Friday, 20 February 2015

Who Are The Real Revolutionaries?

Buried beneath the mountain of verbiage and breathless news reports about the Greek debt negotiations lies a little-noticed role reversal. While the new Greek government Syriza adopts the dramatic plumage, media savvy and rhetoric of ‘revolutionaries’ they are, in fact, staunchly defending the Greek status quo – the very status quo that brought Greece to its knees. The usually media-shy, grey and drab Eurocrats in Brussels would shiver at the comparison, but they have become the real revolutionaries who want to change Greece and bring it kicking and screaming into the 21st century.

            The Greek state, with its bountiful patronage and rigid control, has dominated the Greek economy and protected politically loyal interests for generations. Every party in power has used the state coffers to reward voters with jobs in government or in state-owned enterprises regardless of aptitude or knowledge of the job at hand. The combination of hapless, inefficient state economic enterprises and bloated bureaucracy whose main goal was to strangle at birth any innovation that might reduce its numbers has slowly but surely deprived the Greek economy of the vitality and oxygen needed for real growth. Who in his right mind was going to spend the energy required to fight through the swamp of bureaucracy and closed professions to start something new that just might offer a lower priced, better service or product to all consumers? Far better to stuff your idiot cousin into well-protected state job.

Is he the revolutionary ...
            This is what Syriza wants to defend at all costs. It is, after all, the source of the party’s political power. And this condition is exactly what the bureaucrats in Brussels want to change. Syriza loves to play on the image of the hard-hearted Germans insisting that impoverished Greeks tighten their already tightened belts a few more notches. Greeks respond ‘What belt? I sold that long ago.’ 

Even brilliant economists like Paul Krugman weigh in against the follies of relying on austerity to bring a country out of depression. It is not every day that I take issue with a Nobel Prize-winning economist, but Krugman may be only half right in this case. I agree completely that austerity by itself accomplishes nothing but misery. How can any country, or company, for that matter prosper on a diet of nothing more than the economic equivalent of kale and tofu?

It is the flip side of the austerity coin that has been obscured in all the concern for the long-suffering Greek people. So far, Syriza and its vocal supporters have said very little about the vital structural reforms required to get Greece off the welfare rolls. What about opening up the economy to newcomers and, God forbid, foreigners? What about amending the bureaucracy to encourage instead of discouraging enterprise? We know that Syriza is firmly against selling or even leasing state assets to raise funds that could be used in much-needed social welfare programs. But why, precisely? Do the party leaders really believe that the state can run things like the railroad, ports or power corporations more efficiently than private owners? The real tragedy is that without these long-overdue structural reforms the pain of reduced spending over the last few years will be wasted. Greece will remain mired in a welfare trap, unable to claw itself out of debt and unable to grow.

Or is he the real revolutionary?
The revolutionaries in Brussels want to change the story line. They are well aware of the desperate state of many Greeks, but they would like to help Greece grow out of the welfare trap rather than remain on the EU’s life-support system. An obvious deal is on the table. Greece’s debt conditions are eased in return for real movement on the economic reforms. Will Syriza pick up this deal? Or will it continue to play the role of the defiant revolutionary defending the barricades with cries of ‘national sovereignty over all else’? One wonders if Greece’s rulers have ever explained that the price of joining the EU and then the Euro was a loss of total sovereignty. The club has rules that one is supposed to obey. One didn’t hear much about a ‘loss of sovereignty’ when EU funds were flowing in to improve the country’s antiquated physical infrastructure. But now when the club secretary reminds members that the club is joint enterprise with certain obligations we hear cries of anguish from many Greek politicians.

If there is no agreement in Brussels in the next couple of days Syriza could possibly elect to hold a referendum on the Euro. It could ask the Greek people to decide if they want to stay in the Euro even with the ‘odious’ conditions imposed by heartless Germans -  or do they want to return to the ‘proud and sovereign’ drachma regardless of the economic pain that might cause. Such a step could give Syriza political cover regardless of the outcome. In any case, we won’t have long to wait for the end of this melodrama.

