When Greek voters elected a hard-Left politician who promised to reverse austerity, Paul Krugman celebrated wildly. In a column filled with economic cant, he explained that it was always a disaster for Greece to turn to austerity when its economy collapsed, instead of spending its way out of its financial woes:
To understand the political earthquake in Greece, it helps to look at Greece’s May 2010 “standby arrangement” with the International Monetary Fund, under which the so-called troika — the I.M.F., the European Central Bank and the European Commission — extended loans to the country in return for a combination of austerity and reform. It’s a remarkable document, in the worst way. The troika, while pretending to be hardheaded and realistic, was peddling an economic fantasy. And the Greek people have been paying the price for those elite delusions.
You see, the economic projections that accompanied the standby arrangement assumed that Greece could impose harsh austerity with little effect on growth and employment. Greece was already in recession when the deal was reached, but the projections assumed that this downturn would end soon — that there would be only a small contraction in 2011, and that by 2012 Greece would be recovering. Unemployment, the projections conceded, would rise substantially, from 9.4 percent in 2009 to almost 15 percent in 2012, but would then begin coming down fairly quickly.
What actually transpired was an economic and human nightmare. Far from ending in 2011, the Greek recession gathered momentum. Greece didn’t hit the bottom until 2014, and by that point it had experienced a full-fledged depression, with overall unemployment rising to 28 percent and youth unemployment rising to almost 60 percent. And the recovery now underway, such as it is, is barely visible, offering no prospect of returning to precrisis living standards for the foreseeable future.
Boiled down, Krugman said that the big bad banks closed the spigot on Greece’s socialized spending spree and Greeks suffered horribly. Krugman then went on to write several mind-numbing paragraphs about GDP and debt and the total failure of austerity. The remedy, said Krugman, is to return to a centralized economy with massive government spending: