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Sunday, February 24, 2013

"The solutions lie outside of Greece". Pro's and con's.

I recommend reading the comments to this article and I draw particular attention to the comments of a reader who writes anonymously under "Xenos" (a British consultant who has lived in Greece since 1998). Here are some quotes:

"I am in complete agreement about the need for reform for the long-term benefit of Greeks and Greece. This reform cannot come from the current regime which is destroying the private sector in order to maintain the corrupt and useless public sector. Short of putting Greece as a colony of the EU, there is nothing the Troika can do to change that."

"The cause of these problems is that the Greek state has created jobs en masse for political reasons, but refuses to create employment (even time-limited) for skilled personnel actually to complete a specific task of important work. Everything takes second or third place to political parties, and this has not changed."

"The fundamental problem is really a scientific one: that you cannot modify institutional structures once they have been established."

"Greece will always remain dependent on its politicians, because that is in the culture of the society. The horrendous bureaucracy and incompetent management structures are taken straight from the Ottoman period, and Greece has had 180 years to lose them. Conservatism is a good thing if you want to keep things as they are: in the case of Greece, this lack of innovation is a disaster. However, I see no change in mentality, nor has the Troika done anything that would help."

"With serious structural reforms, which need to include the appalling judicial system, Greece could benefit from FDI and serious investors. But it’s not happening, as far as I know."

This really presents the dilemma quite well. Everyone seems to always agree on the diagnosis and many, like Xenos, implicate that Greece will never change. Xenos even writes that "the solutions lie outside of Greece — and I suppose people just cannot come to terms with their powerlessness to change anything."

So there seems agreement on the diagnosis and some agreement that Greece will never change, that the solutions lie outside of Greece but --- when the outside does propose solutions it is villified.

Personally, I think the solution lies outside of Greece to the extent that the ouside must recognize that the economic well-being of Greeks will be - as it has been since Independence - dependent on foreign funding for quite some time to come. That is so obvious that it doesn't even deserve debate. What does deserve debate is in which form this foreign funding should come to Greece going forward. I argue that much of it should come in the form of direct foreign investment, others argue differently. But the foreign funding must come to avoid social disaster.

As regards everything else (i. e. all the domestic deficiencies which are described so well in the comments), I can see no way how they can come from the outside. Or is someone thinking about sending in the cavalry to free the Greek people from its establishment?

Like many others, I also have trouble seeing how the solutions can come from within Greece because the existing system would have to amputate itself in order to make this possible. Nevertheless, that seems to be the only avenue open for discussion and it should be pursued with positive and not destructive connotations.


  1. In order to solve a problem you must first understand it. So somebody must understand political dynamics first. In a religiously, nationally and ethnically homogeneous group like Greece (nationalism and religious differences can complicate things) people usually follow a political direction not because of some deep philosophical conviction but because they will get a better share of national resources and more status than the other groups ie self interest. The decision to join is also pretty loosely made, usually fashion and following parents or the other sex. So breaking the old system usually means scaring people (no loot) and strongly indicating that following your present group will result in loosing status and money.
    In Greece full of small political duchies the best way to change people's minds is, well, large foreign investment. Once finding work is no longer at the mercy of the political establishment the power of the political establishment will melt away. So I disagree with Xenos (Brits seems to believe that political systems are or should be immutable -this contains a nugget of truth in the case of the UK) and I agree with you:foreign investment in a large scale is the answer.
    However there is another point that proves Xenos wrong. The present system, apart from disliking investment, dislikes exports, for similar reasons-the vassals acquire income sources outside the control of the political system and they get uppity. Now for Greece the major problem in exports is lack of reliable foreign contacts. Help remove this block and the help will be great.Xenos is ideally positioned for such work. Getting research funds, as Xenos does, helps, but it depends on the good will of the old system. On the contrary helping exporters undermines the old directly. I have personal experience of this: I work in a small telecoms company (SMS services)and we desperately want to go international. However finding partners is the stumbling block that keeps us boxed in Greece.

    1. Interesting. I remember an interview with Prof. Sinn a couple of years ago where he criticized that Greece had a very strong import lobby and not much of an export lobby. And how could that be turned around?

      I am glad you emphasize something which I have also stated frequently but not in the above article, namely, it's not only the money which comes through foreign investment which is good for Greece but, above all, the know-how transfer in all areas and one such area would be good corporate governance. The best corporate governance is more frequently to be found in Mittelstand family-owned companies than in large multinationals.

    2. @theAthensdog, Interesting, I was aware of Greek hostility to inward FDI, but not also to exports. Is this restricted just to "the establishment", or is it manifest in the wider community, as in the case with inward FDI.

