Greece should learn from California

ELENA AMBROSIADOU

The crisis in Greece is very serious. In the short term there will be little or no investment, with negative growth.
Why? Because insufficient cost savings make it harder to meet payment schedules, and there is no stimulus for demand, from Sunday shopping, to straightforward infrastructure developments.
What has Greece been doing wrong? Taking too long to act has made loans more expensive, has weakened asset valuations, has undermined confidence and increased fear.
Greece should have restructured 20% of its public sector workforce at the outset. Instead it has sacrificed private enterprise by overtaxing, thereby entering a death spiral of ever lower demand. It has not focused on protecting vital activities, in favour of appeasement, misplaced efficiency drives, and dangerous neglect and corruption.
An example of appeasement is the public TV and Radio. There are 3 broadcasting institutions. Only one is needed but no changes have been made. Similarly there are several institutions for managing public buildings from schools to courts. Essential public infrastructure is under-invested, often crumbling – a fact which makes many Greeks uncomfortable in their country. Just one institution with proper systems and technology, and a long term plan, would deliver a better result at a fraction of the cost. An example of misplaced and destructive pretence to efficiency is the disruption of the taxi sector in the middle of the tourist season last summer.
Corruption is effected through the building up of the oversized and over expensive public sector. Salaries have been high not because public sector workers are adding value to the economy through the application of technology and innovation, but because cash was available to employ them in exchange for political loyalty via a network of favours. Additions to pension and other ancillary benefits have created a disaster in at least three ways. Public sector employment starved the private sector of a high quality workforce, it made the private sector dependent on the public sector, and vulnerable to any economic crisis, and it prevented rationalisation of any industry, or ministry, or sector of the economy. The corruption of Greece is not just in the tax collection system. Cash was not invested in laying the foundations of an efficient sustainable economy and was wasted through the lack of political will to implement a strategic plan.
In the current government scheme, elected politicians from across the spectrum have to work together, see the problem together and deliver a result together, which any party alone would not have been able to implement. Our politicians know that, and yet they keep offering elections without any ability to protect the safety of the citizens. The interim government has been created but it has not had the power to enforce the changes required. The plan and budget will have to be followed by whoever is in power without fail. This is what the people of Greece deserve.
There is one other well-known state in the world where many citizens are rich but the public treasury out of balance. California, the state of innovation. But there is no talk of throwing it out of the USA or the currency not being the dollar, and the root of the problem is not a north south divide in production and demand. It developed and grew out of proportion by relying on balancing the budget through ever increasing bond issuance.
I logged on the internet to see the California government state budget. Here is what its Governor has written in his introduction:
“The 2011 budget did … lay the foundation for fiscal stability. It cut the annual budget shortfall by three quarters — from $20 billion to $5 billion or less. It shrunk state government, reduced our borrowing costs and gave local governments more authority to make decisions.
The budget that I am submitting today keeps the cuts made last year and adds new ones. The stark truth is that without some new taxes, damaging cuts to schools, universities, public safety and our courts will only increase. That is why I will ask the voters to approve a temporary tax increase on the wealthy, a modest and temporary increase in the sales tax and to guarantee that the new revenues be spent only on education.” And more detailed information is provided on the website about each sector of the economy and those services under government control and their rationalisation as well as the growth plans.
When one looks at Greece, the private sector involvement and the international effort made for stability, one realises that Greek society has to change on an unprecedented scale. Like any people, Greek people do not want change, yet this could be helped if they are offered hope. Let us allow the spirit of improved management which controls the unions, eliminates senseless benefits, and delivers measurable contraction of the size of the public sector, together with a growth led approach to managing the economy, deliver
What about the future of Europe and Greece within it? In the banking sector, Goldman Sachs, and JP Morgan with caution expect that the Euro will hold and Europe will hold whatever the pain and conceptual, structural, and political adjustment for all Europeans. The Euro is also here to stay for Greece; the borders of Europe are the borders of Greece; the population of Europe is the brethren of Greece. Let us not be afraid to make that commitment to our future, to our allies, and to ourselves. It takes courage to accept what is wrong, and even more courage to subject oneself to the operating table without anaesthetic. But without it, there is no chance of survival.