Sounds good, but at the same time, he’s planning to roll back the measures that Germany forced on Greece, to make their accounting make sense.
Government spending isn’t de jure a mechanism for boosting the economy. Fundamentally, all it does or is meant to accomplish is to delay market collapse, while whatever caused the original crisis is solved, so that market confidence is restored, before the government goes bust or inflates the currency beyond repair. Government isn’t a growth industry. You can’t government spend yourself back into being a healthy, growing economy.
But the Greek economy didn’t tank because market confidence was down. It’s not like the US, where GM, the housing market, and the banks all were at risk of going under, or like the majority of Europe, where the banking sector was dragged down by the US banking sector. To be sure, that affected Greece, but it also took out the government of Greece, itself, since it was being run in an unsustainable manner (and cooking the books, to help it exascerbate its own situation).
Macroeconomics tends to ignore the topic, since there’s no math that can be applied, but the cause and solution for depressions and recessions is in identifying and correcting real-world issues. Playing around with taxes, quantitative easing, and etc. are all, fundamentally, little more than backseat driving. It can help prevent some accidents, and it can help to get things back on the road, but it’s not the primary factor in deciding what goes where.
Japan, for example, has been trying to boost its economic growth since the mid-80s, using all manner of Keynesian strategies, and failed. The US used those same strategies, during the recent recession, and we’ve basically pulled through just fine. The difference is that, really, the foundation of the US economy is solid. The housing market and GM needed to course-correct, and those affected other industries temporarily, but corrections were made and all of the other industries of the land were on stable foundation. Whereas, Japanese industries relied on purely top-down, authoritarian direction in the 1950-1980 era, and built 4-5 companies up to own every single industry in the land, leaving it so that when the leaders retired, there was no one to promote up except yes-men with no vision, no unaffected industries, and no one with the vision to realize that the problem was a lack of vision. They’re basically boned, until a generation with some mojo ascends to the top of the ladder.
But even besides that, government spending needs to be tailored to keeping the economy propped up, to have any value as an economic tool. If you take the money and dump it into the military, for example, then you’re letting your growth industries - which are required for market confidence - continue to starve. Sure, you’re keeping people employed, but in a job that they’ll lose as soon as the government tries to cut back, putting everything back where it had been. Whereas, in the US, we sent money to everyone, employed or otherwise, so that we weren’t creating a temporary class of employment that would vanish. We also invested in emerging industries and stable industries, creating opportunity for growth - to take in the employees from collapsing industries - and maintaining the employed workforce in fundamentally secure companies.
In the case of Greece, Germany was able to force onto Greece some best practices. They also tried to enforce that the Greek government only have enough money to do the things they should do, to recover. The Greek government, instead, took that as meaning they had to be “austere” and cut back on the things they were doing that were simply wasteful. The hope would have been that they cut those out altogether and instead spend money on things that were useful and would repair the economy. Instead they wasted money “less”, and spend the remainder just paying back the debt.
There’s a cognitive effect that has been noted in people that people who aren’t very good at something often believe that they are good at it. To recognize that you’re doing something poorly requires knowing and understanding how to do it well. If you know and understand it, though, you wouldn’t do it poorly.
Mr. Tsipras’ argument makes sense in the context of his knowledge and understanding of how Greek economics work. It is internally consistent and sound. But it’s a poor argument in the context of a properly managed economy. Possibly, he’s just making the argument that he has to out of political necessity, but from the German point of view, saying, “But you didn’t really give us a chance!”, isn’t much of a pitch if they know well enough to know that there was every possibility of chance, it was just squandered.
To a large extent, what needs to happen, is that Germany needs to step in and personally reform the Greek economy, since it’s likely that the Greeks don’t have the experience with modern, growth economies that Central and Northern European governments do. Unfortunately, that’s sort of like saying that what needs to happen is that mankind should sprout wings and learn to fly. It’s not very likely to happen anytime this decade.
