Greece’s Economy Reverts to Ancient Greece

Maybe That’s a Good Thing Given the Circumstances

One of the necessary items for a modern economy is a money system, banking system, and an easy way to engage in transactions.  Internet commerce, for example, could not be possible in a society that did not have electronic payment transfer systems.

The earliest forms of commerce took place in what is called a barter system.  If you had some corn and needed an ax, you would barter an amount of corn for the ax.  If the person who had the ax did not want corn, well too bad for you, you were stuck with the corn.

A monetary system changed all that.  A corn holder could sell the corn and use the money to buy the ax, and the ax seller could use the money to buy whatever he or she wanted, even corn.  Thus modern economies were started.

The country of Greece is in a terrible way.  The country joined the Euro, borrowed heavily to finance a bloated and inefficient public sector and then ran out of money.  It had to be rescued by a combination of the International Monetary Fund and the European community.  In order to get the emergency rescue funds, the rescuers imposed a level of austerity on Greece that made its economy even weaker, meaning it needed even more rescue (no, there is no logic in that, there frequently is not in economic policy).




Eirini Vourloumis for The New York Times

Angeliki Ioanniti, a seamstress,
 runs a small shop in Volos

 and participates in a network t
hat uses barter and vouchers.

 Such networks build on a sense
of solidarity in tough times as

 peopleseek creative ways to cope
with a radically changing landscape.

 

The Greek economy is so damaged that it is now reverting in part to a barter economy.

Part alternative currency, part barter system, part open-air market, the Volos network has grown exponentially in the past year, from 50 to 400 members. It is one of several such groups cropping up around the country, as Greeks squeezed by large wage cuts, tax increases and growing fears about whether they will continue to use the euro have looked for creative ways to cope with a radically changing economic landscape.



The New York Times

The barter network in Volos

has grown to 400 members.



So what does this mean for Greece?  Well a couple of things.  First of all it means reduced economic activity.  Second, the ability to collect taxes will be more difficult so the budget deficits will increase.  Third, economic activity will slow down, requiring even more bailout money in the future.  In summary, what will happen is the exact opposite of what the European community and the IMF want to happen.

See, like we said many times there is no logic in economic policy.