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You make some good points. I think the solution has to be one that looks at the state as a service provider. Until the issues have been depoliticised, decisions will be made for political reasons rather than good business reasons. As a service provider, the state has 2 sources of revenue, primarily: private customers i.e. people, and corporate customers i.e. companies. Both those customer groups pay for services in the form of taxes. Now, those customer groups must be, by and large, wealth creators for there to be any wealth that can be taxed or even redistributed (if that is your political inclination). So, it simply won't do to just reform the state, to spend less, etc. A system has to be put in place rapidly that boosts wealth creation. This includes: minimal bureaucratic lag in the creation of new companies (Chile, for example, enables new company creation within 2 days), very low taxes, easy interaction with regulation bodies, a business-friendly environment, etc. If the state is too sclerotic to reform, it can be set up through free-trade zones in isolated parts of the country. This was China's route, when they essentially replicated Hong Kong in Shanghai, Shengzen, and all the other FTZs. It allows to you to be ultra-reformist in small experimental areas without putting at risk the power structures that exist in the state at large. |
That all has nothing to do with this. This is about what happens when governments fail financially. Financial commitments that exceed tax revenues and no way to balance them. European austerity measures can work (as they sort of are in Ireland) when the political situation is relatively stable and the underlying financials are not too severe. But, Greece is a case where it cannot work.
Printing money (aka monetary easing) is not just an alternative to what you suggest, it's what you do when the state's financials collapse.