The Greek Crisis and the Future of Capitalism

I am certainly not a fan of the ex-IMF director Dominique Strauss Kahn (aka DSK). He headed an institution that dictates the economic policy of many poor countries. In the 90s, it is the same IMF that came up with the Structural Adjustment Program that was a key reason behind the loss of hundreds of thousands of jobs, the closing of factories and the privatization of flourishing companies in many developing countries.

However, recently in an interview on French TV, and in a desperate attempt to clear the air after he was accused of sexual assault in the US, DSK suggested that Greece should be allowed to go bankrupt. I totally agree with him.

The Greek tragedy is being played over and over without any sign of relief being detected at the horizon. European politicians keep dreaming that Greece will overcome its difficulties whereas investors are expecting the worse to happen at any day. The markets are sinking, stealing on their way the little gains made over the last few weeks. The agony is hard and long and the Europeans and Americans are watching. They are praying for a miracle but in their hearts they know it will not happen any time soon.

It is unlikely that Greece will be able to reimburse its debts, so why not help it instead: organize its bankruptcy and thus avoid another crash of the financial market.

In my opinion, two main reasons why politicians are still in a state of denial about the Greek situation: the future of the Euro Zone and that of capitalism.

Although many economists think that after the bankruptcy of Greece is over it is still possible to keep the Euro Zone stable and Greece, they hope, will still be part of it. Nevertheless, the fact that one country failed its commitments will open the door wide to other candidates such as Italy, Spain or Portugal.Politicians do not want Greece to to create a precedent. They don’t want Greece to open the first crack in an economic zone that goes back to the 1992 Maastricht Treaty. The consequences will be more symbolic than damaging.

Moreover, a Greek bankruptcy will have huge consequences on the US economy and on the future of capitalism. So far, the debt crisis is being downplayed by the biggest market players as “temporary,” but as each day goes by this crisis proves it more likely that it is here to stay.

Our current economic system can’t continue the way it is. We can’t allow the banks and the financial institutions to continue to get a free ride on the back of the population.

In the US, it was the banks that were behind the debt crisis. They sold homes to American families who couldn’t really afford them. They created the subprime mortgage crisis; they took risks that they couldn’t really bear and then when people couldn’t reimburse their mortgages, the banks confiscated their homes and threw the burden and risk unto consumers.

Recently, when Mark Carney, the Governor of the Bank of Canada, dared to challenge some American bankers who gathered at the annual meeting of the Institute of International Finance, his remarks were brushed off as simply anti-American.

Carney’s remark was not coming from a ‘socialist-hippie-anti-conformist” guru. Mark Carney proposed to introduce regulations that would require the biggest banks to have a proportionately higher capital buffer – to protect the taxpayers from the risk of bailouts of huge financial institutions while small-to-medium banks might be allowed to go out of business. He failed to convince the bankers and the debate became emotional and remained behind closed doors. At least for a while. Currently the debate is spilling out into the streets.

The Occupy Wall Street movement is finally being picked up by the main stream media after weeks of ignoring it. People are camping at Wall Street to express their anger with a financial system that is taking away their savings, their retirements and their homes.

It is not anti-American, it is not crazy, it is democracy in action.

One thought on “The Greek Crisis and the Future of Capitalism

  1. The Greek situation is a crisis in the making over many decades. First and foremost the Greek population is one greatly coloured by its oriental past, and very little by its long-gone ideological classical past. The café culture of Greece is well known and sought after by many a tourist every year. It is also a population hammered by very low wages, some of the lowest in the Eurozone. Low wages leads to corruption and bureaucratic inefficiencies. Many front-line service workers, bureaucrats and even professionals like doctors receive ‘fakelakia’ (envelopes with cash bribes/tips) by a public fatigued by long lines and under-staffed government offices and clinics. In Greece there are thousands of fraudsters receiving monthly assistance for various disabilities from blindness to paralysis. When some came forward to avoid being fined or imprisoned, the system could not handle the false-claimants reimbursements. So the state continues to pay their disability payments, till a mechanism is in place to handle their reimbursements.
    The population and the bureaucracy that is supposed to serve it, have become dysfunctional and non-repairable. A bankruptcy is something that should have been planned from day one. A bail-out only sets up the EU for a massive fall, as the other little PIGS (Portugal, Ireland, Greece and Spain) consider lining up for their bailouts. Germany will not be able to sustain these other bigger markets, whereas Greece is puny by comparison.
    As Greeks contemplate the nostalgia of their drachma (past national currency), the Germans are quietly talking behind closed doors of expelling Greece from the union. Greece matters not because of its size or historical importance, but because its that first domino that has begun the fall, and is about to strike the next one in the long line heading back to Berlin.

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