Archived article by Mark Dragoumis – Kathimerini
As reported in To Vima on June 8, 2003, a Greek industrialist who had moved his $100m business to Bulgaria three years ago was asked why he had let his country down and chose to employ 1,800 Bulgarians instead of Greeks.
“Because in Bulgaria,” he said, “I obtained my license to open a factory in one week. Because in Bulgaria, tax inspectors are polite, helpful and do not try to blackmail us by threatening to dispute our tax returns unless we comply with their demands. Moreover, in Bulgaria the planning authorities do not demand bribes to grant planning consent for the extension of our premises. If, rarely, we need to see the minister he fixes a meeting with us within 48 hours. In Athens we are lucky if can see him once every two years. Oh! And something else. Labour is five times cheaper than in Greece!”
Should one conclude that countries paying reasonable wages are condemned to see jobs emigrate, one would be wrong. American wages are at least five times the Greek ones, while unemployment in the US is about half the Greek rate. It hovers around 5 percent while in Greece it stands at 9.5 percent. Why? Because the US produces cheaper and better goods thanks to its knowledge-based economy, employing a highly skilled and well-remunerated labour force.
Nonetheless, American investors do venture abroad in search of better conditions. As incredible as it may sound, this actually helps the American economy as shown in the Economist (December 13, 2003). A recent report on offshoring from McKinsey Global Institute estimates that every dollar the US moves offshore benefits not just the receiving country but also America to the tune of $1.12 to $1.14. The reason is simple: As low value-added jobs emigrate, labour and investment in the home country can and do switch to jobs that generate more value. This is what happened with manufacturing where employment has dwindled in the US, with workers moving into services where the pay is higher and conditions more agreeable. In a free market like the American one, any increase in the knowledge-based sector of the economy boosts innovation and increases the country’s wealth.
Unfortunately, Greece seems averse to innovation. Patent licenses issued in Greece per thousand of population in 2001 were 7.7 while in the EU it was 161 (one hundred and sixty one). For all the pious pledges by Simitis to promote the Lisbon goals for knowledge-based growth, nothing much is being done in Greece about it. Even the EU funds given to teach Greek taxi-drivers English have been squandered. Athenian cabbies are as unshaven, hirsute, foul-mouthed (in Greek) and strike-addicted tax dodgers as always.
Pompous politicians will certainly be telling Greeks during the long electoral campaign that has already begun that ‘Greece’s wealth is its people’. If so, this has been a national resource that has been seriously neglected, ignored, nay wasted. For one thing, according to the Eurostat report published in July 2003, the proportion of Greeks who are economically active (employed + unemployed) is close to 40% while in the EU countries it ranges between 50% and 65%. Do not rush to conclude that the Greeks are lazier than others but do ponder on the extent of the black economy in this country. It seems that those who cannot move their business to Bulgaria opt out of the system as much as they can while staying in the country.
This ‘system’ has been succinctly described in paragraph 246 of the 2002 OECD report that makes depressing reading: “Greece”, it says, “suffers from lack of skills and incentives leading to inefficiency, institutional paralysis, inadequate co-ordination, a legalistic mentality and a spirit of passivity and inertia, over-centralisation, lack of discipline and an aversion to competitive markets. On the other hand, clientelistic relationships and a unionist mentality permeate and paralyse everything.”
The European Commission is still very much concerned with the fact that labour productivity in Greece is still the second lowest in the EU, and that Greece has one of the lowest investment rates in research. It suggests improving the environment for business by reducing red tape and simplifying the tax system. On March 3, 2003, Mr Simitis admitted that the Lisbon EU summit goals on employment had not been reached but added that what was needed was not the deregulation of labour market but “how through new regulations (our emphasis) we can ensure the necessary adaptability in order to boost enterprise competitiveness and employment.”