Posted by: Martin | September 11, 2010

Societal norms in Greece

Today’s must read is a story in Vanity Fair by Michael Lewis about coruption and societal norms in Greece as well as monks making the real estate deal of the decade.

Apparently things in Greece operate a lot like in the Ivory Coast.  Excerpts:

The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon which otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another. Individual Greeks are delightful: funny, warm, smart, and good company. I left two dozen interviews saying to myself, “What great people!” They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back. No success of any kind is regarded without suspicion. Everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families.

But the place does not behave as a collective;  It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good.

Where waste ends and theft begins almost doesn’t matter; the one masks and thus enables the other. It’s simply assumed, for instance, that anyone who is working for the government is meant to be bribed. People who go to public health clinics assume they will need to bribe doctors to actually take care of them. Government ministers who have spent their lives in public service emerge from office able to afford multi-million-dollar mansions and two or three country homes.

The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement. “If the law was enforced,” the tax collector said, “every doctor in Greece would be in jail.” I laughed, and he gave me a stare. “I am completely serious.” One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to 15 years to resolve tax cases. “The one who does not want to pay, and who gets caught, just goes to court,” he says. Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to the income tax goes officially unrecorded, he says, compared with an average of about 18 percent in the rest of Europe.

I wonder how much of economic activity subject to income tax (or tax in general) in the Ivory Coast goes unrecorded. Clearly more than 30-40%.  The most striking difference between the Ivory Coast and Greece seem otherwise to be that the Ivory Coast has not been able to borrow almost without limit at German government bond rates for a decade, thus not creating a gigantic government debt load.

And a similarity is that one can have great economic growth even in a low trust environment with an inefficient and corrupt public sector and government, but maybe not with bad demographics and a large debt load that has to be paid back to some extent (as opposed to be written off via the HIPC initiative)

Vatopaidi Monastery

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