Follow by Email

Tuesday, November 19, 2013

Greeks MUST Endeavor!

This article from the Ekathimerini should be read over and over again! It reports on the Endeavor Greece Report on "Entrepreneurship and Investment Opportunities in today's Greece".

In 2012, the number of new business starts was about 50% lower than in the pre-crisis year 2008. That does not surprise. What does surprise is that the following ratio has remained more or less unchanged: 9 out of 10 new businesses are in the non-productive sector - cafés, restaurants, bars, apparel and shoe stores, etc.

Perhaps this focus on the non-productive sector is a function of Greek mentalities. Perhaps it is a function of traditions. Perhaps it is a function of desiring quick profits the easy way. Whatever it is, that focus is terribly wrong! Greece can only make it out of the current depression if it succeeds in increasing the domestic economic value creation and such value creation takes place in the productive and not in the non-productive sector!

If Greece (as a country, as a national economy, as a society) is to make it out of this crisis, it has to tap the human and natural resources of the country. On the side of human capital, what is required is an unleashing of enterprising spirits and a support for entrepreneurs. And, most importantly, a removal of barriers against entrepreneurship.

The opportunities exist; just read the Endeavor Greece Report. What is required is to take advantage of them; to exploit existing potential to the fullest. Those who believe that it is the government's job to do this are invited to keep waiting for that to happen.  All the government can do is to set a framework conducive for such things to happen. Above all, the government should motivate the Greek people that these things SHOULD happen!

When I read, even now in the 4th year of the crisis, about all the impediments which are put in the way of enterprising spirits in Greece, I wonder what these 4 years of crisis have been used for. And when I hear of all the reservations against private enterprise and entrepreneurs which many Greeks voice, I wish Churchill were still around and would tell the Greeks what he used to say:

"Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon".


  1. Ah, Klaus, still you cling to your belief that the private economy will find a balance, even though reality refutes you.

    Greeks will only start productive businesses under protectionism (i.e. assured profits for the businesses, no other choice for the consumers). It's as simple as that.

    1. I think one has to differentiate between protectionism as an end in and by itself or 'infant industry protection' as a means towards an end. I have always argued that the Greek economy needs some form of 'infant industry protection' for some time so that it can get its economy into shape and compete successfully. However, such 'infant industry protection' must come as part of a long term economic development plan which, among others, makes clear when that protection will end.

      Protectionism as an end in and by itself is for society to judge. Yes, there are quite a few benefits to such protectionism but the evil behind it is that it can’t help but create severe levels of unfairness in society – the benefits of those who are protected are paid for by the others. There is no level playing field. The beneficiaries will thrive. The others may want to leave the country over time.

      I don't think I ever said that the private economy will find balance just like that. I do believe that it will find balance IF there are the right economic framework and the right policies.

      I enclose 3 links. I guess you will not like the two first ones by ex-Fed officials but you will love the one by Skidelsky.

    2. There are always winners and losers.

      First of all, there is no such thing as a free market. There is a more free market, and a less free market. There's always rules. These rules are set by governments, and they create outcomes (distortions according to libertarians).

      So, yes, full blown protectionism favors local producers, and you can say that it disadvantages local consumers (in the sense that they have less to choose from).

      But you know what? After having gone through two and a half decades of import mania, I miss the good old days when Greek producers were being favored.

      But that's just me.

  2. I understand your exasperation with the business development, but not your surprise. Yes, the Endeavor Greece Report is correct, but like most of the reports I have seen, the assumptions they build upon are wrong. There is no human capital; the well-educated innovative Greek is a myth. Compare the education system with that of other nations (PISA if you wish) it's a disgrace. Compare applications for, and grants of, patents with those of other nations. The Greek nation does NOT have a burning desire for reforms. All plans must be based on the truth if they are to succeed; there is no way around the realization of who you are and where you are. If you want to read a more realistic assesment and plan of action, I can recommend Kiel Policy Brief No. 68 from November 2013. In short it says that in return for massive economic assistance, Greece shall give up their sovereignty for a long re-educational period.
    PS. The Greek wagon is different; the majority of the nation sits in the wagon that is pulled by a few wage earners from the private sector. They would scramble to get in the wagon if they thought that the EU would pull it.

