Why Greece failed

How different is Greece? The beginning of wisdom about the current Greek crisis is to recognize that it is fundamentally political, and that it has been long in the making. Greece’s failure is the outcome of a long process during which populism prevailed over liberalism and became hegemonic in society.

Takis S Pappas
16 April 2013

The 182nd Prime Minister of Greece George Papandreou with the former Prime Minister Kostas Karamanlis in the ceremony for the official handover at the Maximos Mansion in Athens, Greece, 6 October 2009. Wikimedia commons. Some rights reserved.

Cultural theories relate the fate of states to culture, and more particularly to its geographical and historical determinants. Countries with hot climates (such as those in Africa), situated in dangerous areas (the Middle East or the Balkans, for instance), or with adverse histories (experiences of having been colonized or engulfed by civil war, let us say) are more likely to remain poor and to fail politically than countries that enjoy more temperate climes, safer neighbourhoods, and happier pasts. Cultural interpretations of Greece’s current political maladies (including the common perception of Greeks as lazy) are not in short supply.

Institutional theories, by contrast, hold that nations stand or fall by their institutions—strong and resilient institutions mean that major political and economic crises can be withstood, while weak institutions crumple and fold under history’s harsh test. Daron Acemoglu and James Robinson, for instance, have recently advanced a comprehensive institutional theory of “why nations fail” that attributes this to a lack of political pluralism and therefore of inclusive economic institutions. “Rich nations are rich,” these authors argue, “because they managed to create inclusive institutions.” In contrast, the most common reason for the failure of nations today is the presence of extractive institutions, as these “keep poor countries poor and prevent them from embarking on a path to economic growth.”

The Greek case, however, puts both conventional theories to a stern test. Cultural theories fall short of explaining how post-1974 Greece succeeded in building a pluralist political regime despite its ostensibly adverse geographical, historical, and cultural conditioning. And institutional theories are at pains to account for Greece’s recent failure, which was not caused by a lack of inclusive political and economic institutions but rather happened in spite of them.

Greece, especially when compared to other similarly debt-ridden European countries such as Spain, Italy, Portugal, or Ireland, is uniquely puzzling in at least two ways. It is both the only country in Europe that saw its state fail in key areas during the recent economic crisis, and the European country that has proven the most resistant to reform. To be credible, therefore, any explanation of the Greek puzzle must account for both the causes that led to state failure and the reasons for the exceptionally strong resistance to reforms aimed at restoring to Greece a sustainable state and the ability to compete in global markets.

To this end, I will attempt to synthesize the cultural and institutional theories in order to propose a unified explanation that focuses on the role played by political mechanisms. The beginning of wisdom about the current Greek crisis is to recognize that it is fundamentally political, and that it has been long in the making. Greece’s failure is the outcome of a long process during which populism prevailed over liberalism and became hegemonic in society. I herein understand populism simply as democratic illiberalism and view it as the polar opposite of political liberalism. It will be shown that, after having reached power in 1981, populism permeated Greek politics and produced what I will call a “populist democracy,” which in turn required two mechanisms: a state bent on handing out political rents to practically every member of society; and a party system built to ensure the distribution of these rents in an orderly and democratic way—that is, by turns rather than in one go. Taken together, these two mechanisms led to a fine coordination of aims between the political class and the vast majority of Greeks, enabling both sides to exploit the state and its resources in a seemingly non–zero-sum fashion. 

Populism triumphant 

Andreas Papandreou (1919–96) rose to power by attacking the liberal foundations of a fledgling postauthoritarian Greek democracy from the left, questioning its legitimacy and rejecting its goals.

Whereas Karamanlis, who explicitly acknowledged the multiplicity of conflicts in society, had emphasized moderation and actively pursued political consensus, Papandreou introduced populism in its purest form. A master at politicizing resentment, he offered the Greek people a wholly new symbolic master narrative according to which society was divided between two inherently antagonistic groups—an exploiting “establishment,” both domestic and foreign, and the pure “people” standing in opposition to it. Largely as a result of this division, Greek politics assumed a highly confrontational style and also turned distinctly majoritarian. It was to remain so for more than three decades.

In the 1981 national elections, PASOK, the party that Papandreou had founded only seven years earlier, won by a landslide and formed its first single-party government. The new government, abandoning Karamanlis’s strategy of state-led growth and now also receiving generous EU handouts, undertook state-directed redistribution. At the same time, political polarization, rather than subsiding, became more intense. By portraying Greek society as torn between the “forces of light” (meaning PASOK voters and sympathizers) and the “forces of darkness” (meaning opposition voters), the new government used the state and its resources to satisfy its own electoral constituencies and reap further electoral gains, while passing the cost on to the whole of society.

