Whatever Greece has been doing economically hasn’t worked out that well, apparently. It seems irrational to say that “What we organized in the past few decades led to insolvency, but we’re much smarter and wiser and would never do that again.”
Maybe Ecuador is the model for Greece. They noted their failures in managing their own currency (the sucre) and voluntarily gave up this government function in 2000, adopting the U.S. dollar as the official currency.
Analogously, the Greeks could recognize that they aren’t capable of drafting and passing laws that lead to a sustainable economy and import another country’s laws and regulations in a big package that nobody can open or tweak. Which country’s laws should they pick?
The CIA Factbook shows that the world’s most successful country, aside from oil-rich Qatar or a few tiny financial services havens, is Singapore. Singapore has a per-capita GDP that is 50 percent higher than the U.S.
Singapore is similarly situated to Greece in many ways. The population is within a factor of 2. Both countries are small relative to neighbors and trading partners. Both countries have military challenges in dealing with much larger potential foes (Turkey for Greece; Malaysia and Indonesia for Singapore; Singapore currently spends a larger percentage of GDP on military than does Greece (World Bank)).
Greeks could strip their politicians of law-making power and say that their courts and police were responsible for applying the laws and regulations of Singapore, however those laws and regulations evolve.
Related:
- Heritage foundation on Singapore (#2 in the world for “economic freedom,” after Hong Kong)
- Heritage foundation on Greece (#130 in the world, in between Suriname and Bangladesh) — this raises the question “Why does the world have to stop and pay attention to the economic challenges faced by the Greeks? Are there not similar challenges faced by people in their economic environment neighborhood? Why do we care about Greeks this week but not people in Suriname or Bangladesh?)
Greece of course already ceded its currency printing power to another country (Germany – the Euro is the Deutschmark in drag) – that is their problem. Currencies are not “one size fits all” – hard countries are better off with hard currencies and soft countries need soft currencies. Greece’s mistake (and Germany’s) was adopting a hard currency. This brought benefits to both sides for a while (Germany got to sell a lot of Mercedes to Greeks who could never have put together enough millions of drachmas to afford a Mercedes, Greeks got to drive said Mercedes) but in the long run it could not last.
I’m looking forward to Greece going back on the drachma so I can again enjoy cheap vacations in Greece. The food at the tavernas was never that good (I traveled around the country and every taverna essentially had the same 5 or 10 dishes on its menu as if the menu was issued by the State Bureau of Taverna Menus) but before the Euro at least it was cheap. Greek wine was mediocre at best, but when it was $1 or $2 a bottle, it was fine – cheap and cheerful as the Brits say. But paying French prices for Greek products was no fun.
Here is the history of the drachma. It was a soft currency par excellence:
During the German-Italian occupation of Greece from 1941 to 1944, catastrophic hyperinflation and looting of the Greek treasury caused banknotes in higher and higher denominations to be issued, culminating in a 100,000,000,000-Drachma note issued in 1944. In November 1944, after Greece was liberated from Germany, old Drachmae were exchanged for new Drachma at a rate of 50 billion to 1. This second Greek Drachma also suffered from high inflation…. In 1953, Greece joined the Brent Woods system in an effort to stop inflation. In 1954, the Greek Drachma was revalued at a rate of 1,000 to 1. The new (third) Drachma was pegged to the United States Dollar at 30 Drachmae = 1 USD. In 1973, the Brent Woods system was abolished. For the next 25 years the official exchange rate gradually declined, reaching 400 Drachmae to 1 U.S. Dollar.
The common currency/economic union was supposed to be the first step in the path to political union. The view from relatives and friends over the decades seems to be that the average citizen would have been happy to live under a fairer system of german/french etc euro laws and the freedom from cronyism/corruption that might entail. I think most people believe that the ruling class has little incentive to change the status quo through which the elites usually enrich themselves to the detriment of the greater good.
Most countries could do worse than imitating Lee Kuan Yew’s government’s policies in Singapore, many of which were simply aimed at maintaining employment and increasing exports. As far as I can see, this has been one of the more effective governments to rule during the last 100 years.
That said, amongst other things, in addition to good government, you’d need to import the hard-working, education-focused Asian culture. And it’s a different time, of course.
This doesn’t mean this I don’t like the idea, I do, but the results may not be the same, given everything else is not equal.
While we’re at it, I’d like to see the US start to improve its trade balance with the rest of the world. Perhaps /we/ should adopt Singapore’s model, instead.
Wouldn’t be such a great idea for the Greek press. Also how would they decide which family should lead the nation forever, occasionally throwing a one-presidential-term bone to especially valued dynastic employees? When I look around Greek politics I don’t see any LKYs.