Wednesday, July 21, 2010

Will America Go the Way of Greece?

This story in the New York Times about the state of railroads in Greece is like a scene right out of Atlas Shrugged. Having recently read that novel and now reading today's New York Times is an unsettling experience.

Losses at Hellenic Railways, however, continue to mount — at the rate of 3 million euros ($3.8 million) a day. Its total debt has increased to $13 billion, or about 5 percent of Greece’s gross domestic product.

In spite of about $3.2 billion of investment since 1997, outside of the main route between Athens and Thessaloniki, the network seems in many respects patchwork and at times chaotic.

Earlier this month, for example, a trip from Athens to Diakopto, a seaside town on the northern coast of the Peloponnese, took more than four hours. The journey required train passengers to complete a second leg by transferring to an overcrowded bus that was delayed for an hour. The result was a near riot as enraged passengers hurled abuse at overwhelmed train officials.

The same trip by car would take less than two hours.

So the railway is a sinkhole for public money, but it is also disgracefully inefficient. Does the union care?

“It is crazy,” said Nikolaos Kioutsoukis, the union chief for the railway. “It’s not surprising that people prefer to go by car.”

Even he accepts that train travel in Greece is not financially viable on many routes. He blames low prices, misguided investment and political meddling for the railway’s poor condition, and says the government should make new investments to modernize the network. He opposes privatization and says that if jobs and benefits are threatened, the union will strike.

He admits the problem but threatens to undermine any attempt to fix the problem. This is unbelievable. He apparently thinks the EU owes him and his membership a living and he does not care that the system is on the brink of collapse. This is the socialist mentality on display for all to see.

Haris Tsiokas, the general secretary for the Greek Transport Ministry, contends that the government’s plan to close at least 35 loss-making routes and cut 2,500 jobs (1,000 via mandatory retirement, with the rest being moved to other government jobs) will make Hellenic Railways attractive to foreign investors. But he concedes that the pressure is building for the railway, which, for now at least, does not have access to debt markets.

Now, as a condition of Greece’s financial rescue, the International Monetary Fund is demanding that a solution be found. The fund and the European Union, which also chipped in to provide the bailout, are requiring that the debt of Hellenic Railways, as well as the off-balance-sheet obligations of other state-owned enterprises, be counted toward Greece’s official debt — which Greece has agreed to do.

Analysts estimate the total to be around $33.6 billion, a sum that would add another 11 percentage points to Greece’s current debt level of about 120 percent of gross domestic product. It would also surely raise questions for many investors about the government’s ability to repay ever-increasing amounts as the overall economy contracts.
The problem here is that the government is not running a railroad. It is running a ponzi scheme that is on the verge of collapse.

Until now, Greece has been able to use its rail system as a means to support employment while not adding to its official debt number.

“This was an accounting trick, another good way for the government to hide its debt,” said John C. Mourmouris, a former chief executive of the railway who is now an economics professor here. “But a company with 100 million euros in revenue can no longer borrow 1 billion euros a year.”

Read it all here. If the NYT says it is this bad, the reality is likely worse.

Greece is just the worst case in Europe (so far as we know now), but it is by no means atypical of the European social democratic welfare state and there are several other countries close behind Greece such as Portugal, Spain and Italy.

When you consider that Obama and the leftists of the Democratic Party are trying their level best to transform America into a European-style, social democracy, it is a wonder that the American public is not more up in arms that it is. The Tea Party movement is a sign that America is rejecting the leftist agenda, but it is a tribute to how powerful the Marxists true believers are in America that any Democrat at all is projected to hang on to his or her seat in November.

However, Rasmussen Polls is now saying that the Republicans are projected to have 44 seats in the Senate after the November elections with the Democrats projected to have 49 with 7 more as toss ups. If the Republicans run the table on the toss-ups, they could have control of the Senate after November. This is still a long-shot but much less of a long-shot than it was 3 months ago. The House, where more Democratic seats are in play, is likely going to go Republican and the Senate is on the edge. If the slide of America into Greek-style socialism is to be halted, the November elections are absolutely crucial.


D. Chambers said...

Hi Dr. Carter,

I think you should do a blog on china and its economic future. Can it remain communist with such a free market capitalistic structure as well as a small but growing Christianization?


Craig Carter said...

Here are two posts I did on China a while ago.


I hope you find these interesting!