Comment

Greece’s economic disaster should make us question the morality of debt

The recently appointed Greek finance minister Yanis Varoufakis (PA)

The current situation of the Greek economy is interesting, to say the least, and there is sense that the long running saga of the story of Greece’s debt and membership of the Euro is entering a new and perhaps decisive stage. One prediction is that by this time next year either Greece will be out of the Euro, or the current government will be out of power. Some sort of resolution seems close, but this story has dragged on and on, and may still have life in it, so do not hold your breath.

Meanwhile, though easy answers seem as remote as ever, there are some hard questions that we can put to ourselves.

First, when someone, an individual, a company, or even a nation, borrows money, are they obliged to repay it in full with interest? You would think the answer to this is a simple Yes, but that is not altogether the case. The interest rate reflects the risk that the lender takes, and thus by lending, the lender is admitting that there is at least a possibility that the borrower will never repay him. Moreover, the recognised legal mechanism that is bankruptcy, which exists everywhere, means that all of us, if we get into debt, do have a way of wiping out our debts by going bankrupt. Going bankrupt is legal, and means your creditors will not see their money again, but is it moral? Every time someone goes bankrupt, someone else loses out, or so it seems to me. Is this the morally right thing to do?

Here we see the imperfect nexus between morality and economics. A capitalist society cannot flourish without investment and risk-taking. Risk-taking means risking losing your money. Ergo, those who lent to Greece, and who now stand to lose their money, should face up to reality. But does this mean that capitalism is intrinsically immoral, which our ancestors, who strongly disapproved of usury and taking interest on a loan, would have held?

But all this is further complicated by the fact that Greece wants to have its debt cancelled and at the same time stay part of the system, stay in the Euro, and receive fresh loans to keep its banks running. This seems to be a contradiction: they want to stay in the game while at the same time having the rules waived in one important respect. Is Greece obliged to stay in the Euro? Is it entitled to stay in the Euro, come what may? Is it entitled to a fresh tranche of funding? The signals we get from both sides in the dispute are conflicting.

But the essential question remains. Is it right to borrow, especially when you have good reason to think you will never repay? Is it right too to lend in these circumstances? Debt is a major moral issue, though one that has not received enough attention, given that the economic crisis we have been living through since 2008 is essentially a debt crisis. But if there were no lending or borrowing in Europe it would mean an end to growth (or so one assumes) and it would also mean that the vast majority would never ever be able to own a house of their own. (Though it has to be said that most people who own a house do not in reality: the bank owns it.)

The second hard question is this: when should banks refuse to lend to people? Should they have refused to lend to Greece in the first place? It seems to me now, with the luxury of hindsight, that it would have been much better if Greece had never been lent a single Euro, particularly as all the money it has borrowed seems to have been splurged with very little to show for it. But to have asserted that at the time would have, I think, aroused howls of rage. Consider the parallel case of banks refusing to lend to young would-be house buyers. Everyone thinks this is a shame; and yet many of those young people, if they were to secure a mortgage might very well never pay it back, and the repossession of the house might well not cover the value of the debt. Are banks charities? No, of course not. They are hardnosed businesses. But they should at the very least be ethical businesses.

One question that the Greek crisis puts before us is far from hard, though it is hard to contemplate, and that is the question of government waste, inefficiency and corruption, something that has afflicted Greece and not only Greece. This has got to end. There can be no exceptions. The hard but liberating reality of the world (that is to say, natural law) is that complete honesty and transparency are the only way forward. That the new government of Greece seems so friendly with one of the world’s least transparent governments, that of Russia, and that members of its government are wedded to anti-Semitic conspiracy theories, is not reassuring.