Friday, November 9, 2012

"Greece Drinks the Hemlock!" - NYT

"Greece Drinks the Hemlock" is the title of the NYT-editorial on the passing of austerity measures. I consider the following sentence as the most important one:

"Greece cannot pay off its debts when it is shutting down its economy. It has to put people back to work". 

And the sentence following the above I consider the most questionable one:

"The only way forward is through more debt write-offs and more low-interest European loans, as well as by opening up restricted job markets". 

Even if all of Greece's debt were forgiven, it wouldn't change much in the functioning of the Greek economy. If all restricted job markets were opened up overnight, it might change something but I would only believe it when I saw it.

Either way, the Greek economy would continue to be an economy which does not generate enough value to justify the standard of living which Greeks justifyably desire. There simply is not enough domestic production to satisfy a greater portion of domestic demand (making horrendous imports necessary and underutilizing domestic resources) and there certainly is not enough domestic production to generate the amount of exports necessary to justify the desired imports. And with all that underutilization of resources, chronic unemployment cannot be avoided.

Thus, I return to the 'early promising signals' which I have described in a previous post. A better future for Greece can be expected when the following sentiments are felt throughout Greek society:

* an obsession with import substitution
* an obsession with export expansion
* an obsession with making tourism/shipping competitive
* an obsession with private foreign investment; and, last but certainly not least:
* an obsession with the EU Task Force to do everything possible to modernize Greece's public administration and to make Greece a governable state

If and when that happens, the issue of a debt write-off (which may still be necessary) will become a side issue. Creditors have already accepted the fate that existing debt must be considered - to a large extent - as 'spilled milk'. The difference is that foreigners (creditors and, above all, investors) will be happy to transfer Fresh Money to Greece because they can have the confidence that the money is well spent.


  1. As usual, very well said.

    Sadly none of these issues appear to concern the parliamentarians with the exception, to some degree, of Alexis Tsipras (Thessaloniki, September). But certainly not the old centrist ND/PASOK. But very few of the latter 'have hands stained' - Shakespeare - in the true marketplace of the economy.

    I do hear these concerns echoed amongst colleagues in the private sector. Drasi and Dimiourgia Xana, also. There is a realisation and eagerness for these obvious changes, meanwhile new small export companies are getting off the ground, especially by internet. For this to really go ahead on a large scale it needs government support in the form of large scale reform of business regulations - and where are they? Nowhere!

    1. The reason why I so adamantly repeat these theses is that I could personally experience, in the late 1970’s/early 1980s, how the right policies can turn a defunct economy around in a reasonably short time frame. That was Chile.

      Almost every day, someone in the economic leadership explained to the public in one way or another why this, that and the other would lead to an economic recovery. That, in turn, prompted reactions in the media, etc. and created a lot of debate in society. Sometimes it seemed like the whole country had become a class in economics. A taxi driver could explain to you during the ride from the airport to downtown the pillars of Chile’s economic strategy and why they would be successful. In short, that’s what I mean by ‘obsessions’.

      PS: the Chilean project failed in the ‘first round’. Why? Well, they fixed the Peso to the USD which created an aura of financial stability. Foreign loans flowed into the country’s private sector like there was no tomorrow (not to the state because the state kept its house in order). A consumption-starved society used the bulk of those loans for consumption. Wages, prices and asset values rose to unrealistic levels. And then came the point where the flow of foreign loans stopped. Sounds familiar?

      However, the Chileans were smart enough to recognize that the ‘first round’ failed not because of its concept but, instead, because the users had misused the concept. That helped them to embark on a ‘second round’ where they avoided those mistakes and, today, Chile is probably the most successful economy in Latin America. I have explained this in greater detail in the below article.

    2. "For this to really go ahead on a large scale it needs government support in the form of large scale reform of business regulations - and where are they? Nowhere!"

      Yes, this is the deadlock.

