Why Greece is a Lost Cause

Published on 2015/03/17

Economically speaking, there is simply no future for Greece that would permit her people to maintain a standard of living comparable to that of other European countries. All the essentials are sorely amiss:

  • There is no innovative strength in Greece. Back in 2013, the country only ranked 55th in a list of 142 national economies, behind Uruguay, Mauritius and Serbia. There are many signs suggesting a lack in innovative strength, among them the fact that the number of Greek inventions and patents registered is negligible, to say the least. While 46,620 patents were filed in Germany in 2012, just 628 applications came from Greece.
  • The United States is home to business giants like Apple, Amazon, Facebook, Google, Microsoft, IBM and all the rest of them, while Germany is home to Mercedes, Volkswagen, BMW and a strong engineering industry. The Japanese excel at car making and in electronics, but which companies and products from Greece come to mind that have made a difference on the world market? The Greek stock exchange has always been dominated by banks (nearly all of which are practically bankrupt), one bottling company, and one lottery and sports betting company.
  • There is no functional system of state governance, which would include, for instance, an effective inland revenue service. Instead, years and years worth of unprocessed paper files stack up on the desks of Greek inland revenue offices. In this sort of situation, it is hardly helpful of the Greek Government to float the idea of a “reform” that seeks to enlist the help of tourists in tracking down tax dodgers. The way Greece is run is a far cry from any modern system of statecraft.
  • The demographic situation presents a devastating picture. The figure of 88 live births for every 10,000 residents is matched by a death rate of 110. Another 50 residents (mainly young talent) leave the country. Young people who are deprived of opportunities by biased labour legislation and unions that protect older employees in southern European countries (not just in Greece) prefer to emigrate – to Germany, among other countries.
  • What Greece lacks above all, though, is an economic culture in which people appreciate the merits of a market economy and of entrepreneurship.

Greece could perhaps (!) get back on its feet if it enacted consistent market economy reforms and created attractive parameters for investors. Perhaps, that is, if great ideas for companies with attractive business models came into play. But there is no sign suggesting anything of the sort.

A good way for the Greeks to get started would be to accept the bitter truth that they themselves – not the Germans – are to blame for their troubles. By the way, I see no reason to distinguish between the Greek citizenry and their government, however fair and empathetic such a distinction may seem. In a democratic society, the blame for electing a bad government into office lies squarely with the electorate. The people themselves are responsible for the consequences of their poor judgement. And there can be no doubt whatsoever that the administrations Greece has had these past decades were bad to the bone (as well as corrupt). It would be naive to assume that the government now formed by parties of the far left and right-wing populists will do a better job.

The world is actually not as complicated as it may occasionally seem: People are simply better off in countries that have made the leap and tackled market economy reforms. Historic cases in point include the reforms in the UK under Thatcher and in the US under Reagan. Another case in point would be the reforms tackled by the Schroeder administration in Germany in the early zero years. Or the market economy reforms in mainland China.

The new Government of Greece, by contrast, represents the very opposite. It has no intention to improve the investment conditions for domestic and foreign companies, but instead keeps requesting fresh capital from abroad

(just last week demanding “wartime reparations” from Germany) and is devoting itself to welfare programs rather than to improved parameters for investments.

It would be hard to imagine a Greek or foreign company that says: “Right on! This is a government that inspires confidence and makes me want to invest in Greece immediately!” The truth is that Greeks rich and poor will soon have withdrawn all their savings from domestic banks. The banks would long be insolvent if they were not propped up by the ECB.

Any private entrepreneur doing what the Greek Government does would have to answer to charges of failure to file for bankruptcy or bankruptcy fraud before a court of law.

So why has the EU stuck to its policy of helping Greece so far? Because it is common knowledge that Greece is not the only country plagued by these issues, but that the issues are simply more conspicuous in Greece than in, say, Italy. There is also concern that the exit of Greece from the eurozone could be followed by the country’s exit from the European Union – with corresponding geopolitical consequences.

There is, however, no alternative: Either the other countries keep subsidising Greece indefinitely (which is impossible in economic and political terms) or else the country will have to leave the eurozone. People in Greece will in this case have to come to terms with the fact that their geographic location in Europe does not necessarily entitle them to a European standard of living. Greece is not the only country that will have to accept the fact.

The future belongs to Asia. Neither should we underestimate the United States. Europe, though, will be increasingly compromised by the incompatibility of an extreme welfare state and negative demographic growth.

About the Author

Dr. Rainer Zitelmann is one of the leading experts for the strategic positioning and communications of companies.