It is quite popular these days for American right wingers to point to Europe as a prime example of failed socialism, and declare that “welfare states” are unsustainable and inevitably lead to economic collapse. The debt crisis that continues to plague Greece, of course, is their favorite case of how big government welfare states are fiscally irresponsible and result in outrageous deficits.
Bill O’Reilly recently provided the typical right wing commentary on the debt crisis in Europe, with utterly simplistic assumptions thought up to confirm the right wing mantra that social service programs create lazy citizens who end up living for free off of government debt. “In Europe, Greece is bankrupt because of their socialistic policies,” said O’Reilly, “and it all comes back to the same thing, private enterprise being strangled by big government spending and regulations. Entitlements, free stuff, giving people the means to live - giving it to them, rather than having them earn their way.”
See, in the mind of O’Reilly, no one ever pays for entitlements, because social welfare recipients don’t actually work, after all. To him, everyone in Greece is lazily sitting home playing video games, cashing welfare checks and completely mooching off of the debt ridden government. So obviously nobody ever pays for entitlements, they are “free stuff” - plain and simple. This idea makes people like O’Reilly feel real good about themselves. He’s a hard worker - always has been, and people in Europe, who receive things like universal healthcare, are grossly parasitic, feeding off of hard workers like himself.
It is a view that fits right in with the conservative belief that anyone who works hard will succeed, as long as the market is free from government regulations and entitlements, and that social welfare programs are always wasteful and unearned. But when one actually looks into the debt crisis, it is of course vastly more complex than O’Reilly would have his viewers believe.
Here's the video for those of you in the mood for a good laugh (or scream).
Whats Really Going On
For years, the Greek government spent more than it took in, and for many of those years it masked the level of debt with various techniques that reminded some of the Enron scandal. In 2009, when a newly elected Greek government decided to stop masking the debt levels, a panic swept through Europe, and interest rates jumped, helping to create the debt crisis.
But a crucial part of this story that seems to be ignored by people like O’Reilly, is the level of tax evasion and corruption in Greece. And this corruption is not because of the so-called “socialistic” policies, as O’Reilly would surely claim. Tax evasion and corruption have a long cultural history in Greece. There is a systemic hostility towards government and taxes that goes back to the the Ottoman Empire, which ruled Greece for four centuries.
Journalist Thanassis Cambanis wrote in the Boston Globe: “The Ottomans ruled through a combination of neglect and stifling bureaucracy, which gave rise to a system of institutionalized bribes...that Ottoman legacy is still alive, nearly two centuries after the first parts of Greece won independence. The Greek elites mirror the predatory habits of the sultanate, while the citizens act as if evading taxes is a heroic act of revolt against the occupier.”
This culture has cost the Greek government many billions in needed revenue. The country has one of the highest self-employment rates in Europe, and the majority of self-employed underreport or don’t disclose their earnings to the government at all. It has been estimated that about two out of three Greek workers do this, so it is not just the super-wealthy avoiding taxes.
Another important factor in Greek debt is the single-currency system of the euro, which does not allow the government to directly reduce its debt through inflation. In the United States, the central bank can print dollars, but in the Eurozone countries must resort to the European Central Bank. Over the years, the “troika,” which is made up of the European Central Bank, the International Monetary Fund (IMD), and the European Commission (EC), has enacted harsh austerity policies, which means tax raises and expenditure cuts.
Many economists, such as Paul Krugman, have fiercely criticized austerity measures, especially when an economy is in recession. In European countries like Greece, austerity measures have been strongly enforced, while America chose a different route, with more stimulus. The results are clear, Europe is still in crisis mode, and the new Greece government recently passed anti-austerity legislation, calling it a “humanitarian crisis,” while in America, economic growth has hit an eleven year high, and unemployment is the lowest its been in years.
