* Greek economy








Greek Economy


Figure 1.--Here young Greeks in central Athens battle with police over austerity measures (June 2011). For decades, Socialist politicans in Greece and other European countries have won elections by promosing benefits that were unsustainanle. They have been able to pay generous benefits by borrowing money. Now creditors are no longer willing to loan Greece money the country does not have the capability to repay. And the Greek people are having the face the reality that the social welfare system that Socialist politicans assured them they could depend on is unraveling. Right now it is the small periferal countries in Europe that are going bankrupt (Greece, Ireland, and Portugal). But the larger countries also face the same basic problems, a social welfare system that is being maintained by borrowing money. And Greece has an economy so burdened with regulations and restrictions that growth is enemic and unemployment elevated. The result is the elderly are left without the benefits they expected and the young people face a future with little economic opportunity. The sad thing for Greece and Europe's future is many if not most of these young people continue to see inexaustable government benefits as the answer to their problems.

Greece was conquered by the Ottoman Empire (15th century) and was thus out of the European mainstream. Greece achieved its independence (1820s). It was a small, largely agricultural country with only a small industrial sector. This continued into the 20th century. The economy was devestated by World War II and the German occupation which caused a deadly famine. The economy was further damaged by a Communist onspired civil war. Greece benefitted from a recovering European economy. Greece became a popular tourist destinatiin and tourism became an important part of the Greek economy. Socialist political parties and polticans exposing socialist principles have been important in post-War Greece. They have offered the Greek people an extensive social welfare system, winning elections by making entoicing promises. The welfare system constructed as a result was so costly, however, that the Greek economy could simply not support it. This is a problem other European countries are facing. As Prime Minister Thatcher explained in the 1980s, Socialist ecomomies fail when they run out of other people's money to redistribute. This finally occurred in Greece in 2010. The problen was felayed for many years because as a member of the Euro zone, Greece could for many years could borrow money at rates similar to more finncially responsible countries like Germany. The statistics are staggering. The Greek defecit was 13 percent of GDP and the overall national debt waa 115 percent of GDP. About 60 percent of employment is in the non-productive public sector who have generous benefits. Lenders realizing that the current situation is unsustainable stopped lending to Greece and interest rates available to the Government increased to a prohibitive 17 percent. With the Euro in freefall, the Europeans with IMP assistance came up with a $0.95 trillion bailout program. It is unclear if even this huge intervention will solve the problem and it looks increasingly like the debt will have to be restructers, essentialy meaning Greece will default on part of the debt. It will also mean that Greece will have to make substantial cuts in its welfare system.

Ancient Greece

Greek city state economies as were most economies in the ancuent world were primarily based on agriculture. This varied from city to city, but agiculture was important most city states. Greece is not, however, a country blessed with an abundance of fertile soil. Greece is a peninsula, thus it is only natural tht the Greeks with poor agricultural harvests would turn to the sea to supplement their agricultural production. The Greeks from an early point in their history excelled as mainers and traders. It is widely believed that the raiders which the Egyptians described as the sea People were raiding Greeks (1300-1000 BC). Maritime craftsmanship and commerce developed (6th century BC) and became an increasingly important segment of the Greek economy. They sailed throughout the Eastern Mediterranean and played an important role in markets there. Greek sailors were not only merchants, but engaged in a range of economic activities, including fishing, raiding, and what today would be called piracy. They also founded colonies which began as trading posts. Greek traders not only sold Greek products like pottery, wine, olive oil, and metal products but traded in products bought in foreign ports as well. War was an important part of Greek economic life. Greek city states conquered other city states and forced them to pay tribute. The most notable was Sparta which conquered Messenia and based their economy on Helot slave labor. Other city states had economies based on very large slve populations, people largely captured in war and their descendents. Greek sailors might work as mercenaries, hiring out both themselves and their ships to fight for pay. Countries like Egypt were often in need of sea support.

Medieval Greece


Ottoman Empire

Greece was conquered by the Ottoman Empire (15th century) and was thus out of the European mainstream.

Independent Greece (1820s)

Greece achieved its independence (1820s). It was a small, largely agricultural country with only a small industrial sector. This continued into the 20th century.

