*This video was recorded during my backpacking trip through Yosemite in the end of July.
How would you feel if you had a beautiful view of the coastline, but could only ever get out by the beach once per week? Well, now that employers can mandate a six-day work week in Greece, many are faced with that exact problem.
We’re all aware of Greece’s economic struggles over the past few decades, but that instability has been amplified by demographic problems. As the Greek government attempts to balance out economic activity (made up of consumption, production, capital and labor), they’ve chosen labor as the factor that will have to compromise. Obviously a six-day work week is going to piss off some people, but what else can they do?
We’ve seen countries like Japan, South Korea, Italy and Germany face similar problems and combat them in different ways, but the outcome for each country is still uncertain. As for countries who haven’t hit the decision point, like the US and Mexico, they can observe each of these countries’ tactics and draw learnings from each.
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Hey, everybody. Peter Zeihan here, coming to you from just below Matterhorn Pass where I just came from. Tomorrow’s project is over there, that’s Dog Head Peak. And then this is the Finger Head Peak, which I will not be doing because I’m not that crazy. Anyway, I copied the entire via, asked Peter, formed my phone before embarking on this trip.
And while some of you have some very strange questions, one that popped up, which I thought really tied some themes together, was something going on in Greece right now. The government has recently approved that employers can force employees to work six-day work weeks. And you’re like, Greece? That Greece, the Greece that spent itself into oblivion 15 years ago?
The Greece that had the hard left governments that basically refused to pay debt? Well, yeah, they’ve been beaten into shape now, but this is a whole new level. Every economic model, it doesn’t matter if it is laissez-faire capitalism, European socialism, Chinese fascism, Biden debt-driven New Dealism, or Trumpian Peronism, doesn’t matter what it is.
All of them are about managing the differences and the communications between the four major pillars of economic activity: consumption, production, capital, and labor. Different systems will favor different methods. So, like, socialists generally go more for labor, capitalists generally go more for capital, just for example. It’s in the name. What’s happened in Greece is that they are running out of those four pillars.
Part of this is a series of very, very, very bad government and financial decisions that date back to the 1990s. Remember, the Greeks had the largest bailout in EU history and indebted themselves to something like 140% of GDP. The bailout to pay it back is going to take them decades, so the capital side of the equation was already all wonky for them.
The second problem is demographic. The birth rate in Greece has been below replacement levels for in excess of a half-century, and they’re simply running out of people under age 45 to do the work, much less have children. With these two forces completely out of whack, all that’s left is supply and demand in an economy that has been in and out of recession now for 15 years.
That’s not great. So what we’re seeing is the government trying to take a brokering role to decide which one of those four forces—supply, demand, capital, and labor—has to be crunched down so the other three have a chance to work. And this government has chosen labor. That will obviously generate some political problems. I don’t mean to suggest that it won’t.
The Greeks are hardly the only country that is in this situation, and despite all of their many, many differences, I would say that the country in the world that is second closest to having to make these sorts of hard choices is Japan. Demographically, they’re the oldest country in the world and the fastest aging. From a debt point of view, they have been running massive, Greek-style, Biden-style, Trump-style budget deficits now for 30 years.
And if you take into account things like pension arrears and local debt, which I think you should, you’re talking about a debt that is somewhere between 450 and 500% of GDP. So, you know, whenever you look at a country and think, “Oh wow, their debt’s bad,” look at Japan. The Japanese have used what capital they do have to try to find technological solutions for some of these problems.
Getting people to work later in life, for example. What the Greeks are doing and what the Japanese are doing are very much projects in progress. We have no idea if it’s going to work, because, remember, we’ve never, ever been in this position as a species before. We’re looking at the fundamental, the bedrock—we’ve got a little bit of the bedrock of what makes our economic structures work.
Turning inside out. And we are going to have to find a new way forward. For this, I would not necessarily look to Greece and Japan. I mean, for the experiment, yes, watch them closely. But I would look for the more robust countries that are more internationally involved and have a more dynamic economy. The top of my list is going to be Korea, which is aging much faster than Japan.
I need to correct myself there. Japan is no longer the fastest aging country in the world; they may just be down to, like, 10th. Korea is in the top five. I would look at Italy so you can get a European example as well. They’ve been below replacement level for 70 years.
And then, of course, look at Germany. Germany has had a number of issues in its past when the economic model no longer functioned, and things got delightfully lively. So, that’s it for me today. Keep an eye on these countries as they try to redesign themselves. It’s not all going to go well. If you happen to be in North America, keep in mind that the United States is furthest from this problem for demographic reasons.
Our demographics have been stronger than everybody else for quite some time, and Mexico has the best demographics in its peer class. So Mexico City and Washington get to watch everybody else and see how they stress over this, and hopefully, we will learn something from that.
