Home > Uncategorized > Rewriting Greek economic history – the right way (and the ‘Jan Strupczewski’ way)

Rewriting Greek economic history – the right way (and the ‘Jan Strupczewski’ way)

The economic slump in Greece is even deeper than we thought and austerity played and even larger role in causing this slump. than we assumed, up to now. At least, according to two new serious studies by Elstat, one containing revised trade data and the other containing data on spending on health.

* The trade data show that the goods trade deficit (not the same thing as the current account!) was between 2006 and 2010 even larger than estimated up till now. Which means that (A) the macro economic capital inflow imbalance was even larger while (B) the spending bust after 2010 had even larger consequences than hitherto estimated (as the deficit dwindled even faster, thanks to an unprecedented decline in domestic demand).

* The health data show that health expenditures declined from about 9 to about 8% of GDP while the old data showed that the share of health expenditure was more or less stable at 9 % of GDP (mind that GDP declined with 25%). This means that (largely government financed) health expenditure declined even faster than we thought which i.e. contributed more to the slump.

Taken together, means that austerity was even more brutal than we thought. Economic history is, to quite an extent, ‘bean counting’. And counting more beans or counting them in a more precise way sometimes changes our view of the past. Which is what Elstat did. This contrary to the endeavours of mr. Jan Strupczewski, as far as I know a Reuters journalist, who does not bother to make any kind of serious calculation or even a basic investigation of even the data and qualifies himself as a non-serious journalist – writing an article which implies that Varoufakis is to blame for the consequences of the closing of the banks (not for the closing of the banks, no, the lack of trust inspired by Varoufakis is what caused the consequences of the closing of the banks. I agree, not a very consistent or serious position but that’s exactly the problem). Please, Jan, take a course inaccounting. Rewriting economic history? Please! But be serious and count the beans. Or do the kind of non-serious articles you write offer you more chances for career-enhancement in Brussels?

  1. July 18, 2015 at 3:04 pm

    When the dust settles we should remember that the problem that got Greece’s into this mess is not fiscal profligacy, or poor tax collection, or corruption, or inefficiency. It’s Greece’s trade deficit. Sure enough these other problems allowed the trade deficit to persist for several years and accumulate huge imbalances, as the government borrowed enormous sums at rates that were too low to support unsustainable and morally questionable consumption. If instead Greeks had borrowed individually to finance that consumption the bubble would have burst sooner, and it would have been obvious back in 2002 or 2003 that Greece’s problem in the Euro is its significant trade deficit. Greeks would have discovered, sooner, that the Euro makes them poor and perhaps would not be so self-destructively attached to it.

    And nobody has to be lazy or unproductive or otherwise uncompetitive to be causing such a trade deficit. Greece could have Europe’s most efficient dentists, lawyers, or bus drivers, and maybe it does, but it would still end up poor. Why? Because what matters is the proportion of a country’s economy that’s in the export sector. The whole economy, all the dentists and lawyers, and bus drivers, want to consume imports. If there’s just a few hoteliers and olive growers exporting stuff the country runs a deficit. If another country has lots of skilled workers making cars for export they run a surplus. Only the size and competitiveness of the export sector matters, not of the entire economy.

    Of course there’s a virtue in organising your country’s economy for export, and in being able to compete successfully in international matters. But that virtue probably isn’t thrift. I would guess it’s something more complex. And the way to turn things around, aside from reinstating a protectionist barrier like, I don’t know, a separate currency, is not to badger all those non-tradeable professionals to be more efficient. It’s to shift their numbers into greater numbers of exporters. General austerity is too blunt and destructive a price signal to do that with.

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