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True to form, he sent me the following defence of his position today:
“Read today’s ‘Comment’ in Ekathimerini entitled ‘Samaras and the madhouse’. A true reflection of how I see the insurmountable problems in Greece – which can only be resolved by a return to the Drachma and a sole concentration on Tourism, Agriculture and Shipping together with an abandonment of true reforms across a myriad of professions. I.e. the Greeks will never change – except to be encouraged to enhance their activities in the three areas that I have mentioned”.
Personally, I am at a loss. For quite some time now have I read reports how much progress Greece was making on just about everything and now the Executive Editor of a major newspaper writes that this is not so.
Who in the world knows what’s really going on in Greece?
Last November, it was announced that HP had chosen Piraeus as the site for its central distribution center for products destined for Central Europe, the Middle East, North Africa, the Mediterranean region and the former Soviet republics. HP products will be distributed by sea from the terminal that Cosco controls in Piraeus and by rail via state railway service operator TRAINOSE. That then rekindled Russian interest in Trainose which will transport a considerable share of that volume to other European countries.
Also in November, Unilever announced that 110 of its products that are currently imported to Greece from elsewhere in Europe will soon be produced in this country, in a much-needed boost for the local economy. Even a high school student will quickly understand that this move will have some positive impact on employment.
There is no new employment without new investment and there is no new investment without demand for logistical support. Thus, at the center of all this is a good infrastructure and outstanding logistical resources. That, of course, brings Cosco to mind again, an investment which I have already praised several times as the prototype of a good foreign investment in Greece.
That piece of information took a while to settle with me. I mean, we have now seen for almost 3 years an unparalleled undressing of a nation/society, coming up with every piece of dirty laundry that one can imagine. Presumably, even the natives of a most remote island on the other side of the globe have heard by now that there is absolutely nothing positive to be said about Greece. And now this?!?
I googled a bit more to check what kind of headlines this award had prompted in the Greek media. Regrettably, I am a poor Google searcher which is probably the reason why I couldn’t find any.
Now let’s get this straight. Here is a foundation which isn’t exactly like any other foundation in the world. Presumably, only the most qualified projects attract the attention of the Bill & Melinda Gates foundation. And here is a Greek project which did attract the attention of this foundation. A project about the blue skies of Greece? About the blue waters of Greece? About the ancient treasures of Greece? About the hospitality of Greeks? About any other Greek stereotypes?
No! A project about ’embracing technology and creating a vibrant community asset’ instead!
Ever since the Euro-crisis erupted, the term ‘contagion’ has made the rounds. Meant by that was the risk that the crisis of one country could spread to another country, and so forth. The classic domino effect.
There is another kind of contagion, namely the contagion of negative information. Everyone knows the question whether the glass is half-empty or half-full. Imagine a situation where there are 70% negatives and 30% positives. If you only talk about the negatives, the 70% will gradually move towards 100%. But if you talked more about the positives, the 70% might even retreat.
I trust I have made my point.
“Dear Mr Papandreou,
My name is Theodore Vasilopoulos. I am 11 years old and I live in Athens.
I am writing to you because I have found a solution to Greece’s debt crisis. The government could build a factory that converts solar energy, wind power and waterpower to electrical energy.
Please try to convince countries that we owe money to and ask them if we could pay our debt in energy. It might take a while, but if we have that factory, we might become the most resource-rich nation in the world.
I have listed the advantages of implementing my proposal in point form below.
1) We would be able to pay back our debt for free.
2) We wouldn’t have to buy raw materials from other countries to produce energy (for example coal and petrol).
3) We would get the energy for free.
4) When we pay back the debt, we could continue supplying countries with our alternative energy, making a profit.
5) If the countries appreciate the work we have done, we might be able to stay in the euro.
I hope you seriously consider my proposal. Looking forward to your response.
Yours sincerely,
Theodore Vasilopoulos“
Theodore Vasilopoulos will soon be two years older but he will sadly have to recognize that there is still no economic development plan for the Greek economy.
It is simply not understandable why no one in Greece (be that the government, the academia, the media, etc.) is coming up at least with a proposal for an economic development plan. A proposal which could serve as the basis for debate. I have made an appeal to Greek brain power once before and I repeat it again here!
Those who think Theodore’s plan won’t work should come up with a better plan; and again with a better plan. And if Greek brainpower gets its act together, there would probably be a fairly decent plan within weeks.
But for heaven’s sake, don’t leave the planning up to 11-year olds!