      The xenos comment - The horrendous bureaucracy and incompetent management structures are taken straight from the Ottoman period... does ring true for today's Greece.

      I'd also say that it rings true for much of the EU edifice - maybe even more so. Which for me at least puts the kibosh on the notion of Greece being placed under EU Colonial rule.

      But, from where did the Ottoman Turks get those characteristics. Maybe some came from the Byzantine Empire that they displaced. Which means Greece has to shake off not nearly 400 years of history, but more like 1600 years. Which is a big ask without a cultural revolution or of some sort, and they can be rather messy affairs.

      A consequence of Greece and other Balkan and MENA states being behind the Ottoman Purda for almost 400 years, is that they didn't directly experience the cultural revolutions known as The Renaissance and The Enlightenment. Of course individual Greeks influenced and experienced both, but they didn't do it in Greece. Instead, they experienced them in foreign countries - where by and large they remained.

      One way that we might discover " the solutions can come from within Greece..." is to ask ourselves "What countries could Greece use as models for transformation" or "What countries have successfully (re)invented themselves in recent history". Some that come into my mind are - Singapore, Chile, New Zealand, Germany and Turkey. There's probably something to be learnt from each of them and maybe there are some common traits they share. I am NOT suggesting that Greece could become just like any of those countries, what I'm saying is that there might be lessons to be learnt. Example if one thinks New Zealand and Singapore have healthy banking sectors, and that the Greek one is on its knees - then how, in the long run, could it be made to be more like NZ and SNG's. I am of the firm opinion that Greece can learn just as much or more from non-EU countries as it can from EU countries.

      This paper from the Business History Conference in Paris last Aug/Sept - Mittelstand Multinationals (48 page PDF) provides some interesting insights & anecdotes with a historical perspective.


  2. Attributing greek public service structures to the Ottomans is a popular fallacy.
    First, it should be noted that the Ottoman Empire was quite cleverly structured and relatively benign. Greeks don't like admitting this, but it is true; "Better the Sultan's fez than the Cardinal's mitre" referred to the hated and feared Venetian and Frank regimes that preceeded rule by the Sublime Porte.

    In fact, and far more pertinent to our present situation, the greek public service and management structure was directly put in place in the 19th century by the French. (Greece's tragedy! my father used to say...). Following the revolution the Great Powers took on different responsibilities to set up the constituent parts of the new Greek republic. The English under Edward Lowe created the banking system, which until the last few years was one of Greece's great assets, and which almost alone in Europe was relatively little affected by 2008.

    The French were assigned the civil service. Anyone acquainted with France up to the 1990s (and still now, though improved) knows that this is a nightmare of Kafka-esque bureaucratism and unneccessary paperwork.

    The world's most ideal civil service was hammered out by the English through their experience as a colonial power - simple, logical and transparent. This can be experienced today in the UK, Australia, Canada, New Zealand - with pleasure and relief, after living on the continent! What distinguishes this system is the notion that a public servant is indeed a servant of the public, paid by the public.

    French & Belgian (which are similar) public service traditions were replicated in the EU - so there, Xenos, is your connection.

    German civil structures are highly peculiarised; many departments are good (tax for example), but the system is difficult to replicate elsewhere given the overlap, or non-separation, (rather, intertwining) of public & private sectors which grew out of their own guild traditions, and so can really only be transferred to a place with similar traditions - ie NOT Greece. In fact the german approach, which works well there, and also in another form in Holland (NL) is something that the more clear cut, adversarial anglo-american tradition would find highly suspect, and inevitably breeding corruption.

    Indeed Germany is constantly in the European court for the problem of its closed professions.

    The wisest thing to do is put in place the English model in Greece, but if you examine the Troikanaut team, the English are nowhere represented. Less transparent, over-complicated structures are being put in place instead.

    1. History seems to repeat itself. I understand that the EU Task Force assigned the public administration reform to the French...

    2. Indeed - tragedy number two!

      The difference between the continental approach (France, Italy, Belgium etc.) and the English approach is that the Continent has the tradition of the top-down Administration, and the other, a mediating Civil Service. One administers, the other serves...
      From this point of view, the Troikanaut team on the whole is a case of the Blind leading the Blind.

      I know which I'd prefer - and I can assure you that given the choice (which they have not been - ), the 70% greek private sector would prefer it too!

    3. Kurt Tucholsky, a famous German writer with a sharp eye for weaknesses in one's own society, once wrote: "It is the nightmare of every German to stand in front of the desk of a civil servant and it is the dream of every German to sit behind that desk".