Barron’s had a good editorial by Panos Mourdoukoutas, chairman of the economics department at the C.W. Post campus of Long Island University. His editorial, titled “Right Models, Wrong Sectors” claimed that Greece adopted a semi-Soviet, semi-Latin economic model, one which established a mixed-market system which tried to blend the best of both free markets and government. Unfortunately, according to Mourdoukoutas, government’s role was not well applied. Reading it, I wonder if he was writing purely as a critique of the Greek government or as a warning to the U.S government.
“…the Greek economy shares many similarities with the economic models established by the former Soviet Union and Latin American nations.
With the model of the former Soviet Union, the Greek economy shares the extensive presence of government in the business and professional lives of Greek citizens, controlling directly or indirectly more than 50% of the economy.
Though the Greek government is democratic, it runs the economy by borrowing the worst features of the former Soviet Union and the authoritarian regimes formerly common in Latin America.
The government is present in utilities, telecom, transportation, energy and banking, as owner, financier, entrepreneur, and manager, keeping afloat inefficient enterprises, employing hundreds of thousands of people, deciding what kind of products and services should be produced and how and when they should be delivered.
The government is present in the pension fund industry, as manager of employer-employee contributions, deciding who will retire, when they will retire, and what pension they will receive.
The government is present in the commodity markets, as regulator and gatekeeper, deciding who will pursue what kind of business, how they will pursue it and for how long; and in the resource markets; and in labor markets, setting labor compensation packages and employment conditions.
With the model associated with Latin America, the Greek economy shares a lack of a fair and transparent regime that sets the rules of the economic game, a vague interpretation of the law and frequent disruptions of business and public lives by the frequent protests of political minorities.”
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“…the Papandreou government nurtured a culture of vested rights and entitlements that included employment security, job security, 14 months of salary per calendar year, and the right to strike and protest against every effort of business modernization.”
…
“The extensive presence of government in the economy constrains the efforts of Greek citizens to improve their own lives and the lives of fellow-citizens. The presence of government in publicly owned corporations and banks as entrepreneur and manager turns them into welfare agencies, rather than true enterprises, relying on taxpayers for their survival. The presence of government in the pension-fund sector as manager of employer-employee contributions turns pension funds into a ruling party revolving credit of line, to be periodically renewed by taxpayers. The presence of government in the economy as industry-gatekeeper limits the opportunities of the Greek people, creates, government fiefdoms, and breeds corruption.
The extensive absence of the government from the commons, most notably its failure to create a fair and transparent regime, constrains the ingenuity and creativity of the Greek people and the ability of citizens to better their lives. It replaces the ancient Greek culture of merit and fairness with a culture of nepotism and patronage.
Vague interpretation of the law and frequent protests by unions and left-wing radicals raise the risks associated with the pursuit of genuine business opportunities. They reinforce government bureaucracy and corruption, and above all, limit the ability of the government to develop a sound taxation system to finance its large presence in the economy.”
The concept of a nurturing Big Government which would see to the needs of all its citizens is a very tempting one. But the reality is that humans are not totally altruistic. We just haven’t evolved to that point yet. Power can be very intoxicating, and the more power we delegate to others (the government), the more risk we put ourselves in. There are very few people that can resist the temptations of a powerful office, especially when special interest groups are intent in gaming the system to their advantage. It’s no secret how much money gets showered on politicians. Very intoxicating indeed.
If there’s anything to be learned from the example of Greece, it’s that the promise of socialism, even if only partially adopted, is likely to excite in the short-run. But in the long-run, it is counter-productive, leading to incredible waste of resources and prevents its citizens from reaching their full productive potential. In the end, citizens slowly lose their liberties and, because of a learned dependency on Big Government, become slaves of the state.
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