A modest proposal to end the Greek debt crisis: Let the rich pay the rich

Let’s face it, when we remove the complex financial structuring, the obfuscating economic theory and the strident political posturing and just look at the flow of money, the Greek debt crisis reduces to one kettle of rich folk owing money to another kettle of rich folk.  Kettle, by the way, is the name for a group of vultures.

Here’s the simplified version: The debt Greece owes is primarily in the form of loans from private (not state) banks and bonds. For the most part, rich folk own bonds and the stock of banks. So when Germany and the rest of Europe refuse to let Greece off the hook for this debt, they are doing nothing more than protecting the interests of the wealthy.

Let’s look at why the Greeks owe so much money. The primary reason is that the country has never done a good job of collecting taxes from the wealthy.  Tax evasion by the wealthy in Greece is notorious and has been covered in recent years by virtually every mainstream news media, Reuters, Bloomberg News, New York Times, The Economist, Forbes, Wall Street Journal, Slate, Der Spiegel, all of them.

If these wealthy and upper middle class Greeks had paid their fair share of taxes, Greece would have the revenues to pay off the interest and pay down the principal on the loan and to make bond interest payments. Thus, it’s really the debt of the rich that we’re talking about.

My modest proposal is to have European governments and regulators get out of the way, and let the one kettle of rich pay the other directly. I’m fairly confident, that some part of this debt will cancel itself out, as some of those wealthy Greeks who avoided paying taxes invested their scofflawed income in Greek bonds and European banks.

Here’s how my plan would work:

  1. Freeze debt at remaining principal.
  2. Assess a special income and wealth tax on the top 1%-2% of Greek earners that is earmarked to paying off the principal on the debt and bonds over a 20-year period.
  3. To make the assessment work, Europe will have to agree that any wealthy Greek citizen living or working in another Euro country must pay it, as must any wealthy Greek who changes nationalities for 10 years after becoming a citizen of his or her new country. The Eurozone countries would also have to insist that the nations with which they trade agree to the same policy for wealthy Greek nationals as a condition of all treaties.
  4. Europe will also have to help the Greek government learn how to collect taxes more efficiently, with grants that pay for training, new technology and pumped-up enforcement.

With the debt spun off—in a sense privatized to the appropriate private parties—European leaders will be free to put together a package of loans to the Greek government to jumpstart growth and create jobs—technology investments, infrastructure improvements, product commercialization, foreign investment. It will represent a kind of reboot for Europe and Greece after the disaster that austerity induced.  Another way to look at my solution is to think not of Greece but of the Greek debt as the sick patient that needs to be isolated. My plan isolates this debt by giving it back to the people whose problem it would be if governments followed policies to help all the people, and not just the wealthy.

The big objection to my plan is that after having to settle for the return of principle over an extended time frame, the rich folk who are creditors won’t have enough money to invest in new jobs. We hear that excuse for lowering taxes in the United States all the time, despite the growing evidence that in most cases, raising taxes on the wealthy produces more jobs, because the government spends the money, which boosts the economy.  While not the enormous gap we have in the United States, Europe has nevertheless seen a large increase in wealth and income inequality over the past 30 years. Like everywhere else, the ultra-rich and the merely wealthy have so much new money that they have been piling it away in cash and bloated assets. They haven’t been investing it because of market conditions. If and when market opportunities exist, the rich folk hurt by having to absorb the entire brunt of the Greek fiasco will still have plenty of cash on hand to take advantage, and thereby create jobs.

Of course, given the fact that most elected officials in Europe, as in the United States, vow their fealty to the interests of the wealthy, my modest proposal has less chance of being enacted than Jonathan Swift’s modest proposal of 1729 to ease the economic troubles of the Irish by having the poor sell their children to the wealthy for food. After all, we are used to sacrificing children and young people to war. But it’s a rare occurrence in history for rich folk to sacrifice to solve any problem, even those of their own creation.


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