Reno and Gadea SketchThe nasty thing about Keynesianism is that when it fails, its practitioners can always claim that had they just spent more money, it would have worked. This leads to arguments in the United States about whether the stimulus package should have included a trillion-dollar platinum coin and even more government spending, but in Europe the results of these arguments can be even more devastating.

Greece has recently chosen in a referendum to unchain itself from the euro and jump off a fiscal cliff rather than remain burdened by the tied monetary policy of the eurozone, remain incapable of devaluing its currency, and drown itself in a pool of high unemployment, low productivity, and un-fundable pension payments. For Greece, neither option, oxi nor nai, was very appealing.

But then again, none of this should be very surprising. The writers of “True Detective” may believe that we get the world we deserve, but we would argue that we get the government we elect.

To join the eurozone, Greece swept away worries over excessive debt and brushed off concerns about its incredibly liberal pension system. After the financial crisis rudely showed investors and the European Union the truth, the same people who had run their economy into the ground promised to undergo reform. Four years of austerity later, in which the governmental share of GDP increased and the government hired 70,000 new workers with full benefits, the Greeks went out and elected a 40-year-old radical Marxist who promised to end “austerity” and bring the Germans to heel with ludicrous demands for war reparations.

This fantasy ended. Greece was forced to make a critical choice.

While Greece burns, our politicians still make promises they cannot keep. It worked incredibly well in Puerto Rico, where equally good intentions led to 40 years of Democratic control and a pile of unsustainable debt. The government tried reform under Luis Fortuno, incidentally a Georgetown alumnus. For his efforts, he was kicked out of office by a man promising a return to the good old days of increasing pension payments and the government dole.

Now, Puerto Rico cannot pay back its debt and has requested for Congress to let them declare bankruptcy. Meanwhile, in Chicago and Springfield, unions are declaring all-out war over the idea that profligacy cannot be solved with a higher credit limit.

None of these news stories have stopped the true believers, of course, and their stories are spellbinding. Bernie Sanders, two months ago a little-known Democrat, has shot up the Democratic polls by essentially promising the same things the Greeks were promised: more government, speculatively financed. The question of who will pay in the end is waved away like the question about Greek pensions: increased taxes, hockey-style charts, the belief our creditors will never call in our debt. But in policy, rhetoric is far more powerful than the math.

This cannot hold. Keynes may have dismissed his detractors blithely, saying that “in the long run, we are all dead,” but living Greeks have to deal with the economic crisis now. Waving away the results of poor economic policy might work temporarily, but in the end, the only thing that matters is whether the accounting sheets balance to zero.

Basic math may not be able to win at the ballot box anymore, but in the end, after the rhetoric fades and the lines at the ATMs grow longer, the mathematicians will have their revenge. It’s not the bankruptcy of finance that we must worry about; it is the bankruptcy of reason. When we look at problems like financial instability and choose just one framework for analysis, our beliefs may lead us into a mire we may find difficult to free ourselves from. Three words for the Greeks: kanete ta mathimatika.

Do the math.


Reno Varghese is a rising senior in the School of Foreign Service. James Gadea is a rising senior in the School of Foreign Service. Exit Stage Right appears every other Tuesday.


  1. Reno Varghese says:

    Because this article was posted after the Greek Referendum, the editors have chosen to change the content of the 2nd paragraph. After discussing the matter, James and I have decided to post the original paragraph we submitted for the edification of the reader. We feel it flows more logically with the rest of the essay and stresses the point that we attempted to make; neither option in the referendum nor their results are a good one for Greece.

    Thank You,
    Reno and James

    “At the time of publication, Greece will have decided in a referendum whether to unchain itself from the Euro and jump off a fiscal cliff or to remain burdened by the tied monetary policy of the Eurozone, remain incapable of devaluing its currency, and drown itself in a pool of high unemployment, low productivity, and un-fundable pension payments. Oxi or Nai; neither seems terribly appealing for Greece.”

  2. Very well-written and insightful article. But I think y’all are stretching the boundaries of Keynes’ philosophy. Keynes would have never advocated the kind of spending/policies that Greece undertook over the past 5 years (i.e., excessive public sector wages, low VAT rates, government sponsored monopolies, horrific tax collection systems). The Greece narrative is not one of Keynesianism gone wrong. It is one about how poor institutions and lack of monetary independence can lead to disaster. What you write may be true–when Keynesianism actually does fail, supporters always say enough money was not spent. You’re right. That’s a cop-out. But Greece is by no means a follower of Keynes’ principles. If you’re taking Keynesianism to mean “excessive spending,” then that’s incredibly reductive and misrepresents his principles.

  3. Georgetown Student says:

    Pretty language but ultimately vapid.

    • Forgive me if I don’t understand you correctly, but what about this article do you find “vapid”?

      Reno and James, in my opinion, argue quite convincingly that (1) Greece has painted itself into a corner as a result of its irresponsible finances and corrupt politics; (2) other countries should use this as a lesson against taking on unsustainable debts, and that (3) unfortunately reason (and by extension, math) does not prevail at the ballot box.

      To this, I would only add a few things. Keynes himself said near the end of the Depression that he never intended for his idea to be taken that far; the application to Greece is a little stretched because we’re not talking about economic stimulus or public works but simply handouts. If Greece could do even a mediocre job of collecting its taxes and spending its money honestly, then its proposals could be taken a little more seriously. Government institutions need to be fixed. Public outcry by the people of Greece only supports Reno and James’ argument – most people will not be reading the papers on which they’re giving the opinion; instead, they’re the uninformed or propaganda-informed “fight the power” types and reasoning with them is like talking to a wall. This has nothing to do with Greece’s political sovereignty or as some claim “subjugation” by the EU. If you don’t pay your mortgage, you get your house taken away; why should this be any different? If your country doesn’t pay its debts, well, there’s some parallel there.

      This is not at all to insult Greece as a culture or as a people. But unfortunately, their leaders have made some terrible decisions, and in a very painful way, the Greek people will now be held accountable for their leaders’ self-serving missteps.

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