The famed economist examines Greece’s debt crisis and the lessons of World War II Germany has resolutely ignored
Lynn Stuart Parramore
Tuesday, Aug 25, 2015
On August 18, Nobel laureate Joseph Stiglitz joined Harper’s Magazine deputy editor Christopher Beha at Book Culture in New York to discuss the Greek financial crisis. In Stiglitz’s view, the latest bailout not only ensures that the country’s depression will worsen, but undermines the entire European project.
Bad economic ideas inflict untold human suffering. When they come cloaked in a fog of Orwellian obfuscation, their poison and effects can spread with little hindrance. The public is misled. Power plays are hidden from view.
In Greece, where suicide rates have risen sharply in the wake of austerity measures, people lose hope.
Joseph Stiglitz, who has been following the Greek crisis closely and is recently returned from Athens, sets himself to the task of cutting through the fog. His plain English and fearless use of moral language to expose the ugliness behind economic and political abstractions lend clarity to a situation that is not just bringing a nation to its knees, but threatening to destroy the European project and bring on a future of conflict and hardship.
In discussing Greece’s Third Memorandum of Understanding and its draconian terms, Stiglitz observes that the MoU is really a “surrender document” that eclipses the country’s economic sovereignty and ensures that Greece’s depression — already deeper than America’s Great Depression — will get worse. An economy that is seeing youth unemployment reaching up to 60 percent is likely to lose another 5 percent in GDP. That is over and beyond the 25 percent plunge in GDP the country has suffered since the imposition of austerity measures.
Socially conservative Germans, Stiglitz warns, are doubling down on the discredited notion that austerity policies help economies recover in times of crisis. In reality, the insistence on keeping wages down, stripping bargaining power from workers, forcing small business owners to pay taxes a year in advance, and cutting pensions will only hamper demand and lead to a deepening spiral of debt. (Stiglitz emphasizes that hardly any of the money loaned to Greece has actually gone to help the Greeks themselves, but rather private-sector creditors, namely German and French banks).