The positive side of the Greek elections

Last night (6/4/12) the political system of Greece since the restoration of democracy in 1974 collapsed. The two dominant political parties, centre-right New Democracy and centre-Left Pasok, were thrashed by the electorate. The liberals, split in two tiny parties, did not manage to enter Parliament. The big victors were the Left and the Nazis. In the face of the worst economic crisis that Greece has been since the end of WW2, this election result seems to be the worst possible case. Greece may be ungovernable, the country’s creditors may retract their support, and the country may have to return to the drachma and face economic disaster of unpredictable dimensions.

And yet, as every real crisis, it holds the seeds of an opportunity for positive change. Firstly, the humiliating defeat of PASOK – the party which ruled Greece for most of the time since 1981 – is a welcome sign that the electorate sees no future in continuing with the political model of government that the Greek socialists established: a model of crony capitalism that spurned corruption and a huge national debt that is now strangulating the country and the nation. New Democracy, which tried to emulate PASOK, has been punished too for not offering an alternative.

The Greek Left has traditionally been an opportunistic coalition of protesting Marxists without any sense of political responsibility. Its spectacular rise ushers in is a new era for them where romantic ideology must face the ugly facts of government. The Left has now the unique opportunity to leave political puberty and enter political adulthood. Steering clear of maximalist rhetoric and focusing on resisting ineffective austerity it may indeed exploit the rising awareness across Europe that German hard-headedness is leading the continent and its economy to disaster. The victory of Holland’s socialists in France, the realization in Spain that more austerity will simply finish off the country, rising unemployment across the EU, are signs that Europe needs a new plan of action. The Greek Left may be just the right partner at this hour of continental crisis to help put together this new plan, this New European Deal.

The rise of the Greek Nazi party (Xrisi Avgi) was made possible by two main reasons. First and foremost has been the total lack of immigration policy that, combined with an ineffective system of policing Greece’s sea and land borders, has resulted in hundreds of thousands of destitute immigrants becoming trapped inside Greece. These immigrants have found their way in the centre of the big cities, especially Athens, turning them into ghettos. The Nazis exploited the absence of effective policing, and took the law unto their hands. They became street vigilantes. Angry and scared, the citizens of large swathes in immigrant-occupied cities rewarded them with their vote. But this vote would probably never have reached the almost 7% that the Nazis got if it wasn’t for the help they received by the Greek media. By banishing them, the Greek media garnished the Nazis with the attractive aura of the “real revolutionaries” – an image that proved irresistible to large numbers of young people. Given the fact that the Greek media have identified themselves with the corrupt establishment, the young voted for Xrysi Avgi to punish the system. They did. Unfortunately, they have also punished themselves and their country.

Nevertheless, the rise of the Nazis may prove to be a wake-up call to political parties across the spectrum. They may serve as the terrible nemesis that comes after the political hubris of thirty years of crony capitalism and corruption at every level, political, economic and social. The Greek Nazis are a bunch of criminal thugs. The fact that they will now enjoy exposure in the media as a parliamentary party will be their ultimate demise. Till then, they will taunt and ridicule the political system which allowed them to exist and thrive.

As for the liberal centre, which was completely annihilated, it is time they realized that speaking to a small intellectual elite does not win elections, no matter how powerful or clever the arguments.  If liberals wish to have a role in the future of our country they must start speaking with a voice that will make sense to the people.

The following days will be crucial for the future of Greece. Not all is lost. Politicians from Left and Right must exhibit the necessary patriotism, dexterity and political maturity in order to rise above ideology and steer the country safely away from its impeding catastrophe.

How to fix a “communist” country (Greece)

The latest bailout for Greece is one more product of the prevailing philosophy among EU governments: austerity measures in return for bail-out money. Strongly influenced by the IMF’s prime tenant, bailouts such as these protect primarily the interests of bond investors by transferring costs to societies and citizens. This makes sense because it creates trust in bond markets by minimizing risk for invetors in case of default. Governments can therefore borrow to cover their deficits. Nevertheless, whenever a real crisis hits profits are privitized and risks are socialized, creating strong resenment to citizens and taxpayers.

