Beggar Thy Neighbour 

July 15th, 2015 | K. McGregor 

beggar thy neighbour

Capitalism cannot survive without allies and markets. Making allies and developing new markets cannot come about by allowing a beggar thy neighbour attitude to creep into our thinking. Greece has been a typical example over the years of how a well meaning nation has been crippled by lenders and put into a situation where it can no longer pay its debt unless it goes further into debt slavery, begging for dollars. Instead of lending Greece billions of euros in bailout cash, mainly to make interest payments, it may have been wiser to let them struggle through their financial mess. If the lenders did ,Greece would be well into a recovery with little debt to pay. Giving an alcoholic a bottle of booze won't cure the addiction.

It's interesting to note that the Bretton Woods Conference of 1944 was supposed to stop the disparities between countries by eliminating trade and capital barriers that was thought to have caused WWI and WWII. Ministers from the U.S., Britain and France met with representatives of 41 other Allied countries to lay the financial and economical basis for the world to follow after the expected defeat of Japan and Germany. The idea was to enable the US to print as much money as needed to rebuild war torn Europe, set up a world bank to lend money for the reconstruction and launch the IMF, which intended to finance short-term imbalances in international payments. Bottom line, the Bretton Wood Agreement was to outlaw practices which were agreed to be harmful to world prosperity and to assist nations in overcoming short-term exchange difficulties. It seems to me that propping up Greece with billions of Euros it could never repay and demanding interest payments that would cripple the country fits the definition "harmful to world prosperity" and tells us that the Bretton agreement is not being taken seriously. 

How can capitalism possibly survive when countries are being turned into beggars?

Another institution called  International Clearing Union (ICU) was also proposed at the Bretton Woods conference in 1944 by economist John Keynes. ICU would be a global bank whose job would be the clearance of trade between nations. All international trade would be denominated in a currency called the 'bancor' with a set of overdraft regulations, exchangeable with national currencies. Keynes foresaw the problem that Greece finds itself in now, with debt that its unable to climb out of, paying interest to service their ever-growing debt and stifling global growth. Harry White, the American rep at Bretton Woods, killed the idea since it would limit the surplus that rich countries could accumulate. So here we are today, trying to rectify the problem created by White.

According to a Reuters calculation, Greece owes $271 billion. If it defaults on its loan payments, who's next? Spain will issue $305 billion of bonds and bills next year just to cover refinancing needs and its budget deficit. Italy is still in a recession that has been going on for over 2 years with a huge, youth unemployment crisis. Its becomes obvious this world financial system doesn't work.

Regardless of what happens to Greece's future, the world debt crisis is getting worse and is a breeding ground for extreme socialism, unless a new financial system is implemented. Enslaving countries with debt is counter-productive and a threat to our freedom and prosperity. Keynes' idea (ICU) may not be perfect, but it's worth a second look.

Lucky for us, Canada is in great shape in comparison to Europe. We have a government that understands what fiscal responsibility is and hasn't let our debt get out of control. I can't imagine being in Greece's position.