Tuesday, May 15, 2012
Taken from Quora.
Are the Greeks correct in their complaints about their nation and their economy being exploited by the Eurozone?
The current protests in Greece seem to blame the Eurozone, and not the Greek people themselves or their government for their current economic misfortunes.Nikos Moraitakis, I'm Greek.
No.
The economic troubles of Greece are the result of nearly 30 years of destructive policies and reckless, unproductive government spending.
Simply put, the development model that Greece has followed for several decades revolved mainly around obtaining money from abroad (European Union subsidies, growth funds, lending) and injecting it into the economy to fuel temporary growth, consumption and the illusion that we're doing well. Where did the money go?
- Most of it was spent in creating an unsustainably large public sector whose main function was to provide lucrative and unaccountable job opportunities for voters. An entire nation became conditioned to aligning their political loyalties with direct monetary rewards (over 1 million public sector employees in a country of 3-4m workforce, earning more than they would in the private sector and enjoying life-long tenure and no link between salary and performance).
- The comparatively anemic private sector was also feeding off state money, which was the largest client for most business activities (e.g. construction companies were relying on state projects for the majority of their income) resulting in entire industries being reliant on the state's ability to borrow money to spend it on the market). It was more profitable to sell crap products and services to the state by leveraging political loyalty than to build competitive products that could be exported. This is also the main reason why Greece exports very little of value despite having one the most hard-working and educated workforces in the EU (the myth of the lazy Greek is simply that, a myth).
- In cases where the state was not directly buying the services of a business sector, it imposed policies that favored that professional group in order to purchase its loyalty (e.g. the right/license to operate a pharmacy is personal and hereditary - yes, hereditary! - with fixed profit margins, a situation that of course makes business easy and profitable for those in the loop, but prevents innovation, investments and work opportunities in the field).
- Finally, the state distributed the majority of development/growth funds from EU and other sources without caring to make sure that the money goes into investments that will create competitive industries in the future (e.g. farmers sometimes prefer to abandon a viable crop in favor of the one that receives the best price-fixing benefits or subsidies, with no incentive to invest in technology that improves their yield and profitability).
Essentially the past 30 years in Greek public policy were dominated by a silent, but well-known to everyone, pact between the government and the people. This agreement boils down to "find a way to throw money at me directly or indirectly and I will vote for you." The politicians corruptly built a system that implements this agreement, many people consciously participated in it, and many upstanding and productive people did not do much to stop them.
It came to the point where, even before the crisis hit, everybody knew and acknowledged the illness of Greek politics and the economy but even the large masses of honest and hard-working people had resigned from the hope that this could be changed. Greece had reached the tipping point many years ago, when the number of people directly gaining from the continuation of this catastrophic system was large enough to be able to elect the government.
This can be observed even today. In the heat of the crisis, an outsider might wonder why the Greek government and people procrastinate so much and cannot implement the changes needed to put the economy back on track (for example, stop spending more than we earn). The economic measures being taken are unfair, indeed because they hit everyone horizontally in unproductive taxes that only hurt the people who were paying their taxes honestly in the first place.
The reason for this is that the nexus of power that installed this system (including the voters that profit from it and support it) is so strong numerically and economically, and so reliant on it to survive that they cling to the dead horse for as long as they can. These people would have a hard time earning their pay in a healthy, competitive economy so they hold on to an untenable system that provided for them in the past. Even when this is suicidal. It's irrational, but people (not only in Greece) generally refuse to understand something if their income depends on not understanding it (cf. Upton Sinclair).
One could argue that some of those policies were motivated by EU policy directly (e.g. unrealistic monetary policy goals in the currency unification process) or indirectly (e.g. throwing money to Greece for development purposes without any mechanism to ensure that this money builds actual economic foundations and not temporary wealth/consumption).
One could also argue that some local or international stakeholders (lenders, markets, political leaders, etc) are taking advantage of the crisis either to profit from it, or to defend the money they lent, and they do this without regard of what will happen to Greece and/or what will happen to the EU. Some may do this opportunistically, and I'm sure some may have more nefarious purposes.
But the fact of the matter is that a sovereign state, with a democratic government, is ultimately responsible for its own policies.
If we had not spent over our capacity for 30 years, if we had used our money and the money that others gave us to build a viable economy, if we hadn't wasted our wealth in frivolous and temporary consumption, if we had a political establishment that did not revolve around "pay to vote", then the crisis would be milder and the exit from it would be easier to achieve.
I wish more of my compatriots would realize and truly believe that no matter what external influences Greece has had, this is largely a Greek problem caused by our mistakes and we'd better rethink and restructure our political and economic establishment while there's still time. Greeks are for the most part hard working, entrepreneurial and very well educated people. The only thing holding us back is the denial of our responsibilities for the current situation and the strong roots that this broken system has taken into our economic life.
