The Remarkable Resilience of Greece

Back in February 2012, I wrote a post entitled “Greece as the Canary in the Coal Mine for Collapse?” in which I wondered whether the harshness of the Greek recession (perhaps better described as a ‘depression’) could unpick the socio-political order so as to push the country into collapse. After a two-week political tour of the country that stretched from the outlying islands to Athens, and took in both the elites and the underclass, the quick answer to my question has to be ‘no’.

It is easy to find examples of poverty and desperation: the photo I took below is of a stray cat sleeping on a homeless woman in the square of Athens’ central cathedral. The blog Zerohedge has assembled similar such photos to create a narrative of a country sinking into a state of impoverishment and despair. But you can play this game in any major city of the industrialised west: London certainly has a similar army of the down-and-out and destitute.

SAM_0446

Yet what I saw in Greece was a society showing remarkable resilience. Take George, a bartender on the idyllic island of Samos. George is a live example of the IMF’s prescribed policy of ‘internal devaluation’. By ‘internal devaluation’, the IMF means the domestic resetting of wages and prices to restore the competitiveness of the Greek economy. Unfortunately, and as the IMF admits, most the adjustment has fallen to wages and little to prices.

For George this has meant a 20% cut in his wages and the scrapping of government unemployment benefits during the winter months (which are a fallow period for tourist work, although George gets some intermittent hotel work). At the same time, rent, electricity and supermarket bills have remained high, resulting in his €950 a month wage being insufficient to support himself and his wife and two young children.

Given the squeeze between downwardly flexible wages and rigid prices, George is relying on the traditional Greek safety net of family, the black economy and, should it be necessary, emigration. George’s father has in the past helped where he could, but is now also experiencing his very own ‘internal devaluation’ in the form of a cut in his pension from €790 per month to €600, so is less able to lend a monetary hand (although George has considered moving his family into his father’s house to avoid his crippling rent bill).

As cash handouts from within the extended family are scarce, George has taken up the traditionally family trade of fishing, and this currently occupies the two days a week when he is not at work. On a good day, this may generate €100 or so, on a bad day the fish haul won’t cover the boat’s fuel costs.

Overall, George bemoans the fact that money is so tight—even with the fishing on his days off— such that the family cannot even afford to eat souvlaki, Greece’s popular dish of skewered minced pork. If things continue this way, he sees the most likely escape to be emigration to Australia to join an uncle in the construction business there. Indeed, this is a well-trodden path dating to the 1950s and 1960s, which has resulted in nearly as many Samos islanders living in the Antipodes as in Samos itself.

Surprisingly for me, George does not see a reversion to the drachma as a solution to any of his woes. Moreover, this conception of the euro as a long-term fait accompli was a commonality of all my meetings during the trip—whether with the left  or right, rich or poor, rural or urban. The one exception was a farmer and taverna operator (again on the island of Samos) who perhaps not coincidentally held an economics degree (although the practising economists of the Athens elite I met later were pro-euro inclusion each and every one).

While George’s boss had cut his pay (following the IMF playbook), in many instances I met many bosses who provided textbook examples of the downward stickiness of wages (in short, living proof of the Keynesian view of the world). In reply to my question “have you cut wages?”, the answers were generally “no” or “by 10% or so”, the common mantra being to keep existing conditions for long-term staff while letting go the periphery hires.

For  small- and medium-sized business owners, the recession has been absorbed through the shrinking of pay-rolls not through a cross-the-board reduction of wages. So a successful hotelier on Samos has taken his number of employees down from 15 to 10 and a shop-keeper on Ermou Street (the Oxford Street of Athens) from 12 to 10. An owner of two mid-sized businesses, food and latex products, said he had achieved a marginal reduction in wages, but this gain had been completely offset by rising energy costs and higher taxation. This, together with the fact that bank-financed working capital had completely dried up, meant that he was in no position to increase his workforce even should new orders be forthcoming.

So we have a paradox. The Greek economy has contracted at a rate that has no precedent for  an advanced economy since the Great Depression. The chart below is taken from the IMF’s 2013 Article IV Consultation on Greece (Article IV consultations are the equivalent of an economic health check).

Greek Unemployment and Depression jpeg

We see a contraction equivalent in scale to the one that propelled Hitler’s rise to power in Germany. Yet for all the hyperbole, Athens this summer is not a Golden Dawn battleground as portrayed in even the respectable media. For example this in an op-ed article by Maria Margaronis in the New York Times:

Even the black-shirted thugs of Golden Dawn patrolling central Athens have become a part of the new normal.

Perhaps, as an outsider, I was not aware of all the political undercurrents in the city. But over the decades, my antennae for street corner suppressed violence has been pretty well honed. In central Athens, the summer vibe was to party not to look for escape avenues should trouble explode.

I also spent the best part of a day with an NGO that dealt with struggling families, the homeless, immigrants and unaccompanied minors. The NGO was described to me as being located in a rough working class neighbourhood. As we walked between the various facilities that the NGO provides, I never once felt uneasy. Certainly no youth gang presence. The occasional junky, alcoholic or crazy crossed out path, but nothing to put me on edge. What struck me was the large number of mum and pop shops open to the street. This was not a neighbourhood in lock-down with metal grills and the smell of fear.

My impression from the trip was that many of Greece’s ‘weaknesses’ in actuality had served it well as ‘strengths’. Jason Manolopoulos in his book “Greece’s ‘Odious’ Debt” described the political DNA of Greek society thus:

The occupation, trauma of civil war, sense of entitlement, the importance of family and clan (or soi), and the desire to ‘voleutis‘ (to get cosy) have combined to create the modern Greek society and economy. It is a monster, a modern day hydra with seven heads: cronyism, statism, nepotism, clientelism, corruption closed shops and waste. This is a systemic, cultural dimension of the Greek sage; it is not just a case of a few unconnected scandals.

Yes. Though strangely it is these same faults that are allowing Greece to absorb such an unprecedented economic shock without a complete implosion of society. Margaret Thatcher once famously said ‘there is not such thing as society“, but the full quote in context provides a richer insight.

I think we have gone through a period when too many children and people have been given to understand “I have a problem, it is the Government’s job to cope with it!” or “I have a problem, I will go and get a grant to cope with it!” “I am homeless, the Government must house me!” and so they are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families and no government can do anything except through people and people look to themselves first… There is no such thing as society. There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.’

For Greece, the state and family are not disengaged. The state is not ‘the other’. For a small country such a Greece, the family and the state enmesh. The ‘living tapestry’ is Greece’s clientelism.

But, what is to be done? Though I don’t see Greece as in a state of collapse, I do see its current economic policy as a forced route march to no-where. The IMF has been abysmal in its evaluation of Greece current and future prospects (for which I will post separately). Further, the current policy of ‘internal devaluation’ appears totally devoid of any measures to produce growth. The troika is extolling a philosophy of stagnation and decline. I will return to this theme in a future post.

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