Politics, Democracy, Anarchy – Does the World Owe Greece?

BY Paul Solman  November 8, 2011 at 10:06 AM EDT

A national flag of Greece flies outside the Greek stock exchange in Athens, Greece, on Monday, Nov. 7, 2011.
A national flag of Greece flies outside the Greek stock exchange in Athens. Photo by Kostas Tsironis/Bloomberg via Getty Images.

In Greece last summer for the NewsHour, we interviewed a plain-spoken, candid economist named Manos Matsaganis. As the Parthenon posed telegenically in the background and occasional passersby stopped to listen, Professor Matsaganis explained Greece’s plight: corrupt government; bloated civil service, an utter lack of trust in “society.”

Economist Manos Matsaganis in Greece

“I don’t think many Greeks believe there is such a thing as society,” said Matsaganis. “Society is them, their children, their family and their friends.”

His solution?

“We have to invent a new way of doing things and very fast. Can we do that? I don’t know. Really, I hope with all my heart. But I wouldn’t be willing to wager a bet on that particular issue. We hang on the balance and we will be hanging on the balance for the next three years.”

At about this point, a young bearded man on a bike, a guitar strapped to it, began to shout, in excellent English:

“The world OWES Greece. We invented everything. The world should pay us a euro every time it uses a Greek word.”

The fellow was smiling, articulate, spirited. I asked him to join the interview. Resolutely, he refused, explaining that his kind never consorted with the media. When I cajoled, he became angry. Then he looked over at our cameraman, wrongly assumed he was recording the exchange (as I’d been hoping he had), and lifted the bike to smash the camera. The cameraman barely managed to convince him we were in between disks on which we record. Back to a smile (sardonic, I guess), he pedaled away.

Making Sense

I’m reminded of the episode because of a newsletter post last week by conservative economist Ed Yardeni, pointing out that “politics,” “democracy,” “pain,” and “anarchy” are all originally from the ancient Greek. And yet they’re as current as the daily news.

For the moment, it seems, the last of these words has been averted by success with the first two. Politics and democracy, that is, have trumped anarchy for the moment. A coalition government has been formed. Further concessions will be made. Greece will cut back further on its civil service and supposedly lavish benefit packages, under strict outside supervision. Government by international aristocracy, many Greeks will complain. Plenty of pain. But not anarchy, a potential collapse of the euro zone, another crash ala ’08. To skeptics, it’s all just buying a little more time. To which a reasonable response might be the ever-more quoted quip from John Maynard Keynes: in the long run, we’re all dead.

Harvard University economist Ken Rogofff

On this page, we try to make sen$e, not prediction$. So we have no forecast for the future of Greece, the euro or even the world economy. But we’re mindful of those we’ve interviewed and whose previous visions have stood the test of time. Harvard economist and history-of-debt maven Ken Rogoff, for instance. A year-and-a-half ago, he predicted an eventual Greek default:

“They’re going to default. And, once they do that, they might as well take advantage of the opportunity to go back to the drachma for a while, find a way to get their debt down.They don’t see it that way but I think a lot of us believe there’s not another easy route for them.”

They still don’t see it that way in Greece — or Europe, for that matter. The fear of contagion — if Greece defaults, who’s next? — is seen as simply too great, and too great of a threat to global economic stability. And Tuesday, at least, the Greek stock market is up two and a half percent for the day, though skeptics might add that it’s down 50 percent for the year.

But we ask ourselves: how have Europe’s economic prospects improved in the past 18 months? Are Greece or Italy, or Spain, Portugal or Ireland, better bets than they were back then?

Editor’s Note: Watch our three-part series exploring how Greece struggled to deal with its financial troubles in the summer of 2010:

  1. Will Greek Austerity Plans Buckle Under Pressure? | An explanation of how Greece got so deeply into debt.

  2. In Greece, New Austerity Measures Rile Many | The response from Greek citizens who are not happy with the reforms and the hit to their pocketbooks.

  3. Examining the Underground Greek Economy Amid Escalating Debt | A look at how the Greek government is also cracking down on tax cheats to make up the budget shortfall, not a simple task when close to 40 percent of the country cheats on their taxes.

This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions _Follow Paul on Twitter._