Aristides N Hatzis Associate Professor Philosophy of Law

Aristides N. Hatzis Associate Professor Philosophy of Law & Theory of Institutions Ph. D. (Law & Econ, U of Chicago) Greece at a crossroads What is at stake, and what to expect Atlas Network Webinar July 1, 2015

l 1929 -1936: Anomalous political situation l 1936 -1940: Dictatorship l 1940 -1944: Word War II l 1944 -1949: Civil War l 1949 -1967: Illiberal Democracy l 1967 -1974: Dictatorship l 1974 - : Constitutional Democracy

1980: The 10 th 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)

1981: PASOK

A modern Greek Tragedy

1981 -2011: From Miracle to Nightmare l 30 years of getting subsidies from the EU, borrowing and spending l Minimal structural reforms l Anti-market bias l The state controlled about 75% of all business assets l Bloated welfare state

Borrowed Happiness l average per capita income: $31, 700 (2008) – 25 th in the world (95% to the EU average) l private spending: 12% more than the EU average (2009) l human development and quality of life indices: 22 nd in the world (2010)

1980 -2010: the road to default l 1980 public debt: 28% of GDP l 1990 public debt: 89% of GDP l 2009 public debt: 142. 8% of GDP – almost 165% in late 2012 l 1980 public deficit: <3% of GDP l 2009 public deficit: 15. 4% of GDP l 1980 government spending: 29% of GDP l 2009 government spending: 53. 1% of GDP

Greek Public Servants

Greek public debt (percentage of GDP)

GREECE 2010 l Public Debt: 142, 8% of GDP – € 350 billion ($ 500 billion) l Public Deficit: 15. 4% of GDP l “Growth”: -4. 5% of GDP

Like there is no tomorrow!

A bloated Welfare State… l 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 l l “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)

An inefficient welfare state l 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%!). l In 2002 the indicator was a poor 4% with a EU average of 31%.

A helping hand to the rich

l Extractive economic institutions: Designed by the politically powerful elites to extract resources from the rest of society. l 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.

The Greek trap l l l l 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”

Greek Extractive Institutions Index of Economic Freedom Long-term score change (since 1995)

Low levels of trust l l l Government: 14, 6% (51, 7%) Courts: 40, 2% (52, 6%) Education system: 51, 8% (66, 1%) Other people 16, 5% (24, 2%) Philanthropy: 9% (28, 9%) Volunteerism 10% (20, 9%) Global average in parentheses

A political culture of l Statism l Protectionism l Corruption l Cronyism l Nepotism l Rent-seeking l Irresponsible spending

Greece is not a free-market economy!

Mostly Unfree. . . l l 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

Greece’s neighborhood

The Greek Vikings* Cost: € 1725 bn * Pelagidis & Mitsopoulos 2011

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

IMF Default They say, it’s our country and Greece. . . What a shame!

GREXIT Loony left to the Greek government: Don’t put the silencer. Let’s deafen those capitalists!

Badly and urgently needed l Regulatory l Taxation l Welfare Reform l Institutional Reform

Conclusion more market, more growth, more jobs

Thank you! ahatzis@phs. uoa. gr http: //www. phs. uoa. gr/ahatzis