So spending more is not the remedy for Greece’s plight, just as spending less was not the cause. What is the remedy, then? No amount of debt restructuring, even debt forgiveness, will suffice to achieve prosperity (in the form of low unemployment and high job satisfaction). Such measures would only help Greece to revive government spending. Then the economy’s stultifying corporatism – clientelism and cronyism in the public sector and vested interests and entrenched elites in the private sector – would gain a new lease on life. The European left may advocate that, but it would hardly be in Europe’s interest.
The remedy must lie in adopting the right structural reforms. Whether or not the reforms sought by the eurozone members raise the chances that their loans will be repaid, these creditors have a political and economic interest in the monetary union’s survival and development. They should also be ready to help Greece with the costs of making the necessary changes.
But it is Greece itself that must take charge of its reforms. And there are encouraging signs that Prime Minister Alexis Tsipras is willing to take up that cause. But he will need a sense of the required reforms. Greece must dismantle corporatist arrangements and practices that obstruct whatever innovation and entrepreneurship might emerge. Nurturing an abundance of imaginative innovators and vibrant entrepreneurs requires embracing a vision of venturesome lives of creativity and discovery.
Read more at http://www.project-syndicate.org/commentary/what-greece-needs-to-prosper-by-edmund-s--phelps-2015-08#JAiegcBXeoAMfCZS.99
