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.