Greek crisis: A crazy way to run civilisation
10 May 2011
Despite a series of swingeing austerity budgets to calm the international markets, Greece yet again totters on the brink of bankruptcy. But should democracies determine economic policy according to what a few thousand traders might, or might not, want?
It used to be that only less developed countries had to live under the power of capricious "international markets". One classic example of this came in 2003, when the new government of Brazil, under Luiz Inácio Lula da Silva, had to temporarily set aside its social democratic mission and simply do what it took to get traders to bring the country's bond prices under control. But now, the unpredictable might of the markets is felt in the world's richest areas, too. The government of Greece and eurozone officials have just come to the realisation that the bailout they designed a year ago is not working – that is, that it has not allowed Greece to re-enter the markets. This outcome for the first of the three bailouts does not bode well for Portugal and Ireland's packages. It is the fluctuations of these markets that triggered the crises in the first place and that threaten to bring on new ones. In the UK, the chancellor, George Osborne, need not hide the fact that Britain's package of cuts is fundamentally about avoiding their wrath. The idea is to avoid in the UK what is happening in Portugal. He admits to the strange way these markets work, too, when noting that the UK's budget deficit is actually larger than that of Portugal. We are now all learning what poorer countries learned first: international bond investors determine to a large extent what range of decisions are available to democratic governments. And those determinations are far from as rational as we would hope. It becomes very near impossible to know what will work, and how much pain and austerity are required to avert disaster. Read full article in Guardian...