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8/2/2019 Doxiadis at Yale Niarchos
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8/2/2019 Doxiadis at Yale Niarchos
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WetendtolookatthecrisisinGreece,orinanyothercountry,intermsofmacro-
economicmagnitudes:GDPanddebtandsoon.Butbehindthesenumbers,there
arespecificgoodsandservicesthatareproducedandtraded.Andbehindthegoods
andservices,therearepeopleinhouseholdsandinfirms,whodecidetoworkinparticularwaysandtoconsumeandtoinvest.Andbehindthepeople,thereare
institutionsthatenableorhindertheiractions.Andthepeoplealsohaveprevailing
mentalities,orinotherwordsaculture,thatguidethemineconomicbehavior.
Thediagramillustratesthis,tohelpyoukeeptrackofwhereweareinthelecture.I
amgoingtofocusonthethreeitemsontheleft,thatis,onwhatgoesonbehindthe
numbers,andthesectors.Whathappensthere,inmyview,canexplainmostofthe
differenceinhowdifferentcountriesperformintermsofGDP,trade,deficits,andso
on.
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First,though,aboutthemacro-magnitudes.Thebroadstoryiswell-known:the
GreekstatebecameinsolventbeforeanyotherEUcountry,becauseithadbyfarthe
worstcombinationoffourmagnitudes:Governmentdeficitsovermanyyears;
governmentdebt(whichisastockfigure,derivingfromtheflowofdeficits);tradedeficit;andsavingsrate.ItisthecombinationofthefourthatmadeGreecethesick
manofEurope,muchmorethananyothercountryintheEuropeanperiphery.
MostofthediscussioninGreecehasbeenaboutthefirsttwofigures:the
governmentdeficit,whichmustturnintoasurplussoon,becausenobodyiswilling
tofinanceitanymore.Andthedebt,whichisnowsohigh,thatnobodybelievesit
caneverberepaidinfull.Roughlyspeaking,eliminatingthedeficitisthehardwork
thattheGreekstatemustdo.Andwritingoffmuchofthesovereigndebtinan
orderlywayisthehardworkthatglobalandEuropeaninstitutionsmustdo.Bothof
theseissuesaredirectlypoliticalandhighlycontroversial;sotheyhavehoggedthe
limelight.
Butonamorefundamentallevel,itisthehightradedeficitandthelowsavingsrate
thatmattermore.Thesewerepersistently,overmanyyearsupto2009,thehighest
andlowestinEuroperespectively.Iwillnotdwellonthenumbershere.Iammore
interestedinexploringwhythenumbershappened.WhyisGreeceadeficitcountry,
bothingovernmentandintrade?
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Thenextlevelistolookatthesectoralcompositionofactivity.Whatservicesand
productsdoGreeksproduceandconsume?Thiswillrevealstructuralweaknessesin
theeconomythatwillnotberemediedbyfiscalpolicyorbyhigh-levelnegotiations
withcreditors.InGreece,thisweaknessisencapsulatedinthepopularphrase:thefrappeeconomy(frappebeingournationaldaytimedrink:cold,shaken,instant
coffee).Itreferstolow-valueadded,easytoprovideservices,relatedtoleisureand
tolocation,andtotourism,ofcourse.Thisisnotaveryaccuratepictureofthe
economy,butitdoescontainalotoftruth.
Inbroadterms,overthepastthirtyyearsGreecehastiltedtoomuchtowards
nonmarketpublicservices,andtowardsmarketedprivateservicesthatarenot
howevertradableinternationally(likeretailshops,lawyers,doctorsand
hairdressers).Iwillhavesomemoretosayonthesectoralcompositionlater,butfor
themomentletustrytoexplainwhythishappened.
ThisisthepartwhereGreeksspecificscomeintoplay.
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Lookathowproductionisorganized,first.Greeceisanextremeoutlierintermsof
thenumberofself-employedandofsmallbusinesses.
