They have to want it as much as you do.*

datePosted on 06:51, April 27th, 2010 by Pablo

I spoke with an old Pentagon friend today (a person with whom I shared strategic planning duties in a specific area of concern, and who went on to far greater things than me), relating to him my early observations about Greece in crisis. I mentioned that the Greeks, who have a public sector that dwarfs the private sector, in which the public sector average wage is far above that of the private sector, have a huge sense of collective entitlement and natural rights. For example, university students (as public entitles) are currently demonstrating daily against proposed cuts in their free lunch and bus pass benefits, but not at the university. Instead, they disrupt downtown traffic. Tomorrow the seafarers, bus drivers and railway workers go on a 12 hour strike to protest wage freezes or labour market infringement  (the train and bus workers are public servants facing wage freezes and the seafarers are striking to protest non-EU ships being allowed berthing rights in Greek ports. Their combined walkout will paralyze the transportation network for 8 hours ). 

But media coverage of the issues is somewhat odd. Rather than look inward, the popular press is full of anti-German rants because the Germans will determine the conditions of the Greek debt bailout (which only delays the inevitable default), and the conditions imposed by the Germans (as majority holders of Greek debt) are considered to be the reasons why Greek workers will not get their entitled, perfunctory raises.  All the while  life goes on–the cafes and supermarkets are full, people crowd the trains, there are few demonstrations outside downtown. People do not appear to connect the impending default to their lifestyle.

Usually wages are tied to productivity, which means that if the public service is well paid it is also efficient (such as in Singapore). But in Greece it is not. From what I have observed and what my Greek interlocutors have told me, nothing gets done or it is waste of time to demand action. For example, on Saturday an illegal gypsy market spung up on the street outside our apartment building. It closed the street to vehicular traffic and vendors camped out on the apartment footsteps. The neighbours shut the front entrance doorway, which is usually propped open, out of fear of robbery. I asked my landlord if that was commonplace and she said that yes, although illegal the gyspy market had run for years because neighbours had zero success in complaining and bribes may have been paid for the authorities to look the other way (which indeed they did–I saw not a single cop during the entire afternoon the market was running).  In other words, Greek public service is as much a hindrance as a help to civil society, hence the proliferation of grey and black market activity. The curious thing is that this situation is tolerated by both of the dominant Greek parties, respectively left and right centre as they may be, because public sector employment and benefits is a common source of patronage and clientilism. Neither one wants to upset that apple cart (even if the latter is foreign debt-bought and effectively owned). 

Mind you, not that all Greek public services stink. When compared to the Auckland raillway system, for example, the Athenian Metro is stellar. There are few delays on the six inter city lines, complete integration with buses and suburban rail lines, and close integration with ferry and airport schedules. The only visible problem, from my non-expert viewpoint, is that there appears to be way too many people (or too little, depending on the station) doing nothing in pursuit of this goal. Then again, I tried the Henderson-Auckland (before and after Britomart) route for years, before and after it was privatised,  and the public-controlled Athens Metro system has it beat by a country mile.

Not that the Greek private sector is a beacon of innovation and entrepeneurship. To the contrary, it is mostly low skilled small holdings with no growth or technological ambition (think butchers, cosmetic vendors and locksmiths), and the political-economic elite (they are the same, crossing familial ties in many instances) in this rigid two party system have no interest in promoting the sort of capitalist ambition that would erode their joint lock on power. Cuba is similar in this regard, because in both cases oligarchic control supplants popular innovation as the motor of progress and majority consent is bought with public sector employment (not that I am drawing a direct line between the two regimes as a whole).

Which is to say, Greek economic backwardness is cultural, contrived and perpetuated by the Greek status quo. The elite see no need to change because deficit spending is a double edged sword, as many US banks found out to their dismay. Deficit-laden countries intimately locked into the European financial system such as Greece will not be allowed to collapse  becuase if they do the financial run is on given that Spain, Portugal and Ireland are all in the same predicament–too much debt, too little ability to pay within IMF/ECB guidlelines.  Hence, Greece may default, but it will not be allowed to financially collapse if for no other reasons than that the repercussions would be catastrophic on the European banking system itself.

Which is where my fomer Pentagon friend comes in. I noted to him that the problem with EU expansion is that the leading EU economies, France and Germany, viewed EU monetary expansion into Southern and Eastern Europe as a development project in which the lagging peripheral economies would be modernised by virtue of their connection with the European core (first via labour-intensive investment, then by value added industrial growth). The Euro giants emulated the US when it engaged Latin America in the 1960s and 1970s under the rubric of modernisation theory: just expose the backward masses to a little capitalist entrepenurialism and all will eventually be right.

Err…wrong.  As my friend noted, the locals have to want the change as much as we/you (external agents) do. And that is a cultural issue more than anything else. 

Developmentalist views such as that of the EU and US ignore the cultural component of investment climates. National preferences are different, cultural mores vary, and collective notions of rights and entitlements are not transferable across borders. The Germans and French may have thought that lending money to Greece to fund the Olympics would promote its modernisation, but like the Yanks in Latin America, they failed to understand that Greek culture–what it means to be Greek–supercedes any IMF/European Central Bank prescriptions. Hosting the Olympics was temporary; to be Greek is forever, and that is not reducible to a current deficit repayment schedule. To the contrary. It is reducible to notions of rights and entitlements crafted over milleniua and mytholoigised as such. That bottom line is not within an IMF  or European Central Bank purview.

