Sunday, October 19, 2014

Why Greece Could Fail

In their book "Why Nations Fail", the authors Acemoglu/Robinson argue that the pillar for sustained political and economic success are a nation's institutions. They coin the terms "inclusive institutions" and "extractive institutions".

Prosperity is generated, so the authors, by investment and innovation, but these are acts of faith: investors and innovators must have credible reasons to think that, if successful, they will not be plundered by the powerful. Order without inclusive institutions may enable an economy to escape poverty, but will not permit the full ascent to modern prosperity. The authors' explanation is that if the institutions of power enable the elite to serve its own interest – extractive institutions – the interests of the elite come to collide with, and prevail over, those of the mass of the population. They argue that there is no natural process whereby rising prosperity in an autocracy evolves into inclusion. Rather, it is only in the interest of the elite to cede power to inclusive institutions if confronted by something even worse, namely the prospect of revolution. The foundations of prosperity are political struggle against privilege.

Yannis Palaiologos of the Ekathimerini blows into the same horn when he writes that Greece's closed society is central to the current malaise: "Some analyses went a little deeper and saw clientelism as the core pathology, an acid corroding everything in Greek life, leaving the country in the hands of well-connected mediocrities and spreading mutual mistrust across the body politic. But even that does not go deep enough. Greece’s biggest problem, which it has done little to deal with, is its lack of openness as a society. It is a stance with deep roots and wide-ranging implications, which decisively undermines its hopes of recovery".

The definition of a problem is always much easier than the proposal for a solution. It's quite a while since I read the book but I do remember that one of the authors' argument was: if a society is controlled by an entrenched elite, particularly a corrupt elite, then it is next to impossible to bring about change in a normal and evolving way.

Would that make a case for Alexis Tsipras?


  1. Interesting first paragraph. Entrenched elite, served by the institutions of power. Newcomers will either yield or be plumbered. Tsipras is part of this since his teens, clearly from his cv, father, wife etc.
    Some say that defining the problem is 90% of the problem. A proportional voting system might help to a peaceful change. The current 50 seats bonus is a blatant distortion of democracy.

  2. A case for Alexis? Seriously? But he is already an entrenched elite.

  3. Tsipras, with his PASOK crown under new coat, will contribute to the greek politics, but not in the way you think. Tsipras, after Papandreou, will be useful, to give another blow to PASOKism and Papandreism, that have infused the greek society for 30 years and made the population think that just by being "Leftist, progressive, democratic" (all patented properties of the left), money fall from the sky and the public sector is the good daddy that will employ everyone and will give raises upon raises and lower taxes, etc.

    George Papandreou was the first step to reveal the smoke and mirrors used by the greek left to hide its nudity. The time where the left would indebt future generations to distribute the money and call this "progress" is over. Some in SYRIZA, still hope that this will happen. They only talk about debt forgiveness, because their hope is to get it, plunder whatever they can from new loans and when things go bust, leave it again to the "evil" right wing to take the hot potato.

    Greece needs a new party in the center right to go forward. Tsipras will help into that, through his failure. At some point, the pasokified voters will open their eyes and stop believing in moneytrees that have leaves with hanging banknotes, that grow only in the land of true socialist believers.
    In Greece, leftists believe that money come through good intentions and purity of ideology.
    The same who voted George Papandreou and now curse him, are the same who vote Tsipras and will curse him too.

    1. Just to balance your feelings against PASOK/Papandreou/Tsipras a bit: I once read a very interesting analysis which - like you - suggested that all of Greece's troubles began with PASOK in 1980. But the author went on to say that the even greater problem was that ND, when it came to power, did not only not bring back financial order and discipline but, instead, tried everything in the book to become a copy of PASOK.

  4. First part:

    I have written a post, but i think it got lost when i pressed the button. So i will write a new one. ND eventually DID become a copy of PASOK. BUT, the root of the problems, starts with PASOK itself. When someone goes to politics, specially in a party that has aspirations to rule the country, he actually wants to... WIN the elections... someday... What happened to Greece is this. PASOK ruled for 10 years, with huge percentages. In these 10 years, it was giving money left and right. The farmers in particular, had their years of glory with PASOK. PASOK TRIplicated in few years the number of public employees. So you have a party, led by a charismatic orator and economics professor (from USA's prestigious universities), that is really improving your quality of life and finds jobs to your children! And he wins with landslides! A famous Papandreou's quote was towards his minister of finance "Tsovolas, give it away all!", in order to win the elections.
    That's how PASOK was winning. New Democracy, manages to win after 10 years and in my opinion, only because Papandreou was under the Koskotas' scandal shadow. If it wasn't for that, Papandreou would win again. ND rules for 3 years. Mitsotakis, the then PM, was scorned and attacked daily by the vast majority of media (80% pro-PASOK), for his austerity (he brought back primary surplus to the budget) and for introducing liberal policies, through 2 liberal ministers, Stefanos Manos and Andrianopoulos. Protesters were using the scorning slogan "0+0=14", to make irony of the fact that Mitsotakis wasn't giving true raises above inflation (like Papandreou was always doing). The goverment fell after 3 years (by Samaras, ironically). Then, you have 10 more years of PASOK, that returns to the usual routine.


