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How austerity will make Greece cool again

In the wake of the Greek elections the new Greek government has reaffirmed its commitment to the austerity plan that got the old Greek government thrown out of office.  While commentators may disagree on the economics of austerity, the sociology of austerity is clear.  Ordinary Greeks will suffer dramatic reductions in the quality and security of their lives so that rich Greeks and foreign bondholders can continue to enjoy very high levels of quality and security in theirs.

From a holistic, society-wide perspective austerity isn’t really about economic growth rates or which creditors will get paid.  Austerity is about changing the character of society.  Gone is a society in which everyone has a basic level of security built on employment commitments with predictable annual raises.  In its place a much harsher social model being imposed.  Ordinary people are being thrown overboard and it’s sink or swim, you’re on your own.

Some will say that people are being thrown overboard from a sinking ship for their own good.  That’s just a lie.  Greece has a national income per capita of over $25,000 per year, making it richer than Asian tigers like Korea and Taiwan.  It is nearly twice as rich as Brazil.  Even with a 10% reduction in income per capita Greece would still be much richer than Saudi Arabia.  The ship may be listing, but it’s hardly sinking.

The European Union through its institutions like the European Central Bank has forced on Greece a set of policies that have little to do with repaying debts or staying in the euro.  Removing job security, reducing minimum wages, and shifting the burden of taxation from the rich to the middle and poor could be done inside or outside the Eurozone.

What the EU has imposed — and confirmed through the results of elections fought under extreme external pressure — is a new social model for Greece.  While for decades Greece has been a not-quite-western member of the European Union, it is being turned into an eastern European country.  After austerity Greece will look more like the new member states of eastern Europe than the core EU states of western Europe.

At some point economic growth will return in Greece.  It is likely to take longer under the new austerity regime than it would have taken without austerity, but it will return.  When it does, austerity will be declared a success.  Rich Greeks and foreign investors in Greece will have things better than ever before.  Ordinary Greeks will learn to live with it, or emigrate.

The sad truth is that it is usually more pleasant to be a rich person in a poor country than to be a rich person in a rich country.  In a poor country, the rich get more privileges, can afford more servants, and don’t have to share their parks and restaurants with the rabble.  Rich Greeks, international investors, and northern European tourists will find post-austerity Greece a more pleasant place than every.

With ordinary Greeks unemployed and wages plummeting, Greece is going to be a cheap place to visit once the protests die down and austerity takes hold for good.  Budget backpacker adventure tourists will soon make Greece a cooler destination than ever.  Cambodia and Ecuador are pretty cool destinations too.  For most people, it’s much better to live in a rich social democracy than in a poverty-ridden adventure tourism destination.  But for backpackers, it’s time to start planning that next summer trip.

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Sydney-based globalization expert Salvatore Babones is available to speak on the Chinese economy (demographics, growth, technology), the Belt & Road Initiative, global trade networks, and Australia-China relations. Contact: s@salvatorebabones.com