Does all this have a bearing on Greece? No, it doesn’t if one follows the premise of given the chance. De jure, Greece did not have the chance of an external devaluation, something which is not provided for under the Lisbon Treaty (obviously, in practice no one could have prevented Greece from exiting at its own will).
The interesting thing is that Weisbrot/Ray’s argument is more or less the same as that which Prof. Hans-Werner Sinn has made very forcefully from the very beginning of the crisis. According to Sinn, the length, social cost and unfairness of internal deflation would become socially unbearable, thus Greece should exit the Euro, make its adjustment within a Drachma-environment (because that is easier) and then rejoin the Eurozone. Sinn has been crucified for that view; Weisbrot/Ray are being applauded for it.
Personally, I have always been and still am against the alternative of a Grexit. A Drachma would return the Greek economy to a standard which may very well have been totally acceptable to Greeks 30 years ago (high inflation, continued devaluations, expensive imports, cheap tourism, etc.). However, I simply can’t believe that the Greeks of today, particularly the younger generation, could be kept satisfied with ‘such a Greece’. If they couldn’t get in Greece the kind of modern life and living standards which they desire, they would simply leave the country, making Greece even poorer. Thus, the extreme adjustment pains of today are to me, theoretically speaking, nothing other than the price which one generation pays so that the next generation has a fairer chance in life.
Which brings me to those ‘adjustment pains’ (aka ‘austerity’). Papers have recently been full with articles about the ‘amazing mea-culpa from the IMF’. Had the IMF not made such blunders, austerity measures would have been much less front-loaded and the adjustment pains would have been a lot less severe.
That, of course, is assuming that it was the IMF’s program which determined the Fresh Money needs of Greece and not the other way around. For 2009, Greece had a primary deficit of 25 BEUR and by now that seems to have been brought to break-even. In between, roughly 45 BEUR had to be lent to finance the primary deficit. Had the austerity been less front-loaded, Greece might have required 65 BEUR (or more) to finance the primary deficit.
The resulting program was probably a compromise between what the IMF would have considered as ‘workable’ and the financing constraints imposed by the lending countries. And there is no question that the results of the program are terrible. Unemployment of 25%+ simply cannot be considered as the ‘normal price’ which one has to pay during an adjustment process. On the contrary, it is a threat to social peace.
Paul Krugman argues that it will take Greece many, many years (far too many years!) to again reach the GDP-level of before the crisis. Once again, the Nobel Prize Winner sounds absolutely convincing. But does he make sense?
Greece’s GDP was roughly 232 BEUR in 2008. Was that Greece’s ‘real GDP’ or was it a balloon blown up beyond tolerance and seconds before explosion? Is that really the right base for comparisons? Shortly after the crisis erupted in late 2009, pundits calculated that if Greece returned to the Drachma, at least 40% of GDP expressed in Euros would be wiped out. From that standpoint, Greece’s ‘real GDP’ of 2008 would have been closer to 150 BEUR than to 232 BEUR.
One must bear in mind the depth of the macro-economic mess which Greece was in by 2008. Here are a few facts:
* Exports were only 9% of GDP
* Imports were 27% of GDP
* For every 1.000 Euro of exports, 3.200 Euro were imported
* For every 1.000 Euro earned abroad, 2.900 Euro were spent abroad
* Current account deficit was 35 BEUR, or 15% of GDP
* Budget deficit was 15%
Yes, an IMF-expert analyzing from an office in Washington, DC, under no pressure to produce any ‘desirable results’, might have suggested that such a mess requires at least 10 years of reasonable adjustment to make the social cost bearable. At the same time, when looking at such a mess, lending countries probably felt that such a situation required a sledgehammer in order to justify the new lending to their electorates.
That brings me back to the million-Euro-question: What alternatives would Greece have had? What could Greece have done differently? What could Greece still do differently?
There is at least one thing which could have been done to reduce the social cost of the adjustment; in fact, to accelerate the adjustment in a positive way. Even a non-capitalist country like Cuba opted for that ‘one thing’ after they lost Soviet funding. One can only wonder why Greece as a country or the EU as a union have not been able to come up with the most obvious measure which becomes necessary when a country which needs foreign funding loses access to foreign credit.
That solution is foreign investment. Bear in mind that even Cuba, possibly the last communist stronghold in the word, realized that without foreign investment they would collapse. And Cuba attracted quite a bit of foreign investment, particularly Canadian investment in tourism.
