Why are neoliberal economic remedies that have failed spectacularly in other parts of the world being rebranded and applied to Greece? Despite uproar on the streets, the Greek parliament has now voted to accept the package being pushed by Europe and the IMF to address Greece's crisis. This postulates that austerity – cutting public expenditure, reducing salaries and increasing taxes – will stabilise the economy in the long run.
But this solution is already not working in Greece. And the evidence suggests it has been disastrous when imposed across Latin America, East Asia and Africa, provoking opposite results to those that are desired. Thus it will actually deepen the Greek crisis.
The answer to why this medicine is still being foisted on Athens is that the inability of Greece to serve its external creditors would probably lead to the global financial system crashing. Greece's creditors are the largest banks in Europe and the US – banks that would be ruined if Greece could not repay them. The "troika" (European Commission, ECB and IMF) which is "advising" Greece is principally concerned with protecting the interests of these large banks and bondholders.
But it is wholly unreasonable to use the Greek people as scapegoats for a colossal global catastrophe. What the troika is doing is bulldozing Greece's democracy. A puppet Greek prime minister is now making decisions that will affect the Greek people for generations. Workers' rights and democratic institutions that were achieved through the sacrifices of our fathers and grandfathers are being sold at the table of fat and rich negotiators.
Greece will have to default sooner or later, and the best course of action would be to default now. Not defaulting now will unequivocally mean defaulting down the road, by which time the economy will be completely shattered, Greek society dismantled and public property sold off to foreign multinationals. True, if Greece goes through a default, the government will not be able to pay salaries and pensions for approximately two months. But if Greece exits now, it can at least manage its own path to recovery. A default managed by Greece will relieve pressure on the economy by cancelling a large part of the debt, while the depreciation of the new currency would boost export competitiveness.
Take it from an economist: economics is a social science that more often than not strikes out when forecasting the future. But careful reading of economic history teaches a key lesson: neoliberal policies create cycles of boom and bust, and never serve the interests of the wider society.
Dr Effie Kesidou is a lecturer in industrial economics at the University of Nottingham's Business School.Reuse content