Thursday, May 4, 2017
What Democracies Can Learn From Greece's Failed Populist Experiment
May 4, 2017
While the crisis in Greece no longer captures international headlines as it once did, the country’s troubles never went away. Greece remains the only Eurozone country still subject to a joint Eurozone-International Monetary Fund fiscal adjustment and structural reform program. In the long-running saga’s latest episode, the recent completion of a crucial compliance review paves the way for the release of $7.6 billion in bailout funds to Greece from its creditors in exchange for further budget cuts and tax increases.
Greece’s troubles date back to the implosion of its economy in 2010. Faced with a massive budget shortfall caused by a combination of overspending and undertaxing at a time of swelling global financial risk, Greece found itself unable to refinance its huge debt. As a member of the Eurozone and a debtor to several major European banks, it was able to elude outright default, securing a bailout from its European partners who, with the assistance of the IMF, demanded an onerous fiscal adjustment. With or without a bailout, an adjustment of such magnitude was both necessary and painful. But the hastily designed, poorly implemented program exacerbated Greece’s considerable economic distortions—a large and inefficient public sector and an uncompetitive private one—triggering a brutal economic depression accompanied by massive unemployment. Combined with the inevitable political turmoil that ensued, this crisis sparked a global scare about Greece’s imminent exit from the Eurozone, which carried dire implications for the survival of the common European currency.
All this made Greece fertile terrain for populism, long before Trump crashed onto the scene and a referendum brought us to the brink of Britain’s exit from the European Union. In fact, Greece’s experiment in populism—broadly pointing to political movements that emerge from the margins to challenge mainstream politicians in the name of the people, while preaching a gospel of sweeping change and scolding the “elites” as failed, corrupt, and responsible for most social ills—has a great deal in common with those in America and Britain.
By upending conventional political practice and highlighting their status as political outsiders, populists secure a political advantage in a time of crisis, change, and uncertainty. Yet, as Greece’s experiment showed, such disruption is very costly. Embracing their outsider status might deliver victory to populists, but does little to help them navigate a complex reality that requires serious, long-term planning, and compromise. If anything, reality sets populists up for costly failure.