      Again (I wrote about it yesterday): Greece needs to be cleaned up from all people in the higher/highest leveled jobs, because they have proved not to be capable to create any positive constructive change in Greece.
      Highly intelligent Europeans, knowing about the right way to communicate and with the needed insight, from the countries where Greece gets money from, have to be there to take over ALL jobs where Greeks fail(ed).

      The fired Greeks, professors, doctors, politicians, teachers, bankers, etc. can be sent into Europe to follow their colleagues, to experience how >they< think, work, talk, communicate, act, check, control, follow up laws, >also behind the screens<. To learn from them and then, when they have proved to have understood it really, in the deepest levels of the highest ethics, to be allowed to go back to Greece. Not earlier.

      To be controlled for ever after being back.
      Deep intelligent thinking is the most needed energy and power now, and it is not implicitly present because it is something human, there without any effort. It needs to be activated, stimulated, constantly, so that it can evolve permanently into a growing awareness, in that what is needed to govern a country in the right way. To survive as Greeks, as Europeans, as world citizens.

    3. "Sadly none of these issues appear to concern the parliamentarians with the exception, to some degree, of Alexis Tsipras (Thessaloniki, September)."

      When rereading this post and also your comment I read something what I did not realize this morning, and what needs another comment:
      Are you really serious? Do you really follow up the news, daily?
      Have you ever heared anything more than that Tsipras and his followers are only complaining, talking, and being against? As ALL do? they are NOT different from any other political party. Only a different name, another face.
      Where are the constructive plans?
      Where are they on the battle field?
      Did you hear what happened in the parliament two days ago?
      I like it very much that there are heavy discussions in the parliament and that all is said finally as it has to be. Not any perfume anymore to cover the bad smells of lies or inconsequent talkings. Wonderful that is is filmed. So that we can follow what happens. Hear. And make our own opinion. So excellent. New in Greece. Also that there is more than one party in the parliament: before there was just one party ruling Greece. The cradle of democracy is finally democratical. Good!! But with so much people sitting there on a chair in parliament that it costs the half of the needed money to pay them. Who were against the lowering of the too high salaries? Yes, Tsipras.
      And in front of his followers he makes them believe that he wants to help them to a better Greece?!? Well, to change things start with your self, you, you, and also you, Mr. Tsipras.
      Shameless. How much they dare to ask for their "job" as a politician. Again: they should be all sent away. All. Not any exception. Greece needs a new fresh wind. A fresh wind, clean. To bring air to breathe.

      It is excellent that the crisis unveils all what has been told between politicians. All what has been recorded, taped or filmed can never be denied. It is there as proof.
      Tsipras is a very popular handsome guy, but he does not know anything about politics. But even a professor in politics cannot solve the problems in Greece. And yes, that might be clear, I want also Tsipras to be sent out of Greece, with all others, to clean up the country from those who kill all life there, legalized by the word politics, by a lot of used emotions awakened by singing Theodorakis songs. Well well. This is creating Big Theatre, Drama, Greek Drama, not solutions. Tsipras is an actor. Not a politician. He copies words, texts, and not one word is his, not from a true inspired soul.

      Tsipras knows how to balm the ears of his followers. He sais what they like to hear and it is Theodorakis who has made this party more popular than they deserve. Theodorakis made a mistake here. He is old and sould stay out of politics. I suspend people around him of using his name to be more popular, to make people think it is ok with Syriza, and that with voting on Syriza Greece will experience a second revival because Mikis Theodorakis is supporting them.
      Big names of the past, including here also Glezos, and with all deep respect for what they did or might have done for Greece, belong to the legend,even when they are living legends themselves. They cannot offer any guarantee that their view is as fresh as it was when they were young(er).
      Politics and all what is happening on this moment worldwide is are too complicated for even living legends. For even Theodorakis.
      I say this out of my deepest respect for him. I am very worried that he creates more danger than he is aware of himself.
      As also Klaus Kastner wrote in an earlier post: I love your music, Mr. Theodorakis, but your views are dangerous.

      Greece needs a true leader. As you can read in an earlier post here and I agree completely.