Greece’s Last Evasion : Bret Stephens
http://www.wsj.com/articles/bret-stephens-greeces-last-evasion-1422316441?mod=hp_opinion
Why capitalism is the only real cure for corruption.
Whenever I think of Greece and its economy, I can’t help but recall the stool-sample story.
Sorry to begin on a scatological note, but here’s a revealing tale about a country that, by electing the radical left-wing Syriza party over the weekend, just voted itself down the toilet. In 2011, Greek entrepreneur Fotis Antonopoulos and his partners decided to start OliveShop.com, an online store specializing in organic olive-oil products.
Before they could start their business, they first needed the right paperwork. As recounted in the Greek newspaper e-Kathimerini, authorizations were required from the government tax office, the local municipality, the fire department. Also the bank, which insisted that the entire website be in Greek—and only in Greek—despite Mr. Antonopoulos’s attempts to explain that he intended to market his products to foreign customers.
And then there was the health department, which informed Mr. Antonopoulos that company shareholders would be required to furnish chest X-rays and, yes, stool samples. Greece has standards, you know.
It took OliveShop.com 10 months to get all the right stamps, certificates and signoffs. The problem with the bank was resolved only when Mr. Antonopoulos opted for PayPal instead. Registering with the U.S. Food and Drug Administration, by contrast, took him all of 24 hours and one five-minute digital form.
The stool story is a useful reminder that, when it comes to understanding the economic life of a nation, it’s worth looking at the micro-side first. As told in the pages of most Western newspapers, Greece’s economy is best measured in debt-to-GDP ratios (174.9% in 2014), external debt (still north of €400 billion), bond yields (9.3% on the 10-year) and so on.
These are all useful data points, assuming you know how to draw the right conclusions. But the study of economics—the word derives from the Greek oikos, meaning “house,” plus nemein, meaning “manage,” to form oikonomia, or “household management”—needs to start with the basics. Like: What does it take to start a business in Greece? What does it take just to get by?
The OliveShop tale is a case study in what it takes to start a business legally. Yet the whole purpose of these peculiar regulatory roadblocks is to create opportunities to grease the skids with a fakellaki—the little envelope, stuffed with cash—that gets you the necessary certificate, or the government contract, or the timely medical appointment. When I interviewed Syriza leader (now Prime Minister) Alexis Tsipras in New York two years ago, his first question to me was: “Here in the United States, why do you not have this phenomenon of passing money under the table?”
My answer was that you’re less likely to seek a bribe if you can make an honest profit instead: Capitalism is the only real cure for corruption. Mr. Tsipras demurred, arguing that what was really necessary was a “revolution in conscience.” Good luck to him with that.
The reality of Greece—and the one that now confronts Mr. Tsipras—is that the country has been playing economic make-believe for decades. The state offers national health insurance: People then pay bribes in order to obtain treatment. The state imposes stiff tax rates to comply with the expectations of Brussels or the demands of the International Monetary Fund: People then figure out how to evade their taxes. The state makes a show of maintaining a First World regulatory architecture: The regulations are subverted through bribery, misreporting and other fixes.
How do people get by? They cheat. That cheating is less a moral indictment of the cheaters individually, or of the character of the Greeks generally, than it is of the system that gives normal people no other good choice if they want to survive.
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Margaret Thatcher once quipped that the problem with socialism is that eventually you run out of other people’s money. For Greece, “eventually” took an especially long time, since it always found a way of freeloading off of someone else: Washington, after the Truman Doctrine was declared in 1947; Brussels, after it joined the European Community in 1981; Frankfurt, after it lied its way into the eurozone in 2001; Berlin, after the onset of the euro crisis in 2010.
Now the game might at last be up. German Chancellor Angela Merkel has made it clear that she will not allow Athens to renegotiate the terms of its bailout, which is what Mr. Tsipras had been counting on in the conceit that the EU would never let Greece fail. A bad bet.
Mr. Tsipras will now have to choose between buckling to the demands of his paymasters, doubling down on socialism, finding another rescuer (maybe China, since Russia is no longer available), or belatedly discovering the virtues of free markets that allow the rule of law to take root.
My guess is that Mr. Tsipras will find a face-saving way to buckle, and Greece will continue to stagger along. The most painful outcome, but perhaps also the best, would be a forced Greek exit from the eurozone that serves as a dramatic warning to the rest of Europe’s lackluster reformers about what happens to countries that take their economics lessons from the op-ed page of the New York Times.
The vote for Mr. Tsipras and his radical leftists is Greece’s final flight from reality. Elections have consequences. The Greeks are about to discover theirs.
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