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GREECE AND THE EURO CRISIS
An odd view of democracy

Feb 3rd 2015, 14:42 BY BUTTONWOOD

JOSEPH Stiglitz has a post on Project Syndicate arguing that Greek debt should be forgiven and that austerity has failed. Some people may argue with the economics or point out that Greek debt servicing costs have been substantially reduced in previous deals. But let us happily accept that some Greek debt will need to be forgiven and that the target for the primary surplus (4.5% of GDP) is ridiculously high.

It asks rather more of the general reader to accept a couple of the professor's debating points. The first is that:

There is a fear that if Greece is allowed to restructure its debt, it will simply get itself into trouble again, as will others. This is sheer nonsense
Actually Greece has a long record of debt problems with around half of its history as an independent nation spent in default. One need only look to Latin America to see countries which have a history of high debts and write-offs (the 1890s, the 1930s and 1980s and for Argentina, 2002). So it would actually be an act of the purest optimism to imagine that it would not happen again. But my bigger struggle is with his closing argument that:

Seldom do democratic elections give as clear a message as that in Greece. If Europe says no to Greek voters’ demand for a change of course, it is saying that democracy is of no importance, at least when it comes to economics.
Yes, the Greek voters have given their opinion but what about voters in other democracies? German voters, when polled, seem pretty clear that they don't want Greece to be given debt forgiveness. Since they would bear the cost of a Greek write-off, why should their views count for nothing? And what about the Finns, Dutch, Austrians etc?

This is hardly an issue of democracy. Or if it is, then some tricky questions would arise; since there are a lot more Germans than Greeks, surely the former would "win" any vote if the two were combined? Perhaps the Germans should, as a moral imperative, take the hit. But as I tried to point out in my last post, it is easy for people in Britain (and America) to lecture the Germans about what they should do with their taxpayers' money, even though voters in their own countries would not be happy to bail out Greece. We can all be moral with other people's money. (Another modest proposal. Why doesn't the US suggest that Greece's debt to the IMF be written off, with the US taxpayer taking all the hit? Since the US is one of the shareholders in the IMF that may eventually happen anyway. But one can't see such a proposal getting through Congress, let alone a referendum of US voters. Democracy won't get a look-in.)

Voters in any nation are entitled to have any social benefit or economic system they choose, provided that they themselves bear the cost. If they choose to fund themselves by borrowing internationally, they must expect creditors to impose some conditions.