The tragic happenings in Greece are a stark reminder of the larger simmering problems that plague the Western countries, societies and economies. The sad state of Greece is also the state of much of the Western societies although for many of them the worst is yet to strike. Excessive indebtedness, rapidly declining economies, a raging class war as a natural consequence of the ongoing neo-liberal economic treachery in which the wealth and power are increasingly being taken away from the people and concentrated in yet fewer hands are all the ills that the western societies and economies are grappling with.
In those countries such as the America and Great Britain which are most affected by the ongoing saga of economic degeneration and ruin, political repression is on the rise, democracy as we knew it is on decline and popular discontent slowly building up.
As the Western democracies slowly transform into oligarchies – the American and British examples stand tall – economic ruin deepens. The most important victim of the West's economic decline is, sadly, its impressive democratic tradition. As economic, social and political crises in the west continue their upward spiral, democracy in the West is becoming a luxury of the past. Sad indeed!
Coming to the main topic of this article, the issue of debt is one that has come back to haunt the Western societies and governments with consequences that threaten the future of the European Union as a viable Pan-Europe political architecture and the future of Euro as its single currency. Similarly, the single most important factor that has the power to undo the Western economies is the same: debt and lots of it.
The irresponsible accumulation of debt by governments, consumers and citizens and corporations over the past few decades is now slowly coming home to roost. Greece, as widely known, has been the first victim of this irresponsible accumulation of debt. The country's fraudulent financial practices came to light after the crisis of 2008 and with it the foundations of global investors' confidence in Greek debt vaporized. Greece is now bracing itself for a second round of financial bailout by the European Union and the IMF.
The first round is going to hold Greece's financial integrity intact until September. From then on, the second round, already agreed upon, will come to the rescue of the country's precarious financial standing. The question that confronts the European elites now is whether to extend the Greece-type financial bailouts to other Euro-zone countries that are next in the pipeline of financial bust and doom: Portugal and Ireland.
Moody's, the credit rating agency, has already cut the Portuguese and Irish debt to junk declaring them worthless. As the credit rating agency has made it known for all, a second bailout for Ireland is a must if the country is to be kept from a devastating default. The same holds true for Portugal, not to mention Italy and Belgium whose staggering levels of sovereign debt are just impossible to be maintained.
xtending bailouts to Portugal, Ireland, Italy and possibly Belgium will not come easy if at all possible. Apart from the massive financial burden of undertaking the debt of these countries by Germany and other solvent European heavyweights, an enormous amount of political will is required to muster support for these bailouts among both the European elites and the public. A successful bailout of these troubled European countries by their solvent European companions is, to be realistic, next to impossible.
Whether we like it or not, a few years down the line, we will be looking at a Euro Zone without some of its financially troubled members. Now the prospect of one or a combination of these countries leaving the Euro Zone is no longer a possibility; it is well on its way. In the U.S., the situation is no different. The massive debt is neither payable nor sustainable. The culmination of this tragic tale of debt accumulation in the U.S. will be economic cataclysm and default. Before that, as it is the old-age tradition with the Americans, going to war is the last resort that the American oligarchs might pursue.
It is important to know and appreciate the damages and ruin that a culture of thriving on debt has done to the Western world. One lesson learnt is the need to keep in check this culture of excessive accumulation of debt and imprudence and prevent these economies from becoming too dependent on debt so they can not pose systemic risks to the global economy.
New and innovative financial products like derivatives and swaps were excessively used without a clear understanding of the risks they entail in this process of accumulation of debt. These products should be well understood and their implications assessed by the financial institutions and government regulators alike. This underlines the fact that for a 21st century financial industry there should be a 21st century regulatory and supervisory framework that can keep up with the fast changing trends of the economy, industry, foresee risks and take timely action to mitigate them.
Perhaps the most important message from the recent debt mess is the need to free the real economies of the developed world - that part of the economy consisting of manufacturing and service providing companies that are engaged in actual production of goods and services and creation of wealth and value- from the clutches of the Finance Capital i.e. the banks and financial institutions.
It has been proved that the financial industry in the developed world, steered by its ruthless financial robber barons, is more than willing to preserve its interests and profits at the expense of the general public and the manufacturing and services sectors that provide employment to the bulk of the population. Unless this grand "change" takes place, the people and economies will remain hostage to this financial system that remains predatory as before despite the recent reforms and imposes painful public spending cuts with the help of its all-weather friends in governments.