The Great Sisyphean Drama
Some of the chief unifying ingredients in the process of Cognitive Progression of Homo Sapiens was their belief in social doctrines and religious gospels. Economic paradoxes were derived out as offshoots from these dogmas of faith. Since time immemorial, these economic paradoxes embrace both sacrosanct economical standards that we pursue and laws to which we come to terms with, perhaps- unintentionally. The behavior of rational or irrational homosapiens is considerably dictated by these paradoxes. But, it's all greek!
The double question is, do these economic paradoxes hold true for the GRexit economy, and if yes, what paradox actually indulges them to solve this crisis?
The legends about the Icarus indulges the readers because it reflects his desire to endeavour beyond human boundaries and the resultant ramifications. Daedalus (Icarus’s father) was ordered by the king to build a structure, the exit to which was difficult to decipher, to contain Minataur, a monster. The king incarcerated Deadalu's family in the labyrinth to keep this a secret. To escape, Daedalus made wings for Icarus from feathers he gathered and attached them through beeswax.
The same way, Greek being the Daedalus in this case, entered the economic depression in the 1980s due to the political reaction by Greek population who, after enduring the effects of a horrifyingly brutal seven-year long military junta, elected a left-leaning, socially liberal government. This political regime resulted in an explosion of government spending. As a result, Greece devalued the drachma(Greece' currency) in 1983 to slow down the path of fiscal expansion and debt funded growth just by the time the Maastricht Treaty was signed in 1992 (which gave birth to the concept of a monetary union and the Euro). In 2001, it joined the Euro which improved the economic progression for time being but the membership of the Euro plastered over the more deep-rooted and severe economic malaise that the country was experiencing. As borrowing costs plamated, excessive borrowing led to a slip in the exchange rate and interest rates started rising which concerned the country's unsustainable, boom-based growth acceleration pursued under weakening systemic growth forces.
The monster, Minataur, that broke the camel’s back was the Global Financial Crisis of 2008 that set the financial markets into turmoil. To prevent the crisis, the European Central Bank(ECB), the International Monetary Fund(IMF) and the European Commission(EC), collectively known as the Troika, agreed to extend emergency funding to Greece and bail out. This bailout marks the beginning of what has now become a long drawn-out saga.
On his journey, Daedalus warned Icarus, in Greece's case, its leadership, to not get too close to the sun! Neglecting his advice, Icarus took a flight into the Eurozone membership in pompous fashion that soon led him to meet his doom.
To contain this situation, the IMF was against demanding more austerity. While, when the government agreed with its European partners to push the economy to a primary fiscal surplus of 3.5 percent by 2018, it warned that this would generate a degree of austerity that would prevent the nascent recovery from grasping which they need not change the view that Greece doesn't need more austerity at this point. This impasse led the successive Greek governments to put the blame for the required fiscal contraction on the country’s creditors. But as the economy continued to degrade, austerity which was winning the blame turned the tables. This led to the election of Syriza (political party) which has resulted in Greek political life being dominated by a fear spectrum, where fear of Euro exit alternated with anger at the pension reform. A centerpiece of the primary reform agenda laid at the first bailout back in 2010, the Troika was pushing Greece to save 1.8 billion Euros, as it had the highest pension costs within the European Union as a proportion of GDP.
The same old Icarus termed as 'economies whose behavior and practices led to their success only to constitute their failure afterwards' have come to haunt Greece once again.
Protagoras' Life of the Court
Looking ahead, how would the Greek philosophers have wanted the Economic Crisis to be solved?
To understand this scenario, let us dive deep into Plato's work, "Phaedrus and the Allegory of the Chariot." In this, Plato portrays his tripartite soul through an analogy to a charioteer directing two winged horses. The charioteer, which represents the GRexit situation, seeks to guide the chariot in the right direction by controlling both the horses, i.e, a white and a black horse.
The White horse is of noble breed which
represents the emotional facet of Greece's political leaders' motivation; it's fierce but willingly aligned with reason. For instance, Greece had a currency peg to the US dollar from 1953-1973. During this period, it held a steady exchange rate of thirty Drachmas to the US dollar and enjoyed a growth rate that was surpassed only by Japan. This seems counterintuitive initially, but Greece has supported Euro membership even in the throes of recession i.e., after the Bretton Woods agreement collapsed, the Greek Drachma devalued gradually, to 282 Drachmas to the US dollar when it was abolished in December 2000 which led to an annual decline of 4.7%. This shows that what is fundamentally needed is a government that will take ownership of a reform agenda and prevent an economic crisis from evolving into a humanitarian one.
On the other hand, the Dark horse is difficult to control which aligns with the country's egoistic desires. Greece's situation being the dark horse is hard to govern, but it must be tamed if the charioteer is to access control. Likewise, Greece should cut out the deep historical roots with the Eurozone. This would allow the country to devalue its currency and subsequently ease the debt burden. Moreover, Greece could default on its debts altogether. Showcasing, "Pride goeth before the fall!"
To be precise, let us imagine, I'm Protagoras and you, being a reader, are Euthalos. I agreed to counsel you in law, free of charge on the condition that you have to win your first court case. So I argued in the court "If I win this case, Euthalos will need to pay me what he owes me. If I don't win this case then Euthalos will still need to pay me because, under our agreement, he will then have won his first court case. Therefore, regardless of the result, Euthalos will need to pay me." Euthalos, however, contested this claim- "If I win the case I will not have to pay him, as the court has declared his case null. If I do not win this case, I still do not have to pay as I will then have not won my first court case. So, no matter what, I do not have to pay."
Correspondingly, there is no defined magnitude of loss, which qualifies an economy to be a victim like Icarus. Some economies face losses beyond repair just like Greece's economy which is now in a series of infinite recessionary loops. Just as the sapiens had evolved to beat the atrocities of time and weather, an economy cannot remain intact without the necessary revamped policies as in the case of Greece, which has to continuously adapt to new policies as and when the situation demands. But, can Greece survive or will find itself in the clutches of a new paradox one fine morning?