Doxiadis at Yale Niarchos

8/2/2019 Doxiadis at Yale Niarchos

1/20


2/20

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.


3/20

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?


4/20

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.


5/20

Lookathowproductionisorganized,first.Greeceisanextremeoutlierintermsof

thenumberofself-employedandofsmallbusinesses.


6/20

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).


7/20

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


8/20

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.


9/20

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


10/20

(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.


11/20

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.


12/20

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.


13/20

Letusseenowhowsmallownershipandrentappropriationcombineinthebig

picture.Todothis,wellgobacktothesectoralcompositionoftheeconomy.

Onefundamentaldistinctionisbetweentradableandnon-tradableindustries.


14/20

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.


15/20

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


16/20

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


17/20

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.


18/20

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


19/20

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


20/20

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.

Documents

Doxiadis at Yale Niarchos