In 1990, after almost a decade of populism, New Democracy returned to office under the leadership of liberal politician Constantine Mitsotakis. Trying to reverse previous practices, the new government moved swiftly to reinvigorate Greece’s economy, reinforce its political institutions, and repair strained relations with Washington and the European allies. With regard to the economy, the ND government made preparing the country for the European single market the top priority, and accordingly moved to cut public spending and reform the civil service. A privatization agenda was adopted with the same goal in mind. The opposition’s intense resistance made the proposed structural reforms and policy alternatives hard to implement, however, and in 1993 the ND government collapsed, opening the way for Papandreou and PASOK to return to power.

After its dismal, defeat-capped spell in power in the early 1990s, ND faced a choice: Should it cling to liberalism or learn to play the game of vote-catching populism? As it turned out, the Mitsotakis government had been liberalism’s feeble last hurrah. Populism’s strong pull soon made it a permanent feature of Greek politics. By the mid-1990s, ND had rebranded itself as a “people’s party” and thereafter tried to outbid PASOK’s already excessive promises. This trend became particularly pronounced when Costas Karamanlis, the founder’s nephew, served as ND’s leader between 1997 and 2009. He expelled the most prominent proponents of political liberalism from the party and took to spouting rhetoric that made him sound more like Andreas Papandreou than like his own uncle and mentor.

Indeed, the failure to make badly needed changes in such key areas as pensions and health (under PASOK) and education (under ND) became the most striking feature of all governments in Greece’s populist democracy. Not only were these reforms opposed by strong interests in society and never fully implemented, but the politicians who sought to introduce them were punished at the polls, and some retired from public life. Reformism stood exposed as a political loser.

Thus for three decades—from PASOK’s rise to power under Andreas Papandreou in 1981 to the resignation of his son, Prime Minister George Papandreou, to allow a caretaker government to deal with the debt crisis in 2011—Greece’s two major parties had been able to hold office alternately, in most cases commanding ample parliamentary majorities: PASOK ruled during 1981–89, 1993–2004, and 2009–11; ND enjoyed office during 1990–93 and 2004–2009. The stillborn coalition governments that formed during the extraordinary circumstances of the short period extending from June 1989 to April 1990 (and that also included the Greek Communist Party) stand as an unusual parenthesis within the two major parties’ consistent alternation in power.

During those decades, Greece developed as a populist democracy, a democratic subtype in which the party in government and (at least) the major opposition party both are populist. What were the nuts and bolts of this system, and how did it last for such a long time? In order to answer these questions, we must first understand the two chief mechanisms that made populist democracy feasible: the redistributive capacity of the increasingly large Greek state and the polarizing mechanics of the Greek party system.

Political patronage, Greek-style

In the view of many, political patronage is the main cause of the Greek crisis. In mainstream theory, patronage is seen as a linkage between politicians and citizens. Such patron-client ties are “based on direct material inducements targeted to individuals and small groups of citizens whom politicians know to be highly responsive to such side-payments and willing to surrender their vote for the right price.” In this understanding, patronage has two features: first, a distribution of state-related benefits (or political rents) to specifically targeted social groups; and second, the material character of such inducements. Greece’s populist democracy, however, exhibited a variant of patronage whose features are notably different from those recognized by mainstream theory.

The first Greek particularity was that rents and other inducements or entitlements were not only material, but also included benefits such as widespread de facto immunity from the law. The second difference is related to the nature of populist democracy itself: Inducements were still targeted at specific groups but, since society had been divided into two irreconcilable parts represented by parties regularly alternating in power, all citizens could reasonably expect to gain from patronage once their own party won elections.

Overall, Greek society became the recipient of three types of state-related benefits: real incomes (such as salaries and pensions) derived from classical patronage functions; privileged protection against market risks; and impunity from the law.

For several decades, then, practically every Greek could reap rents from the state. The existence of such a varied array of rent-gathering mechanisms had a common effect on the Greek mindset, as “almost all Greeks, from large business owners to small landowners on islands and to municipal clerks in villages, [came to] believe it is natural to have some income which derives neither from work nor from risking capital.” Still, given the finite nature of state-related resources, there needed to be a way of distributing them in a prudent and politically sustainable way. This brings us to the second mechanism that made populist democracy workable for a time—the party system. 

Polarized bipartism 

The 1981 election spawned an unusual party system that combined the format of two-party politics with the mechanics of polarized pluralism, which I will call “polarized bipartism.” It served to keep society divided into two conflicting parts, each represented by a major party. The regular alternation in power of the two rival parties made possible the distribution of political rents to society in an orderly, democratic, and economical way.

Interestingly enough, partisan polarization in Greece has not been primarily ideological, as happens in pluralist systems with multiple cleavages (such as differences of class, language, region, or religion, which often create deep social rifts) and a large spread of public opinion. Greek polarization has instead been strategic polarization, pursued deliberately by pragmatic parties competing to grab the state single-handedly and control its resources. To this purpose, each party had an incentive to step up polarization as it tried to win the non-ideological, ambivalent voters in the middle through various inducements. This not only forged in-group solidarity; it also increased the insecurity of political opposition and, therefore, the chances of its fragmentation.

