Abstract
Representative democracy has serious shortcomings. From their analysis, we derived certain rules of prudent conduct for governments and citizens. Thus, we considered it useful to elucidate the consequences of deviating from these rules by reference to an actual case. To this end, we apply our findings to the Greek democracy and economy in the post-war period. We find that the progress Greece achieved before 1974 decelerated afterwards because all institutions sustaining the efficient operation of democracy and free markets were eroded. Under the impetus of the 1975 Constitution, economic policies extended further in the direction of unfettered statism, destroying the international competitiveness of its economy. Some researchers have attributed this reversal to the entry of Greece into the European Union. We look into these allegations and find that they have no basis on the available evidence.
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- 1.
This is the year democracy was restored in Greece after 7 years of military rule.
- 2.
Adding to Gross Domestic Product (GDP) transfers of income from and to third countries yields Gross National Product (GNP). Subtracting from the latter indirect taxes gives Gross National Income (GNI). These indices are used depending on the problem under consideration. If, for example, the problem has to do with the domestic economic activity, appropriate is the index of GDP. On the other hand, if the problem of interest has to do with the external relations of a country, then the appropriate index is GNP.
- 3.
National income statistics are revised frequently, and the revisions are not accepted without reservations among specialists. In Greece, for example, Tsoris (1975) expressed reservations regarding the revisions of national income accounts in 1973. But, as a rule, reservations do not exceed the limits of a technical discussion among economists, statisticians and other specialists, and in any case they do not give rise to suspicions and comments about expedient distortions. Unfortunately, in Greece the revisions, for example, of 2000 and 2007 became subject of strenuous contentions among the political parties. As a result, experts in Greece and abroad started to question the trustworthiness of the revisions. However, the Hellenic Statistical Service more recently became completely independent from the government, and hence it is our hope that the demeaning references to the so-called Greek statistics will be forgotten soon.
- 4.
According to Milward (1984, 53), the assistance in various forms that Greece received from the Marshal Plan in the period July 1945–June 1947 was bigger even than that received by the United Kingdom from the same source.
- 5.
At the beginning of the 1990s, the journal Greek Economic Review carried an interesting discussion regarding the issue of whether the quick expansion of the public sector had “suppressed” or “damaged” that of the private sector. On the one side of the issue were Bacon and Karayiannis-Bacon (1980, 1981), whereas on the other were Hadjimatheou and Skouras (1980). Based on the time pattern of investment in Fig. 9.3, we can surmise that public investments were complementary rather than antagonistic to those in the private sector.
- 6.
The data from these two sources are reported in US dollars of current nominal value. From these sources, we chose the series which are exhibited in Fig. 9.4 after two adjustments. First, using the index of purchasing power parity (PPP), we converted the dollars into Euros, and then, we converted the series that resulted to constant prices of 2000 with the help of the implicit price deflator of total gross investment.
- 7.
- 8.
According to Alogoskoufis (1995, 158, 159), from 1958 until 1992, the budget of the central government run deficits, which in 1989 approached 18 % of GDP, whereas the public debt had risen to 120 % of GDP already from 1992. These data are in sharp contrast with those reported by Bosworth and Kollintzas (2001), which come from the publication of the National Statistical Service of Greece, Macroeconomic Series Based on ESA95, 1960–1999, as well as those from AMECO on which Fig. 9.5 is based.
- 9.
According to the results obtained by Drakopoulos and Theodosiou (1991), most of the robust growth in GDP came from industry.
- 10.
- 11.
Our estimates are based on data from the National Statistical Service of Greece and AMECO. They show that the competitive advantage of Greek agriculture in 1981 was 37 %.
- 12.
Aristotelous (2008) found that, after adopting the Euro in 2002, Greek products and services lost competitiveness relative to the other countries in the Eurozone. As a result, Greek exports to these countries declined.
- 13.
At the same time, according to Schmidt (2000, 435), relative to all countries in the EU, Greece had the largest safety net covering workers and labour unions.
- 14.
On the basis of price controls and barriers to entry of enterprises in the sectors of commerce and investments, according to Mylonas and Papaconstantinou (2001, 505), in 1998, Greece was ranked as the most illiberal country in the EU.
- 15.
A recent discussion in the parliament regarding the issue of opening up all closed professions illustrated just how difficult the transition to a more competitive model in the economy is going to be. The two major political parties did everything in their power to avoid or postpone implementing the obligation they had been forced to accept via the “austerity program”. Unfortunately, more in the conservative party than in the socialist one, the overriding characteristic is their statism and their devotion to catering towards special interests. This we consider to be the biggest problem of Greece at present.
- 16.
