What Greece Needs

An article in the NYT today focuses on Greece’s microeconomic needs, rather than the macro needs that are more often stressed in the media. The author points to three central factors: regulation, fear, and size. The first refers to the notorious byzantine regulations and structures embedded in Greece today. It remains remarkably difficult to start a business in the country due to red tape, closed professions, and clientelism, even now. Fear refers to political uncertainty and the lack of ownership over structural reform and the austerity program. But it’s the final point that is key here, in my opinion – size. Here, the author is referring to the fact that Greece could never achieve an export-led recovery due to the fact that its businesses are overwhelmingly small, family-run operations. In fact, if one looks at the data, Greece is that mecca of small business that American politicians are constantly lauding (America is no such thing – the percentage of workers employed by companies with over 250 employees is higher here than in any other developed country, by quite a margin). As a result, Greece’s businesses were in no position to take advantage of reduced labor costs or devaluation and therefore could never be expected to lead an export-led recovery. This microeconomic perspective explains, in the author’s opinion, the Greek “divergence” from other peripheral European countries that implemented austerity programs.

I am not an economist, but the author’s latter point – on small businesses – is quite obviously a valid one. Anyone who knows anything about Greece knows this – the place is dominated by family-owned businesses and economies of scale are quite rare. Yet the author also advances the argument that SYRIZA does not intend to address problems pertaining to regulation or inefficiency. This is patently false. Tsipras and Varoufakis seem quite interested in doing so – and have stated directly that they want to modernize the public sector, root out corruption, and tackle tax evasion. We shall see how they do; it will be no easy task. But it is not accurate to claim that Syriza’s platform in no way will address the microeconomic problems Greece faces.

 

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