It may well be that, beginning in 2013, Greece will transform into a success story for technocrats. For all we know, the primary balance of the budget might show ever-growing surpluses and so may the current account balance.
Yes, it could transform into a success story from that point of view but all of that could become totally immaterial if unemployment stayed around 25%, or even increased towards 30%. Such levels of unemployment totally thin out the social fabric. It may never come to an explosion or it may. If it does, it happens quickly and irreversibly.
The formula is quite simple: no new employment without new investment and no new investment (particularly foreign investment) unless specific measures of promotion are taken. Foreign investment is not only important in terms of the funding it brings but also, if not even more important, in the context of know-how transfer from abroad which comes along with it.
The more I read about the Cosco-experience in Piraeus, the more excited I get about it as a prototype for successful foreign investments. Cosco is a large foreign investment. There may not be too many in that category. Greece has to go for an industrial ‘Mittelstand’, i. e. many new investments, albeit smaller ones, all over the country.
“One little Cosco a day (or a week…) would keep many problems away!”
To me, “Boroume” is the best example of what personal initiative can accomplish. And, very surprisingly, the video which ARTE made about it references a number of other, similiar non-profit aid initiatives which are being undertaken in Greece. Below are a couple of articles about “Boroume”:
HuffingtonPost, February 15, 2012
HuffingtonPost, December 12, 2012
Ekathimerini, October 27, 2011
I had an interesting experience when I opened the website of ‘Pharmaten’, the pharmaceutical company. I quickly double-checked the location of the company. Was that really a company in Greece? In a country about which one has heard nothing but the worst in the last few years?
Browsing through the website of ‘Pharmaten’, I couldn’t help wondering why there wouldn’t be more publishing about companies like that. I kept wondering how many other companies like ‘Pharmaten’ might exist in Greece. Or, even more importantly, how man new companies like ‘Pharmaten’ could be founded in Greece so that economic growth is generated and employment is facilitated?
The Kennedy’s used the following slogan in their political campaigns: “Many people look at things as they are and they ask ‘why’? I like to dream of things how they could be and I ask ‘why not’?”
Or as Barack Obama continued to exclaim during his first campaign: “Yes, we can!”
Or as Boroume says in their company’s name: “Boroume!”
“This is the sort of thing that drives me to despair. The waste management ‘idea’ didn’t originate from McKinsey’s or the TGFR in 2011/12. Instead it came from an employee of the Greek Ministry of Finance (nee Economy) around 2008, or even earlier. Of course, similar projects have been done long before that in other countries but for Greece, Ms. Tomadaki’s paper is the earliest I’ve seen.
Ms. Tomadaki presented another paper regarding the conduct of R&D in Greece to the 8th international Conference on Technology Policy and Innovation at Lodz, Poland in 2005. At that time she was working in the Laboratory of Industrial & Energy Economics, Department of Chemical Engineering, National Technical University of Athens. I found an EIB loan to a Greek Pharma firm a couple of months ago. The purpose of the loan was — R&D of course.
I get the feeling that whilst everyone is talking about what needs to be done, Despina Tomadaki is out there making it happen.
But will Despina Tomadaki get any public credit? Unlikely, unless you feel so inclined”.
What had happened and who is Despina Tomadaki?
The Ekathimerini recently reported that the first waste management tender is expected to see conclusion next month via a private-public-partnership (PPP) and with financing from the EIB. The casual reader might think that this is one favorable outcome of ‘wise men and women of foreign descent’ who presently advise Greece, be they from consulting firms or from the EU Task Force (TFGR). Greeks on their own could never come up with such a brilliant idea.
Or could they? Canutely King discovered that this ‘brilliant idea’ was first presented by the Public Private Partnerships Unit in the Greek Ministry of Economy over 5 years ago. And the author was — Despina Tomadaki (who now works for the EIB).
One criticism of management consultants is that ‘they look at your watch to tell you what time it is’. There is a lot of objective truth to that. Every consultant that I ever worked with confirmed to me that the bulk of ideas which they bring to customers orginally comes from employees of those customers. The resources and potential for improvement are always there. They just need to be taken advantage of.
So, here is to the many Despina Tomadaki’s in Greek society who could and would contribute a lot to Greece’s turn-around — if they were only asked and recognized. Someone ought to start looking for the Despina Tomadaki’s!
Peter Michael Lingens - www.lingens.online
Res ipsa loquitur - The thing itself speaks
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