Surajit Dasgupta is National Affairs Editor, Swarajya.
Hopefully, readers won’t find the comparisons Greek. The European country is a typical example of the ultimate fate socialism and populism meet. India, beware!
In terms of economics, this is the chronology that unfolded in Greece, which the whole news media is talking about today.
Greece enters Eurozone in 2001.
Unfortunately Europe goes into recession around 2008. Greece being poor, suffers more with 28 per cent unemployment.
Being part of Eurozone, Greece can’t print more drachma to reduce its value in international market and make Greek exports attractive.
The German-dominated European Central Bank is right for a robust Germany, does not work for a weak Greece.
Debt burden on Greece today: 177 per cent of its GDP.
Greece must come up with a loan payment of $1.8 billion to the IMF by yesterday, literally—30 June—to avoid a default.
Constant government borrowing to fund promises by politicians causes Greece’s cash crunch.
Early retirement age of 57 years adds to the government’s pension burden. In 2012, when the minimum wage of €751 was slashed by 22 per cent (or 32 per cent for under 25s), the government cut the basic rate of unemployment benefits back from €460 to €360 a month.
The wage bill of the Greek public sector doubles in 12-odd years, in real terms—and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private sector job. The national railroad has annual revenues of €100 million against an annual wage bill of €400 million, plus €300 million in other expenses.
It’s said that the Greek railway network is so underused and oversubsidised that it would be cheaper to put the train passengers into taxis. A cab from Thessaloniki to Athens would cost €700—that’s about €1.20 a kilometre, double the amount being paid to send people by train, if there is only one person in the taxi. The average state railroad employee earns €65,000 a year. And it’s public money that runs the railways.
The government led by Lukas Papademos that begins its innings in November 2011 has to enter a €130-billion loan agreement to meet public demand. The Greek central bank flies more than €5 billion in new bills into the country from the central banks of Italy and Austria in order to cover outstanding demand. All local banks go bust by early 2012.
The European Commission, the European Central Bank, and the IMF (referred, sometimes pejoratively by Greece’s socialist populace, as the “Troika”) finally offer Greece loan under the condition of steep hike in taxes and cuts in spending; Greece accepts the conditions and gets €240 billion ($268.8 billion); but this leads to domestic resentment; the people bring a leftist government to get more government aid.
Choices before Greece now: accept more austerity as demanded by the Troika, or exit the Eurozone; referendum on 5 July.
Defaulting on repayment is almost certain because most of the bailout money Greece receives is used to repay loans from its creditors. It is virtually impossible for Greece to pay down its enormous debt when the economy is under-performing.
With the possibility of Greek deposits in Euro soon turning into devalued drachmas, Greeks rush to ATMs to withdraw Euros for more value for their money; reacting to the development, its government shuts down banks.
ECB is likely to cut off its emergency cash infusions to Greek banks. Greece won’t get loans on palatable terms, forcing immediate and severe adjustments; Greek banks are likely to collapse, crippling whatever is left of the economy.
However, the Eurozone economy is firming up, bolstered in large part by the ECB’s government bond-buying programme designed to reflate the economy by keeping rates low and boosting economic activity; the 19-country Eurozone has emerged from recession and is growing at 0.4 per cent.
But how did things come to such a pass in Greece?
Populism began in Greece in the 1970s after a brief flirt with liberal economics. The Panhellenic Socialist Movement’s (PASOK’s) Andreas Papandreou promised the moon in this decade and, winning on that promise in 1981, began implementing the promises. The first of those was increasing people’s income through state employment and pensions; the total public sector employment in Greece increased during the 1980s at an average annual rate of about 4 per cent—around four times as fast as in the private sector. This is a lesson for India’s inflationary and exchequer-draining Pay Commissions.
Then, successive PASOK governments developed an ever-growing disrespect for political liberalism and its institutions, which, as their logic went, could be compromised, impaired, or otherwise twisted—as long as it was in favour of realising popular supremacy (read: winning elections). Following that reasoning, institution-building ceased to be a priority, and an idea of institutions as a means of achieving the gratification of the people was put firmly in place. This is a warning call for those who vote for a rabble-rousing party that promises “Swaraj”: the Aam Aadmi Party (AAP). The fascination with “rule and economy by the people” never went out of favour of the Greeks.
