Wednesday, July 28, 2010

Whatever happened to Dedalus? (and, by the way, Icarus too)

The failure and opportunity of innovation in Greece

Many myths are born in Greece, one of which claims that Greeks rank amongst the cleverest people in the world. And yet, by examining Greece’s ranking in the Global Innovation Index[1] you would be hard-pressed not to disagree. The country was at place 42 last year, at the bottom of every other western European country, a fact reflected on the sobering absence of Greek high technology products and services from the world market. More disparagingly, when the crisis hit, the debate about recovery was focused on investing, and improving, the tourism and agricultural sectors; which makes one wonder if our politicians and mainstream journalists live on another planet, or another era.

A favorite explanation for Greece’ lack of marketable hi-tech ideas is that public investment in research and development is very low. Indeed Greece’s public expenditure on RTD, at 0.57% of GDP[2], is one of the lowest in Europe. The key for improvement, politicians will hasten to claim, is more tax money funneled to science and technology. I beg to differ. Given the current situation, not only it is mathematically impossible for the Public Purse to subsidize innovation but, as I will argue, the surest way to stifle bright ideas is through government subsidies.

Since Greece joined the EU in the early 1980s billions of Euros have been invested in research infrastructure and payrolls, in universities and research institutes. And more billions have poured in through a superfluity of EU-funded research programs. And yet, there is very little to show for it. Greek universities have failed scientifically and socially. They have become playgrounds for organized groups of brain-washed, leftist students who terrorize staff and their fellow students, and vandalize what is public property in the name of academic freedom. Meanwhile, all kinds of byzantine machinations percolate in the background, for teaching positions that rarely target talent and more often than not are cheap rewards for blind loyalty. Greek universities have thus become a waste of taxpayers’ money and confer serious damage to the social cohesion of the country because kids from poorer families cannot get the standard of higher education that rich kids –whose parents can afford to send them abroad – do. Bright professors and research students who can, have started to flee. Research institutes do not fare any better. Like every other public institution in Greece they are heavily politicized at the expense of good research work.

The private sector does not innovate either. Since the 1980s Greece has been de-industrialized whilst failing to claim a position in the global, digital economy. The result is that the majority of so-called “innovative” companies are proposal-making manufacturers that go after EU-subsidies. It is precisely this policy of subsidization that has rendered Greece a follower and not a leader; and here is the reason why.

The key to innovation is risk. New ideas are risky because you never know if they have any value unless you invest in them first and then roll them out into the real word. So the question arises who takes the risk for all this? By introducing a grant or subsidy system, the risk is borne mainly by the state (or the EU). But this is wrong for at least two reasons, one ethical another economical. Why should the taxpayer be burdened with the risk for something that, if successful, will profit only certain individuals? Secondly, the only real motivation for doing things right is when by doing things wrong you have something to lose; grant and subsidy takers do not have a strong enough motivation because they simply do not risk their own money and time; on the contrary, their main economical goal becomes the taking of the subsidy; therefore, their success is measured not by the efficacy of the end product but by the approval of their grant application by a bureaucrat who, in turn, risks not his own but the taxpayers’ money in the name of some vague “social good”. Hence, the proliferation of the proposal-making industry and the strangulation of the really good ideas; the latter constantly have to compete against government subsidies and grants, taxation and levies.

And yet there are many people in Greece with very bright ideas. They are the untapped human capital, the best of the best this country has. They are struggling against a well-entrenched system that is indifferent to merit and hostile to business. Potentially, they could be an agent for change and economic growth, if only they were given a chance. The wonderful thing about the digital economy is that you need very little infrastructure. A computer, a modem and access to the Internet is all you need; that, and a good idea. Greece may never become the innovation hub of big multinationals but can become a place for innovation start-ups in the creative industries, the media, web applications, industrial and architectural design, smart green technologies, as well as social innovation.

There is a movement of people, young or less young entrepreneurs, who are willing to take risks. Today, if they want to start a business they must go through a bureaucratic labyrinth and begin to pay taxes and contributions before they make their first euro. This is a serious impediment for someone who aspires to something speculative and risky. Greece cannot afford to lose her brightest entrepreneurs. At the same time, no one expects the Greek socio-political system to change overnight to suit them. And yet this crisis can become, paradoxically, a golden opportunity for those innovators, if only the government would be willing to allow them to mitigate risk outside the system. No subsidies, no grants, no nanny state. In fact, the best recipe would be to have as little state intervention as possible.

