Οι παραμελημένοι θεσμοί

(Καθημερινή 22/01/2017)

Για να βγούμε από την κρίση, πρέπει να ξαναχτίσουμε τη δημόσια σφαίρα, όχι μόνο τις ιδιωτικές δουλειές. Δεν έχουμε χάσει μόνο εισοδήματα, έχουμε χάσει και την εμπιστοσύνη σε αυτά που συγκροτούν μια οργανωμένη κοινωνία. Ημασταν και πριν από το 2009 μια κοινωνία «χαμηλής εμπιστοσύνης», αλλά από τότε το κακό παράγινε. Αντί να συσπειρωθούμε για να βρούμε μια κοινή λύση στο κοινό μας πρόβλημα, διχαστήκαμε περισσότερο. Ακόμα χειρότερα, υποβαθμίσαμε τους λίγους εκείνους θεσμούς που υπηρετούν το δημόσιο συμφέρον και όχι τις πολιτικές παρατάξεις και τις πελατείες τους.

Η παθογένεια στη δημόσια σφαίρα συνοψίζεται σε δύο επιλογές: εισοδηματικές ενισχύσεις αντί για οργανωμένες υπηρεσίες και συνδιαλλαγή αντί για κανόνες. Οι επιλογές έρχονται από παλιά, και έφεραν την κρίση. Μετά έγιναν ακόμα πιο φανερές, και κρατούν την κοινωνία καθηλωμένη σε τέλμα καχυποψίας και απαισιοδοξίας. Continue reading

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Growth for Greece: Ten plus One Points for a Post-Austerity Agenda

We wrote this article with Prof. Karl-Heinz Paqué because we believe that public discourse on the crisis and on the adjustment programmes should now move beyond ideological conflict and national recriminations, and focus on the practical topics of growth policy. Our message is addressed to Greek politicians, as well as to the institutions of the EU and to political leaders in all member states. The paper was presented at an event organized by the Friedrich Naumann Stiftung in Athens on 23rd November 2015.

The setting

The past six years have been hard on the Greek people, as incomes have dropped dramatically, unemployment has rocketed, and a sense of despair has taken hold. The adjustment programs that followed the balance of payments crisis of 2010 failed to stabilize the economy before 2014, and have been widely blamed as being inadequate, wrongly designed or even responsible for the crisis. Whatever the final judgment about past policies may be, it would be wrong to underestimate the adjustment that has actually taken place. Continue reading

Resilience: notes from the Greek crisis

(Keynote address at the annual European Foundation Conference on 20th May 2015)

Thank you to the European Foundation Centre for inviting me to speak at your conference. I feel very honored to be here. I have the deepest respect for those who actually do something about the problems of this world. I know that the room is full of such people.

I was asked to speak on the general topic of “resilience”, so I had to look it up, to see how the term is used in various disciplines. It seems to be common in psychology, in social work, and also, with regards to the organisation of cities. I have no relation to any of those subjects. So why am I here, speaking about this?

I think it is because I live in a country whose resilience has been tested like no other country in the rich world, recently. Also, I am an economist who has observed and written about the crisis on the micro-level, near to the ground, where resilience is tested. And finally, I am an investor in new businesses in an environment where businesses have been wiped out by the thousands.

So I will speak with all three hats, in sequence: first as a Greek, then as an economist, and finally as an investor. Continue reading

Politics and microeconomics in the Greek crisis

A slightly edited version of this article was published in the New York Times, on 26th February 2015.

Everyone frames the depression in Greece as an issue of macroeconomics: fiscal policy was tightened too quickly; government debt is too high; the tools of currency devaluation and monetary expansion are not available inside the euro zone. No doubt these are important factors, but they tell less than half the story. Local politics and microeconomic factors are at least as important in explaining the depth of the crisis.

Greece has fared much worse than other euro zone countries, which also faced a ‘sudden stop’ of foreign financing, and then enacted similar austerity programs. It lost 26% of GDP from the pre-crisis peak, while Portugal, Ireland and Spain lost no more than 7% each. Much of this difference is due to foreign trade.

In all four countries, when capital from abroad stopped flowing in, increasing exports became a primary goal, to offset the drop in domestic demand. The other three achieved this quickly, as projected in their adjustment programs. Greece did not. If it had, its recession would have been much shallower; by one estimate, a 25% rise in exports could have limited the drop of GDP to just 3%. Fiscal contraction would have caused much less damage.