World War II (1939-45)

The economic consequences of World War II for Greece were staggering. Greece like most countries stayed out of the War and remain neutral. The Greeks has some hope of this because it was basically a Fascist country at the time of the War. Mussolini ended any possibility of this when without consulting Hitler, he ordered an invasion (October 1940). Greece was not a wealthy country to begin with. The initial Italain invasion from Albania did not damage the economy significantly. The Greek Army not only held the Itlaians in the birder mountains, but drove them back into Albania. The British provided some $1.2 billion (2004 dollaras) in war assistance. [Ioannides, p. 2.] The German invasion quickly defeated the Yugoslav and Greek Armies even when the British intervened (April 1941). The resulting Axis (Gerrman, Itlalian, and Bulgarian) occupation did massive damage to the economy. The three invading armies established their own occupation zones and actually four currences. (There was a special currenvcy for the Greek Islands.) These currencies had no real value and were worthless outside occupued Greece. The Axis occupation, especially the German occupation was a disaster for the Greek people. The Bulgarians occupying northeaster Greece were also brutal. The Grrman occupatioin was the worse. German policy as in other occupied countries was to exploit the country to support the German war effort. A huge inflation problem developed. One economist explains what happened, "Then in August 1941, the German military administration decided to keep the drachma as the only means of payment. The occupation forces took as much money as they wanted from the puppet Greek government and the Bank of Greece. These requests and so-called 'loans' from the Greek state were completely arbitrary and honored by virtue of force. The occupation forceswere able to extract a lot of resources from the Greek people by the printing of ultimately worthless currency for several years." [Ioannides, p. 2.] The Greek puppet Government also printed mniney for its oin purposes. The result was hperinflation. The inflation was virtually uncaluable. Paper money became virtually worthless. It was one of the worst inflations in economic history. Greece was not self-sufficent in food. And with th occupoation, not only could Greece continue to import, but the German Wehrmacht began seizing food for its occuoation force. Greece was a largely agriculturl country, but dependent on food imports. A combinarion of the Whermacht seizing food supplies, shipments of food to the Reich, and the British naval blockade led to a deadly famine. The result was a terrible famine. Although emegency relief supplies were arranged, serious food shortages persisted. The Axis forces occupying Greece also caused enormous infrastructure danmage as it attempoted to supress the growing resistanc movement. Greek resistance to Axis occupation led to brutal German reprisals, often against innocent civilians because the resistance fighters were more difficult to find. The resistance attacks and German reprisals caused additiional damage, esoecially to the already basic infrastructure rural areas. The combintion of Axis anti-resistance actions and food shortages resulted in heavy mortalities. Historians estimate that something like 7 percent of the population peroshed because of the Axis occupation, most due to civiliazn death. The Germans deported Greeks for slave/forced labor in the Reich war economy. The Germans began withdrawing from Greece (September 1944). The British landed to formalize the country's liberation. Conditions fdid not, howver, improve as the withdrawl of the Germans set in motion a civil war. The resistance had been split duing the occupation between royalists and communists. These two groups as the Germns departed descended into open warefare to determine the country's future.

Cold War

The economy was further damaged by a Communist inspired civil war. Although not fully understood at the time, the Cold ar began in Poland and Greece (1944). Stalin used the NKVD and Red army to supress anti-Communist Poles. In Greece, the British and eventually the Americans supported the royalists. The insuing Greek Civil War raged (19444-48) and added to the damaged during the World War II Axis occupation. As a result, not only was very little progress was made repairing the economy, but living standardards remin far below pre-War levels. Percpita income levels were below that of the poorer European countries as well as the Third World countries like Mexico. Only American food aid prevented widespread famine. Britain was unable to maintain its former international commitments, inlarge measure because of its faltering economy. President Harry S. Truman declared in an address to Congress that the foreign policy of the United States was to assist any country whose stability was threatened by Soviet-backed communism (March 1947). His initial request to Congress was $400 million to assist Greece and Turkey. Congress quickly approved. This became known as the Truman Doctrine. Greece and Turkey became primary beneficiaries of the Truman Doctrine. After the Civil War, Greece began benefitting from a recovering European economy. Greeks moved to countries like Germany and their remitences became an important part of the economy. Greece became a popular tourist destination and tourism became an important part of the Greek economy as the European economy rebounded an average Europeans could afford vacation trips. Shipping also rebounded as an important sector. Shipbuilding also became important. Greece began to report enviable economic growth, albeit from a low base. Lving standards began gradually rising toward those of Greece's prosperous European nighbors.