This can be achieved, for example, by allowing technological start-ups a two-year tax and social contributions’ break. If you think you have a great idea register your tech company with the tax office on-line and get a VAT Number. This procedure should only take one minute and be done wholly on the web. Then, all you have to do is concentrate on being inventive and profitable. For two years you don’t have to pay tax. If you want to employ someone, you do not have to pay IKA. You can pay him/her cash in hand at a level agreed between the two of you. You don’t have to pay TEVE, the various levies, whatever. If after two years you have managed to prove that your idea can succeed in the real world then start paying your dues to the society that permitted you to realize your dream. If not, stop - or maybe try again another idea.

Let the government do that and all else will follow. Given this tax-free framework for innovative start-ups the private sector will be more willing to invest in risky projects. There is a superb example called “Open Fund” right now, a wholly-private, grassroots initiative, which offers seed money and precious business advice to technological start-ups. One must not lose hope that in the near future a major reformation of Greek state universities will also take place under pressure by Greece’s lenders, as well as the establishment of the first private universities, which may be able to transform the current, ruinous situation of higher education in Greece. World-class education standards, a business-friendly environment and less government, and this country may manage to bootstrap itself out of its perennial debts, and become a place we can all be proud of.

I am not a believer of myths, but I do believe in people and individuals with a vision and the will to take risks. What we need is for the Dedalus spirit of inventiveness to be given a chance. Remember that there came a time that Dedalus had enough of his state sponsor and decided to move on; whereupon he had his greatest idea: to fly. Like Dedalus we have to leave behind the shores of false security and take to the skies. Which is a risky business, because for innovation to take flight you need to test the limits and aim to go beyond. To invent like a Dedalus but to think, and dream, like an Icarus.

An edited version of the article was published in Odyssey magazine (Summer 2010 issue)

[1] he Global Innovation Index is a global index measuring the level of innovation of a country, produced jointly by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI), the NAM's nonpartisan research affiliate.

[2] Eurostat Newsrelease 8/9/09

Sunday, May 9, 2010

A social contract, broken

Contrary to western Europe, where property has been the prevailing value of the ruling elites, in Greece it has been rent-seeking. Throughout the Ottoman period, local authority was based on tax collection, as performed by the local elites, the “kotsabazes”. When Greece revolted in 1821, they quickly managed to regain control, albeit through a civil war (that started in 1822!). Greece’s current ruling elites are their descendants, either by blood or spirit. What the kotsabazes did was collecting taxes in the name of the Sultan and keeping them, mostly for themselves. Thus the “State” has always been something that everyone looked upon as a source of income. The “kotsabazes” had the “connections” that gave them the authority, and their subordinates were given a small part of the spoils, as rents for their obedience. Those small parts, as soon as Greece became independent, translated into jobs in the civil service, i.e. employees of the State.

This has been the social contract upon which Greece has functioned for the past 180 years. The ruling elites milk the country's resources (or borrow on its behalf) to fill their coffers, and the ruled (the voters) keep them in power in exchange for jobs in the public sector. This is how we ended up with almost a million and a half public employees.

Following Greece’s virtual bankruptcy and the obligatory measures that the government must take, this social contract has been broken. Hence the riots. The riots bring together the beneficiaries of the social contract; civil servants, pensioners, and other indirect beneficiaries of the state. They are angry because they feel betrayed. And truly they are. Their rulers became rich at their expense, and now, their rulers tell them that they have to reduce their wages, or even leave them jobless. The ruled want “justice’, meaning that they want the rulers to pay as well.

Tuesday, May 4, 2010

Letter from the abyss

History is aplenty with ironies, so here's one more: Greece (the ancient one) the foundation of the European idea, and Greece (the modern one) bringing about its undoing. The Greek communists that unfurled their banners on Acropolis today saw it otherwise. They believed that revolution is back. That capitalism, having failed the peoples of the world, is about to crumple into dust and that communism will prevail. Conveniently, they tend to forget that Greece has failed not because of an oligarchy snatching away the country’s wealth, but because of socialist politics that benefited one and a half million workers (who are employed as civil servants and produce nothing), propped up with borrowed foreign money. Should we blame the bankers and the hedge funds for this? It’s like blaming a rich uncle for giving too much money to a delinquent, adolescent, nephew who went and spent it all on candy. The adolescent became fat in the meantime. And is now crying for more candy without crossing his stupefied mind that a diet is now in order.In failing, Greece has exposed the weakness of European institutions. Whenever I see that pathetic Luxembourgian guy who is supposed to be the “President of Europe” my shoulders drop and I get a tendency to stare at the floor for hours. We have entered a period of uncertainty that will make the recession of 2008 look like nothing.