For most of the 1980s and 1990s, Greek interest rates had run a full 10 per cent higher than German ones, as Greeks were regarded as far less likely to repay a loan. There was no consumer credit in Greece: Greeks didn’t have credit cards. Greeks didn’t usually have mortgage loans, either.
A liberal Constantine Mitsotakis won in 1990 but lost power to Papandreou again in 1993. You may compare this with Narendra Modi’s win across India in 2014, which was a vote against the Sonia Gandhi-Manmohan Singh government’s bad economics, and its subsequent loss in Delhi in 2015, where people reposed faith in and voted for populist promises of freebies.
Take a free ride, AAP: Delhi is Greece!
Greek society, now grown highly averse to losing benefits already received (or expected) through patronage and populist politics, stood firmly against any reform. Sample this: The scale of Greek tax cheating is at least as incredible as its scope. An estimated two-thirds of Greek doctors report incomes under €12,000 a year because incomes below that amount weren’t taxable, which means that even plastic surgeons making millions a year pay no tax at all. The law made it a jailable offence to cheat the government out of more than €150,000 alright, but no ruling party enforced it. Else, every doctor in Greece would be in jail!
Politicians obliged; they gave the people the foolish policies they asked for. And on occasions where they desperately turned bold, they were punished at the polls. Remember how the AAP demanded in 2013 that those who participated in their “civil disobedience movement” by not paying their electricity bills be given amnesty by law?
The court ruled out selective application of law, but politically the AAP reaped the benefits in 2015, getting slum dwellers’ votes en masse. They also lapped up the promise of free water in a state where thirsty pockets had no pipelines, and electric supply at half the tariff with the other half being subsidised. This meant bribing us with our own money, but the lowest common denominator couldn’t care less for this brazen, immoral economics. And the BJP’s offer of electric service portability, like mobile telephony portability, had no takers in this year’s Delhi election.
Gauging a similar public mood in Greece, two new kids on the block—leftist Democratic Social Movement (DIKKI) under former PASOK minister of Finance, Dimitris Tsovolas and rightist Popular Orthodox Rally (LAOS), which was founded in 2000 by George Karatzaferis, a former National Democracy (ND) deputy—competed in demanding more populist measures in their respective ways from the government.
Domestic populism apart, the Greeks also wanted to grow big and be in international reckoning. For that, they needed entry into the Eurozone. The countries running it said they would let Greece into the club if it could tame its wild budgetary deficit and bring it down to 3 per cent of the GDP. By 2000, Greece managed it with statistical manipulation.
The manipulation continued after Greece’s entry into the Eurozone. Miranda Xafa, a former IMF official turned economic adviser to former Greek Prime Minister Mitsotakis-turned-Salomon Brothers analyst, pointed out in 1998 that if you added up all the Greek budget deficits over the previous 15 years, they amounted to only half the Greek debt. That is, the amount of money the Greek government had borrowed to fund its operations was twice its declared shortfalls. “At Salomon we used to call him (the then head of the Greek National Statistical Service) ‘the Magician,’” says Xafa, “because of his ability to magically make inflation, the deficit, and the debt disappear.”
The minority question
Now we come to studying the political right wing in that country and ours—especially what they do to develop their own vote banks in reaction to the vote banks developed through entitlements and appeasement politics. Patriotism, which is a noble philosophy, turns into supremacist nationalism in order to cultivate the fringe elements as votaries of one’s party (but they stop short of demanding full re-establishment of the ancient world).
The way the extreme Hindu right-wing demands Akhand Bharat (meaning annexation of Pakistan and Bangladesh), the Greek right wing Golden Dawn has been demanding annexation of Albania and Turkey including the Turkish cities of Istanbul and Izmir (but not the full territory under the ancient Greek civilisation). Another right wing party LAOS is anti-American and anti-Semitist.