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Intheso-callednon-financialbusinesseconomy(NFBE)57%ofthoseemployedare
eitherself-employedoremployedinfirmsofunder10employees.Thevalueofthis
indexforEU-27is30%.Italycomessecondwith47%,Portugalthirdwith42%.France
isat27%,theUKat21%,Germanyat18%.(2007)
Intheeconomyasawhole,(whichincludesagricultureontheonehand,butalso
banksandgovernmentontheother)35%ofthelaborforceisself-employed,or
unpaidfamilymembers.ThisisbyfarthehighestfigureintheEU,butalsothe
secondhighestintheOECD,afterTurkey.IntheUSthecorrespondingnumberis7%,
inGermany12%andinItaly26%,andinalloftheOECD16%(2007).
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Youmaywellask,why?Howdidithappenthatwehavesomanysmallbusinesses
vineyards,olivepresses,rooms-to-let,minimarkets,doctorspractices,theaters,
clothesboutiques,clothesmakers,ITworkshopsandwhysofewlargeemployers?
Theshortansweristhatweoweitfirst,tohistory,andmorespecificallytotheOttomanstate,whichpreventedprimitiveaccumulationofcapitalasitoccurredin
thewest;second,totheinstitutionsofourmodernstate,whichassistthesurvivalof
smallbusinessbutmakeithardforthemtogrowintolargeenterprises;andthirdto
ourculturewhichmakesithardforustocooperate.
Institutionalbiasinfavorofthesmallscalehasbeensostrongsincethebeginningof
themodernGreekstate,thatneitherthe1.5millionofincomingGreekrefugeesin
1922,northehugewaveofpoorimmigrantssince1990becameapermanent
proletariatforbigemployers,ashashappenedelsewhere.Itwassmallemployers
whobecamerichinfarmsandinbuildingsitesonthebackoftheimmigrants.
Ibelievethatself-employment,micro-employmentandfamilybusinessisastable
andfundamentalinstitutioninoureconomy,perhapsthemostfundamental.Their
shareinemploymentandoutputwillnotshrinkundernormalcircumstances.Not
evenalonganddeeprecessionwillchangethis.Onlyarevolutionininstitutions
would.
Ifthatisso,weshouldacceptthefollowing:itisinstitutionthatdetermines
specialization,nottheotherwayaround.Thatis:becauseweareasocietyofsmall
business,wedonotbuildelectronicdevices;ratherthan:becausewedontproduce
suchdeviceswehavesmallbusinesses.Thisinsightoftenescapespolicymakers.
Theybelievethatwiththerightfundingandinfrastructurewemaygrowcompetitivebusinessesinindustriesthatrequirealargerscale.Ineveryera,small
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businesspeoplewilldotheworkthatsuitsthem.Yesterdaydivingforsponges,today
lettingroomstotourists,tomorrowwhat?
Familystrategiesaredistinctiveinthissmallownershipenvironment,andquite
differentfromwhatyoumightfindinmostofthewesternworld.
Thefamilywillseekstabilityinpolyergy(atermcoinedbyG.Dertilis):havingvariedsourcesofincome,asmanyasitcanfindandappropriate.Thereisfamilysolidarity:
multipleincomesrequiremultiplehands.Thefatherhasapetrolstation,theson
studiesinformationtechnologyfortheupside,butifitdoesntworkouthewillnot
starve.Thedaughterpreferablybecomesateacheroramunicipalclerksomething
securewhichleavesfreetimetocareforelderlyparentsandforthenextgeneration.
Ifthefamilyshopdoeswell,thewholefamilywillworkthere;ifnotitwillbe
maintainedbyoneortwomembers.Thesystemisadmirablystable,flexibleand
long-lasting.
Inasmall-ownershipeconomyhouseholdsavingandinvestmentisalsodifferent.It
ischanneled,quiterationally,intorealestateandintoeducation.Inwestern
economiessavingsareinvestedcollectivelythroughpensionfunds,mutualfunds
andbankdeposits.Theyendupfundingindustry,technology,infrastructure,andin
general,sizeableorganizations.IntheGreekmicro-economymonetarysavingshave
fewreliablecollectiveoutlets.