The Welfare State Is Not Doomed
So the debt crisis is complex, and is not simply because of “socialistic policies,” as O’Reilly said. Still, certain people believe that Greece is the biggest spender on welfare programs, which is again why they are in such straits. But this is hardly accurate. In 2013, the top social expenditure to GDP spending states were France, Finland, and Belgium, which have not gone through debt crises. In fact, Belgium and Finland have lower debt-to-GDP than the United States, while other famous social welfare states, like Norway and Sweden have even lower debt-to-GDP.
And what about Germany, the strongest economy in Europe? Surely if social welfare expenditure destroys the economy and makes everyone lazy, than Germany must be quite opposed to social expenditures. O’Reilly seems to believe this: “In the freer societies, like Germany for example, the unemployment rates 4.7, the U.K 5.6, Denmark 6.2.” The thing is, these societies are also quite generous in providing social welfare to citizens. In fact, Germany and Denmark both have higher social expenditure to GDP ratios than Greece, and have for many years.
The reality is that a states overall welfare programs have little to do with debt or other economic crises. The social expenditure to GDP ratios are quite useful in determining the fiscal viability. As long as an economy’s GDP grows, it is quite alright for welfare spending to grow as well. In Germany, for example, welfare spending increased from 423.6 billion euros in 1991 to 754 billion euros in 2009, but so did the overall economy, so the spending to GDP only rose from 27.6 to 31.9 percent. Germany has universal healthcare, very strong labor laws, and people work an average of 35 hours a week. Yet, the country is known for its productivity. Why is this? As in Greece, culture seems to play a major role. Germans are very disciplined workers, and there is zero tolerance for doing anything but work at work, like browsing facebook or checking personal emails at work.
And finally, what about the famous Nordic countries? Denmark, Finland, Sweden, and Norway are all known for having robust social services, and the first three spend more on social services to GDP than Greece. Nordic countries rank high in areas like prosperity, global competitiveness, global innovation, and ease of doing business. But, unlike what some may assume, the Nordic countries are not outrageously big government countries that spend more than they can afford. They are actually some of the most fiscally responsible governments in the world, and are also politically transparent. Once again, culture is another important part in the success of the Nordic model; they have relatively small populations and a long history of liberalism, guaranteeing freedom of the press in 1766.
When things got out of hand in these countries, the governments chose pragmatism over ideology. During nineties, all four of the countries faced economic problems, and reformed their systems while balancing budgets, without gutting social welfare. In 1998, Sweden reformed their pension system by replacing the defined benefit system with a defined contribution system.
These countries all remain generous welfare states, though certain free market ideas have found their way into the systems. For example, while Sweden is generally thought of as a socialist state by American conservatives, they actually advocated private for-profit charter school reform in the nineties, influenced by Milton Friedman. It is a voucher plan, where the government issues vouchers that are redeemable towards tuition payments at private schools, ushering in the choice between public and private and allowing the market to work its magic. Revealingly, over the past decade, as for-profit private schools have increased, Sweden’s PISA (Program for International Student Assessment) scores have dropped significantly. At the private schools, it has also been revealed that grades have been inflated, falsely giving the impression that private schools performed better than public. Obviously, if private schools were shown to have higher grades than public, more parents would flock to them, which of course would increase profit. Unfortunately it was mostly built on easy grading.
What does all of this reveal? Quite simply, that the inevitable crash of states with strong social welfare programs is nothing more than right wing hysteria, a paranoid style of politics disguised as pragmatism. Pundits like Bill O’Reilly act as if they are objectively looking at the facts, but they simply choose the tidbits that sit well with their pre-conceived notions. Or as Robert Durst said, “I did not tell the whole truth, nobody tells the whole truth.”
The whole truth, of course, is much more complex than what O’Reilly claims. There are many reasons for why Greece and a few other European countries have gone through such crises, and there are many reasons why other states with robust social services, like Germany, Norway, Denmark, Finland, France, etc, have not experienced such crises. The world is a complicated place, and when individuals like O’Reilly dichotomize issues with “market good--state bad,” logic, they are proving how very limited their critical thinking skills really are.