Greek patriot in early 1940s
I had to think of the above when I read through SYRIZA’s new Economic Manifesto (n. b.: I used Google translation, so I may have misunderstood details of the Manifesto but I think I got the overall message pretty well).
In general, I found Alexis Tsipras’ presentation an arousing document. It included all the right soundbites which a domestic audience suffering pain and humiliation likes to hear. The presentation could have aimed at arousing people against some new enemy, for example foreign powers. It didn’t do that and this deserves a compliment.
Mr. Tsipras begins by explaining in detail what SYRIZA means by an Economic Manifesto, by a program. They mean values, principles, clear guidelines, fixed lines, etc. He contrasts that beautifully with, say, Mr. Samaras’ habit of shouting out 18 action steps or the like. And he even used the famous Churchill phrase “Who, if not us? When, if not now?”
If Thomas Jefferson had held in impromptu speech early on during the formation of the American Union, he would probably have used some of the same soundbites which Alexis Tsipras used.
The problem with soundbites is that they are never tangible. By defininition, soundbites consist of sounds and not of specifics. The Economic Manifesto is extremely short on specifics. Actually, specific measures are not even included in the presentation but, instead, only in the short Annex 1.
Soundbite 1 – a public register on all properties. SYRIZA deserves 100% agreement and support as regards the absolute necessity of a complete, nation-wide electronic real estate cataster. That is the minimum standard required if one wants to assess property taxes. A society which has administrative problems with the assessment of income taxes must also use the instrument of property taxes.
Where SYRIZA is wrong is when they call for a registry of ALL properties. To declare all personal properties beyond real estate is a confidential matter between the individual and the tax authorities. A property tax form requires the individual to list all his properties and the tax authorities are charged with verifying that.
Soundbite 2 – “internal devaluation”. The Google translator suggests that Mr. Tsipras considers internal devaluation as wrong. If this is a correct translation, then it is Mr. Tsipras who is wrong. A country which still as a significant current account deficit after 3-4 years of recession has a massive problem with its real exchange rate. There are only 2 ways to solve that problem: either internal devaluation (the long and drawn-out adjustment) or external devaluation (return to the Drachma). There is nothing in between. And SYRIZA has ruled out a return to the Drachma.
Soundbite 3 – government revenues/expenditures. SYRIZA proposes to reign in expenditures at a maximums of 45% of GDP (presently around 50%) and to increase revenues to about 45% of GDP (presently slightly under 40%). Should SYRIZA accomplish that within the 4 years they say they need, they would deserve a Nobel Prize for Public Administration (n. b.: I suspect that the 45% of GDP expenditures do not include interest. If so, that 45% figure would be far too high and much higher than it is today)! SYRIZA does not explain how they plan to reduce expenditures by another 5% of GDP but they are specific as regards the revenue increase.
Soundbite 4 – tax reform. SYRIZA quotes the Greek constitution as saying that Greek citizens have equal rights and equal obligations to “contribute without distinction to public charges and in proportion to their means”. Quite sensationally, SYRIZA seems to include even the Church among those who have obligations. A tax reform following this constitutional mandate could only be good. Details, however, are missing in the Manifesto.
Soundbite 5 – reform public administration. If all the mentioned soundbites were to become reality, Greece would have one of the most modern and efficient public administrations in the world. However, I hasten to add the following sentence which I found somewhere in the Manifesto: “The administration should organize an “invasion” of democracy, meritocracy and democratic planning in daily operations”. That has a very bad sound to it (but perhaps it is poor translation).
Soundbite 6 – nationalizations, etc. Here, SYRIZA gets very ideological about how an economy works. There is a clear mindset that “the state” (or society at large, whatever that means) must play the role of the “visible hand” in the economy. Otherwise, more or less evil forces would begin to take over society. Thus, there can be no thought of privatizing companies which are still state-owned. Instead, the impression is left that one might even look at new nationalizations and in the banking sector they would certainly be planned.
Nationalizations as a tactical measure of necessity can become necessary (examples: the nationalization of AIG; or the partial nationalization of US banks in 2008/09). Nationalization as a strategic goal generally leads to disaster. And Greece is a country which has the advantage of being able to see already what disaster some of its nationalized companies have created.
If the Hellenic Financial Stability Fund has to recapitalize Greek banks, it should certainly get shares for it. However, it would have to pledge these shares to the ECB/ESFS which are refinancing these recapitalizations.
What reactions can be expected to SYRIZA’s Economic Manifesto?
Some will undoubtedly throw it out the window without reading it simply because it comes from the Left. If Mssrs. Samaras and Venizelos did that, it would be a shame because they could adapt some of the soundbites for their own purposes.
Those who are still doing rather well despite the crisis will definitely object to it because the Manifesto would require a greater future contribution from them. And those who have a vision of Greece as a an attractive place to do business; as as well-functioning economy which is not dependent on subsidies from abroad; as a mature partner in the European Union – well, I regret to say, those should object to it.
And, finally, those who are in the lower half of today’s totem pole of Greek society will fall for the soundbites. They will read into the soundbites all those wonderful things which Greeks back in the early 1940s read into soundbites like the one I cited at the beginning of this post. Without wanting to de-motivate those Greeks, I would only alert them to the following Greek wisdom:
“Any fool can throw a stone into the sea, but once he does, a hundred wise men can’t pull it out!”