Can Greece find its inner capitalist?

July 10, 2015
Pro-Euro protestors hold Greek national flags during a pro-Euro rally in front of the parliament building in Athens

Pro-Euro protestors hold Greek national flags during a pro-Euro rally in front of the parliament building, in Athens, Greece, June 30, 2015. REUTERS/Yannis Behrakis

“Tax the rich, feed the poor, ‘til there are no rich no more. I’d love to change the world, but I don’t know what to do. So I’ll leave it up to you.”

Those pessimistic lyrics sung by the British band Ten Years After came from the cell phone ring of a Greek education official I was interviewing in 2011. (The official took the call, and later we got back to the interview.) The moment has stuck in my head for four years because at the time — and certainly now — those lyrics seemed to characterize the dominant Greek position toward politics, economics and the country’s ongoing financial crisis.

Many Greeks feel this way about inequality and socialism, and identify as Marxists — though certainly not all.

For that reason, one way to look at the crisis playing out between European politicians, finance ministers and technocrats is as an arm-wrestling match over what many academics call “political economy” — the study of how economic theory affects politics. Greeks — like citizens of some other European countries — have a schizophrenic approach to their own political economy. (We can thank the Greeks for the characterization: the Greek word “schizo” means “split” and “phrene” means “mind.”)

The crisis has shed light on the fact that European citizens — and Greeks specifically — are divided between those who favor a more socialist long-term political and economic order, and those who prefer a more neoliberal one.

The new Greek finance minister, Euclid Tsakalotos, is an Oxford-educated Marxist academic economist. But some Greeks calls him a “champagne socialist” because he owns several houses and lives the life of a European elite that they and he — as an early Syriza member — despise. His predecessor, Yanis Varoufakis, also identifies as Marxist and has spoken about how much he would like to replace capitalism.

At the same time, 80 percent of Greeks want to remain part of the EU. They want Greece to have access to capital markets and foreign investment. They are fed up with life in a sluggish, collectivist economy. EU payments exceed what Greece pays into the EU, and have improved infrastructure throughout the country in the past 30 years. But many Greeks aren’t sure if the Troika (comprised of the European Commission, the International Monetary Fund and the European Central Bank) is out to help them or exploit them.

Many highly educated Greeks believe that three decades of socialist leaders have dented the country’s economic optimism. “I think Papandreou [Andreas, a socialist prime minister in the 1980s and 1990s] started the country on a downhill path with his policies,” my father-in-law, Evangelos Mavrogeorgis, a member of the roughly 3 million person Greek diaspora in the United States, told me this week. Papandreou formed the leftist Pan-Hellenic Socialist Movement in 1974, created generous social welfare programs financed by massive public borrowing and was stridently anti-American.

Mavrogeorgis believes that life improved when Greece joined the EU, even though the other member states were willing to overlook Greece’s underlying fiscal problems. He thinks the country should comply with needed reforms, but that the EU should also give another bailout and, possibly, debt relief. “To go back to the drachma, the country would be in distress,” he said.

The debate between “two Greeces” mirrors a parallel divide within economics, pitting the neoliberal direction of the Adam Smith, Friedrich Hayek and Milton Friedman tradition against the modern neo-Keynesians such as Joseph Stiglitz, Thomas Piketty and Paul Krugman.

French author and economist Piketty and four other left-leaning economists have argued for the Troika to lighten up on austerity programs in Greece and to loosen the purse strings. “The medicine prescribed by the German Finance Ministry and Brussels has bled the patient, not cured the disease,” they wrote in the Nation.

But the Keynesian crowd’s critique doesn’t solve the underlying problems in the Greek economy, including an extremely bloated public service sector that employs one in four Greeks, pension plans more generous than other developed countries and too many state monopolies. (The Greek word “monos” means “alone.”)

