OPINION

The price of taking risks

Harsh though it may sound, the wisdom of the capitalist model is based on the principle that risktakers must occasionally pay a price for their wrong choices. This way, the system burns itself out and is reborn from the devastation wreaked by those who made the fatal mistakes. Some in Greece would like to abolish this fundamental principle, and install instead some Soviet-style economy where the state will make sure that no matter the risk you take, it will always be there to clean up the mess. Tempted by skyrocketing corn prices, some farmers this year went ahead and tripled production. Well, it does not matter that corn prices more than halved; the state will take care of the damage. Is the Lanaras textile factory closing down because it’s not making a profit? No problem; the state will make up for the losses, although the factory clearly cannot survive. Have some banks made key errors at home and abroad? Neither the shareholders nor any executive will be punished, as the state has pledged to cover their exposure. However, this model of state intervention is not viable and will sooner or later hit the country itself. The state must certainly help banks when they face a liquidity problem, but subject to two conditions. First, there must be full disclosure about their bad loans, hidden losses and so on. Second, shareholders and executives must shoulder their fair share of responsibility. Unfortunately people here tend to sweep problems under the carpet. Politicians are often scared of displeasing shareholders. At a time when the US is considering even nationalizing banks, in Greece they were bailed out and shielded, often in unorthodox ways. The state must finally protect the weak, perform its social function and stop perpetuating conditions that put the brakes on growth. Each euro spent on cultivations with no future and unviable businesses or banks, goes right into a huge black hole, increasing the burden on future generations.