In Defence of Economics: A complement to Joseph Markus’ article on the Greek crisis

by Antoine Cerisier

I read Joseph Markus’ piece on the Greek crisis with great interest and thought I would write my own article on the subject to complement – and sometimes criticise – his arguments.

Guardians of economics?

In his article, Joseph criticised European leaders’ obsession with so-called “austerity economics”, particularly in the context of the current Greek crisis. He rightly denounced austerity measures as “unfair” and pointed to their numerous ill-effects on society, falling “almost exclusively on those least able to afford them”. More precisely, Joseph deemed the technocratic language used by the EU and the IMF as inefficient and too reliant on a priori economic knowledge. Even though I agree with the vast majority of his arguments, this is where we start to differ. Of course, economics is a “dangerous science” – as Adam Smith, one of the first economists, admitted himself. Economic science, with its sometimes complicated models, graphs and numbers, often proves too far from reality. Conversely, it can also be oversimplistic: to ease the economist’s work, the world’s complexity is divided into clearly defined categories and situations – such as perfect competition, monopoly or Country A vs. Country B

Nevertheless, economics is often a very useful tool to understand world events and their effects on people’s lives. A common mistake is to associate economic science with neoliberalism, or so-called neoclassical economics, which only accounts for one side of the story, focusing on small government and budget cuts rather than welfare and inequality. This doctrine, unfortunately, has been at the heart of international financial institutions and a number of Western governments – and has been since the 1980s and the influence of Milton Friedman. However, a number of prominent economists have reacted to the spread of neoliberalism and criticised its effects on society and welfare. The recent austerity wave in Europe has been denounced unanimously in radical circles, but also among more conventional, free-market scholars such as Nobel Prize winner Paul Krugman. In an article for the New York Times, Krugman pointed to the failures of recent austerity measures all across Europe, particularly in Greece. Indeed, almost two years after the start of the EU/IMF intervention in the country, a quick look at basic economic indicators clearly illustrates this debacle: government debt is still sky-high despite the harsh austerity packs, GDP has been contracting for two years, unemployment has risen to almost 20% after massive public sector layoffs, long-term growth prospects are dim… Not to mention austerity’s devastating impact on health, inequality and violence. In the Greek case, economics helps us critically assess the country’s situation with the utmost precision.

Now that I explained the relevance of economic science for the current Greek crisis, let me expand on a few factors which may have caused it in the first place. These are not always well-known to the public, partly due to biased media coverage. The elephant in the room has to be tax evasion. Largely ignored by European media and EU leaders, it has cost in excess of 15 billion euros a year to the Greek state in the last decade. This is partly due to Greece’s “cash culture” but not only: according to the Tax Justice Network, wealthy Greeks hold over 20 billion euros in various Swiss banks. Mathematically, tax evasion should be the single most pressing issue to solve the crisis; not the country’s so-called “bloated” welfare state, or the Greeks’ alleged laziness – in fact, Greece is one of the hardest-working OECD countries. Another problem – related to tax evasion – is poor governance and corruption: a state unable to collect taxes cannot hope to maintain stability. Corruption was also apparent when Goldman Sachs helped the Greek government mask its debt from European regulators through derivatives transactions. Shockingly, the government’s negotiator with Goldman Sachs at the time was a certain Lucas Papademos, Greece’s current Prime Minister…

In an interview I read in Le Monde a few months ago, a prominent Greek author – I cannot remember his name unfortunately – deplored the current state of his country and called for a conference with major intellectuals and artists to discuss the crisis and find possible solutions. He was asking for an artistic and philosophical debate involving people from different fields but then insisted: “for pity’s sake, no economists!”. This reaction illustrates people’s scepticism towards a whole field of social science and its practitioners. I understand many Europeans have been put off by neoliberal, technocratic economic discourse. Nonetheless, leaving economic reasoning to the IMF and like-minded institutions may prove a fatal strategic mistake.


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