Some Thoughts on Greek “Reforms”

Enough has been said for now on the sins of commission in the Greek austerity program.  (See Floyd Norris in today’s New York Times for an excellent dissection.)  I’m interested in what has been left off the agenda.

My starting premise is that the fundamental cause of Greece’s lack of competitiveness is not its wage level but its pervasive clientelism.  The beef against the national railway, for instance, is not that workers were overpaid, but that jobs were dished out as payoffs without any regard for the country’s transportation needs.  Taxes aren’t collected because tax sheltering is another payoff, in this case for the benefit of a higher income class.  Cartels carve up markets, and regulators look the other way—more payoffs and more waste.  One way to think about Greece is that it has the kind of economy Italy would have if it were all Mezzogiorno.

Although the complexities and national distinctiveness of the Greek political economy cannot be capture by any single model, a reasonable first approximation would be that the country is in the grip of a deeply-entrenched system of clientelism that spans nominally public and private sectors.  By clientelism, I mean a system in which patrons extend material benefits (jobs, tax shelters, monopolistic profits) to clients in return for offers of loyalty (votes, support in conflicts with other bigwigs, etc.).  The theory of clientelism was the topic of a paper I presented at the ASSA meetings in Chicago.

The troika has not directly targeted Greek clientelism, but what should we expect the unintended consequences of its demands to be for this de facto regime?  For instance, if numerical targets are imposed that result in public sector layoffs, will this lessen the grip of clientelism or make it even stronger?

I don’t think theory alone can answer such questions, but it can shed light on the mechanisms through which clientelistic relations operate and are either reinforced or broken.  Here are a few questions that come to mind:

Who controls which public sector jobs will be eliminated?  If some of the jobs are “honest” and others “payoffs” (I realize the reality is not so dichotomous, but this is an attempt to jumpstart a thought process), how will layoffs be apportioned between them?  If payoff jobs become more scarce, will they rise in value?  Will patrons be able to extract even more loyalty from clients by offering favors in a depleted environment?

If the minimum wages on which current payment formulas depend are cut by more than 20%, will the formulas themselves become more flexible, and therefore more susceptible to clientelistic manipulation?  Who gets to decide this?  Will an economy-wide salary freeze reduce clientelist discretion or displace more of it to the enforcement apparatus?

As state capacity falls, will this increase the scope for clientelistic relations according to the principle that the disinterested rule of law is a principal alternative to clientelism, or will it reduce the exercise of clientelism within the public sector itself—or both?  Will the state become more susceptible to the privatization of public goods (like public services) by officials using them to purchase personal loyalty?  In other words, which state capacities are likely to decline fastest and furthest?

Social scientists have become skilled at analyzing a wide range of institutions, such as markets, businesses, political parties and bureaucratic administration, but there has been no systematic investigation of clientelism corresponding to its status as one of the fundamental structures of social organization.  As a result, important questions about the Greek economy and society are not even being asked, much less investigated.