Apparently Greece should resume spending its way to prosperity. At any rate, that seems the illogical conclusion from today’s Globe and Mail editorial calling Greece the canary in the European coal mine and noting “absurdly high levels of unemployment” in Eurozone countries from Greece to France but saying it is bad that Athens is now running a primary surplus. “[L]eaving debt service costs aside,” the Globe intones, “the Greek government takes in far more than it spends. In the midst of a depression, that’s not a victory. The country is locked into a feedback loop of government spending cuts leading to economic contraction leading to more spending cuts to stay ahead of the reinforced economic contraction. Much of Europe is stuck in the same dynamic.”
The logic of this argument is hard to follow. If running a surplus is harmful, presumably running a deficit would be good unless there is no good option or precise balance is the only answer. But European governments including in Greece have been spending more than they have taken in for decades now, fostering a large and cozy public sector, and the result has been stagnation and decline. It is very hard to understand why more of the same would, at this point, produce a dramatically different result. Indeed, modern scientific thinking does not permit us to posit a sudden change in basic causal relationships to account for observed phenomena.
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To say so is not to defend “austerity” policies that aim to preserve the existing structure on a pay-as-you-go basis when the whole reason for the long run of deficits, vaguely-understood Keynesian theory notwithstanding, was that it was impossible to fund the welfare state at a sufficiently generous level without borrowing. But it is to say that if insanity is doing the same thing over and over and expecting a different result, the position articulated by the supposedly sober minds on the Globe editorial board qualifies as unreasonable.