You might wonder how we can throw hundreds of billions of Euros at Greece and it just simply disappears, with nothing to show for it. Some of this money we just give to Greece in enormous grants, some of it is loaned to Greek government, companies and individuals by EU, the IMF, the ECB, bilaterally from other governments and commercially from banks and other institutions. It all just disappears. This is because the Greek economy has a number of diseases and it has them so badly that they are terminal. Here are some of them:
Corruption. This is when a contract for, say, a new port goes not to the best contractor but to the contractor giving the responsible government official the biggest bribe. The cost of this bribe is built into the contract, which becomes excessively expensive and public money disappears. In northern Europe and USA this is quite rare. In southern Europe it is normal, in Greece it is the standard way of doing business. It is all pervasive, bribe the examiner and you pass your driving test, bribe an official and you get blind person’s benefit for the rest of your life, even if you have perfect vision.
Cronyism. When the market is ignored and business is done on the basis of favours with friends and family. Sometimes this can be on a small but pervasive scale, as with much freemasonry. Sometimes it can be on the immense scale of huge defence contracts where there is no competition and just one company gets the business.
Corporatism. Where special interests are allowed to override capitalism. We see this in Greece with massive subsidies paid to various interests whilst the super rich ship owners pay no tax at all on their overseas earnings.
Clientelism. The exchange of goods and services for political support, often involving an implicit or explicit quid-pro-quo. In Greece a civil service job is seen as a well paid road to an easy life. But these jobs are the gift of politicians. So there are vastly more civil servants than are necessary, people given government jobs for favours. And the civil service is completely politicised so it works in the interests of individual political parties, not the interest of the people.
Social Justice. A terrible term this, much abused by lefties, but applicable here. There are a lot of really poor people in Greece who scratch subsistence out of a plot of land, whilst there is a super rich elite in Athens with their Ferraris, Porsches, mansions and designer clothes who owe their wealth solely to who they are and not to any contribution to society. They live on the fat of corruption and pay little tax.
Socialism. This is where the state owns and runs (very badly) business monopolies that stop the market working and where the state hands out other people’s money on the basis of what it perceives to be need. This has been tried many times around the world and it always fails. Greece is just one more example.
Worshiping False Prophets. “Economists” such as Krugman and Stiglitz believe that the state can and should interfere in how businesses are run, that the state knows better than the market. This is a primitive form of the science and is known as Keynsian economics and has very little real world relevance. More modern and sophisticated economists such as Hayek, Thatcher, Cowperthwaite, Laffer and Friedman laugh at this and implemented ideas which have generated great wealth for society. The comparison can be seen in Cuba Vs Hong Kong. And of course Greece chose the losers side of this debate and adopted economic practices which are downright harmful.
Black Money. This is when economic activity is not recorded by the state, usually this means cash transactions with no record kept and no tax paid. This underground economy could be as much as half of the Greek total and on an everyday basis is a lot more efficient than the formal economy. It is a solution to many of the other diseases. The real problem is that accumulated wealth leaves the country instead of remaining to be reinvested. And also the proceeds of corruption are parked offshore where they can do no good for Greece. It is estimated that there is 800 billion Euros of Greek black money in Switzerland alone. And there are many fine Greek owned mansions in London, the South of France and the other property hot spots.
Exodus. If you are young, well educated and intelligent there is no future for you in Greece unless you belong to one of the rich elite families. So all the talent leaves the country. Doctors, scientists, engineers and all the other high skill vocations. These people can build a far better life outside Greece than inside Greece. Which is what they do. Leaving the stupid, the uneducated and the feckless behind, with obvious consequence.
As you can see Greece is a text book case in how not to do it. And there are lessons here for every politician in the world. Allow any of the diseases listed above and your people will suffer. Root out and eliminate these diseases and your economy and your people will prosper.