First Detroit and now Greece.

In a previous post a video was shown to demonstrate what a combination of liberal policy, federal expansion and a city reliant on one source of revenue can turn into, a heaping mess.  Although no video this time, an article from IBD attempts to tackle the question of Greece.  What is happening in the small Hellenic country and why are investors dumping Greek bonds in fear of a default?   Greece may be the tip of the iceberg, but much can be learned from a municipal enclave like Detroit to a small European country like Greece. 

Years of embedded socialism — in spending, labor and regulatory practices — are responsible. They've enabled the government to consume the very economy that's supposed to sustain it.

Even supposedly right-of-center parties spent state cash the same way. The last party in power was nominally conservative, but failed to stop expansion of government. It kept hiring, kowtowed to union demands for fear of strikes and did little to change the culture's gimme-gimme mentality.

This of course appears to be identical to the problem we are experiencing in America.  Not only has federal expansion creeped into virtually every facet of our economy, but our so called conservative party is just as complicit in spending, growing government and saddling the country with unsustainable debt.  This spending then inevitably breeds waste and corruption, two forces that take time to build up and will ultimately cripple everything it touches. 

With a shrinking private sector, that's getting harder. One in four Greeks is employed by the state, and 422,000 Greeks — 10% of the work force — are unemployed. Salaries and prices are as high as Germany's, but productivity is not. Job mobility is the most rigid in Europe. In 2009, Greece ranked second worst in Europe on the Heritage Foundation's Index of Economic Freedom.

Once again the parallels are depressing.  Our government is now the biggest and best employer hiring at a rate that far outpaces the private sector.  Worse yet, the salaries and benefits of federal and state employees now on average exceeds that of the average private counterparts. 

Like Detroit, Greece's problems are appearing quickly and this is due to a narrow industry.  Corruption, waste, union pensions and shift from a private sector to government is indicative of many failing centrally managed countries.  As you may have heard recently Dubai shook the financial markets with their surprise default announcement, the situation is similar.  Although Dubai sports a monarchial serfdom while Greece borders a socialist cradle-to-grave model the end result is the same.  Both countries have a narrow industry, both relying on tourism and real estate in the case of Dubai.  The global contraction has significantly impinged both industries thus peeling away the layers of exorbitant government guarantees, corruption and waste.

But people seldom understand and continue blaming the free market for problems only because it is easier to see and simpler to blame.  Just like Greece's socialist PM.

Papandreou still can't bring himself to lay the blame where it belongs — on big government. Instead, he makes bankers the scapegoat, calling for a 90% tax on bank bonuses and vowing to end tax exemptions for everyone else to raise more revenues for the state.

There appears to be no connection between government intervention and the widespread hardships we have endured, but perhaps I am asking too much.  After all, most Americans believe the Great Depression was caused by capitalism's failure and only FDR's public spending rescued us.  Similarly most Americans still believe the current financial crisis was caused by greedy capitalists on Wall St. and only massive government spending can rescue us.  Perhaps collective ignorance is as much to blame as centrally planning socialists.