Sunday, December 15, 2013

One Key Difference Between Greece and a Country Like Austria

Having returned to Austria after 3-1/2 months in Greece, interesting perspectives come to mind...

Austria had an election around the same time as Germany did. Austria now formed a new government around the same time as Germany did. Austria and Germany opted for Grand Coalitions of the two largest parties. In Germany, the negotiators started on the premise that it is a good idea to give each side the success experience of having accomplished one of their major campaign promises (the SPD got the minimum wage, and a couple of other things; the CDU/CSU got the toll fee, and a couple of other things). In Austria, the negotiators focused on preventing the other side of accomplishing any of its major objectives. So much about the difference between smart and dumb negotiating methods.

The 'new' Austrian government is the same one as the 'old' one had been. Together, the two largest parties had lost a lot of votes at the election. However, they promised a 'new style of governing'. Sort of like ND and PASOK.

Reforms of an overboarding state (particularly of an overboarding public administration) were promised but hardly any of that can be found in the new coalition agreement. In fact, the continuation of a two-party domination (serving their parties' interests) was confirmed. Oh, I forgot to mention: taxes were increased.

So what's the difference between Greece (a country near default) and Austria (a country at triple-A)?

Austria has a very strong private sector. The two-party government would argue because of it. The population at large feels despite of it. Nevertheless, there is a very strong private sector.

The Austrian economy has huge private wealth (domiciled in the country; not offshore!). Fiscal conservatives argue that Austria is on the way towards bankruptcy à la Greece because of the overboarding state. They fail to realize that the state will find ways, for a very long time to come, to get a hold on that private wealth in one way or another; elegantly or less elegantly. All in the interest of 'preserving the social peace'.

Austrian governments, for years, have been very 'social-democrat' (even the conservative party). The general idea was and is to spend other people's money. So what's the difference with Greece?

Austrian governments, even when the Socialists had the absolute majority under Bruno Kreisky, were always very much aware of the fact that if you want to distribute milk, you have to nurture the cow which produces it. Put differently: do not inhibit the private sector too much from being successful so that it can generate the resources which the government wants to distribute.

Greece's private wealth, in sum, was, not too long ago, very high: financial and real estate assets. The only trouble is that much of the financial wealth has always been outside the country (guestimates are in the triple-digit BEUR figures) and much of the real estate has been devalued. And the private sector has essentially been the loser under the austerity program.

My advice to Greece?

Copy Austria! Do everything you can to nurture the cow which can provides you with the milk that you desire! Once the private sector is strong and profitable, the state will live happily ever thereafter!

Or to quote Churchill:

"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon".

1 comment:

  1. Before anybody can see a healthy horse this animal must have been nurtured. Ever since WW2 Austrians have been diligently working with a stable legal, fiscal and social conditions.

    It is correct that Greece should copy Austria or any other stable and successful country, but I do not see how Greece could achieve that??

    H. Trickler