greece at a crossroads what is at stake, and what to expect, featuring prof. aristides hatzis
TRANSCRIPT
Greece at a crossroadsWhat is at stake, and what to expect
Aristides N. HatzisAssociate Professor
Philosophy of Law & Theory of InstitutionsPh.D. (Law & Econ, U of Chicago)
Atlas Network WebinarAtlas Network WebinarJuly 1, 2015July 1, 2015
1929-1936: Anomalous political situation1936-1940: Dictatorship1940-1944: Word War II1944-1949: Civil War1949-1967: Illiberal Democracy1967-1974: Dictatorship1974- : Constitutional Democracy
1980: The 10th Member of the European Communities
Greece circa 1980
public debt: 28% of GDPdeficit: < 3% of GDPunemployment: 2-3%average growth rate 1975-1980: 4.6%
inflation: 25% (due to the second oil crisis)
1981: PASOK
A modern Greek Tragedy
1981-2011: From Miracle to Nightmare
30 years of getting subsidies from the EU, borrowing and spending
Minimal structural reforms
Anti-market bias
The state controlled about 75% of all business assets
Bloated welfare state
Borrowed Happiness
average per capita income: $31,700 (2008)– 25th in the world (95% to the EU average)
private spending: 12% more than the EU average (2009)
human development and quality of life indices: 22nd in the world (2010)
1980-2010: the road to default
1980 public debt: 28% of GDP1990 public debt: 89% of GDP2009 public debt: 142.8% of GDP– almost 165% in late 2012
1980 public deficit: <3% of GDP2009 public deficit: 15.4% of GDP
1980 government spending: 29% of GDP2009 government spending: 53.1% of GDP
Greek Public Servants
Greek public debt (percentage of GDP)
GREECE 2010
Public Debt: 142,8% of GDP– €350 billion ($ 500 billion)
Public Deficit: 15.4% of GDP
“Growth”: -4.5% of GDP
Like there is no tomorrow!
A bloated Welfare State…
Social benefits to households (percentage of GDP)– from 22.0% (2004) to 26%.4 (2008) to 29.0% (2009)– (from 2004 to 2009 “conservatives” ruled Greece)– half of it went to pensions
“social transfers” (subsidies to the pension funds of powerful professional groups) equals 52% of this half – 6.34% of GDP in 2008.
EC pension projections (2009)– EU-27: 12.3% (2040) – 12.5 (2060)– Ireland: 6.4% (2040) – 8.6% (2060)– Portugal: 12.5% (2040) – 13.4% (2060)– Spain: 13.2% (2040) – 15.1% (2060)– Greece: 21.4% (2040) – 24.1% (2060)
An inefficient welfare state
The indicator of the efficiency of social benefits in alleviating property is the worst in the E.U. (13%, where the EU average is 35% and some Scandinavian countries were as efficient as 70%!).
In 2002 the indicator was a poor 4% with a EU average of 31%.
A helping hand to the rich
Extractive economicinstitutions: Designed by the politically powerful elites toextract resources from the restof society.
Inclusive economic institutions: Secure property rights, law and order, markets and state support (publicservices and regulation) for markets; open to relatively free entry of newbusinesses; uphold contracts; accessto education and opportunity for the great majority of citizens, i.e., createincentives for investment and innovation and a level playing field.
The Greek trap
A bloated inefficient “welfare state”but alsoTax evasion (as a social right)A huge inefficient public sectorCorruption – essentially tolerated if not decriminalizedPublic sector union powerClosed professionsOverregulation to ensure rent-seeking
“A state made for the welfare of politically powerful pressure groups”
Greek Extractive Institutions
Index of Economic Freedom
Long-term score change (since1995)
Low levels of trust
Government: 14,6% (51,7%)Courts: 40,2% (52,6%)Education system: 51,8% (66,1%)Other people 16,5% (24,2%)
Philanthropy: 9% (28,9%)Volunteerism 10% (20,9%)
Global average in parentheses
A political culture of
StatismProtectionismCorruptionCronyismNepotismRent-seekingIrresponsible spending
Greece is not a free-market economy!
Index of Economic Freedom-2015: 130/178– Last in the EUEconomic Freedom of the World-2014: 84/152– Last in the EUGlobal Competitiveness Report-2014/5: 81/144– Last in the EUICC Open Markets Index: 48/75– Last in the EU
Mostly Unfree...
Greece’s neighborhood
The Greek Vikings*
Cost: €17-25 bn
* Pelagidis & Mitsopoulos 2011
1974-2005
171.600 regulations!– 3.430 laws– 20.580 presidential decrees– 114.905 ministerial decisions– 32.585 local government decisions
Institute for Regulatory Policy Research
IMF Default
They say, it’s our country and Greece...
What a shame!
GREXIT
Loony left to the Greek government:
Don’t put the silencer. Let’s deafen those capitalists!
Badly and urgently needed
Regulatory Reform
Taxation Reform
Welfare Reform
Institutional Reform
Conclusion
more market, more growth, more jobs