At the other end, while minorities are adequately represented in Greece— currently represented in Parliament by the PASOK’s Çetin Mandacı and Ahmet Hacıosman—they do not stop complaining. It’s not new. During the 2002 local elections, approximately 250 Muslim municipal and prefectural councillors and mayors were elected, and the Vice-Prefect of Rhodope is a Muslim, too. Yet, look at their grievance mongering. Muslims don’t object when the Turkish state appoints muftis, but they disagree when the Greek state does so. Importantly, these muftis perform several judicial functions and, hence, cannot be let loose by the State. But as is seen in the Human Rights Watch’s pro-minority tilt in India, it is pro-minority in Greece, too.
And comparable to our problem of Bangladeshi infiltrators, Greeks have a problem in identifying who all sneaked in. So they developed an Article 19 of the Greek Citizenship Code, which allowed the government to revoke the citizenship of non-ethnic Greeks who left the country. Finally this law had to be scrapped in 1998 under domestic pressure from minorities and international pressure exerted by bleeding-heart human rights activists and countries supportive of them.
All this irks the ethnic Greek majority in the country. They hit back with orthodoxy and branding.
Activists of the Greek right wing Anexartitoi Ellines (ANEL) uphold family values and promote Greek orthodox religion. They don’t care for the liberal philosophy that a citizen’s family is no business of the State or a political party. ANEL’s second agenda has an Indian parallel: the attempt to regiment Hindus along the lines of radical Islam. If moderate and extremist Muslims are ‘good’ and ‘bad’ Muslim —or ‘true’ Muslims or un-Islamic apostates—depending on who the accuser and the accused are, if you do not agree with the Hindu right, you are a traitor or Jaichand (who betrayed Prithviraj Chauhan to Mohammad Ghori) in popular parlance.
How to pander and ruin a country
The political right wing in any country is often found leftist in economics. In India, they demand that FDI in retail and GM crops in agriculture should not be allowed. In Greece, they demand that only ‘pure Greeks’ be allowed into “poor people’s kitchens”—a programme of the Golden Dawn like Amma’s Kitchens started by J. Jayalalithaa in Tamil Nadu. To hell with competition and inclusion!
While some grievances of the majority in both India and Greece are legitimate, they forget a political theory proven historically right always: The rich turn averse to politics because activism does not suit business. If the minorities turn rabid in their demands every now and then, the best way to tackle them is to see them flourish economically.
An Azim Premji, for example, will never join a demonstration at the Jama Masjid to demand that the Indian Parliament condemn Israel’s actions in Palestine like a poor Muslim barber, cobbler, manual scavenger or craftsman would, just as a Mukesh Ambani or Gautam Adani won’t demand a Ram temple—like an unemployed Hindu youth of Uttar Pradesh would, ferociously. Business, employment and income growth of citizens are the most effective antidotes to people’s communal and other sectarian tendencies.
Now let’s study the socialist parallels. In October 2009, like Arvind Kejriwal’s leitmotifs Ambani and Adani, PASOK’s leader George Papandreou, son of the party founder, won by a landslide after a bitter campaign dominated by his slogan, “The money exists; it is only that [the ND government] prefers to give it to the few and powerful.” After that, everything in Greece went downhill.
Comparable to India Against Corruption and the Aam Aadmi Party’s “sab chor hain”/ “all parties and politicians are corrupt” campaign beginning 2011-12— but violent in manifestation unlike the Indian counterpart—Greece experienced mass social unrest that involved strikes, demonstrations, sit-ins, arson attacks against public buildings and widespread destruction of private properties, verbal and physical attacks against MPs and Parliament, and terrorist attacks, many of which were directed towards immigrants during the period beginning with the first bailout (May 2010) and ending with the general elections of June 2012.
The radicalisation of the Greek electorate culminated with the advent of the Greek indignados, who, for many weeks in the tumultuous summer of 2011, filled the country’s city squares. The element that united the revolting society was a common desire to punish both the old government parties and political class for having let them down and, my means of newly emergent populist forces, reclaim the “sovereignty of the people”.
