Tuesday, February 3, 2015

An odd view of democracy

Economist
February 3, 2015

Joseph Stiglitz has a post on Project Syndicate arguing that Greek debt should be forgiven and that austerity has failed. Some people may argue with the economics or point out that Greek debt servicing costs have been substantially reduced in previous deals. But let us happily accept that some Greek debt will need to be forgiven and that the target for the primary surplus (4.5% of GDP) is ridiculously high.

It asks rather more of the general reader to accept a couple of the professor's debating points. The first is that:
There is a fear that if Greece is allowed to restructure its debt, it will simply get itself into trouble again, as will others. This is sheer nonsense
Actually Greece has a long record of debt problems with around half of its history as an independent nation spent in default. One need only look to Latin America to see countries which have a history of high debts and write-offs (the 1890s, the 1930s and 1980s and for Argentina, 2002). So it would actually be an act of the purest optimism to imagine that it would not happen again. But my bigger struggle is with his closing argument that:
Seldom do democratic elections give as clear a message as that in Greece. If Europe says no to Greek voters’ demand for a change of course, it is saying that democracy is of no importance, at least when it comes to economics.
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