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Tuesday, February 5, 2013

Public sector privileges - Greece is not alone. Not by far!

I have repeatedly made the point that one of  the collateral damages of the Greek crisis (actually, of the crisis of the entire Southern Periphery) is that it makes all those countries which are not in the news for being corrupt, for having an overdimensioned public sector characterized by cronyism and patronage - well, these crises make all the other countries look good. In actual fact, there are countries with similar structures of corruption, of cronyism and of patronage as Greece (except perhaps for the degree of them). My own country Austria is one of them. Below are some points from a recent analysis:

The President of Austria, a purely representative position without any constitutional power, has been touring the country for years calling for greater social fairness and justice. That's an easy thing to do when one has an annual gross salary of 328.000 Euro. Why Heinz Fischer would earn 11% more than Barack Obama and about twice as much as David Cameron requires some imagination.

The Chancellor of the Republic has to get by with a bit less than the President, or 'only' 286.000 Euro annually. Surely, he carries tremendous responsibilities as CEO of a country which spends almost nothing on its defense and which is not known for its influential role in the European theater. But does that justify Werner Faymann's earning 32% more than his colleague Angela Merkel?

The Vice-Chancellor is even worse off with only 252.000 Euro. His only consolation is that his US counterpart, Joe Biden, earns about one-third less than that.

The Governor of Austria's Central Bank, an institution where one doesn't quite know what responsibilities it carries since the local currency was abandoned, can collect 334.000 Euro annually. His US counterpart, Ben Bernanke, has to get by with about half of that. I guess running Austria's Central Bank or the Fed are not one and the same thing.

And, finally, the head of Austria's national TV & Radio, a totally politicized near-monopoly which has still managed to lose market share consistently over the years, is record holder with 350.000 Euro annually. The head of the German ARD must be jealous when he sees that because that's about one-fourth more than his own salary.

The above is only the very small tip of a very large iceberg. Austria has an enormous direct and indirect public sector which is still heavily politicized. A recent study said that 51% of the more senior positions are filled with political appointees. It would be interesting to see a study of how the total direct and indirect public sector of Austria stacks up with that of Greece. Austria can't be that far behind. And one can be sure that the salaries of all more senior positions in that sector are way above what could objectively be justified (and way above salaries in the private sector). Plus the fact that most of them have job security for life.

Why does that (still) work in Austria and no longer in Greece? Austrian political parties have operated very cleverly since WWII in that they never lost sight of where the money came from which they then happily recycled among their party members, cronies and voters --- the private sector. As a result, the Austrian private sector has always been rather competitive internationally. Greece probably has more strike days in a couple of months than Austria had in the last almost 70 years because Austrian politicians of all colors always honored the principle of consensus (at whatever cost to tax payers) and they shied away from dissens (which might have saved tax payers money in the longer run).

Many Austrians, particularly those who benefit from the system, think that this system is a prototype for how a peaceful social market economy should work. It's difficult to contradict that because how does one show the cost of patronage, cronyism and corruption; the impact on society of enormous preferential treatment here and enormous unfairness there?

Many Austrians think that this can go on forever. Many Greeks probably thought so, too, a few years back...

1 comment:

  1. Brave of you Mr. Kastner to 'fess up to Austria's shortcomings. Its not just Austria, its Belgium, Luxembourg, France, NL....sad to say but practically all countries have their own forms of corruption & cronyism, indeed even Germany....

    What happened in Greece was that the government and public sector lost sight of the fact (if they ever understood it -) that it is the private sector that creates money and pays their salaries. And that the most important part of all private sectors are not the few big companies & banks, but the agglomeration of SMEs that makes an economy tick healthily and even boom.

    Just one snapshot to put it in perspective: It is incredible that they were so stupid in their greed, as to manage to drive away greek shipping, when greek shipping is no.1 in the world!

    This feat / choice was entirely in the hands of the government.