There is a political rhythm to the Greek economic crisis. We spent a long weekend on Santorini dodging strikes–Tuesday was the transport workers, Wednesday was the wharfies, Saturday was the May Day demonstrations. Next Wednesday there is a general strike. Our timing has so far been impeccable. We took a ferry last Thursday, so missed the wharfie action that paralyzed Pireus and left a bunch of cruise ship passengers stranded. We returned on Sunday evening so missed the May Day demonstrations that disrupted the Metro rail. We fly to Samos this upcoming Thursday, so will miss the general strike as well. Fingers crossed that nothing happens next Monday, when we fly back. Given recent strike patterns, Monday is due for one so our luck may run out (not that getting stuck on Samos is a bad thing). But we are getting the hang of the flow of things and look forward to seeing how the general strike goes. Although the foreign press has focused on some violence, the reality is that it is only small groups of anarchists who are clashing with the police, and most of them are teenage students. The unions and other civil associations are led by grey haired folk who may have been prone to street action two or three decades ago, but who now are just trying to protect their collective livelihoods (although two banks were attacked by petrol bombs last night, the usual anarchist and Marxist-Leninist suspects are being blamed).

What is interesting about the unfolding of the Greek economic crisis is how ignorant most foreign observers are about its root causes. Most focus on inefficiency and waste in the public sector and the supposedly indolent Greek way of life, which even if true has its causes in something other than the Greek psyche (as some allege). Let me explain.

In the 1950s a strain of developmentalist thought emerged called modernisation theory that claimed that the problem of Latin America and the Mediterranean Rim was a lack of Anglo-Saxon Protestant values resultant from the mix of rigidly hierarchical religious cultures (Catholic, Muslim or Orthodox) and warm climates. The general drift of this “theory” was encapsulated in the so-called Iberian or Mediterranean Ethos: a culture of indulgence, indolence, patronage, clientalism and fatalism structurally rooted in a benign climate that allowed for easy shelter and food production. If only the Greeks, Italians, Spaniards and Portuguese (which actually is not on the Med) had to live in cold climates where survival depended on industry and resourcefulness–then they would have developed the “proper” entrepreneurial values that would have allowed them to develop along the “proper” lines of the Anglo-Saxon world. In other words, backwardness is a function of culture and climate.

Leaving aside the fact that there are plenty of temperate climate locations where entrepreneurial spirits have flourished, and plenty of cold climates where it has not, or the fact that lumping together whole regions in a culturalist explanation is ignorant at best and racist at worst, or that the notion of one universally ‘proper” form of development is both, this discredited canard ignored the structures of economic and political power (many overtly shaped by foreign intervention) that emerged in these regions and which were not reducible to either climate, religion, or civic culture.

By the 1970s modernisation theory was shown to be profoundly flawed. On a scale of over-determinism (when not cultural supremecism), it is up there along with the “warm water port” theory of imperialism. Yet, in recent years, and specifically with relation to the Greek crisis, it has been resurrected in revamped fashion as an explanation for developmental failure. Inspired by neo-liberal thought, the neo-modernisation thesis is that countries with “too much” state involvement in the economy are prone to political nepotism, rent-seeking, corruption and inefficiency. That makes for a lazy, supplicant, and favour-seeking society. The key to development lies in reducing the role of the public sector so that private enterpise can flourish. The private sector is seen as THE panacea for developmental retardation, and elites in places like Germany believe that the Greeks need to accept this.

While there may be some truth to the need for private sector leadership,  the root causes of the current Greek crisis are, again, not as simple as the overbearing role of the state, nor is the solution simply a matter of reducing it.

As I mentioned in the previous post, Greece has an underdeveloped private sector. But–and this is a very big but– the weakness of  the Greek private sector preceded rather than followed the advent of the modern Greek state, and the private sector never attempted to become the motor force for the entire society. If one considers the nature of internecine conflict in Greece dating back two  milenia (for the historically disinclined, please think about Athens and Sparta, or better yet, the Peloponnesian Wars), one realises how parochial local, sectoral and island interests can be.  That worldview continues today. Greek private industry, such as it is, has little concern about contributing to the public good. 

In light of Greek capitalist myopia and parochialism, the recipe for social peace has rested on the public sector being used as a means of absorbing excess labour (along with emigration). The labour market and welfare systems are two-tiered: there are few protections for workers in the private sector outside of employer generosity or union strength, while the public sector adheres to ILO standards. Tax-evasion is a national sport, but the problem is not with individuals but with politically-connected corporations and agricultural interests as well as religious organisations who do not pay anywhere close to their due share of the tax burden but who do put serious money into the main political parties and individual politicians in order to protect their profits (since the money spent on politics is infinitesimal when compared to the valuated tax assessment of their worth). In order to conceal the results of this long-standing practice, successive governments, be they centre-right or centre-left, cook the Treasury books and leave it for their successors to sort out, in what has become an elaborate wink and nod shell game played between themselves and their foreign creditors.

