Yes, Arianna, We Have No Bananas

Arianna Huffington, a liberal media prima donna and Internet purveyor of celebrity gossip, offers the silliest advice we have heard so far to the beleaguered people of Greece in today’s New York Times. Her missive sets a new high water mark for liberal stupidity, both for the author, and for the newspaper that chose to print it.

Greece should default on its foreign debt, she avers, like Argentina:

Argentina, which defaulted and restructured beginning in 2001, offers a point of comparison. The austerity crowd warned that Argentina would collapse if it stopped pegging the peso to the dollar and defaulted on its debt. There are many differences between Argentina and Greece. But Argentina’s default was followed by a few short months of economic crisis and then many years of steady economic growth — a dramatically different direction than the one Greece is now taking toward a potentially endless path of contraction that is destroying millions of lives and crippling the indomitable Greek spirit.

The trouble is that Greece is another banana republic without bananas. Argentina is a commodity exporter that won the lottery when commodity prices soared. In 2010 the country exported $68 billion worth of goods, mainly food, oil and metals, and imported $56 billion, with a trade surplus at about 3% of GDP. If you have a trade surplus, you don’t need the international lending market. You can pay cash.

Greece, by contrast, had a trade deficit in 2010 of $22 billion, equal to 7% of GDP. In 2011, both the deficit and GDP shrank, and the deficit remained at 6% of GDP.  If Greece defaults, it will be unable to borrow the 6% of GDP it requires to finance this deficit, and it will be reduced to cash-and-carry trade–which means that it will cut imports by the equivalent of 6% of GDP. It appears that arithmetic wasn’t on the syllabus when Mrs. Huffington went up to Cambridge.

Her encomium begins with a sentimental portrait of her self-sacrificing mother, and concludes:

Greece, like my mother, has always been devoted above all else to its children. When the future of those children is diminished, the future — and life — of the country will be diminished, too.

If only the Greeks still troubled to have children, Mrs. Huffington’s sentiments would have more resonance. Greek fertility (number of children per female) fell to only 1.28 in 2005, the rock bottom of the European pile.

Source: United Nations

The unfortunate Greeks, as it turns out, were not selling their jewelry to send their children to school, as Mrs. Huffington claims her mother did; in fact, they weren’t having many children at all. They were borrowing wildly from the rest of the world to live the good life. The average Greek owns six properties due to emigration and depopulation, because whoever is left inherited whatever there was to inherit. A large part of the population lives by renting or selling these properties to tourists (for payment in cash, or wire transfer to Lichtenstein). Taxi drivers take three-month vacations. A third of the economy is off the books. Corruption is endemic.

Greece well may default on its debt; the parties that favor cooperating with the European Community’s bailout-and-austerity plan did not get enough votes to form a government in last week’s election, and its political system presently is in chaos. If Greece does default, the result will be a vastly devalued currency, and a massive reduction of wealth for all Greeks. When Greek land and labor have become cheap enough, money will flow back in and pick up the bargains. And the Greeks will endure an economic dark age, a horrible example for feckless and spendthrift countries. Talented and educated Greeks (like Mrs. Huffington) will emigrate, and adverse selection will leave a rump population to gnaw on the bare bone of resentment. Infertility will hollow out the remaining population, and eventually turn Greece into a beachhead for impecunious North Africans seeking entry into Europe. At present fertility, the working-age population of Greece will fall by half over the present century.

If America is foolish enough to return politicians of Mrs. Huffington’s ilk in November, something similar will happen to us.