I have read about what is happening in Greece. It seems as if the conditions for ordinary people are worsening. Crime and suicide rates are rising rapidly. Hospitals are short of staff and food lines are lengthening at churches and social agencies. There is violent protest in the streets and many of those who can leave, are. Decisions made by governments are affecting people in the most personal way that can be imagined. I am sure the vast majority of the people in question are at a complete loss as to how to explain what has happened to Greece and to them.
It seems that Greek society cannot afford the life it has voted itself. European banks certainly lent money to them for this purpose in ways that do not seem sensible today. And to be sure many Greeks do not, and have never, experienced the high wages, early retirements, over staffing and lax spending oversight of the public service. And many of those people would argue they are deserving of what they had, and that it was a civilized way to live. That seems to be neither here nor there now, as for now both groups are facing the same hardship. And it is very real.
The actions taken by the European Union to try to bring Greek government expenditures in line with Gross Domestic Product numbers are being described by some as the harsh medicine that nation needs. There is argument about that. Perhaps a stimulus would be better for them as a people. But they cannot act because Greece does not have any choice. They do not have the resources to take an alternate path, especially if they want to stay part of the European Monetary Union. What lessons are there for us?
Ontario is on a course to unsustainable debt. If you do not believe this then you are not looking at the figures put forward by the government itself. We do not take in enough revenue to pay for what we have been told the government will do for us. So this either matters or it doesn’t.
If it does, then the government needs more money or we need to adjust our expectations of what it will do for us. Raise taxes then? (The Greeks are doing this as well as cutting expenditures by the way. Prices rise and incomes decrease. ) We could do it but there are problems with this. One, there isn’t enough money in the pockets and bank accounts of all the rich people in Ontario to cover our debts and future obligations. We could take it all and it would help for only a few months or years. And then, what then? Raising tax rates for high income individuals may be attractive, but it will not solve our problem. It is also true that as tax rates rise, revenue will eventually fall. How long this takes is debatable but it will happen. Two, if we turn to corporate tax rates, businesses always have the choice to decrease investment and operations or leave entirely. There are jurisdictions with higher tax rates than Ontario that seem to function reasonably well. Yet none of these shares a 3000 kilometre border with the United States of America. States there are anxious to provide a tax and wage friendly welcome to business.
If we want to imagine a world where these things are not true we must truly take a leap of faith. Perhaps it would be better if we were not in a cash economy at all. Some kind of socialism or social compact at least to lift the burden of having to figure out how to pay for our present and future health care, education, roads and services. Aside from the obviously failed attempts at building a command economy in the ‘communist’ mould, does anyone have any idea how this would work in the immensely complex economy we have constructed? Any good ideas on how to go from here to there, when we don’t know where ‘there’ is?
Maybe this is a bridge too far. What if we legislated that the private banks had to finance our promises to ourselves or if we just printed the money we needed. But if these banks existed in the world we have and our money did too, we could be making it easier in the short term and worse in the long. This isn’t 1931. Money has other places to go. No one needs to lend to us and inflation could destroy our savings.
We must, I think, face the facts. If the world is what it is, then we must recognize the limitations of what we can promise to ourselves. We can do what needs to be done deliberately and incrementally. Or someday we could find ourselves in the same place where the Greeks are and that is too painful to imagine.