In the wake of the 2008 housing bubble collapse, businesses have had to retrench and cut spending to make up for the loss in consumer demand. The more long-term commitments an organization has, the harder this process is, as it must renegotiate employees' contracts to reflect the new economic climate.
The NBA lockout and the Greek economic austerity plan might not seem connected, but they stem from the same underlying problem: Both the NBA and Greece have made unsustainable wage guarantees, and neither controls its own currency. As a result, wage roll-backs are the only way to cut future costs.
Inflating the currency is a time-tested way of stimulating the economy. In America, the Federal Reserve has issued trillions of dollars in U.S. bonds under the rubric of “quantitive easing.” And while the stimulus measures they financed didn’t re-ignite the American economy, most economists agree they’ve staved off a possible depression.
Unfortunately for the Greeks, their currency — the euro — is controlled by the European Central Bank in Frankfurt. If their liabilities to government employees were in Greek drachmas, they could simply devalue the drachma to make up for lost tax revenues. Now, because they can’t afford the euros they need to pay their workers’ pensions and health benefits, their only other option is to cut them.
Similarly, if the NBA paid players in “NBA bucks,” some of the most exorbitant contracts that the old CBA system made possible — Atlanta Hawks guard Joe Johnson’s $120 million contract (worth more than either LeBron James or Dwyane Wade’s) and Orlando Magic guard Gilbert Arenas’ $110 million deal — could be made less financially onerous by creating more “NBA bucks.” But because their players are being paid in American dollars, demanding drastic “haircuts” is the only way to ease that burden.
Unsurprisingly, neither the Greek public nor the NBA players have been eager to do that. The Greeks see the austerity plans, which cut government spending and raise taxes in the middle of a recession, as being imposed by foreign financial interests for their own benefit, while the National Basketball Player's Association (NBPA) has raised many legitimate questions about the NBA’s accounting practices.
Neither side wants to budge. It’s a level of distrust common between labor and management: In the NBAPA, many suspect the real goal of the lockout is to break the union, while much of the Greek austerity plan doesn’t seem likely to get the Greek economy back on track.
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