From Agrarian Trade to Special Economic Zones: Greece’s Big Question

by Nigel Bolton-Shaw on August 29, 2012

Greece is going to adopt the Chinese Way. According to reports, Greek officials have decided to combat the country’s incipient depression by creating “special economic zones” to provide tax breaks and regulatory advantages to companies that settle in Greece.

The European Union must approve such efforts – so much for national integrity – and may or may not do so. If it does, Greece will try to avail itself of a solution that has benefited Ireland, China and other countries.

Simple, huh? Not so fast … The difference is that Greece is, well … Greece.

Let’s begin at the beginning. Once upon a time the Greek economy was terrible but livable. The Greeks  haphazardly pursued an agrarian/tradesman-oriented lifestyle. Tourism was a leading industry.

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Creative chaos reigned in between bouts of dictatorship. Greeks pretended to pay taxes and the government pretended to provide services. The big Greek trade unions won terrific victories for their members and retirement was assured at 55 or younger.

Of course, most Greeks assumed in their Mediterranean way that what they were promised and what they would get were two different things.

There was for instance a lot of corruption and cronyism in Greek government as there was everywhere in Europe. Doctors didn’t report their swimming pools and yachts, tax collection was so rudimentary it wasn’t even computerized and it was simply assumed that those with access to the government till were “on the take.”

But that was all before the Euro. Once the Euro came in, things changed. The European Central Bank followed a fortress Euro approach, which meant that the Euro was fairly expensive compared to other currencies.

This contrasted to the miserable Drachma, which was just as inept (a currency) as the Greek central bank that supported it.

But the thing was, Greece did well with its miserable Drachma because it was a TOURIST-focused economy. Countries with devalued currencies are attractive to tourists. Everyone loves a bargain.

The ECB approach benefited Germany, which was an industrial power. Because Germany had an industrial inside track in Europe, it could sell a massive quantity of goods at high prices.

The Greeks were whipsawed. Most of the European “southern” countries with economic values and societies similar to Greece’s suffered a similar fate.

Only the Southern European countries and Greece especially didn’t realize the full extent of the damage until 2008. Then it became apparent.

For the Greeks, the reality was that European imports, valued under the Euro, would remain quite expensive while the tourists that had valued the cheap Drachma would be far less likely to arrive in Greece using the high priced Euro.

And that’s where Greece is today. It is a country that never took its governance very seriously. A 4,000 year-old agricultural society, it was not culturally sympathetic to the industrialization of the West.

But now things have got to change. Europe is insisting on “austerity” – and for the Greeks, austerity really means a Northern industrialized society.

The Greeks don’t HAVE an industrialized society. Tourism was big in Greece because it fit into the Greek culture and way of life. Now the Greeks will have to build big factories and create “innovation” to compete with Germany. And the Greeks don’t really like the Germans to begin with.

It was the ability to devalue the Drachma that kept the crazy, chaotic, live-for-the-moment Greek society afloat. When this happened, everyone suffered a little; but since everybody was affected equally, there wasn’t a great social upheaval. The dysfunctional Greek society just continued.

Now the Greeks are told they will be adopting the Anglo-Saxon/German model. Taxes will be efficiently collected, government will be run honestly, regulations will be enforced, wages will be cut, books will be balanced and common sense will reign.

This approach is to be taken with Portugal, Italy, Spain (and eventually France) as well. Will it work?

That’s the big question.

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