More austerity for a county in crisis means less ability for that country to pay its way out of debt. This is exactly what has happened with Greece during the past two years, with its economy tail spinning into deeper recession. “When in a hole do not dig”, goes the saying that seems to fall in deaf Brussels ears. But of course Greece does not only have a problem of debt but of deficit too. Which nullifies the effectiveness of a typical Keynsian prescription of increasing public spending in order to spur the economy. It would be like throwing good money after bad. Greece is truly caught in an economic cul-de-sac, and no amount of bail-out seems to have any effect.

Boys having fun: will it work this time?

It is therefore important to examine why standard economic theory and tools fail in the case of Greece. Everyone in the world seems to understand that Greece is a “special case”. But what does that mean exactly? What is so “special” about Greece?

The real problem with Greece is its model of government. As long as this model persists, the country will keep producing annual deficits that will in turn increase its debt. Its economy will never become competitive. Why? because Greece is the last “communist” country in Europe. Not in name of course but to all intent and purpose when it comes to designing economic policies for change. Like a communist country Greece consumes all its resources in funding the state apparatus which identifies in fact, as well as in the minds of most of its citizens, with the economy itself.

Until today the troika (EU, ECB, IMF) have wrongly assumed that Greece is a western capitalist country with a bloated and inefficient public sector. This is not the correct diagnosis because it crudely underestimates the symptoms and totally ignores the cause.

The Greek economy is run, directly or indirectly, by the State. The only difference from a classic communist country is that the “State” is not run centrally – by say cadre commissars or the “Party” – but by a winning coalition of special-interest groups. These special interest groups are many and include the public sector trade unions, lawyers, engineers, doctors, pharmacists, farmers, and basically just about everyone with some leverage on the weak political system of Greece.

As long as this winning coalition retains its hold of power on the State,Greece will never be able to climb out of the hole. The members of the winning coalition do not have incentives for change. They refuse to be productive. In the name of  “social justice” they protect their privileges and entitlements at all costs, including the possible cost of their own country come to ruin.

Until today, nothing has challenged this winning coalition. The troika applied pressure on the Greek political system and demanded reforms. But Greek politicians are not powerful enough to face down the winning coalitions of Greece, and never will be. Unless helped by external forces Greece will remain forever the perennial beggar of Europe.

Nevertheless, recent history has provided us with many examples where winning coalitions broke down because the economy imploded. These states were the ex-communist countries of Eastern Europe. The European Union managed well in integrating these countries into the Union, and transforming their economies. Germany, in particular, has accumulated much experience in transforming, and absorbing East Germany into the Federal Republic. It is this kind of experience that must be brought to bear unto Greece now. I believe that ultimately it will. Greece cannot be left behind, because if it does it will continue to cause instability in the European Union. Greece must become competitive. Which means that the current model of government will have to change.

A new Greece is born

Lector caveat: this is a fantasy tale. After one hundred and eighty years of pointlessly trying to emulate a western-type state, Greeks decide to face up to their true cultural facts. They are not children of the European Enlightenment, or the Renaissance. Nevertheless, they are democratic and communal. So in a historical referendum they vote to abolish the central State. Henceforth, Greece will be made up of cantons where citizens will practice a mix of representational and direct democracy. A national government with only three ministries will continue to exist: a ministry for national defense, for managing natural disasters and security and a foreign ministry. All other ministries and public organizations are abolished, or absorbed in the local canton governments.

Cantons are at liberty to pursue their own political choices. They are independent. They do not get finance from any central government. They have their own budgets and tax systems. Some cantons, where the influence of the Left is strong, decide to follow socialist models of governance. There is at least one canton where the Communist Party has formed a government. Other cantons liberalize and go for free markets.

As cantons are free to choose their way of economic and social development Greeks begin to experiment, for the first time since the Hellenistic era. Innovation flourishes and attracts bright minds from around the world, who come to work or set up their businesses in Greece.