Greece the Grasshopper and the Ants

Keep your friends close and your enemies closer.  That was the thinking of France and West Germany in 1951 when they decided that the best way to prevent a third devastating world war would be to make everyone play together—at least economically. 

            To accomplish mutually assured economic dependence they joined with Italy, Belgium, Luxembourg and the Netherlands to create a common market for their coal and steel.  The road to Hell is paved with good intentions and this was just such an example.  Coal and steel were essential to 50’s era industrial nations and the idea was that if you remove competition for these vital resources you remove a rivalry that could rise to the level of war.  By 1999 the one world ball had rolled into a European common market with a common currency. 

One big happy family!  Well, every family has its problems.

            Greece is a prodigal son that has overspent and over promised its citizens into bankruptcy—again.  After a referendum in which Greece resoundingly said they love their addiction and refused to go to rehab, the rest of Europe has given them until Sunday to either come up with a serious plan to grow up or get voted off the island.   

Greece is the textbook example of socialism run amok.  A country that has the smallest economy in Europe (2% of Europe’s GDP—roughly the economy of Connecticut) also has the largest pension plan.  Greece’s pensions currently make up 13.5% of its economy and are projected to reach 25% by 2050.  [Of course, 25% of nothing is still nothing, but the Greeks haven’t figured that out yet.] 

The Greek government, in a manic attempt to make everybody happy, said that if you worked at a job, any job, for 30 years that you could retire with a paycheck that equaled your salary.  If you worked in a physically “arduous” job (which evidently included hair dressing) you qualified after just 25 years.  

            [In contrast, US government pensions in 2000 represented 5.3% of GDP.  However, in 2009 that number had jumped to 6% and will be at 7% by 2020.  We are moving in the direction of Greece, even while seeing the folly of that choice.]

            Greece also has 26 days of paid vacation days each year.  The US has zero.  Their government paid health insurance costs another 2.8% of GDP, but is so short of doctors due to low reimbursement rates that the common practice of getting to the head of the health care line is bribery, favoring the rich.  The super rich just leave Greece when in need of health care. 

            So, we have a nation that is spending money like crazy while indulging every whim of its populace that leads them toward sloth.  Greece has raised a population that works little, wants much and feels entitled to receive whatever it wants, just by lifting their lips to the ever present government tit.   Welcome to socialism, a tapeworm that injects its host with a drug as addictive as heroin. 

            Milton Freidman, an economist whom I don’t always agree with but certainly respect, predicted all of this as early as 1997.  His point was that you can’t share a currency without sharing a monetary policy.  This works for separate entities like our fifty states because we also share a government.  Not so in Europe.  You can be as profligate a grasshopper as you want and the thrifty ants are still required to bail you out.  Sooner or later the ants have had it, the grasshopper gets cut off, and maybe even eaten to pay back all the largesse he has consumed. 

            Watch, listen, learn and keep the faith.