Thursday, 5 February 2015

Rigid Ideology Trumps Welfare Of The People

Nothing better illustrates the ‘profoundly unserious’ nature of Syriza’s plan to revive the Greek economy than its position on the sale of state assets. Syriza’s new ministers have gone out of their way to condemn the practice and say they have absolutely no intention of pursuing any more privatizations. So much for the claim of helping the long-suffering people of Greece. If the party was genuinely interested in easing this suffering it would relax its rigid ideology and use these state assets to generate the necessary funds.

           The Wall Street Journal ran an interesting analysis of the Greek debt situation in the 20 February edition. Stephen Fidler points out clearly that Greece has the resources to tackle its debt, but the government chooses not to. This analysis would seem to be supported by comments from two leading government officials regarding the controversial privatization program.

            Finance Minister Yanis Varoufakis opined in one of his carefully-calculated sound-bites that “it is not very clever to sell off the family jewels in the middle of deflationary crisis. It is wiser to develop state property and increase its value using smart financial resources to strengthen our economy.

            Panayiotis Lafazanis, leader of the hard-left faction of Syriza, added that the Public Power Corporation “will return to the state as a state-run company which will operate as a driver of economic growth.” Are they kidding??!!

           These comments demonstrate clearly that neither of these people has ever been involved in selling or running anything, and has absolutely no idea what they are talking about. First, when is a better time to sell assets than when you need money? The government can set the minimum price it will accept and work to attract bids. Because assets like the Public Power Corporation, the Port of Piraeus, and the railway are potentially valuable for the right buyer the bids could easily exceed the state’s minimum price. The cash received by the state would come in very handy to meet some of the legitimate social needs in the country. This much is elementary, not even Economics 101. 

Fashion statement or finance minister?
            Second, the idea of the Greek state ‘developing’ these assets or having state-run companies becoming “a driver of the economy” is ludicrous. Over the past several decades the Greek state, regardless of the party in power, has demonstrated convincingly that it cannot run a car wash let alone something as sophisticated as a major port or energy company. Just look at the sorry record. Olympic was a decent airline until it was nationalized, starved of investment, over-staffed with political patronage, and ultimately went bust. The airline was well known for people getting paid and never bothering to show up for work. The railroad could be a very valuable asset by connecting with a potentially efficient Port of Piraeus and offering a much quicker way to the heart of Europe than taking a ship all the way through the Straights of Gibraltar and up to Rotterdam or Hamburg. But, under state ownership the railroad never even began to reach its potential. All you have to do now is contrast the part of Piraeus Port owned by the Chinese company Cosco with the state-owned section to see the difference. One bustles with activity and productivity while the other stagnates

Furthermore, all these state assets require millions of Euros of investment to make them productive and efficient. Under state ownership where is that money going to come from? The Treasury is already empty, and there will be intense pressure to spend what little money there is on re-hiring people or boosting pensions rather than buying things like a new crane for the Port of Piraeus.

            One would hope that Syriza would at least be honest with the Greek people. One reality they do not touch upon is that the party is beholden to powerful unions. And these unions have always been opposed to privatization. Such a move away from state-ownership could seriously weaken the unions’ influence. In addition, continuing state ownership guarantees Syriza’s grip on the levers of economic power in Greece. Friends can easily be rewarded while enemies can be left outside the charmed circle. One gets the distinct impression that the last thing Syriza wants is strong economic growth led by a private sector that it cannot control.

            Another way to generate some cash for much needed social programs would be to cut the bloated defence budget which is still one of the highest in NATO as a percent of GDP. Surely, if Syriza were seriously interested in helping the people of Greece it could divert some this money into much needed social spending.

             But what do we get instead of serious proposals? Grandstanding helicopter flights by the new minister of defence over disputed islets close to Turkey where he dramatically drops a wreath for all the cameras to witness. Why? What on earth was he trying to do other than provoke another problem that Greece does not need? Despite deeply entrenched Greeks fears to the contrary, Turkey is not about to lunge across the border and grab some territory

            Greece does indeed have the ability to help itself.  But the government has to get serious about generating sustainable income rather than simply bleating about Europe’s ‘obligation’ to reduce the country’s debt. If Syriza really wants to prove its 'anti-establishment'  tendencies it could actually do something to help the people of Greece rather than rely on trivialities of costume design and grand, theatrical -- but ultimately empty -- gestures