by Mitch Kokai
Senior Political Analyst, John Locke Foundation
It is as though the Muses came to an agreement: In the here and now, mankind is subject to rhetoric, but mathematics gets the final say. In Athens, in San Juan, in Detroit, in Sacramento, in Springfield, and, soon enough, in Washington, Mathematics is arousing herself from her torpor, and she is cranky as hell.
The long term is here.
Greece has defaulted on its sovereign debt, and its banks have been shut down. Television viewers accustomed to watching a few odd ducks cheerfully prepare for Armageddon on Doomsday Preppers are now seeing a disorganized version of the same thing as panicky Greeks storm empty ATMs and attempt to stockpile food and fuel. Puerto Rico has announced that it cannot pay its debts. A half-dozen Illinois cities and the Chicago public-school system have spent 2015 teetering on the edge of bankruptcy, with the state legislature considering a new bankruptcy law to handle what is expected to be a deluge of insolvency.
The words and the numbers have long told very different stories. Let’s stay, for the moment, with the case of Greece.
In the run-up to the 2008 financial crisis, Greek leaders lied to bond investors and the bosses at the European Union, claiming that they were complying with EU restrictions on the size of government deficits and national debt. In reality, the Greeks had been scheming with their bankers — notably Goldman Sachs — to keep excess debt off the books. Financial crisis or not, that book-cooking was always going to be revealed: Greece maintained an excessively liberal pension system (Greeks could retire after 35 years of work at 80 percent of their working income; for Germans, it’s 45 years and 46 percent); it is publicly and privately corrupt, with jobs in its bloated public sector being handed out as political patronage and tax evasion running rampant; workforce participation is low, and private-sector workforce participation — i.e., engaging in genuine economic production — is very low.
The Greek economy takes the form of an inverted human pyramid, which is inherently unstable.