Paul Krugman's article entitled "Greece's Economy Is a Lesson for Republicans in the U.S." published in the New York Times on July 10 says that Greece offers major lessons for us regardless of its economic size, which is roughly equal to that of Miami. The article continues, "To understand the real lessons of Greece, you need to be aware of two crucial points. The first is that the 'We're Greece!' crowd has a truly remarkable track record when it comes to economic forecasting: They've been wrong about everything, year after year, but refuse to learn from their mistakes. The people now saying that Greece offers an object lesson in the dangers of government debt, and that America is headed down the same road, are the same people who predicted soaring interest rates and runaway inflation in 2010; then, when it didn't happen, they predicted soaring rates and runaway inflation in 2011; then, well, you get the picture." Concerning the second mistake of Main Street economists, particularly the Republicans, about the Greek crisis, Krugman suggests, "The second is that the story you've heard about Greece — that it borrowed too much, and its excessive debt led to the current crisis — is seriously incomplete." I agree that the narrative of Greece borrowing too much and going bankrupt is incomplete and wrong. Greece did not go bankrupt because it borrowed too much, but because it failed to grow at a rate that would allow it to pay its debts and it failed to use it monetary policy effectively. In other words, it has grown poor because of the incompatibility between its fiscal policy and monetary policy. At this juncture, Krugman argues, "Today, however, Greek debt is over 170 percent of GDP and still rising. Is that because Greece just kept on borrowing? Actually, no — Greek debt is up only 6 percent since 2009, although that's partly because it received some debt relief in 2012. The main point, however, is that the ratio of debt to GDP is up because GDP is down by more than 20 percent. And why is GDP down? Largely because of the austerity measures Greece's creditors forced it to impose."
Krugman simply suggests that Greece should leave the overvalued euro that prevents it from practicing its own monetary policy and should actualize a new cautious growth model that suits its economic condition. He objects to the fact that there is a fiscal policy of austerity; but there is no compatible monetary policy and that processes such as borrowing and growth are separate from each other. Krugman says that the U.S.'s Republicans offer policies that are similar to the ones that led Greece to bankruptcy, and they want the U.S. to cut down on all public expenditures, particularly health expenses, with the exception of military spending, as much as possible, keep interest rates up, make the dollar extremely valuable and further reduce the taxes collected from the rich. Krugman is right in his argument. The Republicans want this straitjacket for the U.S. and are putting both the U.S. and the world at risk of a great economic crisis. The tailor who sews this straitjacket is not just the Republicans in the U.S. In Turkey as well, some figures from the ruling Justice and Development Party (AK Party) and all opposition parties uphold this straitjacket. For instance, the economic policy of the Republican People's Party (CHP), which is gearing up to become a coalition partner of the AK Party, is no different from this straitjacket propounded by Krugman. Other than that, the AK Party's ministries that administrate the economy mainly promoted the understanding that led to the Greek crisis. President Recep Tayyip Erdoğan has always criticized this understanding that keeps public expenditures down as much as possible. This understanding eases imports and borrowing and makes exports difficult by making the Turkish lira extremely valuable with high interest rates. Turkey could have further grown by creating job opportunities in this process, but it was largely prevented from doing this by the impact of neoliberal policies. Today, the IMF and rating agencies recommend these impoverishing economic policies to Latin American and Asian countries, as they did with Turkey. If they do not practice these policies, rating agencies threaten them with downgrading their scores. Likewise, rating agencies and the Western media advises that a coalition government in Turkey should accept these policies as its guiding principles. However, it is now very difficult to put Turkey into the same straitjacket as Greece.