Humancapitaltakesadifferentform.Inwesterneconomieshumancapitalcan
developinstandardizedcareerpathsthatis,bybuildingrelationshipsinside
organizations.Highereducationisusefulmostlyasafirststepinacareerifthejobs
marketdoesnotdemandit,theyoungwillnotinsistongettingit.Insmall
ownership,thevalueofapersonisvestedintheirindividualcharacteristics.Thejobsmarketdoesnotgiveclearsignals.Iwantanengineeringdegreenotinordertowork
atVolkswagen,butbecauseIwillhavenumerousoptions,asareseller,contractor,
consultant,retailerorjustpossiblyamiddlemanager.Thatiswhyfamiliesoverinvest
ineducationfortheyoung:inEnglishlanguagetutorialschools,inuniversityexam
tutorialschools,inlivingexpensesforout-of-townstudies,andevenforstudies
abroad.Innationalaccountstheseexpensesappearasconsumption,buttheyare
investment.
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Movingbeyondfirmsandhouseholds,totheinstitutionsthatappropriateresources
andthatregulatetheeconomy:nextdistinctivecharacteristicinGreeceisthewide
prevalenceofrents,mostofwhichareconferredviathepoliticalsystem.NotethatI
definerentsabitdifferentlyfromthestandardeconomicdefinition.Inbroadtermsitisunearnedincomewhichderivesfromprivilegedaccesstoascarceresource.The
operationaltermisprivileged,i.e.aparticular,specialincome,thatisnotavailable
tothepopulationasawhole.Forexample,ifacountryprovidesforabasicpension
forallcitizensovertheageof65,thismaybeunearnedincome,butitisnota
privilege:itisbasedonasimpleandgeneralrulewhichappliestoabigcategoryof
citizens.Iwouldnotcallthatarent.If,however,asisthecaseinGreece,some
professionalsgethigherpensionsatanearlierage,justbywarrantofbelongingtoa
particularoccupation,thisisrent.
Politicallyconferredrentsaretheresultofclientelistpolitics,i.e.ofthepoliticsofthe
particularratherthanthegeneral.Theycomeinmanyforms:sinecuresinthepublicsector,privilegedpensions,investmentsubsidieswithoutanyimpacton
development,extraordinaryprofitsofgovernmentcontractors,andgraft.Theyalso
derivefromregulationswhichallowsomepeopletooverchargeinthemarket
(restrictedprofessions,regulatedprices,prohibitions),and,lessobviously,tothe
benefitsofbreakingthelawwhenyourcompetitorsareconforming.Inthiscontext,
corruptioninthesenseoftakingbribesisjustaspecialcaseofrentharvesting,which
inmostothercasesislegal.
Itisimportanttonotethatrentsarewidelyanddemocraticallydistributed.
Especiallyafter1980,mosthouseholdscouldgetsomebenefitsfromthesystem.
Democraticlegitimacywasstrengthenedbynewinstitutionsthatmadeaccesstorentsmoreimpartial:thestatestartedhiringbasedonstandardizedexaminations
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(ASEP),andtheuniversityentrancemechanismeliminatedthepossibilityofpersonal
favors.Ifpeoplehavetoworkhardandtocompetehonestlyinordertogainaccess
toaposition,nobodyquestionswhetherthepositionitselfisparasitical.Andthe
privilegesattachedareconsideredfair.
Therearealsosubstantialnon-politicalrentsintheprivatesector.Tourismincomeincludesamajorrentcomponent,sincevisitorspayfirstforlocationandthenfor
service.Transfersfromshipsandemigrantsarethefruitofrealworkabroad,butfor
thereceivinglocaleconomiestheyactaspurerent.
Sorentappropriationmechanismsarequitevaried,buttheyhaveacommoneffect
oneconomicculture:almostallGreeks,fromlargebusinessownerstosmall
landownersinislandsandtomunicipalclerksinvillages,believeitisnaturaltohave
someincomewhichderivesneitherfromworknorfromriskingcapital.Ifthey
cannothaveit,theyfeelwronged.
Thedominanceofrents,orrentocracy,willshapepoliticsandadministrationand
culture.Tonamejustthemostimportanteffectsbriefly:ItfostersaZero-sum
mentality:rentdoesnotcontributetogrowth,itonlysharesinwhatisthere.It
breedspopulism,whosefundamentalstrategyistoshiftresponsibilityforthewhole
totheoppositepole,theenemy.We,thepeople,fightforourshareofthepie,itis
otherswhoareresponsibleforthesizeofthepie.
