    “It is hard to say whether one culture is more moral or ‘better’ than another in an absolute sense, but nothing is more clear than that some cultures are more effective than others when it comes to capitalism.”

    There you go: pick a frame of reference, some criteria for judgement, and then make your judgements.

    One good thing to do: judge cultures by the criteria of their practitioners. Does the culture deliver the goods? If Greeks want to have Porsches, fancy nightclubs, and diabetes medicines, but their lackadaisical work ethic doesn’t create the industrial base that makes those things possible, *then their culture is inferior, by its own criteria*.

    Go ahead, be a hippy. Drop out of medical school, leave the rat race. Raise your own organic food, live in a commune, shag with wild abandon, whatever. Just don’t go whining to the rest of us when you want AIDS medication but can’t afford it. If you didn’t contribute to the System, you’re going to have to settle for homeopathic remedies… or admit that your culture is, I’ll use the word again, INFERIOR, and quit trying to insist that “fairness” demands something of anyone else that you weren’t willing to contribute to providing for yourself.

    More later.

  • Charles R. Williams

    So a way must be found for Greece to default. They can then pick up the pieces and order their affairs as they like. Greek default means insolvency for European banks. This will require a huge bailout.

    Instead the Germans are dribbling out money to the Greeks in a short-sighted effort to hide the pea. This is dysfunctional for all of Europe.

    When Greece defaults and the banks are bailed out, it is possible that other sovereign states will be unable to finance their deficits. They in turn may need to default with the remaining sovereigns bailing out their respective banks.

    This is the honest way forward. The alternative is for the eurozone nations to give up their sovereignty. Effectively this means the end of democracy in the eurozone. The German empire that would emerge would be ungovernable.

  • Eurydice

    @Jin #13 – And there you go – creating a hypothetical situation about people you know nothing about and then pronouncing judgement. Also, I think you’re confusing private and public debt. Greeks wanted Porches, nightclubs and medications before the Euro, but they weren’t borrowing up a storm to get them.

    You might want to spend some time reading about the floods of cash that have been sweeping around Europe ever since the beginning of the Euro. Or maybe not. Most people who’ve got opinions about Greece, whether for or against, whether in the past or today, regardless of the subject, haven’t bothered to do any basic or local research.

  • Jim.

    @Eurydice –

    Greeks want early retirement and generous state benefits, without doing the work that might make those possible. Simply opening up The Economist, reading WRM’s blog here, reading the quotes from Greeks themselves in sympathetic media like the NYT tells a very consistent story… the Greeks like the good life, but they don’t want to do what it takes to create the good life, they want Germany to create it *and* pay for it.

    Their per-capita GDP is among the lowest in the Eurozone. I defy you to name anyone you know who drives a car, owns appliances, or uses software designed and built by a Greek company. Germany is willing to trim its state benefits when its economy doesn’t support them; the Greeks are not.

    The evidence that crosses the Atlantic is clear and consistent. If you’re going to say that it’s all wrong, please share your proof.

  • Jim.

    Professor Mead,

    I ran across your work as part of an ongoing effort to answer the question, “Why did Europe end up dominant over the rest of the world?”. Obviously, this is an enormously important question, since aspects of that answer can give us guidance to maintain the Pax Americana and our standard of living in the present and in the future.

    Other authors like Jared Diamond only manage to answer part of the question. He answered, “Why Eurasia?” rather convincingly, but fell completely flat when he tried to explain the gap between China and Europe. (The idea that the seacoasts of Europe facilitated trade is just plain wrong; China’s bulk water trade far outstripped Renaissance Europe’s.)

    Your work not only provides a great deal of light on “Why Europe?”, and also narrows it down to “Why the English-speaking world?”.

    You should have more confidence in your own culture, and more confidence in your answers. What you’re pursuing is nothing less than the “secrets of success” for a culture or nation. You are looking for ideas that are in fact *better* than other ideas. Don’t lose sight of that.

    That’s not to say that any given thing the English-speaking world does is automatically better, and not to say that every change we have made since the 19th century (when the power of the English-speaking world was at its relative peak) has been a good change. There are some tremendous blunders that we have made, particularly in terms of social issues, that threaten to critically undermine the foundations of our strength. Many of us have also lost sight of our confidence in our own destiny, and somehow we ended up with mass media that aids, abets, and tries to accelerate this process.

    There are answers out there to be found. There are answers that are more right and answers that are more wrong. (Relativism is rubbish). Even if there may not be answers that are always right, there do exist alternative answers that are always wrong. (Multicultism is rubbish.) Sometimes there are situations where there seem to be few or no good answers; that doesn’t mean that the pursuit of answers is futile. (Despair is a mortal sin for a reason.) On the contrary, half-blind perseverance is our only option, sometimes.

    You’re on the right track, Walter. Don’t self-destruct by pursuing “no good answers” relativism. You can have more than that, you can help us all have more than that, if you keep faith.

  • Eurydice

    @Jim #16 – I’ve got one example which is a large corporation owned by my cousin. He creates and builds many products, and software devlopment is a part of that. He has offices throughout Eastern Europe and Russia, he’s got contracts with the US, China, Japan and India, and employs 750 people. He works 24/7 to bring in new business and to keep everybody employed. I have several more examples like this, but my point isn’t to prove that Greece has a thriving private sector because, of course, it doesn’t. And my point isn’t that all the reports have been wrong because a great many of them have been right.

    My point is that the situation in Greece is much more complex than the conclusions you’ve drawn from the clips you’ve been reading. It’s not all Greeks are lazy and bad, and all Germans are hard-working and good. If, as you say, you rely on quotes from Greeks, then you might place some reliance on reports from me, although I’m not quoted in the so-very-friendly NYT. And while you ponder the idea of complexity, you might want to think about the effects of globalization on what is a national brand – for example, if you buy Barilla pasta in Europe, chances are it was made in Greece. So, is it an Italian product or a Greek one?

    As for the Greeks wanting large pensions – they can want whatever they like, but it doesn’t reaaly matter. The fact is that, already, people have been fired and salaries and pensions have been cut by half – that’s the reason the economy has been dropping faster than the debt. That’s the reason private businesses have been closing right and left, that’s the reason the horribly inefficient government is even more horribly inefficient. Even the self-assured IMF has started to wonder if this austerity thing might be causing a problem. It will take time to unravel the effects of the socialist octopus.

  • Jim.


    It sounds like your cousin is intent on contributing to the system of creating the goods and services that he wishes to consume.

    If his fellow countrymen were equally intent, Greece would not be in this mess. That’s my point.

    All the evidence I’m seeing points to the idea that your cousin’s values are not common in Greece, but are common in Germany. Those values are, I would say, *superior* because they actually create the material well-being that the people of those countries enjoy (and demand their governments provide). Values that are intent on consumption but do not help creation are *inferior*, because they don’t contribute to people getting what they want, in fact they hinder it.

    Do you see what I’m getting at here?

    I’m not out to judge people; I’m out to judge *cultures*, and the individual values and practices that make up those cultures. German culture gets Germans the material wealth they want; Greek culture far less so. They’re free enjoy what their cultural values do get them, and if they enjoy that more than material wealth, more power to them.

    But to complain about what you don’t have when you don’t contribute to creating it is childish, and to take away what others have labored to create (even by way of “bailouts”) is no better than theft.

    The fact is, austerity is simply the adjustment of government largesse to a sustainable level. It says, “that’s enough, you can’t pretend you’re a good customer anymore.” If companies have gotten used to people able to pretend to be good customers because of over-generous credit, they’re going to get their business disrupted; but dependence on unsustainable (bad) customers is poor business practice and is not viable long-term anyway.

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