NEW YORK (TheStreet) -- How will things break for Greece if it decides to get in line with the rest of the Eurozone, starting with the adoption of painful economic reforms? Greek Prime Minister Alexis Tsipras should look no further than Ireland and Chile.
Conveniently, two recent news stories, both in the Financial Times, spell it out pretty clearly. The first story contrasts the situation in Chile with that in Argentina and Venezuela. The second story examines the difference between Ireland and Greece.
In the first story, the author, Benedict Mander, writes, "While most of Latin America is still struggling to adjust to the end of a boom in commodity prices that propelled growth in the resource-rich region over the past decade, there are signs Chile's economy may be turning around."
Mander continues, "The health of Chile's economy often regarded as the best run in the region, is also attributed to the strength of its institutions and its free trade model." The economy is not burdened with "heavy-handed state interventionism" as are those of Argentina and Venezuela.
An economist at Nomura Securities (NMR) - Get Report, Mario Castro, argues "Chile is an example of how credible institutions can smooth the economic cycle and make adjustments less traumatic." Castro points to the fact that Chile has a "widely respected and independent central bank" and a "well-established" fiscal program.
Chile still has its social problems, but relative to others, it is doing very well.
Ireland entered a bailout program imposed by the International Monetary Fund in late November 2010.
Peter Cunningham, in the second article cited above, writes, "A severe fiscal retrenchment in Ireland meant deep adjustments to personal lives. Side by side with the effects on families of steep government cutbacks, bank credit was rigorously curtailed."
Cunningham continues, "Small businesses were badly hit as credit lines were abruptly withdrawn. Emigration, for centuries Ireland's solution to hardship, once again took flight. An estimated 5 per cent of the population has left since the start of the crisis -- a tragedy for many Irish families, whose children now live in Australia, Canada, or England."
The IMF "has promoted Ireland, whose current forecast growth is set to top the eurozone, as a model to be followed by other bailout countries."
Well, much of the talk today is about Grexit and debt default.
Economists spend so much time these days talking and writing about market failures and the shortcomings of market economies and fail to give credit to the fact that markets do work a significant portion of the time.
But when governments move to resolve market failures or attempt to impose will on economic outcomes, it can often become hard to stop, especially if some of the efforts don't achieve the desired effects.
In this respect, it is always helpful to be pragmatic about what policies work and which ones don't work; the worst outcomes occur when ideology gets tangled up with good intentions.
And, here is where the new Greek government seems to be having all sorts of trouble.
Tsipras, the Prime Minister, and his party Syriza, were elected on an anti-austerity program. In trying to work things out with the Eurozone and others, Tsipras is facing stiff opposition from extreme members of the party because they are afraid that he is moving away from what the people wanted him to do.
The problem is that the platform of the Zyriza party is unworkable and not acceptable to the Eurozone and others involved in the situation.
Whereas, Ireland did what was needed to get back on the right path, Greece, which had the chance to do the same thing in 2010, failed to follow Ireland's example, and now is way in over its head in the effort to turn things around.
It is good to hear the success stories as well as the failures. Markets do work most of the time and we need to hear that along with all the stories about how markets fail.
This article is commentary by an independent contributor. At the time of publication, the author held no.