Rentocracyalsoabhorsmeasurement:rentiersdonotneedtomeasuretheworld;
producersdo.Rentierswillhaggle.Producerswillplaninputsandoutputsandwill
trytomaximizethemarginbetweenthetwo.Therentocraticstatebehaveslikethe
rentier.Itbargainsconstantlywithvariousgroups,andalwaysgivesalittlemore
thanitstartedoutto.Itisnotconstrainedbyanabsolutelimitforexpenditure.Itendsupinvariablyindeficit,whichhadnotbeenplanned.
Beyondfiscalnumbers,societyingeneraldoesnotdemandmeasurements,either
forpollution,orforthequalityofhospitalcare,orfortheimpactofpolicingon
crime.Thereisnopressureonpublicservicestocountandtoevaluate.Thatishow
wegettoGreekstatistics,longbeforeanybodyintentionallytamperswiththe
numbers.
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Ontoculture.AlotoftalkinEuropeandinGreeceisaboutthementalityofGreeks,
whichissomehowdifferentfrommostwesternpeople,andwhichliesattherootof
behaviorssuchascorruptionorexcessiveconsumption.Ithinkthereistruthinthis,
butnotinwaysthatareusuallydiscussed.IdisagreethatGreeksarelazierthanothers.AndIdisagreethatoureconomiccultureisinsomesenseavestigefromthe
past,i.e.thatwehavenotembracedmodernrationality.Ithinkthatafundamental
aspectofoureconomiccultureisopportunism,andthisisarationalandmodern
trait,albeitshort-sighted.Irefertoopportunisminthegame-theoreticsense:a
tendencytobreakrules,ortodefect,ifthatwillleadtotangibleshort-termgain.
Wearesocietyoflowtrustandoflowsocialcapital;thisisborneoutbyseveral
cross-countrysurveys,suchastheWorldValuesSurvey.Itisalsocommon
experience,whenyoudobusiness:inventurecapital,inwhichIveworked,trustand
cooperationbetweenfoundersandinvestorsisamajorproblem.Manydealshave
failedbecausethepartieshaddifferentagendas.IhavecomparednoteswithcolleaguesfromnorthernEurope,andtherearealotofthingsthattheycantakefor
granted,whichweinGreececouldnotstartingfrombasicreportingoffactsand
numbers.
Ihaveoftenaskedmyself,whythisdifference?Mytentativeexplanationisthatover
severalcenturiesGreeksmissedoutontwofundamentalprocessesthatcanfoster
cooperationamongstrangers.Oneliesinthedomainofanthropology:theprocess
bywhichtheWesternpersonhasinternalized,orindividualized,therulesof
society.TheCatholicChurchandlatertheProtestantmovementshavebeen
instrumentalinthis.TheGreekOrthodoxchurch,withitsemphasisonthemystic
andthehereafter,tookadifferentroute.
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Thesecondprocessliesinpoliticsandeconomics,andithastodowithbuildingand
reproducinghierarchies,whichimposerulesfromabove.IntheWest,feudalism,
monarchyandtheCatholicChurchinteractedtocreatetheabsolutiststatewhich
wasmandatedtoruleandguidesociety.Thebourgeoisieinheritedthisstateand
reinforceditsroleofsocietalguidance.Inparallel,duringtheindustrialrevolution
largebusinesshierarchiesweredeveloped,whichassignedstablepositionsto
workersandclerks.SuchthingsdidnothappeninGreece:weoverthrewthe
Ottomanstateratherthandevelopingit,andweresistedeconomichierarchies.
Inotherwords,advancedwesterneconomieswerefoundednotonlyonfree
marketsandindividualincentives.Theywerefoundedonhierarchies(verticalrules)
andonstrategiesofcooperation(horizontalrules).Successfulandhegemonic
capitalismisfreemarketsembeddedinasocietyofrulesandresponsibility.
Otherwise,itiseitherajungle,oracommunityofcornershops.WeGreekshave
subscribedneithertoverticalnortohorizontalrules.Weareneitherobedientnor
cooperative.Ifwehaveavoidedthejungle,Russiastyle,isbecausewehavekeptthecornershops.
Sowemaynotbegoodatgoverningthecommons,butwehavedevelopedsome
admirableeconomicinstitutionsfordealingwithopportunism,whichwestern
technocratsfindpeculiar.Takepost-datedcheques,asameansoftradecredit.