    1. I have now read #68 and as I read it, I was reminded of many of the themes which I have tried to bring across in this blog. Certainly the idea of massive foreign investment as a source of know-how transfer seems key if one wants to bring Greece’s economy from the middle ages to modern times within one generation.

      The idea of outsourcing reform projects and involving consultants? Well, the day Greece agrees to that will be the day when I become bullish on the Greek economy…

      A reader of my blog once had an even more radical suggestion. He suggested that the entire government should be outsourced. If I recall, he had in mind a committee of a Suisse, a Finn and someone from Singapore (or something like that).

      The discussion of the debt was a bit too long for me. One of my points has always been that the debt, however important it is, is a secondary issue. A debt problem can be solved very quickly by a number of people in a conference room --- provided that they want to solve it. To bring the Greek economy from the middle ages to modernity is a job for a generation, at least, and it requires a lot more than Greece on its own can handle.

      Finally, this is probably the first more or less official paper which states one very basic truth in black and white: Greeks, since joining the EU, could develop a living standard which bore absolutely no semblance with the country’s economic value creation. Even worse: the economic value creation declined as the living standards increased. I have often heard Greeks say things like “the Troika wants us to become like Bulgaria”. Well, I don’t know how Bulgaria’s (or any other country’s) economic value creation compares with Greece’s but Greeks will experience that, over time, nature has a way of bringing living standards in line with economic value creation.

  3. Klaus.
    As much as I hate to be negative and "pee on your parade" then: Why do you think that "infant industry protection" will be less permanent, less corrupt and more efficient than the present protection and subsidizing? Unless of cause, there is the direct foreign, economic and political, intervention that you (rightly) mention that Greeks will not accept. Should they accept it? What do I know? "Des Menschen Wille ist sein Himmelreich". I suspect however, that direct intervention is one of the two choices that Greece will soon be given.

    Do not play innocent with the Bulgarian comparison, we both know what Greeks mean when they use it, "we are better human beings than Bulgarians and do therefore deserve to live better". If saying it makes me seem ungrateful for the love and hospitality I have received here, then, so be it. As for natures way of bringing living standards in line with economic value creation. That rule is not a historical fact for modern Greeks, it has never happened; there were always other nations to bail them out. Is "this time different"? Most Greeks cannot imagine that it could be, I think they are up for a rude awakening.

    PS. You remember the time when we thought that Greece could be fixed in 10 years? Now you, the optimist, talk about a generation. I, on the other hand, has realized, and regret, that it will not be in my lifetime.


    1. I think I should explain a bit. Even though I have been close to Greece ever since I met my wife back in 1975, I had never taken any interest in the country’s economics and/or politics. Back in the 1970s, I marveled how poor the country was and during the 2000s, I marveled how rich it seemed to have become but I never cared much to understand why that was so.

      Everything changed in early 2010 when it became clear that Greece was headed towards an external payments crisis. I had been intimately involved in the foreign debt reschedulings of Chile and Argentina in the early 1980s; I thought I had learned something about the subject matter back then and when I saw how the EU was approaching the Greek problem, everything in me rebelled against such stupidity. And when I saw how the Greeks were handling their domestic problems, my rebelling got even greater. Why?

      Because I had seen the prototype Chile of how things should be done as well as the prototype Argentina of how things should not be done. Off the bat, I felt sure that the Greeks could pull of the same performance as the Chileans had done at the time. That was the basis of my early enthusiasm. The basis of my growing resignation is that the more time passes, the more I see that the Greeks are much more similar to the Argentines than to the Chileans.

      One could go so far and say: what Juan Domingo Peron did for the Argentine society, Andreas Papandreou did for the Greek society.

  4. Yes, and what Alexis Tsipras now promise to repeat, albeit with a small difference, his credit line is not very good. That will not prevent Greeks from electing him, anything to deny reality. Having said that, I am grateful that I do not have voting rights in Greece, that would be a choice between cholera and pest.