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The Missing Greek Exports - advise by Jeffrey Sachs

Many outsiders but also Greeks themselves say that the economic crisis cannot be resolved as long as the 'political elite' stays in power. It is even claimed that this elite uses the crisis to enrich itself still further. They achieve it by passing such laws which supposed to satisfy the demands of the Troika, but end up in reality being of convenience to themselves. It is not hard to imagine what kind of business is possible under such shady conditions. All the reforms initiated so far shall definitely not benefit a large part of Greek society.

For instance, the government stands under the obligation to speed up privatization. After many delays, they now envision the privatization of beaches. If so it would mark a huge break with the cultural values which have prevailed until now in Greece. One of its prime value premise has been that everyone should have free access to the sea. If implemented, it would violate the cultural self understanding and alter society's relationship to the land intricately linked to the sea.

Land ownership, whether public or private, is already absurd for no one owes the sea or the earth. Still, the making of a state and even more so of a nation means claims to a certain territory are staked out by drawing externael borders within which the law supposed to dictate what is possible, what not. Free access to the sea is, however, more than just a cultural consensus, for it does touch upon an universal Right linked to this insight nature does not belong to anyone. Also mankind inhabits this planet earth but has not learned to leave nature accessible. There is the famous saying of an Indian that whenever he shows a white man a beautiful view of the land, the first thing what he does is to build a fence and lay claim to that land.  

Once this process by which nature i.e. free land, water, sky is converted into public ownership, the question needs to be answered whether or not that differs really from private ownership? James Clifford in 'Predicament of Culture' seems to think so when he describes how Indians use collective decision making processes when it comes to use of the land as compared to private owners who expect community services like road building and rubbish collection, but who wish to be left alone on their own private property.

Over time, public land in Greece has been corroded not only due to expanding cities but due to a spreading out of all kinds of settlements, most of them being illegally build. There have been many violations e.g. building in the forest although this is not allowed by law. This corrosion is underlined by the lack of having a land registrary. The European Commission has granted Greece twice huge sums of money to install one but to date this has not been accomplished while the money simply disappeared. The EU with its environmental law has initiated regulations aiming to protect nature against encroaching building sprees. Thus there has been applied something like zoning to stipulate land use and which is called 'Natura 2000'. Through this certain parts of the land are declared off limits for any construction. Even then the ability of the Greek government to observe this environmental law has not been rather shady. At the same time, the crisis since 2009 and the measures which the Troika has proposed, stand in contradiction to this environmental law if a privatization of sea shore property is to be a part of the scheme to gain some extra money to pay off an insurmountable debt. So it is absurd to allow such a reform which shall make possible privately owned beaches. If that happens, it will reveal the whole perversion of land use.

It amounts as well to fraudulent behaviour once any 'pragma' or real love for democracy is obliterated. Samaras plans to have laws passed right now without the full parliament being in session since he sent it into early summer recess. Hence laws can be passed by a reduced parliament. It reflects one of the curious aspects this institution called Greek parliament has at its disposal, namely the means to by-pass any serious opposition. It follows the ill founded thought what is convenient for special interests must be protected against any general interest to uphold the law on a basis of equality for all.

Thus when Jeffrey Sachs was in Athens to advise the Greek government on how to get out of the crisis, it was of interest that he left out these inherent contradictions in how the law is being applied. Instead his approach was purely economical and more specifically financially orientated. He stated two important factors in need to be observed if Greece is going to get out of its huge debt:

Since there are many different forms of debts all requiring different solutions, financial engineering of the debts has to be fine tuned. There has to include in the development of further policy tools, real consideration for the huge burden put upon the entire population. The extra burdens are due to a combination of factors: tax increases but also lower capacity to repay loans due to lowering of wages or even outright losses of wages and other forms of incomes. It is estimated that normal persons have lost 60% of their purchasing power. (40% income loss and 20% tax increase). It means that the repayment capacity has shrunk substantially while the nominal value of the outstanding debts has remained not only stable but is getting stronger.

As this is stressed in the article you find below, I find it being a most sensible approach to start off with a criticism of the failure of the Troika. The main argument of the article is that the Troika failed to provide sufficient credits for exports. For this special financial channels need to ópen up.

Exports is according to Jeffrey Sachs the only hope for the Greek economy to recover. However, despite all austerity measures, there has been no significant improvement in terms of exports. The only reason the problem appears to be not so huge is that imports have dropped due to an overall loss in purchasing power by the Greek consumer. And everyone can see the lowering of quality in all products being offered on the market and especially in some supermarkets food has reached a level of second grade quality and comes ever closer to fraudulent attempts to sell off already semi spoiled food. Due to the strategy of the Troika to stabilize the nominal debt, all what it did was to increase the purchasing power of the lenders. At the same time, Janssen points out in his criticism of the Troika that rather than admitting to the mistake they made, they argue had they not done this, then it would have come to a much bigger crisis. The article counters this illusionary defence strategy of those who defend the austerity policy adopted by the Greek government under the pressure of the Troika.

