The Greek trilemma

The crisis in Greece can be seen as an illustration of a trade-off between sovereignty, democracy and globalization. While all three are important building blocks of a modern European state, lessons from Eastern Europe show how accepting outside guidance can put a country on a path towards a healthier economy and better institutions.
Antoaneta L. Dimitrova
5 July 2011

As we watch with terrified fascination the sovereign debt crisis bring Greek political institutions to the verge of disintegration, the realization slowly may dawn on Europeans that this eruption may soon move from our TV screens to our streets and banks. So far, however, the public debate in ‘supporting’ European states such as Germany and the Netherlands is not so much focusing on the possibility of contagion and collapse, but on isolating the ‘sinful’, profligate Southerners. In a mirror image of misunderstanding, some Greek discourses appear to identify ‘foreigners’ - Germany, the IMF and the EU - as the evil forces of neoliberalism pressing them to pay debts made at the instigation of Western banks through an austerity program that aims to destroy the Greek economy. The increasing tensions created by the structural imbalances of Economic and Monetary Union (EMU) in the EU have clearly moved from the domain of economists, technocrats and politicians to a much broader public debate. The reason for this is that EMU and financial globalization have led to a situation where we need redistribution of resources from one part of Europe to another.

The Greek crisis can be seen as a perfect illustration of a trilemma articulated by Dani Rodrik in his recent book. Rodrik argues that it is impossible to sustain at the same time (financial and trade) globalisation, sovereignty and democracy. He states that globalisation has eroded national governments’ ability to manoeuvre independently and protect social groups most affected by the downsides of globalization. Fritz Scharpf has been making the similar argument that the EU’s institutional imbalances and EMU have affected negatively member state democracies by limiting both input and output legitimacy and eroding governments’ abilities to enact social policies to compensate and soften the effects of market liberalisation. What follows from this trilemma, at least for Rodrik, is that we must choose between national self-determination, national democratic politics and globalisation. For him it is clear that globalisation is what we can have less of. However, despite the deceptive simplicity of isolationist discourses this option is not immediately available for Greece or the EU, at least not in the short term, as the costs of exit from the euro are prohibitively high both for Greece and the Eurozone.

Accepting without debate the austerity programme that has been all but imposed by the EU and IMF without allowing for democratic choice does not appear to be the best option either, despite its attractiveness as an (allegedly) quick way to prevent a financial meltdown in Europe. As several commentators have pointed out on openDemocracy and elsewhere, the causes of the Greek crisis are to be found in Greek politics and governance as much as in global economic arrangements (most recently Takis Papas, ‘It’s the Politics, Stupid’ , 11 June 2011). Furthermore, there are positive developments that should not be ignored: the extreme circumstances seem to have spurred Greeks to reinvigorate direct democracy and reclaim debate as part of recent Syntagma square protests and as a way to decide the future of their country. They should certainly be supported in doing this.

If we accept that there is a trilemma between democracy, sovereignty and regional integration as a manifestation of financial globalisation, the only remaining choice seems paradoxical, but should be considered: to relax ideas of national sovereignty and accept outside guidance to reform the economy and the state. The Greeks do not appear to be ready to embrace this option yet, which is taken by many Europeans as a sign of unreasonable obstinacy and division. But rather than this it may simply be a quite understandable reaction of a public to being told that there is no choice but to accept an unalterable package of measures imposed from the outside.  This is where an essential fallacy lies. Politicians and the public in Northern Europe are certainly right to point out that Greece has no choice but to pay its debts. But there should be, as in every democracy, some choice given to the electorate and politicians on how payment and recovery may be achieved.

This should mean at least a choice between different reform programmes and proposals specifying how to restore the economy and reform structures of governance. As we have learned in Eastern Europe, there are different ways of carrying out reforms and restructuring a state, there are different institutional formats in which privatization can be carried out. Furthermore, these are all transformations that cannot and should not be done precipitately because the impact on governance and the economy could turn out to be the opposite of what one hopes for. Sell your state property in a ‘quick and dirty’ way and you create new injustices and possibly, as happened in some post-communist countries, a new class of oligarchs that aim to capture the state and foster corruption for their own gain. This cannot be the outcome other members of the Eurozone are hoping for.

It may be anathema to Greece to let go of some national sovereignty as Eastern Europeans did when negotiating with the EU and submitting themselves to the guidance of the European Commission and sometimes also the IMF in their reform efforts. But, undemocratic and asymmetric as this external guidance has been, procedurally speaking, it has, on balance, proved good for democracy and governance in Eastern Europe. It has been possible to carry out partly because the public in many Central and Eastern European (CEE) countries and certainly in the ones with the weakest democratic institutions such as Romania and Bulgaria, has trusted EU institutions more than national ones. Politicians have thus accepted the public’s permissive consensus to agree to EU conditions as the shortest route to modernization and reform.

Looking at the substance of EU accession conditions, some of them could clearly be applied to Greece in order to promote governance improvements. For example, the EU’s promotion of the establishment of civil services as independent, non-politicized administrations has helped limit, if not eliminate, political hiring and firing. Other ‘technical’ requirements raised during CEE accession have led to establishing useful institutions such as a working land register. Such reforms can hardly be identified as part of a global conspiracy of neoliberal elites aiming to push the state into oblivion. The European Commission in particular has helped improve governance in Eastern Europe by insisting on governments gathering and providing reliable data on all kinds of important aspects related to state capacity.

The availability of reliable data on the public sector seems to be of special importance in the Greek case.  First, such data is essential for the internal debate, especially in helping decide what needs to change in Greek institutions and policies. If, for example, Greece has five times more civil servants working for the central government than the Czech Republic, with just a slightly larger population, reformers may wish to seriously consider the administration’s efficiency and size. Currently, the lack of reliable data has led to anecdotal evidence being used to justify the need for reform. Just recently a prominent Dutch politician suggested in an internal party debate that Greek schools had a pupil-teacher ratio of nine to one, which, if true, is clearly unacceptable to the Dutch in the context of painful education reforms and increasing class sizes at home. It is difficult to verify and put in context such anecdotal examples, which itself underlines the need for better data to make the debate on Greek reforms in Europe more rational.

If the current crisis has any silver lining for Europe, it may be that a cross European political debate is taking place, one that includes politicians and the public, even if it is currently mostly an angry, emotional, often fact-free discourse. It would help Greek leaders and intellectuals to start gathering and providing more accurate and transparent information to the public in Greece as well as in Europe, even if this does not go together with traditional ideas of sovereignty or feelings of national pride. Without reliable data to judge the state of the state in Greece, it would be hard for its citizens to make up their mind on the justification of any potential reform measure and it would be equally hard for citizens elsewhere in Europe to form an opinion when politicians ask them to support Greece.

The ultimate goal has to be to improve not just the Greek economy, but also its institutions and government, so that political party patronage does not result in a huge and inefficient state and the public trusts that the state collects resources for the common good rather than the benefit of individuals. Thus, the key to resolving the crisis in Greece not in the short but in the medium term may be to start improving democracy and good governance. Any efforts that Greece makes to speak to the broader public in Europe and exchange insights and ideas with new and old member states in the EU may at the same time promote democracy in Europe.

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