With Debt There is No Democracy

The larger the sovereign debt, the less sovereignty a country really has. Former Greek Prime Minister George Papandreou said it would be “a supreme act of democracy and of patriotism for the people to make their own decision” by voting the bailout plan up or down.

The possibility of a no vote so startled world markets that the proposed referendum was quickly dropped. So much for democracy.

If a national government can’t decide how much to tax and spend, what real power does it have? The time to think about that question is before debts get out of hand, not after. Clearly, a country has the power to borrow too much, but that decision also threatens to limit its future financial options, which is to say its sovereignty.

Without financial help Greece will go bankrupt before Christmas. The startling fact is the amount of help Greece needs is much less than California’s unfunded pension obligation.