There is another lesson Kejriwal must have taken from Greece. On the organisational side, Panos Kammenos never misses a chance to claim that ANEL is a movement, rather than a party, born from within the popular mobilisations of 2011 and organised through Facebook and Twitter. Yet, the party remains a personality cult. ANEL’s leader employs rhetoric that is broadly based on two mail pillars: anti-corruption and the conspiracy of the New World Order.
As an MP of ND, he had always been famous for conducting research and producing documents that allegedly pointed to conspiracies or severe cases of mishandling of public finances, and had a habit of appearing to court to either defend himself in litigations against his person, or to accuse others as sycophants. He also accuses all the governing coalitions after 211 of being collaborators.
In the meantime, another India-like event happened in Greek politics. In the manner in which the AAP drew its initial campaigners from the BJP and voters from Congress vote banks, the Coalition of the Radical Left (SYRIZA) in Greece, most popular with wage earners, the unemployed and university students, drew 39 per cent of its votes from PASOK, 12 per cent from ND and 26 per cent from other sources.
Reforms vs populism
Now go back to India of 1991-92 and compare the Troika’s demands on Greece for a loan extension with the IMF and the World Bank’s conditions for loans imposed on the P.V. Narasimha Rao government following India’s balance of payment and gold mortgage crises, which the then prime minister accepted, unleashing liberalization, but then losing in the 1996 elections, when the people find allegations of corruption against his government more significant than the lakhs of Indians he helped turn rich. [Few, if any, of those allegations stood the scrutiny of courts of law.]
But populism is so mad that it can topple the greatest of populists. Like MGNREGA and Food Security Act couldn’t save the Sonia-Manmohan government, in Greece it couldn’t save Papandreou either. He resigned in November 2011.
Whereas the ND regained some votes from its abysmal performance in May 2012, its score was below 30 per cent. Will populism deal a similar blow to India’s NDA? Like the present government here refuses to scrap the schemes launched by the Congress though it had campaigned against them, ND first campaigned against bailouts while in the opposition, but later supported the Papademos Cabinet. The way the ND’s followers dumped the party for this U-turn, will the BJP’s dump theirs in 2019?
Why we’re doing better than Greece
If despite such astonishing parallels between Greece and India, we are not collapsing, it is because we are a much larger and varied society and economy, which does not earn from international sources from tourism alone, unlike the poor European country. But socialism and misplaced right wing jingoism are certainly holding us back from what we could achieve. If India had been Delhi, the country would have gone to the dogs by now—with a Congress-Janata-AAP combine’s freebies, entitlements, goonda rajand appeasement politics gaining popularity, forcing the BJP-Shiv Sena-Akali Dal combine to take recourse to Hindu-Marathi-Sikh sub-nationalism, phobia of competition in the market and aversion to scholarly science and history in education.
Thank God, India is too big to fall for such petty political games. But God does not and will not stand by idiots and cowards always. If the right wing believes the left wing is wrong, it is stupid to try matching the rival’s populism with one’s own. The party that can deliver us from the gloom is one which does something unique, something none dares to adopt: right-wing economics—a pro-consumer, money-generating, poverty-alleviating, booming, vibrant India.
Following Greece’s apparently inevitable ouster from the Eurozone, the remaining, robust economies of the continent are likely to slash lending rates in trying to make themselves an attractive investment destination. India’s Finance Secretary Rajiv Mehrishi has said that the economic crisis in Greece may trigger capital outflows from India. Engineering exports from India may be impacted as the European Union is the largest destination for such shipments. There could be some temporary volatility in the financial market and if a Greece exit happens, then rupee might depreciate.
Robust forex reserves, which are at an all-time high of $355 billion, may cushion any possible impact of the crisis, and growth in India is anyway driven by domestic demand. Besides, the Greek situation has been developing for some time now, which has given our policy makers time to prepare contingency measures. But we know from the 2008-09 American subprime mortgage crisis that these factors could not prevent a slowdown in India. There is no alternative to fast second-generation reforms. One hopes that Narendra Modi and Arun Jaitley will rise to the occasion.
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