Monday, June 20, 2011

Greek economy - what to do?

The Greek economy is too big to fail. The economic system is interconnected and each part relates to all the other parts. If Greece defaults on its loans, other weak economies like Portugal and Ireland are waiting in line like a row of dominoes. Big banks would be damaged by a Greek default, and bankers would come bouncing back to the taxpayer breezily demanding another bailout in order to keep them in the lifestyle to which they are accustomed.

So the EU has no option but to bail them out, and also, maybe, to create an escape route so that Greece can exit the euro and devalue its currency.

So far so good. But what else needs to be done to get the Greek economy back on its feet?

Orthodox economists will prescribe more austerity measures, because austerity is the only medicine in their locker.

However, the austerity medicine is not working, in fact is is making the patient worse.  Unemployment is rising, and with it public anger is rising too. Demonstrators and rioters want to bring down Papandreou's government. They may succeed.

But what would any incoming government be able to do?  What is the alternative to austerity? Clearly, there needs to be a New Economic Deal, not just for Greece but also for the whole world.

There are two interesting, radical treatments available:

  1. Tax the rich.
  2. Form Local Currencies. 

Tax the Rich

Greece will have its fair share of billionaires and corporations who could dip their hands into their pockets and annihilate Greek debts with their small change. A one off wealth tax might go far to bringing Greece's debts within manageable proportions. 

Why is this not done? For the same reason it is not done in the UK. 

The rich simply threaten to move away from any country that has the temerity to apply serious taxes to the super rich.

The solution is therefore blindingly obvious, a solution that will help not just Greece, but also every country in the world. 

Close all tax havens, and agree a global regime of taxation to mega-rich individuals and corporations.

This will benefit all the world's economies, including ours. If Governments governed with the interests of the people in mind, they would have done it years ago. Our leaders do not govern on behalf of the people, they govern with the interests of the rich in mind.

This has to change.

There is a G20 meeting in France this autumn. We should be lobbying already to put a global tax regime on the agenda. 

This is the main item for Greece. Other points to note are that Greeks need a general taxation system that is fair and with which people comply. 

At the same time as forcing taxation onto the rich, the Greeks should also be creating local currencies.

This is a big topic, but essentially, money, like power, is ultimately created by the people to help them conduct economic transactions in an economy that is larger than a tribe - tribe/clan sized economies can work on barter. 

Local currencies should be devoted to meeting basic local needs - water, food, energy, housing, recycling, and in the case of Greece, tourism. No-one can challenge that that is a sound investment. 


john said...

I can recommend all of the links below for an alternative perspective on the 'greek' debt crisis but especially the first. No work today bad back, so busy surfing.
I've come to the veiw that the banks lent to greece knowing they couldn't service all their debts, but they were confident they could control the politicians and gain the right to asset strip greece it may prove to have been a bad judgement if there's no bailout, and without bailouts we could reboot with debt free government currency and local banks and currencies at all scales now that would constitute choice.
Tax the rich- what about a turnover tax for any economic activity in 'our' country [or any other ] what about a tax on assets above say £300,000 at 2% for the next £500,000 adding 1% for every £500,000 up to a max of inflation plus 2% on every 'person' or other economic entity [ no matter how many layers of ownership ] and always at the full rate on assets owned in tax havens. And what about a luxury tax on anything which is sold at a higher price here than elsewhere, for instance a merc at 45000 here and 32000 in germany would attract a 13000 luxury tax. Whose economy is it anyway? .. ..

john said...

-a greek perspective-

DocRichard said...

Hi john
Just to say thanks for all your comments. I just checked and you have been providing helpful comment and links here for ages, unacknowledged. So thanks.

DocRichard said...

"Whose economy is it anyway"?
That is the key question. The Masters of the Universe seem to think they can exist without the real economy. While it is true that they can live in gated communities, there will come a time when there is no-one around to operate the gates, or to do their cleaning, or provide their water and food.

Long before that state is reached, resentment will build (as it is now, in Greece) to the point that their gated communities are threatened with fire.

The Masters have to learn that the economy, like the environment, is a system of inter-related and interdependent parts.

john said...

thanks DocRichard here's an interesting perspective on greece
and this speaks to the increasing democratic deficit that political funding by lobbyists is leading to here, and the flat tax idea appeals too