A considerable number of critics, including main left-wing opposition leader Alexis Tsipras, have argued that the best way to deal with Greece’s financial crisis would be to introduce a US-style stimulus package in order to boost growth and pull the anemic economy out of recession.
To be sure, every wise-headed person in this country would like to see good things like these happen. We all want to see growth, and we all want to see an end to the repeated waves of wage cuts and tax hikes hitting the population.
However, there are two serious issues with this “American recipe,” as it were. The first is that before you can make the central state help the economy, you first have to come up with the necessary money. But we now know we cannot borrow any money. Also, we are not in the position to print money. The prospect of handouts from Northern European Union member states to their suffering counterparts in the South, and particularly to Greece, is an extremely unlikely scenario given the current political environment.
This basic misunderstanding in the past led a number of established economists on the center-left to the erroneous – some would say disastrous – advice they gave to former Greek Prime Minister George Papandreou before Greece signed up to the bailout agreement with the European Union and the International Monetary Fund.
So one point is that there can be no neo-Keynesian policy if there is no one out there to lend or give you money to spend.
A second issue is that there can be no a la carte approach to the American recipe. Adopting a neo-Keynesian policy comes hand in hand with a brutally deregulated labor market, flexible working hours, universities that cooperate closely with the private sector and so on.
The banks and big companies in which the state stepped in as a main shareholder in the United States continued to operate as private enterprises, not as public utilities.
In the US, are particularly in the Barack Obama administration, Greece has found an important ally who is trying to convince German Chancellor Angela Merkel to give up her insistence on austerity.
The truth however is that Obama and Merkel do not stand that far apart on the issue of how a capitalist economy should run these days.
The American recipe has two sides that are inextricably linked: There is, of course, the fiscal side, but there is also the reality of a fully deregulated real economy.