Eachpartyisresponsibleforthecounterpartiestheychoose.Nameandreputation
count.Itisremarkablethatnorecipientofthesechequeswilltrytocashthem
beforetheirdesignateddates,eventhoughlegallytheycoulddoso.Iftheydo,they
willbeeffectivelyexpelledfromthemarket.Thelegalframeworkthatsupportsthe
systemisalsoquiteefficientandpredictable,uncommonlysoforGreece.It
reinforcestrustamongtransactingpartiesbecauseitcarriesimmediatesanctionsfor
anissuerwhocannotcoverthecheque,withoutinvolvingthebureaucracyofbanks
asintermediaries.Thisisaninstitutionofpeer-to-peercredit,whichdeveloped
spontaneouslyfrombelowandisbasedonpersonalresponsibility.Weshouldbe
fosteringsuchinstitutions,notbethinkinghowtobanishthem.
Opportunistsarenotinherentlycrooks.Theyarerationalegoists.Theywillconform
torulesiftheythinkitisintheirinterest.Inanenvironmentwheremostpeopleare
cooperatorsandwhereopportunismispunished,opportuniststurninto
cooperators.GreeksgetcanworkverywellwithinAmericaninstitutions,oncethey
aresurethateveryoneelsealsoplaysbytherules.Butifopportunistsareamajority,tobeginwith,itisverydifficultforthegrouptoconvergetowardscooperative
behavior.Theissuehereispathdependence.Inthiscontext,IthinkthatGreek
opportunismcanbeturnedintoanassetinthefutureglobaleconomy.Moreonthat
later.
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Letusseenowhowsmallownershipandrentappropriationcombineinthebig
picture.Todothis,wellgobacktothesectoralcompositionoftheeconomy.
Onefundamentaldistinctionisbetweentradableandnon-tradableindustries.
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Hereisanindicativelist.Ontheleftareactivitieswhichbytheirnaturecannotbe
providedfromafar,andarenotsubject,therefore,tointernationalcompetition.On
theright,tradablegoodsandservices,thatcompeteinglobalmarkets.
Anotherdistinctionhastodowithsizeandorganization.Someactivities,suchaspublicadministrationortelecomsaredeliveredbylargehierarchieswithmany
employees.Others,suchashairdressers,insmallshops.Inbetweenthereisawhole
spectrum;infurniture,onecanfindaroundtheglobethewholegamut,fromone-
manshopstofirmswiththousandsofemployees;thesametrueforaccountants.
ThereasonIamputtingupthisdiagramisthateachofthefourquadrantsoperates
underadifferentsetofconstraints,institutionsandregulations.Illtalkaboutthatin
amoment,butsomenumbersfirst.
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Thisishowthelaborforcewasdistributedinthefourquadrantsin2007.Ifwego
backto1992,thetradablesectorsaccountedforabout38%ofallemployment;in
2007thathaddroppedby13pointsto25%.These15yearssawamassiveshiftof
resourcesfromtherighthandtothelefthandcolumn.Nowashifttonon-tradablesisacommonpatterninmostpost-industrialeconomies,buttherearedifferent
routesbywhichthishappens.InGreecetheshiftwasexcessive,aswitnessedinthe
veryhighandpersistenttradedeficits,overmanyyears.Thetradedeficitwas
financedbygovernmentborrowing.Thiscreatedexcessivedomesticdemand,which
tiltedthebalancetonontradables.
But,andthisisveryimportant,theeffectsofpoliticswentfarbeyondanexcessof
demand.Byregulationandbyrentcreation,theyshapedaninstitutionalframework
thatencouragedpeopleandfirmstomoveawayfromanythingthatwasexposedto
globalcompetition,tothecozyworldoflifetimeemploymentandprotected
professions.
Taketheupperlefthand,i.e.theorganized,hierarchical,non-tradablegroup.
Government,banks(retailbanks),telecoms,publicworkscontractors.Here
competitivepressuresarenegligible,andemploymentprotectionhasbeenhigh.
MostGreeklaborlegislation,aswellaspensionsandsocialbenefits,wereshapedby
thecorporatistbargainsandconstraintswithinthisquadrant;thesethenspilledover
totherestoftheeconomy,wheretheywereneitherviablenorenforceable.