  5. Second part:

    It's easy for you to say "this was a greater problem", but put yourself in the shoes of the ND politicians a bit. 20 years, only 1 win, for 3 years in power... ND lost several leaders without ever seeing the PM's chair. You can't convince someone who is stuffed by money from PASOK and his children are finding job thanks to PASOK, that PASOK is wrong. Mitsotakis was warning about IMF since 1994, who would listen to him?
    Eventually, by 2004, ND, in order to "finally win", had in deed copied PASOK. Greece ended with 2 PASOKs, one green, one blue. Still, Karamanlis, although made a total blunder, using 2 very mediocre finance ministers, at least had the honesty, before the 2009 elections to go out and say "i will freeze wages and pensions, we need to do austerity", at the same time when George Papandreou was touring Greece promicing "there is money, tens, hundreds of billions, if only one wants to find them" and his staff was giving interviews in newspapers about 22 billions waiting in the non collected debts towards the state, that ND wasn't collecting just out of incapacity, while PASOK would collect.
    PASOK has no precedence in greek history, for a party so ruthless, to do ANYTHING in order to remain in power. You can't easily fight such party, because, for as long as everything goes well, no matter what you say, people won't believe you. The people in the streets aren't economists to analyze market data, CDS and the goverment budget. They only see one party filling them with money and jobs and another giving them "0+0=14" and warning about IMF...
    ND becoming a copy of PASOK was indeed a problem. But when you have "bribed" so much, so many for so long, it's hard for anyone to do anything. At the end ND followed the "if you can't beat them, join them".


  6. ND became a copy of PASOK, because of desperation. When you are the main opposition party and you 're losing for 20 years in a row, with a small 3 year intervall, you become desperate.

    Normally, political parties have a minimum of decency. PASOK's ruthleness had no precedence. Even Papandreou's father, George Senior, who had been PM with the "Enosis Kentrou" party earlier, although a user of rhetoric populism, would never dream to introduce for 10 years budgets that anticipate deficits, nor would ever dream to say a few months before elections to his finance minister "give it away all!" (give raises in order to win). This is the difference. PASOK raided the state structures, like a pirate. They established the "green state". When you hire in a few years the 66% of public employees, you effectively control everything. The PASOK guided syndicates in particular, became powerful. Do you know that PASOK for the state bank employeed invented bonuses such as the "firewood bonus" or the "candle bonus" (money so that the bank employee can buy a big candlestick for their children for the Easter mass).

    How do you fight against such party? Just by saying "IMF will come?" Who will hear you? Mitsotakis said "IMF will come". And look what good it did to him... What happened to Greece with PASOK, is similar with what happened to ex Warsaw Pact countries. In democracy, part of the normality and health of the system, is the exchange of power in the parties. In Greece, this ceased to exist. And had ND not copied PASOK, PASOK would have ruled up to 2009 uninterrupted.

  7. List of ND leaders defeated by PASOK:
    - Georgios Rallis (defeated by Andreas Papandreou)
    - Evangelos Averof (defeated by Andreas Papandreou)
    - Constantinos Mitsotakis (defeated by Andreas Papandreou)
    - Miltiades Evert (defeated by Andreas Papandreou)
    - Constantinos Karamanlis Jr (defeated by Simitis and later by George Papandreou).

    Out of them, only Mitsotakis managed to win back once (for 3 years) and Karamanlis Jr (for 5 years, after having copied PASOK tactics).

    Seems more a like a massacre of political personalities, doesn't it? Until you become PASOK yourself...

  8. Here is for you, Mr. Kastner, a physiognomic test.

    These are the pictures of the ND leaders.

    By just looking at them, what would you say? Especially the first 5, would say they look like great populists ready to give a boat of money to everyone?

    By pure coincidence, those who look less "tight", are also those who managed to defeat PASOK. Because against a big spender like PASOK, "tight" doesn't work.

    In Karamanlis' Jr photo, you can already see a major difference. The obviously staged photo, for a PASOKified politician who probably this is why he managed to win. He was more "papandreified" compared to his "tight" predecessors.

    1. There were no pictures in my link.

    2. If you can't see the pictures, you must have some advertisment blocking program in your internet browser or antivirus. Try this website, same pictures, except Samaras is missing. So there are 6 instead of 7 photos.

    3. Try again here (only Samaras is missing)

  9. The real issue is the clientelism which is related with the way voters elect politicians, mayors and lately head of regions,in many cases with good intentions from people side.
    But the luck of structure especially in municipalities & regions --very vogue procedures and structures plus clientism gave for many years the authority to every mayor & head of region, to use political power for a limited number of people. (which won that authority usually by misleading voters presenting a poor, without details program).
    It not the luck of openess, but how people are trained to participate in a dialogue, with what rules and how adequate information.And of course elites mentality even for the less, to participate in a public dialogue for all issues.

    PS: If i post that as MS you won't answer, right?


    1. I comment on comments when I think that I can add some value. When it comes to domestic Greek subtleties, I can read and appreciate what you write but I cannot add anything to it.

    2. I am not posting your message because you asked that I should not post it. Let me assure you, though, that I try to treat every comment in this blog with attention and respect. If I have done something which leads you to believe that I ignore or belittle your comments, I apologize.

    3. You don't have to apologise, but now you make me think that i am problematic which need special attention and care because you ignore or belittle my comments! This is worst!

      My understanding is that i made a comment that "annoyed" you, if i made a mistake, also i apologize.


  10. Here's another example for you, Mr. Kastner, of what it means to have to cope with PASOK. May i remind you, that PASOK is part of the current goverment.

    Mitsotakis' son, is now minister, responsible for the public sector. He recently announced modifications in the wages of public employees. Those with elementary school education, will take roughly the same money someone in the private sector earns, while those with university grade education, higher. Not only didn't PASOK immediately threaten with veto ("we will not allow any reductions in wages"), but even worse, a PASOK MP and former leader of a trade union (and former PASOK minister), came out to "backstab" Mitsotakis, by saying that "a new wage policy was never asked by the troika for the public sector, it's all Mitsotakis' doing". So, a goverment MPs, is throwing "his" own minister to the dogs.