This failure of trade adjustment is a puzzle to those economists who tend to view competitiveness in terms of labor cost. Wages did in fact drop by much more in Greece since 2010 than in any other country, and labor cost is no longer a barrier to exports. Firms have not taken advantage of this for three reasons: regulations, fear, and size. Continue reading

ALBA Graduation Speech 2012

I had the honour to be the guest speaker this year at the Graduation Ceremony of ALBA (the Athens Laboratory of Business Administration). This is the video, and the text follows.

Today is a day of celebration for you, but it is also, I suspect, a day of reflection. Because you will be going out to find work, or to start businesses, or perhaps to return to your jobs, in the most difficult economic environment we have seen for many many years.

It is a cliche, of course, that in the crisis there are opportunities. And it is a cliche that I will repeat today. But before that, let me give you another, even more obvious cliche: in the crisis, there are difficulties and dangers.

Now, in the course of your study at ALBA you have learned about key factors of success for a business, and how it will be gobbled up by competitors if it does not build those factors. You have learned about opportunties and threats. The literature and the case studies are very useful.

But maybe you have not had time in the classroom to discuss some of the threats that are most important in Greece today, and in countries like Greece (I mean other countries with weak institutions, from which some of our graduates today have come). Neither, perhaps, have you discussed some of the opportunities that arise specifically in such countries, especially in this crisis.

So before you go back into the dangerous and exciting world of real business, here are a few words of advice. Continue reading

Diversity and uniformity in the euro zone

This was posted in openDemocracy, as part of the debate on the future of the euro zone. 

In his speech, which opens this debate, George Soros argued that misunderstandings and misconceptions are shaping history in important ways. This is true in general, of course, and it is true in specific ways within the eurozone.

Proponents of the euro expected that under a single monetary policy and in the absence of currency risk economies would converge, as capital, goods and people would move more freely. An implicit assumption, never properly examined, was that national economic institutions would also become more similar. As Jean Pisani-Ferry tells it, in the early 1990s, part of the European elite selected central banks as a good candidate for merging into one tightly knit system, since they were already operating more or less in the same way; whereas welfare systems or industry policy were markedly different. It was perhaps thought that these other institutions would follow suit, eventually.

What seems to have happened, however, is that the monetary union actually served to mask and therefore preserve institutional differences in most other levels of the economy – in business strategies, in wage setting, in fiscal planning. Under the illusion of harmony, imbalances were allowed to get out of control. Continue reading

Stavros Niarchos Foundation Lecture: Aristos Doxiadis

This is the video of my lecture at Yale on 5th December 2011, titled Greeks Behaving Badly? The micro-origins of crisis and revival.

Stathis Kalyvas has an interesting introduction, on how modern Greece has been often been a forerunner or exemplar of global developments, even before the current crisis (starting at 6′ 00″). The lecture starts at 16′ 35″.  There is thirty minutes of discussion at the end.

 

 

Fluid modernity catches up with savings

So, S&P downgrades the USAAA. The last store of value for financial investors has become fluid, relative, uncertain. Could this be a watershed in economic ideology?

If value cannot be safely stored in money, will holders of money turn to the ‘real economy’ for lasting security? Will they begin again to assess the use-value of products and services? To look for the right balance between basics and luxuries, between consumer goods and capital goods, between local production and imports? To see value in full employment and in social cohesion? But also, to look beyond employment numbers, to what employees actually produce? To rediscover thrift, but also to consider how savings are invested in ‘real’ assets?

Is it time to revive input-output economics? Whatever happened to David Ricardo and to Wassily Leontief?

Economists, Democracies and the Eurozone

I am not going to add one more evaluation to the dozens that have been written about Thursday’s Eurozone summit. I think that Joe Stiglitz sums it up rather well. However, I am tempted to comment on the comments, not just of the past two days, but of the past several months.

Competent academic economists, and even outstanding ones, can be quite naïve about the political process. They seem to judge policy making by the benchmark of a rational, intelligent and benevolent dictator, who seeks to optimize social utility of whatever entity she is commanding.  Much of the recent commentary on the Eurozone crisis is a clear example of this. Continue reading