Thebottomleftquadrantisthedomainoftheself-employedprofessionalandofthe
familyshop.Manyoftheactivitiesherewereregulatedinwayswhichrestrict
competition,and/orweresupportedwithgenerouspensionschemes;especiallythewhitecollar,university-degreetrades(lawyers,pharmacists,engineers).Othersgrew
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withoutspecialprotection,onthebasisoffamilystrategiesofupwardmobility.
Therearetensofthousandsofexcessdoctors,teachers,etc,eitheractiveorin-
waiting.Tosurvive,doctorshavecreatedexcessdemandfortheirtrade,and
teachersornurseshaveexploitedtheweaknessofpublicservicestosetup
complementaryprivateservices.Havingprovidedanalternative,theyhavealso
liftedthepressureforpublicservicestoimprove.Othershadnospecialprivileges
(buildingtradesmen,restaurantowners,shopkeepers),buttheywereabletoremain
independentbecauseoftheinstitutionalbiasagainstlargecompanies;andthey
wereabletomakealiving,becauseofthedemandgeneratedbythetwindeficits.
Thepictureisverydifferentinthetradableindustries.Herethestatecannotprovide
muchprotectionorrentstobusinesses.ThisisforbiddenbytherulesoftheEUand
theWorldTradeOrganization.
Inthebottomrighthandquadrantthereareaboutonemillionjobs.Abouthalfarein
agriculture,about30%areinmanufacturing,andtherestareinservices.Inso-called
manufacturingmostofthejobsareinworkshops:bakeries,carpentersandironmongers,seamstresses.Inservices,theyareintourism.Institutionalprotection
islimited.Ithasbeensubstantialforpartsoftheagriculturalsector,viatheCommon
AgriculturalPolicy,i.e.forfarmerswhogrowwheatorcottonincentralandnorthern
Greece;butnotforproducersoffruitandvegetables.Mostofthequadrantsurvives
onamixofskill,hardwork,andbytheweakprotectionaffordedbydistancefrom
theefficientlargecompetitor.Tourismandmanyofthefarmsalsorelyonnatural
advantage.
Theseareentrepreneurialoccupations.Theyhavetorespondtochangesin
technologyandcompetition,theyaredirectlyaffectedbyglobalization,theydonot
turntothestateforsubsidiesandregulation,theymustmanagecashflow,andinsomecasestheyalsohireandfire.Atthesametime,theyhavelowersocialstatus
thantheprotectedprofessionsinnontradablelowerquadrant.
Onefactorinsurvivalislowcompliancetoregulation.Butlowcompliancehasa
price:theymustkeepbelowtheradarbykeepingsmall.Thetransitionfromself-
employmenttobeinganemployerisespeciallytricky:iftheycanhirewithoutpaying
allthenon-wagecosts,itcanbeprofitable;iftheyabidebyalltherules,itmaynot
be.Forthesebusinesses,thelargeinfluxofimmigrantssince1990hasbeena
bonanza.
Finallythereisthequadrantoforganized,sizeablecompaniesthatcompeteintheworldmarket.Asyoucansee,itisminute.2.5%oftotalemployment,bytheofficial
definitionofabigcompanyof250employeesormore.Evenifwestretchthat
definitiontoincludeallfirmswithmorethan20employees,thequadrantisjust
6.5%.
Tomakealongstoryveryshort,thisisbecauseregulationspillsoverfromthe
cossetedlargenontradablequadranttothisone,whichhastocompeteagainst
foreigners.Andbecausesmallfirmshaveaninformaladvantageinbeingablenotto
complywithregulation.Andbecausethereisageneralideologicalandinstitutional
biasagainstcapitalistproduction.Andbecausesalariesinthepublicsectorgrew
muchfasterthantheprivatecompetitivesectorcouldafford.Insummary,themost
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attractivecareerpaths,thebetterbusinessopportunitiesandthehighestmargins
wereallinthenon-tradables.
Steadygrowthcanonlyresumeifthereisalargeshiftofresourcesbacktotradables,
intonewviablecompetitivebusinesses.Intermsofjobsthisshiftmayhavetobe
about15%oftotalemployment.Thatis,750thousandpeoplewillhavetomoveintodifferentactivitiesfromwheretheywerein2008.
