In recent months, economists and politicians on both sides of the Atlantic have been debating the proper course of action to solve the Greek debt crisis. Put simply, governments and investors are uncertain about the ability of the Greek government to repay its mounting debts accrued from expensive retirement policies and other public programs. This uncertainty has affected every member state of the European Union and has contributed to global financial woes.
Left-leaning economists like Paul Krugman along with statesmen in the European Union have called for a bailout to save Europe from financial collapse. In effect, they call for the government to print more money, thereby devaluing the existing currency in the economy in order to make debts easier to pay off. This means that people who have saved money—many of them German—will see the value of their savings erode and the purchasing power of their earnings diminish.
The debt crisis certainly has implications for Europeans, but what effect will it have on Americans?
If Germany agrees to bail out the Greeks, it establishes a dangerous precedent as Spain, Italy, and any other nation that faces insolvency has grounds to request a bail out. In effect, bailing out Greece is only delaying the day when Greek debts will need to be paid—by someone in some form. The longer Europe waits, the worse that day will be. Because of the interconnectedness of the global economy, a deepening economic recession in Europe will cause further pain in America.
Bailing out Greece also sets a precedent for American policy. Eventually states like California that face huge deficits may need to be bailed out by the more prosperous states. In such a scenario, it is likely that the U.S. government will print money to fund these bail-outs as well. As in Europe this would sap the value of American savings, pitting responsible savers against insolvent governments.
It is important to remember that neither the Germans nor the Greeks were put into their respective positions by forces outside of their control: each had control over its own economic destiny. The German people chose to behave responsibly and have reaped the benefits of their decisions. The Greeks, on the other hand, elected politicians who spent the nation into debt and economic collapse.
In effect, those who favor a bailout in Europe and America are asking the Germans, who have behaved responsibly and have prospered because of it, to pay for the mistakes of their neighbors. The Germans who have saved their money for their retirement, to purchase their dream home, or to pay for their children’s education will see those savings become more and more worthless as the Euro continues to depreciate. But this means that Germany is to be punished because it did not overspend or engage in fiscally irresponsible behavior.
Likewise, by giving the Greeks their bailout, we accept that the Greeks should get billions of dollars because they were too incompetent to govern themselves responsibly. Subsequently, bureaucratic incompetence, financial irresponsibility, short-sightedness, and every other problem with the Greek government become the justification for the redistribution of wealth. Fiscal irresponsibility entitles you to wealth, but responsibility does not. In fact, the more unproductive and thoughtless a person, city, or nation, the more they are entitled to the wealth created by the productive members of society.
When we move beyond the economic details, the Greek bailout boils down to a question of moral principle: should the responsible be obligated to sacrifice their success to save the irresponsible from the consequences of their actions? Should one person’s debts outweigh another person’s savings?
The Greeks have not earned their bailout through the production of things that make life worth living. Instead, they have “earned” it by doing the opposite of production: by destroying their economy and the livelihoods of their citizens. The bailout would reward the incompetent, the thoughtless, the unable to pay, at the expense of the competent, the thoughtful, the able. By bailing out the myriad of problems of the Greek state, Europe will enshrine as a standard one overarching principle: not the sanctity of what is valuable, but of what lacks value—the zero, the null, the void.
If, by contrast, morality celebrates competence and ability—if it celebrates value above disvalue—we should leave the Greeks to face the consequences of their actions.
A morality that protects the rights of the productive members of society leads to prosperity of all. Indeed, Germany’s material prosperity has followed from economic policies grounded in respect for individual freedom that permitted their citizens to innovate and succeed. In fact, after World War II Germany stood at the crossroads. It could either continue the price controls and high taxation rates imposed by Hitler and sustained by the allies, or it could adopt free markets and lower tax rates. Just like today, the Germans had to decide whether to sacrifice ability to incompetence or to embrace liberty and free markets.
Fortunately, the Germans chose freedom, and the result was an economic miracle: post-war Germany experienced one of the greatest periods of economic growth in history. In less than a decade, the people of post-war West Germany went from living in rubble to enjoying the fruits of economic freedom: cars, refrigerators, homes, electricity, and children’s toys—all of the things that make life enjoyable. All of it was made possible because of Germany’s decision not to chain the productive to the nonproductive. The freedom to be productive, to use one’s mind to plan their financial future, to keep the fruits of one’s labor creates prosperity; sacrifice does not.
Today, Germany’s relatively free-market policies have again resulted in relative prosperity. When the government does not overspend and leaves its people alone to innovate, prosperity follows. For this prosperity to continue, the Germans should ignore the voices calling for a bailout, just like they ignored the advice of similar economists after World War II. We should support the desire of the German people to keep their earnings secure. Millions stand against Germany; those of us who believe that the Germans should not sacrifice their prosperity to the Greek people should stand with them. If we do not, the same moral standards that drove the Greek collapse could cause a similar crash in America.