Which is why my friend Ray’s point is well taken: an external actor can only help as much as the locals want to help themselves. There is no point in offering assistance and prescriptions if the locals do not see the need to change. Absent a local consensus on the need for change (which can be influenced by externally driven media manipulation but which ultimately has to resonate in the hearts  of the citiznery) better then  for external actors to cut bait than to engage in futile hope that the local conditions will change.

In fact, the opposite may be true: the less a country is propped up by external actors and the more it is forced to look inside itself for solutions, then the more it may eventually address the root causes of its backwardness, decline or stagnation (New Zealand could well be a case in point). In any event, only after internal failure is acknowledged that external assistance will make a difference in Greece or elsewhere, and that difference is not material but attitudinal.

 According to my buddy, that fact is as true for Greece as it is for Somalia, Irag and Afghanistan, and in the latter instances, the stakes are arguably much greater. I disagree with his summary assessment as it applies to Afghanistan (as I believe that there is more at stake than local self-realisation), but cannot help but recognise the truth in his words. At the end of the day in this age, no matter the degree of previous exploitation and subserviance, the root problem of backwardness lies within. Or to put it in my friend’s terms, “if the locals do not want to do it, it aint gonna happen.”

There is truth in that view and no amount of good intentioned external help will resolve the fundamental issue.

*Update: For a jaded by humorous view of Greek politics check this out.

4 Responses to “They have to want it as much as you do.*”

  1. What would Hayek say on April 27th, 2010 at 09:45

    A very good post Pablo, very interdisciplinary crossing economics (public choice theory, new institutional economics, agency dilemma), history and politics (with some security studies thrown in for extra credit).

    Your post reminds me of the concept of “genteel decline “http://www.economist.com/world/europe/displaystory.cfm?story_id=15065405&fsrc=rss also see the book The Leopard”http://en.wikipedia.org/wiki/The_Leopard”

    None of this detracts from your friends point that “if locals do not want to do it, it aint gonna happen” which is the same as “you can lead a horse to water but you cant make it drink”.

    It does sound similar to NZ pre 1984 – which raises the issue about the importance of social institutions, in particular the political governance of a country, being able to address this problem before internal collapse occurs. For NZ possibly part of our pre 1984 wasn’t Muldoon per se, but the fact that our electoral system was not able to legitimise the significant opposition to the status quo (FPP preventing new ideas from gaining political traction), as a result there was no release valves until currency and debt crisis. This meant reform was sudden rather than incremental – one of the significant differences between NZ and OZ. Whilst both countries were similar important differences were that OZ still had reasonable access to international markets and whilst having some barriers to trade it had not gone to the lengths of NZ (nor was it reliant on a single buyer like NZ was with the UK), this allowed new ideas and productivity improvements into Australian industry.

    In NZ we liked what we had (recall Muldoon’s pension promise) but were never willing to face the cost of maintaining that lifestyle, instead hoping for a lottery win or deffering the problem onto the next generation.

    Having said all of this – I look forward to your next installment, Greece is an interesting place to look at right now, for all the reasons you described. Hopefully there is at least one or two books to come from the current world situtation which will take a look at how countries responded to the different crisis and what drove there decisions, and what if any could be termed successful within that countries own framework.

  2. Lew on April 27th, 2010 at 10:13

    Keep ‘em coming, Pablo. I have a post written but I’ve put it on hold until this afternoon.

    I’m in complete agreement with your friend’s analysis — not only is it pointless (from a pragmatic perspective) to try to foist social or economic “improvements” upon a populace who sees no need for them, I’d say it cuts against the right to democratic self-determination.

    That having been said, it sounds like the existing economic-political interests which abide are also doing their own bit to impede that self-determination. So the most effective solution for those who advocate change moves from a policy focus (“bring these people reforms”) to a political communication focus (“make people want reforms”), at which point a policy track can be followed.

    Not knowing much about the situation, could it be argued that the leverage being exerted by the EU and other such actors has this as its goal? Are they trying to bring “the pinch” home to make a more robust and entrepreneurial (but less localised and culturally authentic) market economy seem like the lesser of two evils?

    L

  3. Pablo on April 27th, 2010 at 19:07

    Thanks Hugh. I owe a lot of my interpretation of events here (I cannot quite call it an analysis) to my ongoing conversations with my partner, who has studied and written about Greece at some length (which is the main reason why we are in Greece at the moment).

    Lew: It could well be the case that the EU is trying to leverage reforms from the outside. The irony is that people here are well-organised collectively in defense of their particular interests and demand reforms, but not those that the EU wants (in fact, popular demands are often juxtaposed against EU/IMF-imposed austerity measures). Here the reforms that are seen as needed are political (end of corruption, more transparency and accountability etc.), rather than economic. There seems to be a disconnect in the popular consciousness between one and the other, and no one wants to pay the burden of sacrifice.

    Everything is seen as the politician’s fault (which may largely be true), but the truth also is that politicians failures cannot fully account for the weak and highly stratified private sector and the persistence of a (for lack of a better phrase) “state supplicant” mentality whereby everyone looks to the state first and last to solve their problems. That takes public money, and given the lack of private initiative to provide collective goods, that means lots of deficit spending in a country whose main economic value is in services (tourism) and highly elastic niche agricultural exports (olives, yogurt and cheese).

    This seems to be abetted by the public/private dichotomy I have seen in other societies (Brazil and Portugal come to mind), where the response to collective failures is a retreat into the private sphere of family and friends, thereby compounding the atomizing effects of disarticulated, defensive and self-interested collective action. The end result, again, is a bifurcated society in which elites engage in populist-clientalist rule relatively unaffected by the regular venting of dissatisfaction on the part of an effectively disenfranchised and profoundly alienated population.

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