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Welfare Populism
and the Greek Crisis
Aristides N. Hatzis
Associate Professor
Philosophy of Law & Theory of Institutions
P...
 1929-1936: Anomalous political situation
 1936-1940: Dictatorship
 1940-1944: Word War II
 1944-1949: Civil War
 194...
1980: The 10th Member of the
European Communities
Greece circa 1980
public debt: 28% of GDP
deficit: < 3% of GDP
unemploym...
1981: PASOK
A modern Greek Tragedy
1981-2011: From Miracle to Nightmare
 30 years of getting subsidies from the EU,
borrowing and spending
 Minimal structu...
Borrowed Happiness
 average per capita income: $31,700 (2008)
 25th in the world (95% to the EU average)
 private spend...
1980-2010: the road to default
 1980 public debt: 28% of GDP
 1990 public debt: 89% of GDP
 2009 public debt: 142.8% of...
Greek public debt (percentage
of GDP)
Spending and Revenues: A Sad Story
GREECE 2010
 Public Debt: 142,8% of GDP
 €350 billion ($ 500 billion)
 Public Deficit: 15.4% of GDP
 “Growth”: -4.5% o...
Like there is no tomorrow!
A bloated Welfare State…
 Social benefits to households (percentage of GDP)
 from 22.0% (2004) to 26%.4 (2008) to 29.0% ...
An inefficient welfare state
The indicator of the efficiency of social
benefits in alleviating property is the worst in
t...
A helping hand to the rich
Greek Public Servants
A political culture of
Statism
Protectionism
Corruption
Cronyism
Nepotism
Rent-seeking
Irresponsible spending
Back to the 1980s
Austerity: two types of
adjustment
[T]here has been a very big
divergence between tax-based and
expenditure-based fiscal
a...
Greece is not a free-market
economy!
 Index of Economic Freedom-2015: 130/178
 Last in the EU
 Economic Freedom of the World-2014: 84/152
 Last in the EU
...
Greece’s neighborhood
 Extractive economic institutions:
Designed by the politically
powerful elites to extract
resources from the rest of
soci...
The Greek trap
 A bloated inefficient “welfare state”
but also
 Tax evasion (as a social right)
 A huge inefficient pub...
The Greek
Vikings*
Cost: €17-25 bn
* Pelagidis &
Mitsopoulos 2011
1974-2005
171.600 regulations!
 3.430 laws
 20.580 presidential decrees
 114.905 ministerial decisions
 32.585 local g...
Greek Extractive
Institutions
Index of Economic Freedom
Long-term score change (since1995)
Badly and urgently needed
Regulatory Reform
Taxation Reform
Welfare Reform
Institutional Reform
Conclusion
more market, more
growth, more jobs
Thank you!
ahatzis@phs.uoa.gr
English-language Facebook profile
https://www.facebook.com/aristides.hatzis2
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
Welfare Populism and the Greek Crisis
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Welfare Populism and the Greek Crisis

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Slides from my lecture at the regional conference of the European Students for Liberty - Sofia (Oct. 17, 2015)

Published in: News & Politics
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Welfare Populism and the Greek Crisis

