It surely must be amusing, to the alert observer, to note the plethora of convenient excuses that the financial crisis of 2008 is providing to the casual, armchair-prone, self-proclaimed “policy makers”: economists re-inventing the wheel that economics is a social science and not just numbers, politicians bending backwards and pleading social reform par excellence, social activists ready to replace “capitalism” with their own, pre-packed mythology. The list of participants in this excuse-charade is endless as is the number of excuses being put forth, for the source of the crisis but also for its resolution.
What is not amusing, however, is not only the recklessness that this great number of commentators and policy makers show in vividly proclaiming their “informed opinions” but also the ease of the public in digesting them. We have started on a dangerous path in the aftermath of the crisis, which is to replace something that went wrong with multiple, and uglier, versions of the same.
The discussions that were surrounding some time back the Grexit issue are now re-flamed with the Brexit referendum and one cannot but think as to whether and how these two might be connected. Are they?
There is no doubt that they are connected but not in the sense of continuity, that one might trigger pressures for the other – although with the fluidity of modern, excuse-based policy making anything is possible. They are connected by the emotional-based arguments that proponents of “exiting” the European Union and (for Greece) the common currency make, without the slightest understanding of the disruption and misery that the effects of such an “exit” might and will bring.
Emotional-based “reasoning” is part of the convenient excuses scheme that is easy to use, excludes discussion about the real problems, avoids tackling issues of liberty and freedom (of movement of capital and labor), confuses entrepreneurship with gang-style, mafia operations, mingles political corruption with genuine and legitimate flight of capital because of state bureaucracy and high (yet inefficient) taxation, ignores the support to the underprivileged (areas and people) that the European project has provided and many others.
Worse yet, the proponents of “exit” are either oblivious to the consequences of their ideas or purposefully avoiding to explain them to the general public: who’s to loose more from an “exit”, being in the UK or in Greece: the wage earners, the underprivileged or the system that they are trying to bring down? Are they aware that the business flow of any major corporation with operative ability across global currencies, would experience minimal discomfort – if at all? Do they believe that players in global trade will stand in awe as Brits and Greeks proclaim their “independence”? They will simply adapt, their prices, their routes, their supply lines and that’s that. Are they aware that the savings of micro- and medium-based households would become extremely volatile if not disappear? Do they care about that? How does an “exit” will solve debt problems (Greece), or structural, trade and other problems (both UK and Greece)? Would an “exit” create better business conditions, attract more foreign direct investment, lower taxes or improve the health care system? What would be the impact on unemployment and exactly which strand of society would bear the brunt of a possible transition? How long will it take for the economy to re-calibrate? What will happen to prices and the purchasing power of consumers? But most important of all: will the “exit” change economics at its core? Will fiscal profligacy become en vogue again? Or are going to be returning to the era of quotas, tariffs, domestic sector protection and true social inequality for those not lucky enough to receive public funds, pay high taxes and not be in a protected sector?
The current system we have in place is far from perfect but there is absolutely no reason to make it worse, at the expense of those hit most hard by the crisis. If we disagree on what the future should be we have an obligation to stabilize the current system first, remove obstacles to higher productivity, make amends to it so that it can produces new jobs and growth: then, and only then, when the people will feel comfortable with different options for their future can we re-open the “exit” discussion, the idea being that such an “exit” would be through the door not a free-fall on the elevator shaft.
Do the math “exit” lovers, and answer all the questions. There is no repeat on this exam.