Some may object to this remark on the grounds that from the beginning of the 1990s, there emerged a trend towards establishing decision-making entities quite independent from the government. The case has to do with the so-called independent administrative authorities like, for example, the Competition Committee and the National Committee on Telecommunications and Posts. Aside from the narrow domain of their activities, it is uncertain how independent these authorties are, since their boards and managements are all appointed by the government.
- 17.
In turn, as it was to be expected, the lack of credibility on the part in the governments led citizens to lose their confidence in the laws and the moral commitment of the governments to apply them equally in all directions. In Bitros and Karayiannis (2011), we report that this distrust holds especially among younger entrepreneurs.
- 18.
All indications are that Greece constitutes a typical example that fully confirms the theory of Olson (1965), according to which tightly organised pressure groups have the ability and do use it to extract from governments benefits that burden all citizens.
- 19.
Europeans suspect that Greece was accepted in the Eurozone on the basis of data that had been “massaged” to look better than they were in reality. To explain the source of their suspicion, let as return to Fig. 9.5. From this, we observe that from 1995 onwards, Greek governments started efforts to reduce public deficits down to the Maastricht limit. Their efforts paid off in 1998–1999. But these years were very crucial because they were the years of observation, which would predicate the decision of the EU authorities. At that time everything was ok, and no suspicion would have arisen if the stabilisation of public finances was permanent. However, public deficits started to accelerate again soon after the years of observation. According to Katsimi and Moutos (2010), as long as the Greek governments were obliged to introduce measures to gain entrance into the Eurozone, they did so. Afterwards, when the coercion from the EU rules was not that coercive, the Greek governments return to their old practices whereby they increased public expenditures to gain re-election. Thus, in the light of the difficulties to reduce public spending, Eurocrats are justified to suspect that the data were “massaged” and that stabilisation policies never were applied in reality.
- 20.
We remind our readers that mainly because of public borrowing, domestic and foreign, Greece went bankrupt five times since 1821. These incidences took place in 1826, 1843, 1860, 1893 and 1932, and in all, Greece was obliged to make concessions to its creditors which reached up to surrendering its national sovereignty to “big powers” (see Reinhart and Rogoff, 2009, 96). Moreover, Greek governments have used frequently the “practice” of inflation to reduce in real terms the obligations of the state towards domestic creditors, that is, Greeks.
- 21.
For some quantitative indications regarding the adverse influences on the competitiveness of the industrial sector of the distortions in the labour markets, see Milas (1999).
- 22.
For example, from the study of Hondroyiannis et al. (1999), it follows that in the middle of the 1990s Greece’s banking sector operated in a framework of oligopolistic competition.
- 23.
- 24.
For example, the Skaramanga Shipyards were and remain problematic to the present day.
- 25.
For an appraisal of the effectiveness of these fiscal measures, see Eisner (1969).
- 26.
According to Gwartney, Hall and Lawson (2010, 72), this very low ranking is due to the further tumble of Greece with respect to the criteria: (a) property rights protection, where from the 25th position in 1980, it fell down to the 50th in 2008; (b) freedom of commerce, mainly towards third countries, where from the 39th position in 1980, it tumbled to the 80th in 2008 and (c) state regulations in credit markets, labour markets and enterprises, where from the72th position in 1980, it fell to the 90th in 2008.
- 27.
The process of tariff reduction at the level of EU is described briefly by Tsaveas (2002, 332).
- 28.
Mamatzakis (2003) has found that the decline of productivity in the agricultural sector emanated also from the significant reduction of public investments in agricultural infrastructure.
- 29.
Various studies, like the ones by Brissimis and Leventakis (1989) and Paleologos (1993), have confirmed that the devaluations of the national currency in the 1980s did not improve the balance of payments. In the short run, devaluations had some small positive effects, but over the long haul, the competitiveness of Greek products and services returned to the pre-devaluation level.
- 30.
EU aid was not wasted only in the agricultural sector. The same happened with the aid that was spent to improve human capital. In particular, a large part of the financial assistance was directed to further education and training of the unemployed. These expenditures in essence were nothing more than income support for the unemployed, the educators and those who initiated and coordinated the training programmes. Unfortunately, according to research by Rodokanakis (2010), which focused in the area of Attica and covered the period 1990–1995, the resources that were devoted to these activities raised consumption, without improving the productivity of labour and without enhancing the productive capabilities of the unemployed. Even worse is the finding by Katsoulacos et al. (1996) that Greece failed to adequately and effectively use the aid which was earmarked for Research and Development (R&D).
- 31.
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Bitros, G.C., Karayiannis, A.D. (2013). The Case of Contemporary Greece. In: Creative Crisis in Democracy and Economy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33421-4_9
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