...or structural adjustment progammes, familiar to many of the developing world's indebted nations and now coming to a European country near you. As Greece, a country dear to my heart, reels from the financial pages into headline news, its plight highlights the austerity policies now being advocated as a response to the recession. I am not an economist, but I teach history and we are currently discussing the economic crises of the 1930s. This makes me alarmed at the dominance of orthodox economic thinking, with its associated social costs, as the favoured response to continued financial market speculation. These are a few recent pieces worth reading:
Here is Larry Elliott, first on Greece and the European Union, and then on warnings about the future emanating from the Repubic of Ireland, "Ireland's suffering offers a glimpse of Britain's future under the Tories". Helena Smith reports on the mood in Greece itself. Whilst Joseph Stiglitz pleads for support. Finally, an English blogger living in Thessaloniki posts on poverty in Greece in the context of the crisis.
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You part fund public expenditure by issuing bonds which buyers must believe will be repaid, and, on repayment, will have yielded an income not eroded by inflation and, in their denominated currency, will not have depreciated through currency depreciation. All lenders worry when borrowing is too high in relation to the borrower's income.
Such lenders are not just domestic, but international. It follows that you need low inflation, a stable currency, and reliable tax revenues.
I don't know about Greece, but the UK's borrowing has been too high for too long before the banking crisis broke. We suffer crises caused by bad government and bad banks. The crises intersect but have different causes.
Government should lead and convince the people that the pain of financial rectitude will be bearable; it will not be bearable if there is manifest unfairness in bankers flourishing whilst the rest suffer.
The UK government has not come close to a convincing policy, for example, by dividing retail and investment banking. At least Obama has shown willing.
We can try a command economy, but we know where that leads, don't we? So it comes back to governments not being beholden to banks, and governments having the courage to show leadership.
Sorry to have rambled, but I am profoundly pessimistic about the prospects for countries the governments of which spend incontinently, and are bought and paid for by banks.
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