Wednesday, February 17, 2010

Can Greece be reinvented?

The Financial Times reporter finished his grim report from debt-stricken Greece with the wishful suggestion that only the “reinvention” of Greece may bootstrap her out of her recurring bankruptcies. First, let me take issue with the invention part. Then, I will look into that prefix “re”.

The invention of Greece

The idea of modern Greece, like any human artifact really, has been an invention. In the late 18th century the Balkans were fermenting with nationalism, inspired by the French Revolution and Napoleonic Wars. For most people in the Balkans it was straight forward to define their national identity. Serbs, Croats, Romanians (to a certain extend) and Bulgarians knew who they were from the start. But most people who lived in the Greek peninsula and parts of Asia Minor did not. Certainly, there were several individuals identifying themselves as “Greeks” in very high places in the Ottoman Empire, as well as across Europe. These “Greeks” were inheritors of the dominant ideology the Easter Roman Empire (Byzantium) that came to be following the Crusades and persisting after the Fall of Constantinople in 1453. This ideology had journeyed a long way from original Roman Universalism in order to arrive around the 11th century to a loosely-defined “Greekness” by way of language and in comparison with its other Christian contender, namely “Frankisness” (i.e. the emerging Latin West). And yet “Greekness” did not fit comfortably with the Ecumenical spirit of Eastern Orthodoxy because, simply put, neither religious dogma can coexist with free thinking, nor nationalism with universalism.

Not managing to confound this apparent contradiction the intellectuals who defined modern Greek nationalism in the late 18th century produced an ideological chimera: a Greek identity based on Christianity.

The Greek Uprising of 1821 took place in the midst of this ideological confusion adding one more extra layer; the virtual absence of “Greeks”. Greece and Greeks did not really exist. What existed were communities of Christian farmers and herders that lived in the Greek peninsula and spoke various mutually-incomprehensible Albanian, Slavic and Greek dialects. But Greeks had to be invented. And they were. The “philhellenic” movement helped decisively towards this invention, creating an ideal Greece of romantic allure. When the Modern Greek State was organized in the late 19th century, a German prince came to become the first King of Greece and make the romantic dream into a reality. You can look at it as a first attempt of the western world to create a Disneyland. He failed of course. It was too early for Disneylands and the Balkans are a tough place anyway. He was succeeded by a more pliable royal dynasty of Danish origin who quickly integrated into the convenient confusion. The simulated image of classical Greece reborn of its ashes into a modern state (something similar to, say, Israel), was adopted as the national myth and ultimately became the country's tourist, and not only, slogan.

The politics of division

From the start then, the country was divided. The soul of the people was divided. And so was the language. Not wishing to delve into many historical details, the essence of the political history of Modern Greece is this.

The clan-based Ottoman society of mainland Greece (the core of the modern Greek State), rural in its base and loyalty, paternalistic in its nature, non-national but local, non-idealist but practical, infused the spirit of the institutions of the State. Government, instead of shaping a new, national society of law-abiding citizens, was consumed by the previous Ottoman social morphs. The clans transferred their power to members of the parliament, ministers, political families, kings and dictators, etc. The inequalities stemming from this state of affaires became intensified after 1922, when millions of Asia Minor Greeks (i.e. Christian Orthodox but not necessarily Greek-speaking) arrived in mainland Greece. They, not being part of the clan system that held sway, were marginalized from the start. Soon, and as Greece became increasingly industrialized, the new labor force from Asia Minor became the backbone of socialism and the labor movement, demanding a new deal. This “new deal” was in fact a desire to transform society into a really modern state. This movement was subsequently appropriated by the communists, became extremist and led to the pointless, albeit bloody Civil War of the late 1940s. As a result of this disastrous fratricide, the hope of a “new deal” was killed at its infancy and the old clan-based Ottoman status quo survived even stronger. The rise of the so-called “Left” of the Pan-Hellenic Socialist Movement in the early 1980s was another appropriation of nationalistic idealism, this time in the darkest and most sinister form. Creating even deeper divisions in the already divided Greece, two decades of third-world “socialist” rule solidified the model of a state that serves an oligarchy. The only difference was the type of the new oligarchs. When during the preceding decades the ruling class was families who exploited the mineral wealth of the country, now it was the turn of media, public contractors and telecommunication magnates. Since the 1980s, whenever Conservatives and Socialists exchanged places in government, they made sure that the paternalistic status quo remained intact, whilst serving their respective oligarchies and buying out political power by means of recruiting voters into the civil service.

