Robert Zaller: Bring Back the Drachma? The Greek Economic Crisis and Europe
When the euro—the ev-roh, as Greeks pronounce it—replaced the drachma as the currency of Greece, I decided to keep a few bills and coins in my pocket. The drachma was, after all, the oldest currency in Europe. Socrates bought his groceries with it (or, more likely, Xanthippe). It had been down before, but never finally out. Besides, it was visually attractive. It honored classical art, democracy, and the Greek Revolution, all very good things. The euro was drab and utilitarian. It honored no one's tradition, for fear of offending someone else's. Plato couldn't appear on it, or Dante, or Goethe. It had in fact no tradition, since it was the product of no one's culture and no one's history. It was simply itself, a common currency for a free-trade zone linked by certain rules and agreements. Scrip.
The Greeks themselves were of two minds about the euro. On the one hand, they were sentimentally attached to the drachma. On the other, entry into the euro zone meant full membership in the European Union. A European currency promised a European standard of living. The drachma was the weakest currency in the EU. When it was retired, it exchanged at a rate of 342 to one....
In recent decades, the Greeks have been learning the mixed blessings of European integration. The Greece I first encountered was, by American standards, a poor country. People bought at small local markets, and carried their purchases home by hand. They darned their clothing. They spent their evenings at the neighborhood taverna, other amusements lacking. There was only one four-lane highway in the country, the “national road.” It could take a day to reach an island.
The Greece of today has many wide roads, hydrofoils for sea travel (hermetically sealed lest you actually get a view), video games and pornography for the evening hours, American-style supermarkets, and fast-food places for tavernas. No one takes a siesta, because air-conditioning keeps out the summer heat. No one takes leisurely midnight meals during the workweek, because everyone has to be up for eight hours of uninterrupted labor—if one has a job.
These aren't just lifestyle changes, they're “modernization.” Modernization costs money. Private cars do; condominiums do; personal computers do. No one can afford poverty anymore. Yet, while prices have continued their relentless rise toward general European levels—an obvious consequence of a common currency zone—wages have not kept pace. Greeks have made up the difference in the usual ways. They've gone heavily into debt, encouraged by the credit card culture. They've shifted more and more of the economy underground, away from licensing fees and taxes. They've honed tax avoidance to a fine art....
To put the general crisis in better context, it is helpful to consider what the EU is and isn't. Europe was, within living memory, master of the globe. In 1945, Great Britain alone commanded a quarter of the world's population and resources. Within an astonishingly short time, the European empires vanished from the scene. Men like Robert Schuman in Germany and Jean Monnet in France foresaw that, without economic integration, Europe might well become an economic backwater in a relatively short time. They saw, too, that the continent itself was being politically partitioned by two hegemons, the US and the USSR. Its armies and arsenals had already been largely deployed in the service of the superpowers. Economic autonomy was its last card....
Present-day Europe is the only major economic zone in the world that is still politically balkanized. China, India, and the US are all unitary states. The US is a federal republic of fifty states, all exercising certain sovereign functions. All fifty states, however, are required to balance their budgets annually, no matter at what cost. Only the federal government can print money. Of course, creative accounting can postpone the day of reckoning, as in California and New Jersey. Many state governments might have gone effectively bankrupt last year but for federal stimulus money. Nonetheless, the rules are understood, and the federal government has powerful leverage to enforce them....
The current crisis will pass. The International Monetary Fund will prop up Greece if no one else does. The EU will probably need its own fund, and rules for administering it. This will push political centralization further. It will not be an easy process, nor an edifying one to watch. In the meantime, Greece will pay a stiff price for the sins it only shares with others. Some of them will doubtless pay in turn....
As for me, I'll keep those souvenir drachmas in my wallet. When even The Financial Times of London speculates about bringing back the drachma, you never know.
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