Greece, Socialism and the Euro

Published: 2021-07-12 04:40:05
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Category: Socialism

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In his article “Greece’s Exit from the Euro Would be a Socialist Disaster,” Louis Woodhill makes a strong case against the socialist direction of Greece’s recently-elected Prime Minister, Alexis Tsipras (2015). This article is written as both an analysis and an opinion, with Woodhill offering a clear indictment of both socialism and Tsipras’s possible plan to exit the European Union (EU). The gist of Woodhill’s article is that socialism does not work without outside funding from capitalist nations. He states that Tsipras was elected on campaign promises to maintain Greek socialist practices and increase government spending by borrowing from EU countries (particularly Germany). If that plan does not succeed, Woodhill presumes that Tsipras may intend to remove Greece from the EU, discontinue use of the Euro, and initiate its own currency, potentially called the “New Drachma” (ND). The main flaw Woodhill notes behind such action is that no one would be willing to accept or trade in NDs, their value would plummet, and Greece would eventually devolve into economic chaos.
Woodhill’s first claim, that socialism is inherently unworkable without funding from other countries, is supported by a statement made by former British Prime Minister Margaret Thatcher, “…you eventually run out of other people’s money” (Woodhill, 2015). He concedes that this leaves Greece with two choices, stay within the EU, or go it alone (and, according to Woodhill, face economic failure). He supports this statement by likening the looming disaster in Greece to the collapse of the Lehman Brothers financial house, but provides a solution to avoid the problems faced by Lehman Brothers. Basically, Woodhill predicts that, if the European Central Bank refused to make loans to Greece, and member banks wrote off Greek debts that would be unpayable via NDs, the impact would be negligible. “Greece accounts for only about 1.3% of Eurozone GDP, and a tiny 0.3% of world GDP” (Woodhill, 2015). Thus, if Greece decides to try to further its socialist spending through self-financing, other countries should not step in to bail it out, and the impact, according to Woodhill, would be minor to everyone, save Greece.
Woodhill anticipates that, if Greece leaves the EU, Tsipras will in fact turn to NDs as the official currency. His contention about this move, however, is that it will likewise result in negative economic consequences. While the government might insist on using NDs to pay its workers and finance its projects, private industry and retail outlets would be loathe to do so, according to Woodhill. He supports this statement by comparing an independent socialist Greek economic regime to that existing in Venezuela, which, according to Woodhill, must enforce its socialist policies through police-state tactics. Woodhill’s immense distrust of socialism in embodied in his statement “[se]rious socialism requires a police state to force people to act against their own economic self-interest” (2015).
Socialism is both the topic and target of this article. Woodhill squarely places the blame for Greece’s economic woes on excessive government spending to support a social-welfare system, while relying on countries prospering from private enterprise to keep his nation afloat. Woodhill himself is a software entrepreneur and obviously no fan of government regulation or excessive hand-outs. His analogy to Venezuela implies his support for free market capitalism. In the United States, for example, businesses have the freedom to operate without fear of government police agents interrupting their operations to dictate policies or forms of currency that are or are not acceptable.
The implications for the United States are clear. If America leans toward social-welfare programs to the extent Greece has, it could impinge on the free market and entrepreneurship. Without a solid taxpaying base, Thatcher’s word could become a reality here as well as in Greece or any country that exceeds its capacity to support programs beyond its abilities to collect tax revenues. Already, legislation such as the Dodd-Frank law has been characterized as an assault on American freedom, particularly in the realm of business. Of course it is unlikely that the United States would find itself in the economic predicament of Greece, but the point concerning freedom from excessive socialist spending or government regulation can apply anywhere, even here. For example, some partisan pundits point to the Affordable Health Care Act as legislation that may already disincline business expansion or hiring.
Indeed, in this article, Woodhill intimates that negative impacts from Tsipras’s initiatives are now occurring, as Greeks may be withholding payment of national taxes with Euros, choosing instead to wait and pay them with devalued NDs. This, of course, only makes matters worse for Greece, because the revenues it needs to continue its socialist spending is reduced as long as the specter of a new currency looms in the minds of taxpaying Greeks. Woodhill does not offer a solution for Greece’s predicament other than staying within the EU (and, no doubt, rejecting the socialist model). If Tsipras proceeds with his ideas, “social and political upheaval” appears to be Woodhill’s prediction of what will befall the already economically-beleaguered socialist state (2015).

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