The dual nature of Greece

Today, after almost two centuries since 1826 when Greece became an independent country, it is a country of two people. What divides the people is their relationship to the State apparatus. Those who have a relationship with it – let us call them the “Old Greeks” - people like the civil servants and the entrepreneurs who deal with public contracts and procurements, are the direct or indirect beneficiaries of the State. The lowest in that clique (i.e. the civil servants) enjoy relative prosperity and security. The highest strata, the media barons, the construction company owners, are multi-millionaires. The State makes sure that laws are enacted (or not enacted) with such frequency and fluidity so that, in the end, anything goes - as long as it creates wealth for the ruling oligarchy and keeps the State-supported underclass (teachers, policemen, low-paid civil servants) clothed and fed and constantly wanting.

The West as the inventor

Europe invented Greece (modern and ancient) in the 18th and 19th centuries because Greece is what unifies Europe. Greece, not Rome with its savage history of power and deceipt. Greece, of white marble and pure thought, of brave heroes and the rest. Greece, of carefree walks and dance and wine and worrying little about anything. The Epicurean Greece. The place that must exist somewhere in order for life, the hard-working life, to have meaning. Greece is a western utopia. The irony, and tragedy for modern Greeks, is that the utopia of their country has become their reality.

Modern Greece, regardless my analysis, is a dream come true. Sometime the dream is a nightmare, sometimes is not. In any case, the dream is disconnected from reality, hence the billions in public debt. The Greek government did not really “lie” – it just said what everyone expected it to say. That, somehow, life can go on without care. Greeks have bought into the unreal and went on to sell their unreal treasury bonds to the world markets, which bought them too.

Reinventing poor Hellas

The process of reinvention can only come from the outside, not the inside. Greece cannot reinvent itself. It cannot awake from the dream world that has been pushed in for the past two centuries. The country and the people have been into it too deep. Even if the current crisis is overcome, Greece will return to business-as-usual soon afterwards. Make no mistake of it.

But the West, the original culprit of invention, can reinvent Greece. It can anihilate the dream of the inheritor of ancient glory and replace it with a model state without memories (false or not). The cost would be dire but, given enough time and peristence, even the anarchic Greeks can be taught a lesson in submission. So the current crisis is not just about money. It is about Europe, the other, bigger artifact. The reinvention of poor Hellas will be the reinvention of Europe.

Tuesday, January 12, 2010

The Edge Annual Question: How Is The Internet Changing the Way You Think?

There is no doubt that the Internet has changed the way people work, communicate, and relate to each other. It has created a new collaborative environment where teams can form ad hoc and work seamlessly in a manner not possible in pre-internet times. In doing so it has caused an economic paradigm shift from a molecule-based economy to a bit-based one with enormous impact across most industries.

The Internet has also changed the way people relate to each other. Social media have arrived at a time where a great number of people in technologically-advanced societies prefer safer and therefore shallower social relationships. By providing a middleware of make-believe personalities and touch-and-go messaging Facebook, Twitter and the rest are undermining much of the emotional depth of humanness. “Friends” are no longer what friends used to be.

Its impact on the western political system is perhaps less obvious but not least important. Representative democracy is being undermined constantly by the de facto disintegration of political constituencies as well as national borders. The Internet’s effect on newspapers and the media is more prominent and corrosive, but is comes a late second to the radical transformation of citizens allegiances.

All in all, the internet is facilitating modern globalization in unprecedented ways. Historically, various eras of nascent globalization (e.g the Achamenind, Hellenistic and Roman Empires, or the British Empire), lacked the communication technology to evolve into the next level; which explains, partly, historical regressions. This is no more the case. The Internet, thanks to its decentralized architecture and built-in redundancies, hinders regressions. For example,it is now virtually impossible to return to the days of nationalism because the net, and its users, can bypass whatever legal or physical obstacles nationalism may put on their way. This single fact has transformed much of the way we think about our own national identity, by changing traditional narratives of nationhood. Coupled with the current demographic tsunami of millions migrating from the poorest regions of the planet to the richer ones, it accelerates the challenging of many century-old ideas (or “myths” as they tend to be termed nowadays).

Which leaves us with two extreme scenarios for the future - and the most likely possibility that tomorrow will fall somewhere in between. The cyber-optimist would envision a digital noosphere morphing into a collective consciousness; the dawn of a brave new, truly global, civilization. National borders disappear, communities flourish, and so do free markets, liberty and free speech. The luddite-pessimist an era of strife where pre-Internet ways of thinking, nationalist philosophies, entrenched political systems, legacy legislators and post-romantic intellectuals, will desparately try to control the uncontrollable.