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Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There

Politics / Social Issues Jan 30, 2015 - 10:21 AM GMT

By: John_Mauldin

Politics

Jared Dillian writes: I’ve been following the activities of Syriza for a long time. They started putting up big numbers in the polls in Greece three or four years ago.

Syriza has a message that’s very popular with Greeks: Screw Germany. The word they use to describe what’s happened to Greece during the period of time since the debt crisis is “humiliation.”


To be fair, if you owe a lot of money to someone, it can be tempting to give them the finger. When Greece’s debt was restructured, it was done in such a fashion that none of the debt was really forgiven, but the maturities were extended far out in the future. Since Greece doesn’t grow (for structural, demographic, and cultural reasons), this is known as extend and pretend. Everyone knew, even back then, that the only hope Greece would have to avoid default would be whatever ability they had to refinance.

Greece has been struggling under the yoke of this debt over the last few years, and the Greeks are sick of being serfs. So Europe gets the bird, although deep down, Greece doesn’t really want to drop out of the euro. They get a lot of benefits from being part of the Eurozone, namely purchasing power and low interest rates.

So naturally, having and eating their cake simultaneously is the goal.

But Alexis Tsipras (the head of Syriza) will threaten to not pay to get what he wants, and it will be interesting to see if Germany will call his bluff. The German people have a pretty low opinion of Greece these days, so if it’s politically palatable to eject Greece from the euro, Merkel might do it.

But Tsipras at least has a credible bargaining chip: He says he can deliver higher tax revenues through better enforcement, as Greeks are notorious tax cheats. If he can pull it off, then Greece may not default.

That’s all a very nice story, but I don’t believe it for a second. There will be no increased tax revenue. It’s all talk.

I want to talk a little about Syriza and who they are, because the mainstream press likes to frame them as an “anti-austerity” party. But they are much more than that. In reality, they are just one step away from full communism.

If you don’t believe me, take a look at the Syriza Wikipedia page. SYRIZA, which is an acronym of the Greek words for Coalition of the Radical Left, until recently, wasn’t really a party at all—just a collection of parties cobbled together under the auspices of screwing creditors.

Here’s a list of the parties that coalesced under the umbrella of Syriza:

  • Active Citizens
     
  • Anticapitalist Political Group
     
  • Citizens’ Association of Riga
     
  • Communist Organization of Greece (KOE):
     
  • Communist Platform of Syriza: Greek section of the International Marxist Tendency
     
  • Democratic Social Movement (DIKKI)
     
  • Ecosocialists of Greece
     
  • Internationalist Workers’ Left (DEA)
     
  • Movement for the United in Action Left (KEDA)
     
  • New Fighter
     
  • Radical Left Group Roza
     
  • Radicals
     
  • Red
     
  • Renewing Communist Ecological Left (AKOA)
     
  • Synaspismós
     
  • Union of the Democratic Centre
     
  • Unitary Movement
     
  • And a number of independent leftist activists

Sounds like some nice folks you’d have over for dinner and a game of Trivial Pursuit.

In addition to debt forgiveness, Syriza wants a bunch of other stuff, including forgiveness of bank debt for people who are unable to meet their obligations. It’s no coincidence that the Greek stock market was down 13% when the snap election was announced, led by the banks.

In the entire post-World War II period, you’d be hard pressed to find a farther-left national government in Europe than what Greece has now.

In the interest of full disclosure, I think it’s important to point out that I’m a very free-market kind of guy, and if something is bad for markets, I oppose it. I think the Greek Syriza experiment will turn out very badly, and the Greeks will end up with a sharply lower standard of living, however that comes about.

If it comes about by exiting the euro, an immediate consequence will be that they can count on a very weak drachma and high interest rates, possibly followed by high inflation. There will be food and energy shortages. There will be pretty much everything you had in Cuba and Venezuela, just in a less extreme form. Economic misery will abound. And just as a reminder, it is very hard for such places to be governed democratically.

Every once in a while finance gives us these gifts—little controlled experiments where you can watch how two competing economic philosophies play out. East and West Germany. North and South Korea. Even among the 50 US states. As you go around the world, you can see what works and what doesn’t.

Many people think the Scandinavian countries are socialist, but they aren’t—they are very capitalist economies with high levels of redistribution. Sweden was socialist from 1968-1993, but not today. Don’t confuse that with what is going on in Greece. Greece’s economy already is dysfunctional, and it’s going to get worse. We are going to see what happens to this little Marxist archipelago, formerly a member in good standing of the European Economic Community.

But I am getting ahead of myself. As of today, they’re still a member.

The trades here are very easy. It’s hard to have a stock market in a country where property rights barely exist. It’s hard to have bank loans or bonds where debt can be arbitrarily forgiven by the government. The nonexistence of capital markets is bad, contrary to what some folks think.

I don’t usually say things like this, but any Greek stock above zero is a potential short. Politics, like stocks, has a habit of trending—for a very long time.

P.S. Thanks to David Burge (@iowahawkblog) for the inspiration for this week’s title.

Jared Dillian

The article The 10th Man: Socialism Is Like a Nude Beach—Sounds Like a Great Idea Until You Get There was originally published at mauldineconomics.com.
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