Greek Economic Crisis: What If It Happened In The U.S.?

Greece has found itself in a devastating economic crisis that may take the country years, if not decades, to recover from. In exchange for huge bailouts from the European Union and International Monetary Fund, the Athens government has been forced to enact a series of draconian austerity measures and spending cuts.

As a result, tens of thousands will lose their jobs, Greeks will see their salaries and pensions reduced; government services are being slashed; and discontent has wracked the nation.

What if the Unites States (a much larger and more powerful nation than Greece) were to face a similar crisis as the Greeks?

For example, the overall unemployment rate in Greece is at nearly 21 percent, while just more than half of Greek youth are jobless. Translating those numbers to the U.S., there would be about 32-million jobless Americans (versus the 12.8 million now without work).

International Business Times spoke to an expert on the U.S. economy to speculate on how an economic and financial collapse of the magnitude of the Greek crisis would impact the States.

Steven Leslie is the U.S. economist and analyst at The Economist Intelligence Unit and is based in New York.

IB TIMES: If the United States found itself in an economic crisis like the one that Greece is ensnared in, what would life in America be like? For example, how many people would be unemployed and how many homeless would fill the streets?

LESLIE: It would be bad, but in completely different ways. The U.S. provides the globe with its main currency and bonds that are the basic debt security. So a default like Greece's would precipitate a major global financial crisis.

It's hard to know what exactly would happen, but it would make the Lehman Brothers crash seem like a minor event. Firms would collapse, letting go of many workers. Trade and finance would freeze up.

Greece doesn't have that impact because it is a small country with a tiny economy.

IB TIMES: In Greece, the overall unemployment rate is now at 20.9 percent, with almost half the young are jobless. Has the U.S. ever experienced such numbers in its existence? If we had such dire figures, would the U.S. government topple?

LESLIE: Well, the U.S. did have massive unemployment during the Depression. The [reporting of the] current unemployment rate only debuted in 1948, but I believe historians do have estimates of unemployment in the period. Keep in mind that Franklin Delano Roosevelt beat Herbert Hoover in the 1932 election [during the depths of the Depression] and then was elected to three more terms.

IB TIMES: The Greek economy is expected to shrink another 4.5 percent this year, after declining 6.9 percent last year. Has the U.S. ever suffered such a one-year contraction?

LESLIE: No, the U.S. has never suffered such a recession. But if such an economic shrinking ever happened, it would lead to huge job losses and the closure of many firms.

IB TIMES: Greece has been in recession for five years in a row. Has the U.S. ever endured such a thing? Perhaps during the Depression? Or are there safeguards put in place here to prevent such a prolonged slump?

LESLIE: Our data show that Greek output has actually fallen for four years (starting with a tiny drop in 2008). I believe estimates are that the U.S. and other economies suffered multi-year recessions during the Depression. In response, Roosevelt and his advisors devised counter-cyclical fiscal policy (i.e., government spending). Others have invested in monetary safeguards, including Federal Reserve chairman Ben Bernanke (who is himself an accomplished economic historian of the period). The current government used both types of measures.

IB TIMES: Would such a lengthy recession in the U.S. lead to huge social spending in the U.S.? Or would Washington, like Athens, have to severely cut back on social services?

LESLIE: The U.S. is a sovereign state that has continued to be able to sell its bonds. Greece has chosen to abide by EU rules and accept the austerity demanded of it. At any rate, no one would buy Greek bonds, so Athens didn't really have any choice.

IB TIMES: Greece's government deficit is at 10.6 percent of GDP as of 2010 - how does the U.S. deficit compare?

LESLIE: U.S. debt levels (measured by the debt-to-GDP ratio) are about half those of Greece. The U.S. will have to run deficits of that size for many years to run up the equivalent levels of debt in relation to the economy. Hopefully the economy will recover in the meantime and permit more deficit reduction.

IB TIMES: Is Greece in the midst of an unprecedented economic malaise for a western country? Is it worse than what the U.S. experienced in the 1930s?

LESLIE: Well, certainly wartime and the post-war years in Europe were much worse. But yes, it is probably the worst economic spell since the 1950s.

Having said that, the Greeks do have the option of emigrating, as many have been doing. Few people could do that during the Depression, the war years or the late 1940s.