Via the Greek Default Watch blog I have had an exchange with another reader who criticized me for not understanding that Alexis Tsipas is the answer to all of Greece’s problems. I replied to him at length and my reply is below.
Thank you for your thoughtful reply. I respect that you expressed your views so emotionally. I obviously have hurt deep feelings on your part and that was not my intention. Sorry. However, allow me to say that much of what you are criticizing about my views is what you read into them and not what my views are. That seems to be a bit of a Greek trait. I have been married to a Greek for almost 40 years and every time we got into an “argument” (fight is such a bad word…) and she would blame me for this, that and the other, I asked her when I really said this, that or the other. And the typical reaction to that would be: “You may not have said it but I know you meant it that way!” When one side is determined to be in the victim’s role, it becomes a no-win-situation for the other side.
For example, if you follow the backlinks in my above-mentioned blogpost, you will find that I have so far written 10 articles about Mr. Tsipras. The first one was titled “Cheers for Alexis Tispras! And more…” and to make sure that you can read it, I link it again here.
Perhaps it would be an idea for you to argue with me based on what I said instead of what you think I am saying. For sure, you will see that I don’t stop discussion and demonize the opponent but the opposite.
I agree with you entirely that Greeks have been ripped off. One part of Greek society (I would like to think it’s still a minority) has taken the other part of Greek society for an unbelievable ride. My sense of modern Greek history is that, ever since independence, the country’s elite has pursued its own interests and not so much the interests of the country, perhaps even at the expense of the country. However, when there is not so much money to rip off, the ripping-off remains limited to a small number of oligarchs. With Greece’s joining the EU, the money started flowing and with Greece’s joining the Eurozone, the money really started flowing. Todate, Greece has received about 130 BEUR in grants from EU structural funds and another 70 BEUR from the agricultural fund. Mind you, those are non-repayable grants (instead of repayable loans!). And from 2001-10, a net amount of 300 BEUR was dumped upon the country as cheap loans. When you dump that kind of money into the middle of the desert, you will see some fantastic growth in living standards even there.
Now, such amounts of money open all doors for ripping off and the rippers were no longer a handful of oligarchs but, instead, they became quite a large segment of society. Money entered the country as debt of all and became private equity of some (and much of it left the country as private equity). And I agree with you that now you have a situation where many of those who had the least benefit from that party are asked to pay the entire bill. I would agree with you that such a rotten system should be starved to death.
You suggest that the answer is not to pay taxes to such a rotten system. Fine. Many tax payers in the Eurozone totally agree with you except that they are not as harsh as you. They are not saying “let’s not give them our tax money”. Instead, they are saying “we’ll give you our tax money but the condition is that you must change your ways”. Is it not understandable that taxes which you as a Greek wouldn’t even give your state, foreigners want to give your state only under conditions?
Many now seem to be saying that only Mr. Tsipras can change that rotten system because he has not been part of it and he is “fresh”. I agree with you (and you can read this in my blog) that I consider Mr. Tsipras as the only Greek politician today who has the leadership traits to really motivate masses. But in order for the right change to come about, the medicine must make economic sense.
Contrary to what you read into my lines, I have no big faith in economic science because a science which has so often been so wrong can’t be much of a science. I have big faith in common sense and common sense dictates that there is no such thing as a free lunch. Common sense suggests that Greece, as an economy, needs foreign funding like a human needs oxygen.
Since the beginning of the crisis, Greece has impressively cut down imports and increased exports. This July was a new record in that trend. And yet, in the month of July, Greece still imported almost 1.900 Euros for every 1.000 Euros which it exported! To put numbers to that: from Jan-Jul 2012, Greece imported almost 12 BEUR more that it exported! Now, income from services like tourism makes up part of that hole but still: for 2012, I would project that Greece will have spent at least 11 BEUR more abroad than it earned abroad (back in 2008, that was 35 BEUR!). You can take out interest from that, arguing that Greece shouldn’t pay any interest to foreign usurers but you still end with a hole of 6-7 BEUR.
My point is that not only does the Greek state need foreign funding to pay salaries/pensions etc. but the Greek economy needs foreign funding to remain functioning. When you need foreign funding, it’s not smart to alienate foreign funders the way Mr. Tsipras does it. What if foreign funding stopped overnight? Well, my understanding is that, apart from energy, etc., Greece imports 40% of its foodstuffs. So, Greece could end up where Cuba ended after the Soviets stopped their funding. I fear Mr. Tsipras is not at all aware of the fact to what extent today’s Greek living standard depends on foreign funding.
Personally, I am convinced that the only longer-term solution for Greece is foreign investment. Greece needs foreign funding but it already has more than enough of it in the form of repayable debt. It needs the funding as non-repayable foreign investment. And foreign investment would bring the know-how transfer in all areas of economic life which Greece so desperately needs. Do you think Mr. Tsipras’ actions todate have made potential foreign investors more or less interested in investing in Greece? My sense is that even Greek investors are not impressed: almost 4.000 Greek businesses have emigrated to FYROM and Bulgaria since the crisis.
I agree that the austerity as applied in Greece is not working. But why did Greek leadership opt for the easy route (take the money from the usual suspects, i. e. those who are taxed at the source; those who have always paid taxes) instead of going for the tough route (structural reforms; making sure that money is not taken from the living and paid as pensions to the dead, etc.)?
I am not arguing that Greeks should go through hell. I consider a million unemployed as a discussion stopper because it is an intolerable situation. But the only way to reduce unemployment is through the creation of new jobs. For new jobs to come into existence, you need investment. And for investment to come, you need favorable business conditions and a welcoming attitude for investment. Greece presently ranks, by far, the lowest in the EU for the ease of doing business and the highest for the level of corruption. Turn these 2 rankings around and Greece would have a good future.
How to do that when you have a rotten establishment? Well, the book “Why Nations Fail” argues that when the entire political and economic establishment of a country is rotten, it is next to impossible to change it. My Greek friends are pessimistic and tell me that Greece will never change. I think that if Mr. Tsipras had a twin brother who has as much talent for economic common sense as Mr. Tsipras has for motivating the masses, and if both of them teamed up, that might work. Absent that twin brother, Mr. Tsipras needs to acquire economic common sense in a hurry if he is not to turn Greece into Europe’s equivalent of a Cuba.
You criticize my criticism of Prof. Varoufakis. Well, I have had my private email exchanges with him where I congratulated him for all his very good suggestions about solutions to the Euro crisis but criticized him for never making any suggestions what Greece could/should do on its own to solve its problems. His well-known position is, of course, that there is nothing that Greece can do on its own because it is caught up in a much larger crisis (title of one of his upcoming seminars: “Why there is no such thing as a Greek crisis”). To me, that’s a classic example of using all one’s energies to solve someone else’s problems and no energy whatsoever to solve one’s own. Suggesting that there is no Greek crisis which Greeks could/should tackle on their own when, quite obviously, the State of Law and the enforcement of laws are not working; when the economy is controlled by monopolies, cartels, cronies, etc.; when laws passed by parliament are not always implemented; etc., etc. – well, and then suggesting to gullible followers that there is no Greek crisis is quite irresponsible, in my opinion.
Let me close with a link to an article where I once suggested what the Greek brainpower should use its brains for.