Howcanthisbedone?Thiscomplicateddiagramillustratesthevariouspathsby
whichnewjobsmaybecreated.Thearrowsontoppointingdownareforeigndirect
investment,theoneonthetoprightpointingupisgrowthbylargedomesticfirms,
andsoon.
Thepointofdrawingthesepathsisthefollowing:eachofthearrowsreflectsa
specifictypeofshiftofresources,whichinvolvesdifferenttypesofactor,different
policiesanddifferenthumanconsequences.Thisone,(upperrighthand)forexample,isaboutexistingfirmsthathaveexcesscapacitybecauseofthedownturn,
andcaneasilyexpandtheirbusinessifdemandpicksup;orif,bydevaluation,they
gainacostadvantage.Inagoodscenario,theymayalsoinvestinadditionalplant.
Here,thebusinessmodelexists,andsodoesthemanagementteam.Theywilljust
hiremoreemployees,whowillmoveeasilyintojobsthatarewaitingforthem.
Thistransition(lowermiddle)however,fromasmallnontradablebusinessintoa
newtradableone,involvespeopleriskingamoveintoanewjobthattheywillhave
tocreatefromscratch.Itinvolves,forexample,adoctorwhohasspentadozen
yearsbecomingqualifiednowdecidingtostartasmallexportbusiness.Therewillbe
asenseoffailure,ofdislocation,ofgreatriskbeforeandduringthatmove.Itisnotjustachangeofjobs,itisachangeofidentity.
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Policymakersandeconomiststendtofocusonthepathswiththeredarrows,i.e.on
foreigndirectinvestmentandontheexpansionofexisting,sizeableplayers.Myview
isthatinthecaseofGreecethesecanhaveverylimitedimpact.Itisthegreen
arrowsthatweshouldbetryingtoencourage,byanymeanspossible.Thatis,the
rapidcreationandgrowthoftradablemicro-businesses.Thisisnotastandardmodel
ofexport-ledgrowth,butthenGreeceisnotastandardeconomyinthisrespect.We
willhavetoinventamodelbasedonwideownership,polyergyandthesmallscale.
Thisiswhereourinstitutionalcomparativeadvantagelies.
So,goingbacktothebroadanalysis,whatmustwekeep,andwhatmustwechange?
Thesmallscaleis,Ibelieve,exogenous;aconstraint.Ofcourse,weshouldhavean
environmentwhichenablessmallfirmstogrowintobigones,andweshoulddothis
mostlybylevelingtheplayingfieldofcompliance.Butitismainlytheoutlookand
thestrategyofthesmallfirmsthemselvesthatshouldchange.Cantheytransform
theiroffering?Cantheybecomemorecompetitive?
Familieshaveimportantassetsintryingtobuildnewbusinesses:Ownership,and
experiencewithmulti-tasking,andinvestmentineducation.Sothereisasolid
foundationthere.Bureaucracyandregulationarebigbarrierstoday,but
governmentscanremovetheseiftheydecidetodoso.Thiscanmeanrealcost
savingsquickly.
Whataboutrentsinthenon-tradableeconomy,whichdistortincentivesfor
entrepreneurs,andwhichimposeheavycostsoneverybody?Thisiswherethecrisis
becomesanopportunity.Fiscalconstraintsaremakingitverydifficultforthestateto
continuetoawardincomestospecialgroups.Thoserentsthathaveadirectfiscalcostarealreadybeingcut.Thosethatderivefromregulation,suchasclosed
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professions,couldsurviveinthecrisis,ofcourse.Thetroikaispressingtoremove
them,andthereseemstobemajorityofpublicopinionforliberalization.Butchange
isbynomeanscertain,andthepoliticalstrugglearoundthiswillcontinue.
