Greece has a huge public sector which is maintained in the expense of private sector. The government did not fire almost anyone from the public sector the last 3 years. Neither privatizations have been accomplished. The official unemployment is almost 30% all from private sector.
However, some critics say that we should not fire public servants because now these have money and move the economy by consuming. Whereas, private workers spend less because of their unstable jobs.
A. What do you think?
Greek libertarians say that government should cut spending dramatically, massive firings in public sector in order to low taxations in order to attract local and foreign investments in private sector. Thus, unemployed people will move to private sector. But this can't be done in one night. If this would happen, I suppose that there would be a large amount of time between dramatical cut spending huge unemployemnt and the attraction and establishment of new private investments.
B. What is your opinion about that? Wouldn't it be riots, vandalism, increase in poverty etc until new job positions the new investments would create?
A. Wealthy people generate wealth through trades of their own private property. Entrepreneurs in a free society will build new products and services to entice free people to use their products and services in these trades to make a profit. This process creates wealth. A society depending on increasing govenrment force to take from the aforementioned entrepreneurs will stiffle their output and leave less for the individuals to trade amongst themselves thus making them poorer. So I think that by keeping the armies of government sustained people in Greece, or anywhere else for that matter, all the society does is destroy their future and create misery. Of course it is almost always easier to steal in the short run to pospone the upcoming misery but you can't hold it off forever.
B. Possibly, I bet though the riots and vandalism would be much less of an issue if the populace is armed and allowed to protect its private property.
Please note that doing what needs to be done which is for the government of Greece or any other place to back off and shutdown will force entrepreneurs dependent on government subsidies directly to themselves or to their customers will immediately face bankruptcy. This is painful as these people must re-orient their productive talents to products most demanded by consumers. But just because there is pain does not escape the necessity of doing so.
A) The public sector in Greece has already contracted back into its citadel. To avoid layoffs (any layoff) they've cut welfare and various subsidies down to a trickle. This is dangerous business because of the entitlement mentality running deep in Europe. Two sectors in particular have not been touched by cuts: law enforcement and the military. However law enforcement is proving itself unable not only to protect public and private property, but also to enforce most government's decrees: for example the use of firewood has been prohibited (to force people into buying natural gas and heating oil, hence paying the hefty taxes slapped on them) as the distribution of free food and medicine (to force people into buying them and hence paying taxes on them) but the police isn't lifting a finger to stamp out either behavior, especially when the nationalist Golden Dawn group (which has ties to both the police and the military) is involved. The Greek military is a bloated monstrosity and Greece is the only EU country whose defense budget is considered a "State secret". Since most of that money goes into buying gadgets from France, Germany and the US, the usually garrulous EU doesn't complain. This is a double edged sword: on one side the loyalty of the police and the military is apparently insured, but on the other both are being strenghtened relative to the other branches of the government. Again, dangerous business: the people will not riot, but the possibility of a coup (perhaps with the tacit approval of the US) has become much more real than anybody would like to admit.
B) Sadly, to have an economic revival you first need pain. The pain is directly proportional to how bloated and distorted the previous situation was. In Greece, where about 40% of the population received a government paycheck, pension or some other subsidy, where untold billions were squandered (including the Olympics) and capital accumulation has been disincentivated (Greeks with capital have mostly fled the country and won't come back unless forced by the EU, more than a remote possibility), the pain would be massive. And the pain hasn't started yet, since all that's been done has been buying time hoping another bubble would pop up and make everybody feel rich again.
Poverty is already creeping up the social ladder. Vandalism is already rampant. Riots haven't broken out yet because of social conditioning (in spite of all, people still believe in the present rotten political system) and are unlikely to break out on large scale.
Personally I believe the EU and Greek politicians and bureaucrats will find a way out of this, if only for a couple more decades. The system is just too big to fail: if Greece falls, Spain is next in line. After Spain, it's Italy's turn and then France's. If demand from France and Italy drops, Germany enters a recession and at that point it's possible the UK or The Netherlands will leave the EU to save their skin initiating a domino effect. That's as easy as that and that's why I say they will find a way out of this.
Europe has a huge advantage over the US: the entitlement mentality is a step or two more advanced. That makes much easier manipulating people into thinking sacrifices are needed because of the implicit assurance that all those freebies may sudden dry up.