Why Fixing Greece Requires Anarchy
On July 5, the Greek people voted against the latest bailout offer from the European Union, moving the country closer to an exit from the Eurozone and a return to its former national currency, the drachma. The government had already defaulted on a $1.7 billion payment to the International Monetary Fund on June 30, which led to bank closures and strict capital controls at ATMs. It now appears that Greece will be bailed out again, go deeper into debt, and be back in a similar situation in a few years. What the Europeans fail to understand is that it is impossible for them to fix this problem by their current methods. Let us examine why.
The Past is Prologue
Such problems do not occur overnight. In order to understand the present, one must first understand the past. Therefore, let us see how Greece reached this point.
Greece was home to the first advanced civilizations in Europe, and many of the features of modern Western civilizations originated in Classical Greece. Among these are the modern conceptions of mathematics, philosophy, science, architecture, literature, and democratic government. These allowed the Greeks to drive out Persian attempts at conquest and eventually conquer the Persians under the leadership of Alexander the Great. Their dominance was not to last. The Roman Republic was able to turn some Greek city-states to its side and wage the Macedonian Wars against the others, eventually taking over all of Greece by 27 BC. After the Roman Empire split, Goths, Huns, and Slavs raided Greece. The Byzantine Empire took over Greece from the 8th century until its collapse in 1453, with some parts of Greece falling to the Franks and Venetians after 1204. After this, the Ottoman Empire conquered Greece and held it until a resistance movement began in 1821 and the modern Greek state was established in 1832. It was a kingdom until a democratic movement abolished the monarchy in 1924. The monarchy was restored in 1935, but a Nazi collaborationist regime took power from 1941 to 1944. The monarchy regained power until 1974, during which time a civil war between communists and anti-communists caused economic damage and social tensions. During the last seven years of the monarchy, a coup d’état ousted King Constantine II and replaced him with a military junta. The democracy was restored in 1974 and has continued until the present day.
This history helps to explain the behavior of Greeks toward the European Union. Having a tradition of originating the concepts of democratic self-government, then being subjected to external authoritarian rule for two millennia, then being subjected to domestic monarchs and military dictatorships, and finally regaining sovereignty would create a mentality of resistance among the Greek population to external control of the sort that the European Central Bank, the German government, and other creditors seek to exert over Greek economic policies. This mentality is of sufficient strength to overrule economic and mathematical reality in the view of Greek voters, such that they would reject fiscal austerity measures even though they are necessary to prevent an economic catastrophe.
Democracy Is The Problem
Greece is not the first democratic nation-state to endure a sovereign debt crisis and go into default. Since 1982, Mexico, Russia, and Argentina have defaulted on sovereign debt while practicing some form of democratic government. The United States government has defaulted on debts on seven occasions since 1779. But it should be no surprise that democracies would build up sovereign debt and eventually default because the incentives inherent in democracies lead toward such a situation, and the rational self-interest of everyone involved is to take what one can while affecting a tragedy of the commons on a massive scale. In the words of Elmer T. Peterson (and often falsely attributed to many earlier writers),
A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.
It is at this point that a defender of constitutional republics will try to insist that these are somehow different from democracies. In practice, it is only a question of the average time it takes for democratic incentives to wreak havoc, and the checks and balances of republicanism do slow down the march toward disaster. In theory, this insistence is akin to claiming that making a chocolate cake multi-layered and decorating it in a certain way somehow makes it not chocolate.
Another notable aspect of democracies is that there is a minimum age for participation in the voting process. This means that influence is entirely held by people above that age, and that those who are below that age are helpless to stop any predations inflicted upon them by their elders under color of law. Abolishing the voting age would not help much, however, as those who are below the minimum voting age are unlikely to have a firm understanding of economic realities and the voters in the present day would still be able to sell unborn future generations into debt slavery.
Anarchy Is The Solution
First, I must clarify the type of anarchism advocated here. There are anarchists in Greece who are farther left than the communists and socialists in the Syriza government. Anarcho-communism, with its contradictions concerning the nature of private property and hierarchy, will only make matters worse. What is needed is the sort of anarchism advocated by Murray Rothbard, Hans-Hermann Hoppe, Robert Murphy, and many others, in which the state is eliminated in favor of free markets, private ownership of the means of production, and individual liberty.
We may either establish a direct proof for the need for anarcho-capitalism or show that statism makes it impossible to solve the problems in Greece. In essence, we must show that the state provides the necessary backing for the institutions which result in such problems, namely central banks and national debts.
National debts do not work like personal debts, despite the rhetoric of starry-eyed economists, politicians, and propagandists. Legitimate personal debts cannot be incurred without direct consent of the debtor, but a government can borrow upon the future productivity of its citizens, even those who are as yet unborn and could not possibly have a say in the matter. Personal debts are generally discharged when the borrower dies, but sovereign debts are interminable; for example, a sovereign debt in France that currently pays an annuity to creditors dates all the way back to 1738. While debtor’s prisons have fallen out of favor for personal debts, the non-payment of sovereign debts in the form of refusing to pay taxes is still punished by incarceration. When going into personal debt, the borrower chooses how much to borrow (and is limited by what the lender will lend!), decides how to use the money, and chooses a payment plan. With a sovereign debt, the citizens get no such choices; they may only try to vote out those who made bad decisions after the damage is done. The proof against the state here is straightforward; there can be no sovereign debt if there is no sovereign.