MilitaryJunta


Democratic Greece (1974)

One informed observer points and the return to democracy as the point at which the current economic problems began (1974). Greek shipping magnate, John Coustas says that the bnewly elected government began enlarge the Greek Government to 'enlarge their influence'. This process was not begun by the Socialists, but when they were elected, they greatly increased the expansion of the Greek state and the borrowing to support the expansion of government (1981). Socialist political parties and polticans exposing socialist principles have been important in post-War Greece. The expanded Government mean hiring large numbers of bureaaucrats who salaries have to be paid by taking the private sector. Over 15 percent of the labor force is now in the state sector. The Socialists offered the Greek people an extensive social welfare system, winning elections by making entoicing promises. The welfare system constructed as a result was so costly, however, that the Greek economy could simply not support it. This is a problem other European countries are facing. And they were not honest abnd transparent about the debts being run up. In addition to expanding givernment and borriowing, the Socialists not only made no effort to promote entreprenurial activity (meaning wealth creation), but pursued policies that discoraged private economic activity. The term 'profit' gradually became a dirty word in Greece, something that was seen as virtually immoral. (This relates to Marxists construct of the labor theory of value. The Socialist policies included not only increased taxes, but a range of other policies such as an expanded regularory environment. A good example is the Supreme Court's enviromental role. Coustas explains, 'Anyone who wanted to make an investment here was considered a kind of bloodsucker.' [Jolis, p. A 15.] Interestingly, outside Greece, Greeks had the image as canny busunessmen. Greece is noted for shipping. Men like Aristole Onasis built huge concerns. Coustas mnaged to inherited a small Greek shipping company from his father and turned it into one of the largest shipping concerns in the world. Coustas explains that the reason that Greeksre successful in shipping is that, "Greek shipping has nothing to do with the Greek state." His company is incorporated in the Marshall Islands. And none of his ships or the ships of other Greek shipping companies, new building ciontracts worth $100 billion, are being built in Greece. Greek shioyards like Skara manga and Elifsis have gone bankrupt. Coustas tells how the workers at a Japanese shipyard thanked him for a shipbuilding order and promissed they would produce a good ship. He asks, "Can you imagine that happening here? Here, if you tried to do the same thing and place an order in the Greek shipyards, you would get protests that either you paid too little, or are trying to pressure the workers, or whatever." [Jolis, p. A 15.] Thus Socialist politicans not only vastly increased the entitlement programs, but at the same time undermined the economy which was expected to generate the income needed to support the welfare payments. The shoerfalls were covered by borrowing.

European Union (1981)

Greece wa aoor county by European sandards and dependent on imports, specially food imports. The country was devetated by World war II and the subsequent Civil War. Greece joined the European Union (1981). Membership in the European Union aided Greece in many ways. It could have greatly benefitted the shipping an other indistries. Greece's small manufcturing sector actually declined. Governmnt policies and popular attituds strongly influenced by socilist thinking pevented any substantial economic growth. Unions made unrealistic demands. The Government passed work rules tht made it virtually impossible to fire workers. Rathr protect workers, business ectivity decreased. Businesswere increasingly reluctant to hire workers. Government employees became an increasingly importnt part of the work force. And began to finance the social welfare program desired by the public through the expedient of borrowing money. Until the creation of the Euro, however, there were limits on hat creditors would lend as wella rising interest rates ht Greece could not afford. Real prosperity uddenly appeared after the country joined the Euro Zone. The Euro ws foinded (1991) and Greece soon signed on (2001). This was possible only because the country' Socialist Government falisfied financial statements which hid just how deeply enbedlted the country was. And once in the Euro-Zone Greek Governments were able to borrow money for ahile on the same terms of the financially responsible German government. The result was even greater borrowing, As Prime Minister Thatcher explained in the 1980s, Socialist ecomomies fail when they run out of other people's money to give away. Nothing so illustraes this dictim as the Greek financial disaster. This finally occurred in Greece in 2010. The problen was delayed for many years because as a member of the Euro zone, Greece could for many years could borrow money at rates similar to more finncially responsible countries like Germany. The statistics are staggering. The Greek defecit was 13 percent of GDP and the overall national debt waa 115 percent of GDP. About 60 percent of employment is in the non-productive public sector who have generous benefits. Lenders realizing that the current situation is unsustainable stopped lending to Greece and interest rates available to the Government increased to a prohibitive 17 percent. With the Euro in freefall, the Europeans with IMF assistance came up with a $0.95 trillion bailout program. It is unclear if even this huge intervention will solve the problem and it looks increasingly like the debt will have to be restructers, essentialy meaning Greece will default on part of the debt. It will also mean that Greece will have to make substantial cuts in its welfare system. The EU-IMP is now working on a bailout. This only addresses the country's huge debt and based on past experience will only postpone addressing the mountain of debt. And there is no indication that Greece has the slighest inclination to change policies depressing the private sector. The Greek people rather than blaming socialist politiczns turned to ctigating the people that lent them mny and now the people who bailed them out. And to 'save' them elected a rdical left-wing governent --Syriza (January 2015).

Sources

Jolis. Anne. "Greece: Where progfit is taboo, The Wall Street Journal (July 13, 2011), p. A 15.







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Created: 2:42 AM 6/26/2011
Last updated: 11:50 PM 7/2/2015