Greeks are by and large a nation of small property owners. Owning a home is, like in NZ, their core objective. The private sector is dominated by small and micro-enterprises run by owner-operators (often familial in nature) who eek out small margins catering to immediate needs (think dairies, dry cleaners. locksmiths and the like). The state does not direct investment capital towards these people, not does it particularly focus investment in large corporations either. What large-scale investment exists comes from foreign-connected sectors such as shipping, and much of the profit generated by the handful of such firms goes off-shore.

To this can be added a large black market fueled by unchecked migration across Greece’s incredibly porous borders. One in ten inhabitants in Greece are foreign born and the majority are undocumented.  This cash economy circulates outside the confines of the state (remember my anecdote about the gypsy street fair in the last post), yet is vital to filling the demand for basic necessities as well as for labour in the agricultural and service (including tourism) industries. Relatively little of the economic activity generated by these non-citizens provides revenue for the state, and with little immigration enforcement available (and largely impossible to regularise in the near term), that situation will only get worse as the official economy shrinks under the austerity regime now being imposed.

Thus the historical source of income stability (at least since the end of the colonel’s dictatorship in 1973) are public service jobs. But without an efficient tax system owing to the political cronyism of the major economic players, public budgets require external financing, which has led to more than two decades of deficit spending happily financed by foreign financial speculators trading in risk derivatives. The idea behind this play, which I accept, is that while firms may go bankrupt nations do not. Compounded interest ensures the investor’s profitability even if the principle is lost in a default (as Argentina showed in 2001-02). So the bottom line is that the system now under siege worked for everyone–the Greek elite enjoyed its privileges, the Greek population remained relatively content and peaceful even if economically underdeveloped by modernisation theory standards, and foreign financiers made money off Greek debt.

The trouble is that with the creation of the Eurozone currency system controlled by one central bank, countries such as Greece were placed in a financial straitjacket that eliminated the autonomy and cushion provided by independent national currencies.  It cannot devalue or overvalue its currency based on market conditions (as for example, Singapore does regularly), and thus is locked into a monetary (supply and demand) framework over which it has not control. Hence, should it default on its debt to its European backers, one major option would be to defect from the Eurozone and re-establish its national currency. There will be pain involved but it would allow Greece to reorganise its finances in more independent, if austere terms. It has enough investment to ensure that even with defection it will not sink (consider that tourism constitutes 20 percent of the Greek economy and its limited niche export markets could actually be favoured by such a move). That in turn might encourage others, particularly the other members of the so-called “Club Med,” to follow suit, which could well spell the end of the Eurozone (especially when considering that a Tory victory in the UK will mean an end  of talk of its ever joining and that Turkish incorporation into the EU could set the stage for an even bigger Greek-type scenario). Thus the Greek bail-out is not so much about Greece as it is about protecting the Eurozone as a currency market.

Which means that the strikes are going to continue, at an increased pace and on a potentially broader scale. In the face of elite indifference to their plight, it is the only means of defense for most Greeks. They have just been told that the public sector will take a 25 percent wage cut on top of a ten percent cut six months ago, then have wages frozen for three years. Imagine if that happened in NZ. Do you think that even the placid Kiwi public worker would take that lying down when s/he had no part in the deficit debacle? The retirement age will also rise while pension benefits will be cut. Although most people appear to accept the former, the latter is a major source of aggravation because as I mentioned before, there is little to no private sector pension plans. Prices of public utilities are set to rise and there is talk of privatising the bulk of the health system (which already is a two-tier system in which private health providers are used by the wealthy). All of which is to say that the burden of sacrifice will be shouldered by those who had nothing to do with creating the crisis in the first place. In fact, although improvements in tax enforcement are mentioned, that remains to be seen, and nowhere has it been mentioned that politicians will take a wage cut or corporations will be required to offer non-wage employment benefits in order to off-set cutbacks in public benefit programs while encouraging labour migration to the private sector. 

Which makes me think that the recently announced IMF/ECB Greek rescue package is more cosmetic than substantive and could well provoke a public backlash that could provoke renewed military interest in internal security. That, indeed, would be a disaster.

Note: As always, my observations on Greece are indebted to the insight of my partner as much as my own. I will take blame for any errors.

PS: I have been thinking of writing a post about our brushes with petty crime and come curious Greek mores, but do not want to turn this into a travelogue.  I shall try to integrate any such thoughts into a larger discussion of more serious subjects.