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The Greek Economic Crisis

According to the world-systems analysis by Immanuel Wallerstein (2004), Greece belongs to periphery of the world trade system. At that point, Dr Wallerstein had foreseen the economic troubles for Greece in 2015, when the country was close to declaring bankruptcy in the face of the International Monetary Fund and its $1.7 billion loan (Liakos). Modern Greek culture is completely different from the modern German culture in terms of cultivating the notions of industry, thrift, and acquisitiveness. Greeks were well known for their love to spend money. The Greek economic crisis was caused by various circumstances such as the long-term economic backwardness and proximity to the world trade system’s periphery, but Wallerstein and Stiglitz offer the reader an opportunity to understand the true cases of the economic troubles in various countries of the world.

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According to the perception of globalization by Professor Joseph Stiglitz (2006), Greece became a victim of the globalization mismanagement, which initially aimed to offer the international community more opportunities in terms of the economic growth. Stiglitz accused various international forums like the World Economic Forum in the Swiss town of Davos of the extreme mind polarization concerning the fate of the globalized economy. Diverse international economic forums in various states demonstrate lack of understanding. While affluent economies struggled to maintain higher standards of living for their own population, the developing economies struggled to occupy larger niches in the global market and thus boost economic growth.

As a result of the harsh austerity measures in Greece, more Greeks became pro-Socialist and even pro-Russian. These measures caused the introduction of new pro-Socialist and pro-Russian government headed by Prime Minister Alexis Tsipras who started to blackmail the troika by tightening Greek-Russian friendship.

If Greece refused to accept the offer of IMF to redeem the country, it would completely collapse. Greeks would face hyperinflation and substantial fall of standards of living. Well-being would fall tremendously (Smith).

The Greek public opinion as to the European Union started to change slowly (Varoucha). Greeks became more pro-Russian. While Turkey refused to install Russia’s natural gas pipeline on its territory, Greece was likely to accept Russia’s offer to transit its natural gas to Europe. Though Greece decided to fulfil new IMF requirements for the debt accounts servicing, public opinion in Greece blames the EU supranational policies for their economic troubles.

Jamaica was labeled as the “Caribbean Greece” because the country was one of the most indebted states in the world with the national debt equal to 140% GDP (Clegg). Half of the budget spending was directed to the servicing of the debt accounts because 45% of the budget in 2012-2013 were funded by borrowing. Jamaica suffered from the economic fall in 2010, which was though changed by the economic growth in 2011. The next 2012 year demonstrated further economic fall. Jamaica could not succeed in combating the unemployment and poverty rates. Unlike Greece, it received help from the neighboring Venezuela by cheap oil supply.

The Greek crisis proved the reliability of the Wallerstein’s world-systems theory because Greece started becoming pro-Russian and pro-Socialist. Since both Russia and Greece belong to periphery of the world trade system, distal Greece now sympathizes with distal Russia. The critical situation demonstrated the true nature of the Greek economy that proved to be uncompetitive within the framework of the European Union. The EU consists mostly of the core countries, according to the Wallerstein’s world-systems analysis of the world trade system. In was the uncompetitive Greek economy that automatically made Greece a peripheral country.

The austerity measures do not help Greek economy to recover at all (Varoucha). They jeopardize future economic growth in Greece, forcing the entire country to converge its policies towards better economic ties with Russia. Consequently, Greece diverges from the supranational EU policies. Simply put, Greece has to service the debt accounts instead of investing in the real-sector economy in terms of machine building, IT, etc.

Immanuel Wallerstein defined “the modern world-system as a capitalist world-economy” (Wallerstein 43). The core countries dominate in terms of producing the surplus value, and, at that point, Greece cannot be qualified as a core country, according to the world-systems analysis by Wallerstein. Moreover, Greece does not even belong to semi-peripheral countries such as Brazil, Argentina, Iran, India, China, and Indonesia, which are much bigger than Greece itself. 

Immanuel Wallerstein has also divided various countries into the nation-states and colonies. Since the early twentieth century and until the 1960s, Greece had been treated as a territory under the influence of Great Britain. Figuratively speaking, Greece played a role of a British colony in the Mediterranean. The point is that Greece had to spread the NATO influence on the Mediterranean, restraining various threats from the Middle East and North Africa. Greece was treated as a European frontier aimed at defending the European core countries from the chaos from the Middle East and North Africa.

According to Joseph Stiglitz, mismanagement of globalization provoked the Greek economic crisis that, in turn, was caused by the economic mismanagement. Stiglitz certainly claims that “development is difficult as it is; with this debt burden, it becomes virtually impossible” (Stiglitz 48). Liberalization uncovered a bitter truth. While highly competitive countries took profit by liberalization, backward economies failed to adapt to a new reality within the framework of the World Trade Organization. Joseph Stiglitz indirectly accused the IMF policies of funding backward economies in promoting economic backwardness in the end. Since the indebted countries could not develop their economies properly, the modern financial policies, favored by the International Monetary Fund, caused the long-term impoverishment of some backward economies.

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The most obvious conclusion concerning Greece, based on the Stiglitz’s readings, implies the statement that lending money to the backward economies requires harsh financial monitoring over the expenditures. Simply put, the IMF loans cannot be spent on the infrastructure such as roads, bridges, or sport arenas, but on the construction of the industrial facilities that would provide the national economies with the surplus value. Otherwise, Greece will remain with a peripheral “colony-like” economy, according to Immanuel Wallerstein.

The researches by Immanuel Wallerstein and Joseph Stiglitz help to understand the main causes and potential solutions for the Greek economic crisis. Modern IMF lending-money policies do not help Greece to recover its national economy and thus provide stable economic growth. The IMF money cannot be spent on the infrastructure, but on the production facilities instead.

The Greek economic crisis can be overcome with the surplus value generated by the brand new production facilities, which, in turn, have to be constructed with a help of the IMF loans. Otherwise, the IMF loans establish a vicious circle, making backward economies even more backward since they spend more GDP percentage on servicing the debt accounts. While Wallerstein explains the nature of the Greek economic crisis in terms of geographical position and real-sector economics, Stiglitz focuses on the political interaction between various national governments and intergovernmental organizations, such as the International Monetary Fund or the World Trade Organization.

As a conclusion, the news reports do not explain the nature of the Greek economic crisis to the full extent. Hence, various researches conducted by outstanding analysts Joseph Stiglitz and Immanuel Wallerstein help the reader to understand true causes of the Greek economic crisis. While the news reports usually state the actual economic consequences of the crisis for the population, numerous theoretical researches of Wallerstein and Stiglitz help to understand the true causes and possible solutions for the Greek economic crisis. At that point, review of the news reports about the Greek economic crisis has to be accompanied by the review of relevant researches such as the publications issued by Immanuel Wallerstein and Joseph Stiglitz.