Central banks exacerbate the problems of sovereign debt, as they allow for the hidden tax of currency debasement that can hide the effects of overspending from the general population. As most people lack understanding of the operation of a central bank, politicians can use it to create the illusion of something for nothing in order to buy votes in the present and send the bill to the future. Of course, being forced to service the debts of one’s ancestors is a form of slavery, but if politicians and central bankers cared about morality, then they would not be politicians and central bankers. Central bankers lend to governments, make profits from the interest payments, and try to avoid losing their principal. This is antithetical to a free market, but a free market is against their rational self-interest until the debt reaches such a magnitude that a default becomes likely. Then, they suddenly purport to favor free markets rather than oppose them because free markets create the economic growth necessary to sustain their parasitism upon the people. This would be bad enough, but it gets worse. Sometimes the most profitable outcome for central bankers is to let a government borrow its way into default if there is the possibility of an external bailout, as the Europeans continue to provide for Greece. Even without a bailout, the rising interest payments on an unsustainable debt may be sufficient to compensate for a haircut that comes during a debt restructuring. Central banks also exacerbate war, the worst government program of all, by reducing a government’s borrowing cost and increasing the confidence of lenders. Along these lines, central bankers could make matters difficult for a government in arrears by funding its enemies, much as the Iron Bank of Braavos does in Game of Thrones.
Central bankers are evil, but they are not stupid, so it is difficult to believe that the above paragraph would be news to any of them. Once again, the state is vitally important to the maintenance of the problem. The state forces people to use the fiat currency created by the central bank by demanding that all taxes, fees, fines, etc. be paid using that currency and by demanding that the fiat currency be accepted as legal tender for all debts. Abolition of the state would not mean concurrent abolition of central banks, but the free market places central bankers at an enormous disadvantage, so it is unlikely that such institutions would survive for long.
Finally, there are other aspects of the state itself which make the problem intractable. Stifling regulations have made it increasingly unfriendly to do business in Greece, and those who are employed in regulatory agencies exist parasitically upon the productive economy. The corporate tax rate in Greece is rather high, though many countries are worse. The true purpose of regulations is not to protect consumers or workers, but to allow the wealthiest business owners to capture them for use against their smaller competitors. This is the quid pro quo that the wealthy receive for funding political campaigns. Likewise, the true purpose of corporate taxes is not to raise revenue (as these are really just taxes on the end users of a corporation’s goods and services), but to create loopholes for the wealthiest people. There is also the matter of unsustainable pension programs which were created partly for the purpose of buying votes in the present at the expense of the future, and which must be eliminated before they cause an economic catastrophe. It is against the rational self-interest of politicians to eliminate these, so the only sure way to be rid of them is to eliminate the statist system itself.
Feelings Are The Enemy
That someone will feel economic pain from any approach to this problem is unavoidable. Many people will argue that the elderly have paid into the system and should therefore receive a return. To argue this is to confuse paying for an investment with paying an extortionist, as participation in the government retirement system is not voluntary. There is no money in the system with which to pay them, as it has not only been spent, but has been used as collateral for borrowing more money. Thus, there is effectively a negative amount of money in the system with which to pay the pensioners. Many people will also argue that the elderly pensioners are victims in this situation, but they are actually victims of their own making, and as such are not worthy of the same compassion as the victim of another person’s wrongdoing. (If anyone deserves such sympathy, it is the young and the unborn who have been victimized by the elderly by having massive debts run up in their names!)
This is also a matter of personal responsibility. When the empty promises were made, it was the responsibility of the people at that time to refuse the offers of economic snake oil salesmen, and to bear the cost of accepting such logical impossibilities as truth. Now that the con game is revealed, they should suffer the consequences of their decisions rather than be able to foist their maladies upon their children and grandchildren.
Of course, those who propose that the elderly are the homesteaders of their own misery and deserve to suffer for it will be the targets of name calling and appeals to emotion, but these are merely admissions of defeat and ignorance on the part of those who resort to such childish tactics. To solve such a problem as the situation in Greece, we must realize that logic trumps emotion and act on this realization.
Prospects Are Slim, But There Is Hope
Admittedly, the likelihood that Greece will follow the path recommended above is none for now and slim for the near future. Most people, and therefore most institutions, tend to do what is right when they have exhausted all of their other options, and the Greeks are not made of finer clay than the rest of us. That being said, there are signs of hope. The Greek people already distrust rulers because of the past two millennia of history. They evade taxes to the tune of at least €76 billion since 2009, with billions more unknown from Greece’s robust agorist economy, which equals almost 25 percent of the entire Greek economy. Overall, the Greek government collects only about half of the taxes that it levies. Greeks likewise have little respect for gun control laws, with an estimated 2.5 million guns in civilian hands but only 100,000 of them in compliance with gun laws. The Greek government, by comparison, has only about 1.57 million guns. The combination of an armed populace and a robust black market means that the Greek government would not be so difficult for its people to overthrow, despite its relatively strong armed forces and large welfare state. Should the Greek people decide to embrace rather than reject economic reality and overthrow not only their own rulers but those in Brussels as well, they stand a decent chance of becoming free and prosperous.
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