Monday, July 27, 2015

Greece off the grid and other Greek stories

There were small craft warnings out on the Chesapeake yesterday, so of course I went sailing.   No rain, no storms, just sun, wind, and a field of whitecaps all across the bay through a long afternoon.  On a day like that, though, in small craft warnings, in wind creating waves up the whole fetch of the Chesapeake, sailing is, let’s say, not entirely a passive experience, so I’m a bit stiff this morning.  And I was awakened this morning at a crazy early hour by thunder and a brief but energetic rain.  So I’m not out walking or running, or any of those things I keep trying to do to keep from aging too fast. 

Which means I’m sitting idly on my couch at 6:13 AM, wondering what to do with myself. 

I guess I have a few minutes to write.  So I might as well say something about what I thought was the most interesting piece in yesterday’s Washington Post: it was on the Sunday Opinion page, at the bottom, but it wasn’t exactly opinion.  It was simply an observation.  In the print version it was titled “Greece’s invisible economy”, but online it seems to be titled “Lessons in resiliance from rural Greece”.  In it, Alexis Adams, a resident of Red Lodge, Montana (but also apparently a resident of Leonidion, Greece), described a side of the Greek economy that will be largely undisturbed by the negotiations with Europe, or with the IMF, or with a change from the Euro to the Drachma, or the New Drachma, or as Mr. Adams points out, to the Obol, which was the Greek currency 2500 years ago.  As you might have guessed, he was describing the traditional lives of rural Greeks, where “traditional” is a condition established over centuries, or even millenia.

Here’s a snippet from Mr. Adams’ piece:

my neighbors in rural Greece carry on with their lives as they have for centuries. Invisible to most economists, they subsist in ways that cannot be measured easily by typical economic yardsticks. Nonetheless, their economy is real, will help them survive the current crisis”

His whole story, but particularly this quote, reminded me about something I’ve talked about here before (using Malala Cake as an excuse): GDP is a very rough estimate, and it very specifically does not include non-market activity.   It does not include household production of things.  So he’s probably right that the Greek GDP measures includes very little of the economic activity of Mr. Adams’ neighbors.  They grow their own food, make their own cloth, and raise sheep and goats that provide them with milk and cheese and meat.  Since these things are not bought or sold in markets, they do not appear in the GDP.  But they are, without question, economic activity of the most basic kind. 

And Mr. Adams declares that 39% of the Greek population lives like this.

The official measure of the ratio Greek government debt to Greek GDP is up in the range of 170% these days, but Greece’s GDP is severely depressed.  It has declined by about 25% since 2008.  If the Greek GDP even returned just to its 2008 value, the debt-to-GDP ratio would decline to about 130% (very rough numbers).  But that doesn’t account for any possible growth in potential GDP for the last 7 years.  And if Mr. Adams’ data is right, it takes no account at all of much of the production of nearly 40% of the Greek population.

The other interesting comment on Greece yesterday, or perhaps the day before, was this column by Joseph Stiglitz, Nobel Laureate in Economics and former Chief Economist at the World Bank.  Prof. Stiglitz has an even more caustic view of the European agreements with Greece than I do.  He says:

“One underlying problem in Greece, in both its economy and its politics, is the role of a group of wealthy people who control key sectors, including banks and the media, collectively referred to as the Greek oligarchs.”


“The rationale behind many of the key structural reforms has not been explained well, either to the Greek public or to economists trying to understand them. In the absence of such an explanation, there is a widespread belief here in Greece that special interests, in and out of the country, are using the troika to get what they could not have obtained by more democratic processes.”


“…special interests in the rest of Europe and some within Greece itself have taken advantage of the troika to push their own interests at the expense of ordinary Greek citizens and the country’s overall economy…When a country is down, there is all manner of mischief that can be done.”

And he, like many others, is skeptical that the current agreement will work at all, unless there is a quick and substantial change in the strategy of the European Commission and the European Central Bank (the IMF has already changed its strategy proposals for the better).  The expanded austerity will do nothing but expand the Greek depression, which will, by the same kind of arithmetic I used above, drive the Greek GDP further down and the Greek debt-to-GDP ratio up.  And as increasing unemployment and inequality mount, so will resentment. 

At least for 60% of the Greek population.  The 40% that Mr. Adams has described will apparently simply continue their lives as they have through all the history that has washed over them and around them over the last millennium or two.

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