A victory for democracy in debt-laden Greece … then what?

Andrew Sheng says Greece's debt troubles show the futility of wishing for freedom from responsibility

PUBLISHED : Friday, 10 July, 2015, 5:45pm
UPDATED : Wednesday, 28 September, 2016, 8:44am

Last Sunday, the Greek people voted overwhelmingly "no" to the proposals from the European Commission for an austerity solution to their debt crisis. This reminded me of a similar vote in the Hong Kong Legislative Council to the proposals for constitutional reform from Beijing. From the Greek point of view, it was a victory for democracy. From Brussels' point of view, the "no" vote solved nothing. The question in everybody's mind now is - what's next?

A friend sent me a quote this week on US historian Edith Hamilton's The Echo of Greece, an instant classic when it was published in 1957, on the Greek mind and its influence on Western thinking and development. Talking about Athens and its downfall, she said that in the end, Athenians wanted security more than freedom. "Yet they lost everything - security, comfort, and freedom. This was because they wanted not to give to society, but for society to give to them. The freedom they were seeking was freedom from responsibility. It is no wonder, then, that they ceased to be free. In the modern world, we should recall the Athenians' dire fate whenever we confront demands for increased state paternalism."

Famous last words.

Asians who think that democracy is the solution to all problems need to remind themselves that, in the end, philosophers (politicians and the public alike) still need to eat. Democracy is the means to an end, not an end in itself. Democratic politics, as it tries to buy public popularity with instant promises, is a fiscal problem. Both sides of the political spectrum try to outbid each other in popularity - the elite votes for lower taxes and, to buy support from the electorate, increases welfare spending. The result is what we have today, higher and higher debt, financed only by lower and lower interest rates.

What did the Greek referendum or the Hong Kong vote prove? That the politicians say they don't like something. But what is the alternative? My reading is that the Greek public basically said to Brussels that "we are family, so you need to bail us out". Brussels (or, more specifically, Berlin, since the Germans are more equal than other Europeans on the push for austerity) says to the Greeks, who are only 1 per cent of the family, "if we bail you out, what about the Italians, Irish, Spanish and Portuguese?"

This is a larger problem than just Greece. Financially, the Europeans can easily bail out Greece; geopolitically, Greece is important because it is part of the Balkans region, historically the source of conflict in Europe.

To put this in perspective, Greece owes the rest of the world US$350 billion, of which the International Monetary Fund provided US$35 billion. This was almost the amount provided by the IMF in total to Thailand, Indonesia and South Korea during the Asian crisis of 1997-99, which together have 30 times the population of Greece. The per capita income of Indonesia in 1998 was one twenty-eighth that of Greece in 2014. So much for democratic fairness.

This is not the bailout of a poor country, but a pretty rich country helped by a group of rich countries.

The dilemmas of democratic politics are not unique to Greece. As Moises Naim, a former editor of the influential magazine Foreign Policy, pointed out in his book The End of Power, "in many countries, the fragmentation of the political system is creating a situation where gridlock and the propensity to adopt minimalist decisions at the last minute are severely eroding the quality of public policy and the ability of governments to meet voters' expectations or solve urgent problems".

This fragmentation is due to the rise of social media, which has connected people to other people like themselves, making the political discourse and power beyond the reach and comprehension of conventional politicians.

The masses know what they may not like, but given so many things changing at the same time, the policy options and outcomes are much more difficult to articulate, present and implement.

The real problem is that many hard truths, such as fiscal sustainability, are difficult to convey to the voter. There is no free lunch, although democratic central banks are opting to print money to make it appear that there is a free lunch.

Confucius was not wrong when he said that the stability of a country depended on self-discipline, not just for politicians at the top of the heap, but the man or woman in the street. Hamilton said it best in The Greek Way: "Liberty depends on self-restraint. Freedom is freedom only when controlled and limited."

When politics promises heaven, it is likely that purgatory will follow. Greece will have a dark period of pain to come. We will all do well to learn that lesson from Greece.

Andrew Sheng comments on global issues with an Asian perspective