WhatifGreeceweretoquittheeurozone,howwouldthisaffecttheshiftto
tradables?EconomistswhoarenotveryfamiliarwiththeGreeksituation,oftensaythatitwouldbeagreathelp.Intermstheimmediateimpactonrelativeunitcosts,
thisistrueofcourse.Butforthistoleadtoasustainedgrowthofexportsother
thingsmusthappenaswell.Entrepreneurialenergyandcapitalmustflowintonew
businessesintheuncertainworldofglobalcompetition.Thiswillnothappenifthe
stateisabletoprintmoneyandtorundeficitsthatwillcontinuetofinancecozy
privileges.So,astheeurozoneisatlaststartingtoimposesomesortoforderonthe
Greekrentocraticsystem,exitwouldgiveasecondwindtoit.Rentsarethemain
reasonwhyweshouldavoidthedrachma.
Finally,onopportunism.
Atthestartofmytalk,Idefendedtheneedtounderstandthelocal.Toend,Iwill
offersomethoughtsonhowthisparticularlocalmayhelpusthinkabouttheglobal.
Greekopportunism,Ibelieve,isthenormalbehaviourofthehomoeconomicus,the
rationalegoist;theopportunistdefectsintheabsenceofstrongenforcementof
rules.Inmanyotherwesternsocieties,peoplearenotrationalegoists,theyaremore
cooperativebypre-disposition.Theyare,inthewordsofElinorOstrom,conditional
cooperators.Butthefoundationsofthatpredispositionmaybeeroding.In
postmodernsocietiescollectivitiesbecomefluid,identitiesareshifting,uncertaintyis
increasing,alongwithindividualchoice.ItistheworldofUlrichBeck'sdo-it-yourselfbiographies,andofRichardSennet'scultureofthenewcapitalism.Hierarchiesare
8/2/2019 Doxiadis at Yale Niarchos
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losingtheircontrolovertheself-interestoftheindividualandinternalizedrulesof
cooperationaredissolving.Ifthisisso,thenGreekopportunismmaybeaglimpseof
thefutureoftheWest.
Willthisbeadystopicfuture?Maybeyes,maybeno.Itwillpaytoobservehow
Greeks,whodidmanagetobuildagoodlifeinthepast30years,willcopewiththiscrisis.Thenewsisnotallbad.Hardshiphasbroughtangerandconflict.Butithas
alsobroughtoutnewcivicinitiatives,aspeoplerealisethatthepaternalisticstate
cannotdeliveranymore.
Teachersstayonafterschool,tohelppupilsinneed,voluntarily.Guerillagardeners
arecleaningupthecities.Farmersareformingnewcooperatives.Thesearenot
massmovements,buttheydoshowhowindividualsarerediscoveringthebenefits,
andeventhepleasures,ofsolidarityunderpressure.
Onanotherlevel,globalmarketsandtechnologyarecreatinganewframeworkfor
stablecooperationamongopportunists.Thewebandsocialmedia,common
standards,andworkflowmanagementtools,rendereachpersonscontribution
transparent,andcanmakemuchofhierarchyredundant.Individualsorsmallteams
canhaveaglobalpresenceandglobalreputation.Aloneprogrammerisnowable
sellherservicesallovertheworld.Forthefirsttimeinhistory,goodscanbe
producedcollectivelyandresponsibilityapportionedindividually.Thesearetoolsof
cooperationforopportunists.Beyondbusiness,theycanleveragesmallamountsof
voluntaryworkintomajorcontributionstocollectivewelfare(asinWikipedia),and
canallowthemaintenanceofsomecollectivegoodswithoutaskingforbigpersonal
sacrifices.CoulditbethatGreekindividualismcannowfindacreativeroleinthe
worldeconomy?
Itcanhappen;buttobuildawholenewnationaleconomyaroundsuchsmallscale
endeavors,therewillhavetobeaconnectingtissue:institutionsthatsupportthe
individuals,andmostimportantly,anewpublicnarrative.Greecewillbeatesting
groundforshapinganewnarrativeoutoftherubbleofafailedmodel.
Whatcouldbethebuildingblocksforthat?Perhapsitwillbecommonrolemodels.
Perhapsclustersofsimilarbusinesses,andnetworksofpeer-to-peerlearning.
Perhapsitwillbepublicserviceswithequalaccessforallatagoodminimum
standard.Perhapsanewrespectforthecommons,basedoninformationand
transparencyandindividualresponsibility.Perhapsnewmodelsoflocaldemocracy.
Ibelieveandhopethatitwillbemostorallofthese.ButImaybeverywrong.
So,watchthisspaceandfindout.