As part of the “austerity” measures just passed by the Greek Parliament, the state will be raising taxes about $40 billion over the next five years. The Greek state had to pass these measures to qualify for a $16 billion emergency loan from the IMF, ECB and EU to finance its deficits. In the future these loans will have to be paid back. There is only one place from where a state, broke or otherwise, can attain revenue and that is from tax payers. Along with tax increases there will also be large-scale “privatization” of state services.
I put privatization in quotes because it is inaccurate to call it that. Given that the Greek state paid for construction of its public sector utilities and infrastructure through money acquired by force, it should have no right to ownership of them in the first place. How can the Greek state give away something to which it has no right?
The dynamic of most schemes for state privatization of public services goes roughly as follows: One day I show up at your house with a group of large, intimidating thugs. I tell you that from now on you will pay me $10 a week to mow your lawn, tend to your garden, and build you a stone pathway. If you don’t like this deal you can always move to another neighbourhood since that sure beats the heck out of having your legs broken and your house windows smashed. As time goes on, despite my ability to forcibly extract money from you, I am still unable to make a profit and my landscaping “business” slowly begins to go more and more into debt. Eventually I must borrow money from a well established bank to pay for the necessary lawnmowers, shovels, wheelbarrows, jumbo-jets, and executive suites.
But here’s the catch. When I make these loans I use your assets as collateral! I tell the bank from whom I loan money that if I am for some reason unable to pay my debts, they can take your house, car, and property. In fact, since I have large, intimidating thugs under my employment, the bank is more likely to lend me money, and more likely to want me to default, since they are confident that they will come into possession of your property through the aid of my employed goons’ strong arm tactics. It is a win-win for the bank and for my landscaping “business.” Even if I do default I’ve already made a sizable amount of profit milking you and get to walk away with a jumbo-jet, executive suite, and a possible possible finder’s fee courtesy of the bank. Things don’t look so good for you.
The Greek people, tax payers, consumers, the productive classes, are the victims in this same way. They have had a bureaucratic, welfare, corporate-friendly state placed upon them through force and threat of implied force. This massively inefficient institution is a drain on society’s resources and no one in their right mind would ever expect it to make a profit, or draw even. Yet too many people, and unfortunately this includes so-called advocates of free markets and limited government, do not blame the terrible, anti-social, people-eating machine that is the state. Rather, they blame Greek tax dodgers, welfare bums, and existence of an underground Greek economy. Can anyone say with a straight face that if more Greeks paid their taxes we would not be having the same problems today?
Something like 30% of the Greek economy is underground while tax avoidance is a routine activity. As far as that last part goes it sounds like we have a lot to learn from our Greek friends.