Few modern neoliberal economists seem to be paying attention to Greece. But their ideological comrades from Wall Street and in government seem to ignore the more vocal Keynesians. A report from J.P. Morgan last month notes the “Greek crisis does not pose an existential threat to either the euro system or to Europe’s financial system.” And Germany’s finance minister, Wolfgang Schäuble, has been publicly frustrated with Syriza’s antics and shown a willingness to let Greece exit the euro.

Modern history suggests Greece would be much wiser to follow Germany’s “ordoliberal” approach that advocates free markets, guided by a strong, lean government and the social conscience of religion to maximize the potential of an economy while also preventing it from destroying itself.

German Chancellor Angela Merkel and Bundesbank President Jens Weidman adhere to the ideas of German economist Walter Eucken, who was the father of “ordoliberalism.” Eucken opposed National Socialism and after World War Two, his ideas were fundamental to the rapid rebuilding of West Germany that became known as the Wirtschaftswunder or “economic miracle.”

Both Eucken and Hayek believed in the importance of individual liberty, the power of free markets, competition and the idea that government should have limits. But they differed on the role of the state and the role of religion.

Eucken argued that human dignity goes hand in hand with competitive markets and a smart government helping to create ordered liberty. He also believed pure capitalism doesn’t have enough concern for the poor. He believed religion in society helped provide that social conscience. That thinking would gain traction in Greece, where key leaders of the Orthodox Church — arguably the most important cultural and economic institution in the country — expressed support for remaining in the EU.

The positions advocated by the ordoliberal school provide the best hope to save Greece, and should be taken seriously by other countries wrestling with political economy schizophrenia.

Greece should agree to a more neo-liberal path and the European creditors, in return, should create a program of graduated debt relief over the next 10 to 20 years to get a more competitive Greece on its feet.



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The author is clearly a “labelist” and seems to think economics is all about attaching labels to economists. I fail to how that solves anything.

Posted by QuietThinker | Report as abusive

The troika is there to exploit the Greeks. But then so are the Marxists. There has never been a Marxist government that has done anything but use the natural desires of the working people to gain power and enrich themselves. It’s somewhat the same in the US. Half of the democratic party is simply liberals with a constituency they have to pay lip service to, but never do they ever do what they say they will. The Marxists were always up front about that. They more than once stated that as soon as they had power the true believers were dead to them. Of course, conservatives in the US should see the same thing in their pandering lot too. I guess that’s why the people always have to suffer, because they put their trust in liars and criminals and they seem to never wake-up no matter how many times they get lied to. Seriously, as dumb as most people are they would probably be better off being held firmly on a chain of their very own.

Posted by brotherkenny4 | Report as abusive

if Marxists really believed their system organizes the society as a whole better, they would welcome competition/trade and national sovereignty.
Most Marxists want global govt or some form of super state, because thats the only way they can pretend their system is working.

libs in the usa want everything at the federal level because they know their policies implemented at the state level would become an embarrassment as all economic activity will leave their state.

this leads me to believe that marxists dont really think their system works at all in organizing and maximizing the society. they just hate the idea of inequality, they have these songs about destroying the rich in their head. its a way of comforting themselves or something

Posted by yobro_yobro88 | Report as abusive

Bloomberg TV reported yesterday that, after a half-heared protest, Syriza now agrees with the Greek shipowners (who control trade reported to be worth $105bn per annum) that they should pay no tax at all on their overseas earnings. Which, with a competent accountant, means no tax at all, period.

Isn’t Greece’s real woe that her leaders are so anosognostic that they don’t even know that they’re not Marxists? They spend like socialists and tax like capitalists, and that’s obviously never going to work.

Posted by Ian_Kemmish | Report as abusive

Nothing about country or people of country.It is purely a political game.”Liberalization”is one of the conditions.In short this PM must go like Assad must go.Who cares for poor people!

Posted by gentalman | Report as abusive

The Balkans United against the biggest evil ever the EU. Support to Greece from Macedonia.

Posted by Macedonian | Report as abusive

This article is incoplete and one sided.

Posted by GreeceMacedonia | Report as abusive