Grexit Would Promote Liberty

The negotiations between the EU, Greece, and its creditors drag on and Greece has recently postponed a repayment of debt to the IMF. It now seems clear that the best result for liberty would be for Greece to leave the Eurozone.  The new Greek government wants to build a big and powerful state and violate the economic liberties of citizens. Its creditors should not abet the strangulation of economic freedom by extending their loans. Accommodating the Greek government will also help new leftist parties in other nations win votes for a program of economic illiberalism financed by foreigners.

The Syriza party argues for ending austerity by which it means it wants to aggrandize the state and put chains on the private sector. Let’s consider some of the “anti-austerity” measures on its agenda. First, they want to resist reform of labor laws, making it harder for employers to fire workers. This proposal violates the rights of employers and employees to make their own decisions about tenure. It also is blow against long term growth as it will make it harder for the market to match workers with the jobs they can do best.

Syriza plans to hire back government workers, even though Greece still has a very high ratio of  government workers to private sector workers. This bureaucracy poses a threat to liberty, because it helps Greece enforce some of the most onerous regulations on business in the OECD. A bloated bureaucracy also burdens the taxpayer and generally weakens the creation of a culture of entrepreneurship that Greece needs. Similarly. Syriza wants to slow privatization of enterprises that are private in most other Western democracies. State enterprise is a recipe for political patronage and inefficiency.

Syriza also wants to raise pensions in a pay-as- you- go system that has very generous retirement ages. This platform also retards economic growth, as rational actors withhold investment when they calculate the future taxes that will be necessary to plug large deficits.

Syriza is not the only socialist party that is bidding to come to power in Europe. In Spain, for instance,  a new leftist party, Podemos, has shot up in the polls. In France, the National Front wants to pursue similarly economically illiberal policies.  Greece shows there is not much difference between extreme national parties and socialist parties in Europe on economic liberty: Syriza formed a coalition with the Independent Greeks, a nationalist party quite similar to the National Front.

Giving into the Greek government will embolden these parties that threaten liberty and prosperity. Grexit will be painful for the Greeks in the short term, but it will prevent longer term harm to the rest of Europe. And in the end Grexit will be Syriza’s undoing, potentially opening the way for smaller government alternatives in a nation that is Europe’s closest approximation of a failed state.