You would not think it is a hard argument to make. But you would be wrong.
Whether or not the program is well implemented, it will lead to unsustainable levels of debt, just as a similar approach did in Argentina: The macro-policies demanded by the troika will lead to a deeper Greek depression. That’s why the I.M.F.’s current managing director, Christine Lagarde, said that there needs to be what is euphemistically called “debt restructuring” — that is, in one way or another, a write-off of a significant portion of the debt. The troika program is thus incoherent: The Germans say there is to be no debt write-off and that the I.M.F. must be part of the program. But the I.M.F. cannot participate in a program in which debt levels are unsustainable, and Greece’s debts are unsustainable.Paul Krugman, also writing in the New York Times, has been hammering this point for years. But faith-based economics is a barrier that no force in the universe can penetrate.
I have to say that the business about the milk makes Lenin's arguments about capitalism's suicidal competition for market share sound good:
Consider the case of milk. Greeks enjoy their fresh milk, produced locally and delivered quickly. But Dutch and other European milk producers would like to increase sales by having their milk, transported over long distances and far less fresh, appear to be just as fresh as the local product. In 2014 the troika forced Greece to drop the label “fresh” on its truly fresh milk and extend allowable shelf life. Now it is demanding the removal of the five-day shelf-life rule for pasteurized milk altogether. Under these conditions, large-scale producers believe they can trounce Greece’s small-scale producers.
Sound familiar? It should if you live in Hawaii and cannot buy fresh milk at any price. (I used to get it sometimes at Foodland -- it cost $10.80 a gallon -- but now it is not available at all. And I can see the remains of Maui's last dairy from my living room window.)In theory, Greek consumers would benefit from the lower prices, even if they suffered from lower quality. In practice, the new retail market is far from competitive, and early indications are that the lower prices were largely not passed on to consumers. My own research has long focused on the importance of information and how firms often try to take advantage of the lack of information. This is just another instance.
Size matters. If the situation were reversed, and it was little Greece that was well-governed with hig tax compliance and big Germany that was profligate and corrupt, would the "market" make the same moral arguments about who should suffer? No:
The project’s first complications stemmed from Schwarz and Wowereit’s ever-changing ambitions. With construction under way, Schwarz, seizing on increasing forecasts for air traffic (up to 27 million passengers at that point), had von Gerkan add north and south “piers” to the main terminal, turning it from a rectangle into a “U” and dramatically enlarging the floor space. Schwarz also dreamed of making the airport a Dubai-like luxury mall. Airports earn significant money from nonaviation businesses, the FBB boss noted, so why not insert a second level, jammed with shops, boutiques, and food courts? Von Gerkan derided what he called the Vermallung of the airport—its “mallification”—but he capitulated to Schwarz’s demands.The whole story about Berlin's unusable $6 billion airport repays reading. Just remember while reading who is the lecturer and who the lecturee when it comes to fiscal responsibility.
The Unite States is not inncent in all this. Our embrace of Greece's corrupt, rightwing dictatorship helped contribute to the lack of faith by today's Greeks in their government. Stiglitz says he believes in democracy.
It is too bad the United States does not.
UPDATE: Not really connected to the issue of Greece but amusing. It appears it isn't that easy to build a flat expanse of concrete.
A RELEVANT UPDATE: Another economist -- Robert Shiller, famous in real estate -- notices a flaw in efficient markets religion. Better late than never, maybe.