Greek debt: Two cheers for can kickers
Getting out of debt may require austerity. But from debtors to creditors to future generations, nobody wins if austerity stifles economic growth.
Clichés may make you pull your hair out, but when they spread like wildfire and multiply like rabbits they can’t be dismissed merely as lazy thinking. They signal a widely accepted view of the world.
If there is a quintessential cliché for 2011, it has to be “kick the can down the road.” You hear it from commentators talking about the budget deficit, the home foreclosure backlog, and – in particular, now – the sovereign-debt crisis that is rocking Europe. Kicking the can down the road may seem feckless. Neither a borrower nor a lender be. The buck stops ... well, you get the message.
And yet while time and forbearance are no guarantee of solving a debt problem, the alternative can be much worse. Think of this as the debtors’ prison dilemma. Debtors’ prisons, a fixture of Charles Dickens’s novels, were outlawed in the United States in 1833. They were illogical. Although the threat of jail sometimes may motivate a debtor to repay a debt, actual imprisonment does the opposite: You lose any ability to make the money to service the loan.
Greece is gasping for air because of its inability to meet its debt obligations. Most Greeks admit they made bad choices over the past decade. But the severe belt-tightening now required – including the possible sale of ports, railways, and the national telecommunications system – seem much too harsh to them.Bankers, however, are leery of pouring good money after bad.
Other indebted nations on Europe’s periphery – Portugal, Spain, Ireland, and Italy, in particular – are also hurting. Like millions of ordinary people, these nations are caught in a vicious cycle. By restructuring loans and pushing problems into the future, the day of reckoning is only delayed.
On the other hand, with a little breathing room, maybe a weak economy will be able to grow again, making debt repayment more likely.There’s a big difference between prudent spending – even occasionally splurging – and profligacy. But if every account entry in everyone’s life had to be balanced every day, the world would be a bleak and stagnant place. House cats, camping trips, and backyard pumpkins can’t be economically justified. A penny saved is a good idea, but borrowing for education or home or to turn a smart idea into a business can make sense as well.
If two guys tinkering with a primitive computer in a garage in Cupertino, Calif., in the mid-1970s had had to turn a profit immediately, there’d be no iPhone or its hundreds of imitators. And if Apple’s investors had thrown in the towel during the late 1980s and ’90s, the company wouldn’t be the global powerhouse it is today. A large part of the Internet-driven push for individual freedom going on in the world arose from what seemed in the ’90s like a nonessential development.
I remember my first halting encounters with the World Wide Web. I was sure it was just another time-waster with its chat rooms, amateur bloggers, and hot-or-not frivolities. In August, the Web will be two decades old. It is still a vast wasteland – in addition to now being a vital part of business, culture, politics, and communication. If it had had to pay for itself in its youth or adolescence, the Web would have been a failure many times over the years.
Today the Web is profoundly affecting world history.Social media are helping fan the flames of freedom around the world. Brave people still have to face police water cannons, tear gas, or worse. But now they have ways of organizing and communicating that circumvent authoritarian control.
In a world of debt and doubt, sometimes the best policy – besides honesty – is faith in the future. We know the risks and worst-case scenarios. But when we kick the can down the road, we can discover things we never quite anticipated.
John Yemma is the editor of The Christian Science Monitor.