  1. 1. Welfare Populism and the Greek Crisis Aristides N. Hatzis Associate Professor Philosophy of Law & Theory of Institutions Ph.D. (Law & Econ, U of Chicago) European Students for Liberty Sofia, Oct. 17, 2015
  2. 2.  1929-1936: Anomalous political situation  1936-1940: Dictatorship  1940-1944: Word War II  1944-1949: Civil War  1949-1967: Illiberal Democracy  1967-1974: Dictatorship  1974- : Constitutional Liberal Democracy
  3. 3. 1980: The 10th Member of the European Communities Greece circa 1980 public debt: 28% of GDP deficit: < 3% of GDP unemployment: 2-3% average growth rate 1975-1980: 4.6% inflation: 25% (due to the second oil crisis)
  4. 4. 1981: PASOK
  5. 5. A modern Greek Tragedy
  6. 6. 1981-2011: From Miracle to Nightmare  30 years of getting subsidies from the EU, borrowing and spending  Minimal structural reforms  Anti-market bias  The state controlled about 75% of all business assets  Bloated welfare state
  7. 7. Borrowed Happiness  average per capita income: $31,700 (2008)  25th in the world (95% to the EU average)  private spending: 12% more than the EU average (2009)  human development and quality of life indices: 22nd in the world (2010)
  8. 8. 1980-2010: the road to default  1980 public debt: 28% of GDP  1990 public debt: 89% of GDP  2009 public debt: 142.8% of GDP  almost 180% in late 2015, est. 200% in 2016  1980 public deficit: <3% of GDP  2009 public deficit: 15.4% of GDP  1980 government spending: 29% of GDP  2009 government spending: 53.1% of GDP
  9. 9. Greek public debt (percentage of GDP)
  10. 10. Spending and Revenues: A Sad Story
  11. 11. GREECE 2010  Public Debt: 142,8% of GDP  €350 billion ($ 500 billion)  Public Deficit: 15.4% of GDP  “Growth”: -4.5% of GDP
  12. 12. Like there is no tomorrow!
  13. 13. A bloated Welfare State…  Social benefits to households (percentage of GDP)  from 22.0% (2004) to 26%.4 (2008) to 29.0% (2009)  (from 2004 to 2009 “conservatives” ruled Greece)  half of it went to pensions  “social transfers” (subsidies to the pension funds of powerful professional groups) equals 52% of this half – 6.34% of GDP in 2008.  EC pension projections (2009)  EU-27: 12.3% (2040) – 12.5 (2060)  Ireland: 6.4% (2040) – 8.6% (2060)  Portugal: 12.5% (2040) – 13.4% (2060)  Spain: 13.2% (2040) – 15.1% (2060)  Greece: 21.4% (2040) – 24.1% (2060)
  14. 14. An inefficient welfare state The indicator of the efficiency of social benefits in alleviating property is the worst in the E.U. (13%, where the EU average is 35% and some Scandinavian countries were as efficient as 70%!). In 2002 the indicator was a poor 4% with a EU average of 31%.
  15. 15. A helping hand to the rich
  16. 16. Greek Public Servants
  17. 17. A political culture of Statism Protectionism Corruption Cronyism Nepotism Rent-seeking Irresponsible spending
  18. 18. Back to the 1980s
  19. 19. Austerity: two types of adjustment [T]here has been a very big divergence between tax-based and expenditure-based fiscal adjustments. The former have indeed been very costly in terms of output losses. The latter much less so. Alesina et al. (2015), “Austerity in 2009-2013”
  20. 20. Greece is not a free-market economy!
  21. 21.  Index of Economic Freedom-2015: 130/178  Last in the EU  Economic Freedom of the World-2014: 84/152  Last in the EU  Global Competitiveness Report-2014/5: 81/144  Last in the EU  ICC Open Markets Index: 48/75  Last in the EU Mostly Unfree...
  22. 22. Greece’s neighborhood
  23. 23.  Extractive economic institutions: Designed by the politically powerful elites to extract resources from the rest of society.  Inclusive economic institutions: Secure property rights, law and order, markets and state support (public services and regulation) for markets; open to relatively free entry of new businesses; uphold contracts; access to education and opportunity for the great majority of citizens, i.e., create incentives for investment and innovation and a level playing field.
  24. 24. The Greek trap  A bloated inefficient “welfare state” but also  Tax evasion (as a social right)  A huge inefficient public sector  Corruption – essentially tolerated if not decriminalized  Public sector union power  Closed professions  Overregulation to ensure rent-seeking “A state made for the welfare of politically powerful pressure groups”
  25. 25. The Greek Vikings* Cost: €17-25 bn * Pelagidis & Mitsopoulos 2011
  26. 26. 1974-2005 171.600 regulations!  3.430 laws  20.580 presidential decrees  114.905 ministerial decisions  32.585 local government decisions Institute for Regulatory Policy Research
  27. 27. Greek Extractive Institutions Index of Economic Freedom Long-term score change (since1995)
  28. 28. Badly and urgently needed Regulatory Reform Taxation Reform Welfare Reform Institutional Reform
  29. 29. Conclusion more market, more growth, more jobs
  30. 30. Thank you! ahatzis@phs.uoa.gr English-language Facebook profile https://www.facebook.com/aristides.hatzis2

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