Greece and Canada: Parallel Universes?

Now that it has become abundantly clear that the “Greek issue” had little to do with Greece, and everything to do with the Western world’s perilous dance with sovereign bankruptcy, let’s look at some parallels to Canada’s own, “safe” economic reality.

LIFESTYLE

As I previously discussed, Greece’s transition from a relatively simple, cash-based economy to a modern credit culture took very little time – half a generation or so. In Canada and many other countries, the changes happened gradually over the span of two or more generations. Things had already begun to change in my parent’s day, but I can recall my grandparents being able to afford a good lifestyle on one modest salary, while avoiding credit cards like the plague. In truth, aside from a brief peak in the heady days of the 1990’s boom, real wages in Canada have declined steadily since the 1970’s, to the point where it now takes many families two incomes and tens, if not hundreds of thousands of dollars in debt, just to cling to the designation of “middle class”. Maybe we should stop feeling sorry for the “1000 Euro Generation” and look at the precipitous drop in our own living standards?

TAX INEQUITY

The veneer of respectability provided by civil law has not been as well established in a newer debt society such as Greece, but the obvious corruption there has less blatant comparables here. As was widely reported a few weeks ago, wealthy Greeks are buying up shocking amounts of property in London, and it was found that only a few hundred of the more than 13,000 owners of swimming pools in Athens reported them when filing taxes, leaving union workers to shoulder the tax burden. Here, the “haves” pay accountants and consultants to avoid taxes legally, while the average worker must pay their share to the nickel. Is it really that different?

GOVERNMENT CORRUPTION

In Greece, it’s a given that corporate cronies of the current ruling party will reap the benefits, and bribery will get you anywhere. But Canada is a clear and transparent society, free of such unenlightened corruption, right? It may not be readily accepted by the average person, but the reality is that yes, it happens here. Those in the business community are more aware of how politicians are awarded lifetime board appointments for “favours” done while in office, lobbyist court our leaders with trips and gifts, and even plain old cash changes hands too. Both Mulroney and Chretien were exposed in bribe scandals (the Airbus Affair and Shawinigate), as have countless lower-level politicians. There is also the simple fact that for most, success is all but impossible without already having money and connections. Is it any wonder that a widening gap in income between the “haves” and “have nots” – thus shrinking the middle class – is a dangerous problem in Canada, as well as Greece?

DEBT TO INCOME

Did you know that most Canadians are technically bankrupt? Personal debt in Greece has risen dramatically over the past 10 years, but it is still nowhere near the 145% measured in 2009 for each Canadian household. The report further stated that “under this scenario, about 1.3 million households could have a vulnerable or dangerously high debt service load by 2011.” Here as in Greece, global banks preyed on uninformed people with irresponsible loans. Our industry has been steadily replaced with a consumer economy for years (while Greece has always been heavily consumer-driven), so it is especially perilous for us. The rise in our debt-to-income is also directly related to my first point about the decline in lifestyle available from our real income, and ties in with my last point to follow…

THE FUTURE?

One of the primary factors that define a “have” country is a high level of education among its citizens. When I was attending business school here in Ontario, my cost to attend was around $3000 a year, paid for by my summer work and subsidized with grants. Midway through school, the grants disappeared, replaced with unanticipated debt through student loans. Tuition has since skyrocketed and the grants have all but vanished. Faced with today’s situation for students, I may not have attended business school at all. Tertiary education in Greece is more selective than here, and tuition is free – but similarly, just as our graduates are welcomed into years of crippling debt, Greek grads face years of an average salary of only 1100 Euros. The future prospects for both countries are further hampered by low birth rates – high debt, low wages, and a smaller workforce to put back what the Baby Boomers will soon be taking out, sounds like a recipe for disaster to me.

When I encountered people here in Toronto who had been following the Greek “crisis”, their overall view, regardless of their opinion on where the blame lay, was that Greece’s was an isolated situation that only Greece and maybe the European Union would be impacted by. Many also thought – and who could blame them, given the mainstream news reports – that the problems were solely due to Greek laziness, tax evasion and spending profligacy.

But while they feature more obviously in Greece, the problems leading to the crisis are, in effect, symptoms of a general decline in the Western world. Massive personal and private debt, high income disparity, declining real income, corruption driving public wealth into elite hands, and the burden for both public and private debt landing on the shoulders of those who can least afford it. Welcome to Canada, the “True North Strong and Free”!