The remains of an economy

……. but it is like a beautiful woman whose face has been splashed with vitriol. Here and there, an arch, a pendant, a shattered remains of arcade, is all that is left of her renowned beauty… 

The great philhellene and author Lawrence Durrell was referring to the city of Zakynthos after the terrible earthquake of 1953. He could easily have been referring to the Greek Economy after two years of austerity measures that have destroyed hundreds of thousands of jobs, billions of Euros in invested capital and have plunged the population in a permanent state of clinical depression.

Transforming the last Soviet-era economy in Europe to a competitive market economy is not an easy task. It has proven difficult even for powerful leaders with clear objectives and an iron will (which is hardly the case here). Ironically many in Greece blame “capitalism” for all our woes when our economy is anything but “capitalistic”.

Instead of breaking the myriad of bonds that crush any productive economic effort (labor market rigidities, over-regulation, collapsed justice system, systemic corruption) the little men in charge of our rescue decided to tax the economy to death. By applying “horizontal” taxes and pay/pension cuts they have in fact distributed the cost of austerity very unfairly and, worst of all, in a way that has destroyed and is destroying both human capital (the hysteresis phenomenon in unemployment) and invested capital. This means that even if/when the economy picks up again it will balance at a much lower level of economic activity and will lack the means of real growth. And all this in order to “save” (in the medium term at best) the hundreds of thousands of state employees that ND and PASOK have piled upon us in their efforts to remain in power. And, despite Mr. Pangalo’s famous quote (“we “ate” them (i.e. the loans) together”), most of us Greeks were not sitting at his table. We are simply now paying the bill.