What is so important on hand of the article by Ronald Janssen are the numerous other factors which contribute to exports not increasing. Besides micro- and macro economic factors, he adds such important factors like political stability and institutional capacities to further exports. Many Greek business people refer to disadvantages created by Greece having entered such trade agreements which impede export business e.g. Greek construction firms complain about more regulative measures being imposed upon them in comparison to others, as this puts them at definite disadvantage when seeking in competition with other construction companies contracts abroad and especially in the Middle East.

However, the institutional factor he mentions has to be perceived as being something more than just facilitating business. Any society not in tune with developments in the world, but turned inward due to local Patriotism and nationalist tendencies reinforced by irrational movements like Chrysi Avgi, is bound to impede any effort to stay in dialogue with the rest of the world and therefore adopt a realistic outlook for future export chances. But when not knowledgeable about business opportunities or about what shifts in standards are taking place, then there is the tendency within the Greek society to presume too much rather than verifying what is really the case. In reality, made assumptions made on the basis of this general lack of knowledge and expertise fall way far short of what is really needed abroad. To this an academic elite contributes by propagating at times outdated models of causality to explain things but which for an outsider sounds not only naïve, but highly irrational both in outlook and conceptualization. It is also a matter of great concern that Greece has no real international institutions located inside of the country, institutions which would be capable to set quite other standards than the famous foundations created by rich ship owners and putting a stamp on the public and cultural life as if the entire society has to be grateful to these benefactors. It means but reproducing linkages to the outside world by means of Greek patronage linked to and based upon especially the influence of ship owners. This monopolizing of public and cultural life means little or no social innovation can take place, as a society does not need a 'motor of dynamics' capable of bringing about changes in how recognition and reward systems work in society. Once the interaction between culture, social life and education is impeded by this institutional distortion, then there is not possible to conceive cultural adaptation to global challenges as an ongoing learning process which needs to take place at many different levels. Thus the responsiveness to international movements is simply not there. Hence institutional capacity building should be a top priority.

Also I would like to add that I do not believe in the myth that exports would rescue the Greek economy. Without increasing the internal demand, and we see this being as well a problem in Germany with too many living at low income level near and even below poverty line so that there is no real overall demand for even goods and services coming, for example, from Greece, there cannot be attained this social and cultural consensus which would support in effect sensible measures. The huge discrepancy between decisions taken by but a select few and the rest of the population struggling to survive makes it hard to make a case for citizens' participation in all decision making processes.

As a matter of fact, the crisis has been handled by the established parties to disenfranchise the citizens even further. Here is of interest that Janssen advocates a 'hands-off' from the instruments of collective bargaining and therefore identifies one huge mistake being made in conjunction with weakening of trade unions made out to be number one enemy of reform: the undermining and even abolishment of the institution of 'social dialogue'. Such an institution would be needed to guide regulations for industrial relationships.

Unfortunately in the period leading up to the crisis, this institution of 'social dialogue' has been misused for the sole purpose to gain only more and higher incomes, even though they did not make any sense any more in terms of what was being earned, for example, by the railway company. As this negative political process puts the citizen on the fringe of the political process, no wonder that this has strengthened the the right wing Extremists who believe the entire problem is a loss of national sovereignty. Thus the loss of demand in the internal market can also be seen as a factor contributing to a loss of institutional capacities needed if export efforts are supported in a wider sense by the entire society. Many more people cannot afford any longer trips abroad and therefore this loss of exchange of inner and outer information leads to a lack of understanding why no one seems to know any solutions and why the negative pessimism dominates.

Social and cultural consensus reach a truly breaking point when people abandon themselves and no longer interact with others. In a society known for being social, this is a structural contradiction. It leads to isolation of the individual and thus as Durkheim had predicted to suicide. The latter has been reaching an alarming level and contributes to the overall spirit in a wish to move forward being less and less able to inspire and even to prevent more and more people losing first contact then empathy for the others. Without means of reflection of the socially embedded self understanding people face depressions and all kinds of demotivational crisis, so that the extra effort to get out of the crisis is even less possible when needed the most. 

Hatto Fischer

Athens 3.7.2014



"DG ECFIN And The Missing Greek Exports" by Ronald JanssenEconomists at DG ECFIN are starting to notice something we have pointed out already some time ago: Despite an enormous cut in wage costs, Greek exports have firmly stayed put in recessionary territory and hopes for an export-led recovery have proven to be illusive. Troubled by this failure of Greek exports to lift off, DG ECFIN […]

Social Europe publishes an article with the title "Germany, Greece, And The Future Of Europe", in which he argues creditors need to be wise, and by citing Kant, he argues a country like an individual should not serve as a means to another 'political' end, but be treated as an end in itself. This is something Germany with Schäuble is failing to do.

by Jeffrey D. Sachs on 21 July 2015 @JeffDSachs




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