Would there have to be chaos?
Technocrats scaremonger about a Greek default, but to what extent does the country even need to rely on international trade?
"A disorderly default would set the country on a disastrous adventure. It would create conditions of uncontrolled economic chaos and social explosion. The country would be drawn into a vortex of recession, instability, unemployment and protracted misery…”
This was the warning delivered by Greek PM Lucas Papademos on Sunday as he and his technocratic cronies attempted to sell austerity by painting a picture of something even worse in the event of default. Finance Minister Evangelos Venizelos claimed “the social costs that come with these [austerity] measures are contained in comparison to the economic and social catastrophe that will follow if we don’t adopt them… We have to sacrifice a lot so as not to sacrifice everything”.
Leaving aside the fact that austerity is self-defeating as a strategy to reduce public debt (and the IMF knows it), and that history suggests the damage done by default is short lived, how realistic are
the predictions of ‘economic and social catastrophe’?
the predictions of ‘economic and social catastrophe’?
One likely effect of default is that Greece will find its capacity for international trade severely restricted in the short term. If it has to rely on trade to provide the most basic of services to its population, we might reasonably expect catastrophe.
A paper produced for the UN defined absolute poverty with reference to eight basic needs: food, safe drinking water, sanitation, shelter, education, information and access to services. Energy supplies are clearly also another vital area of concern.
Food
Two weeks ago, the head of Greece’s main farmers’ union said the country could be 98% self-sufficient if it made the most of its capacity to produce food. “We have to stop undermining Greek agricultural production and terrorising people about not having enough to eat if the country goes bankrupt,” he said.
Water and sanitation facilities
Despite substantial variations over time and geography (likely to be made more extreme with the effects of climate change), Greece has abundant freshwater resources, with a withdrawal rate of only 12%.
Healthcare
This is an area of greater concern. Greece does not have a strong domestic pharmaceutical industry and there is already evidence of multinational drug corporations halting drug deliveries as a result of unpaid invoices. More positively for the people of Greece, InPharma magazine, representing the interests of big pharamaceutical companies, notes “in a worrying trend for pharma, Spain, Germany and Italy [along with Greece] have all recently proposed or enacted [enforced wholesale] drug price reductions”.
Shelter
Greece obviously doesn’t rely on external markets to provide its housing stock, and despite a 25% increase in Greece’s homeless population since 2009, the houses are still there. There may be scope for a compulsory repurchasing programme of property bought by speculatorsat knock down prices during the crisis.
Education, information and other services
The national debt hasn’t resulted in Greek teachers losing their ability to teach, nor lawyers losing their ability to practice law, nor social workers their capacity to care. Radio and television signals can still be broadcast. Internet infrastructure isn’t going anywhere, neither are printing presses.
Energy supplies
In 2009 Greece produced 10080 thousand tonnes of oil equivalent (ktoe) in energy of which around 80% was coal and peat and only a tiny fraction was oil. Meanwhile domestic consumption ran at 20589 ktoe of which around 65% was oil. Greece’s dependence on foreign oil presents possibly the greatest challenge to social cohesion in the event of default, though the country does have an oil producing sector outputting some 8000 barrels/day(68% more than Portugal and 1800% more than Ireland).
Keynes was aware of the dangers of becoming too reliant on external markets for basic goods, warning “Ideas, knowledge, art hospitality, travel – these are the things which should of their nature be international. But let goods be homespun whenever it is reasonable and conveniently possible; and above all, let finance be primarily national.”
Fortunately for Greece, it retains the basis for a happy and healthy society. Combined with the introduction of alternative currencies and wartime approaches like rationing and tight state supervision of key industries, Greece could weather the storm kicked up by default. And ironically, its adjustment to becoming less dependent on foreign imports and fossil fuels could well place it ahead of the crowd over the coming century as all countries of the world face up to the reality of peak oil and climate change.
http://www.neweconomics.org/blog/2012/02/14/would-there-be-chaos
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