Not long after its transition to democracy and under the pressure of rising populism, Greece saw its party system go from moderate multi-partism to an essentially two-party affair. From 1981 until the 2009 elections, the Greek two-party system continued to function—on one level at least—as such systems normally do: There were two major parties, each of which found itself in a position to compete for an absolute majority of seats in Parliament. One of the two would win a parliamentary majority large enough to allow that party to govern alone. Most importantly, the two parties regularly alternated in power.

Despite its two-party format, however, Greece’s party system displayed distinctly polarizing mechanics, which enabled political actors to portray society as being divided into two political camps, each resembling a close-knit majoritarian community given to denying its opponents’ legitimacy. As a result, the centre—in the sense both of centrist parties and of moderate liberal ideological and policy positions—fell into decay. What was left was a polarized competition between rival sets of populist forces that vied against each other to represent “the people.” Unlike classic bipartism in liberal democracy, where a variety of cleavages intersect to produce a multidimensional voting space, the type of bipartism found in populist democracy tends to reduce party competition to a single dimension. Politics, in other words, becomes a confrontation between a majority (the masses, the people, the underprivileged, the poor) and some minority (the elite, the establishment, the privileged, the rich). Given this simple, albeit symbolically powerful, ordering of society along a single dimension, as well as the strong majoritarian impulses that are typical of populism-permeated systems, both major parties in populist democracies have every incentive to play up rather than soft-pedal polarization. In such cases, as issue-based voting becomes secondary at best, parties strive to vilify their opponents, outbid them, or both. Accordingly, as the average voter turns to the highest bidder, societies tend to cluster around opposed poles; as the majority of the people cleave to one pole or the other, the middle ground is lost and the median voter becomes a rare phenomenon.

The problem, however, is that when politics is polarized, bipartism does not work. In such a system, in which bipartism fails to produce a political society characterized by moderation and what John Rawls famously called “overlapping consensus,” polarization breeds political instability and the system becomes dysfunctional. In this case “we should expect the parties to become more than two and another type of party system” to emerge. And indeed, this is exactly what happened in Greece during the successive elections of May and June 2012, when bipartism collapsed and gave way to extreme pluralism, with once-marginal parties such as the left-wing Syriza coalition and the right-wing Golden Dawn gaining significant (or in the case of Syriza, even major) shares of seats in Parliament. 

A planned “tragedy of the commons”

As the crisis raged, former PASOK deputy premier Theodoros Pangalos sparked controversy by presenting it as a typical “tragedy of the commons” in which selfish and reckless individuals chose personal gain over societal well-being. As he told Parliament on 21 September 2010, “We [Greeks] all ate it up together following a practice of wretchedness, bribery, and squandering of public money.” The problem with this and similar interpretations, however, is that the Greek political system is not an unmanaged commons in which uncoordinated individuals try to increase the marginal utility of public goods to themselves. Instead, the Greek crisis has been the result of a perfectly institutionalized political system that was built with intent and design, and remained functional for a long time because of a high level of co- ordination that was achieved between the country’s political class and the vast majority of Greeks.

The crisis in Greece has been the outcome of its particular system of populist democracy—that is, a democracy in which both the party in office and its main rival are populist. Two mechanisms made this system endure for nearly three decades. The first was a state intent on distributing political rents as widely as possible; the second was a party system ensuring the widespread delivery of state benefits via party rotation in office. With two strong populist parties regularly alternating in power and being in control of a generous state keen to distribute political rents, voters learned that the state was up for grabs and that it was better to associate with the state through party contacts rather than venture into the market through competition. They also learned through electoral iteration that even if one’s party lost at the polls, it was likely to return to power next time around. Politicians learned that there was no mileage in reformism—society would only penalize them for it at the ballot box. Based on this widely shared understanding, Greece’s populist democracy worked relatively well until the crisis broke out, instantly revealing that the Greek state had run out of resources. From there, it was only a matter of time until the 2012 elections confirmed the collapse of Greece’s populist democratic system.

The current financial and economic crisis has led to the demolition of the two mechanisms that, for decades, had supported Greece’s populist democracy. On the one hand, the Greek state, now short of external funds and with its creditors hounding it to apply harsh austerity measures, no longer has rents to hand out to society. On the other hand, the two-party system that was vital to the orderly distribution of rents lies shattered and, for the time being at least, has given way to an extremely polarized form of multipartism.

Also gone along with these two mechanisms, of course, is the old sociopolitical contract on the basis of which voters and politicians co- ordinated their actions, individually benefiting from the state at the ex- pense of the public good. Quite clearly, then, Greece’s political leader- ship badly needs to forge a new, shared social contract. It must provide the mechanisms that will restore the liberalism which populism put to rout—a liberalism that must return if Greece is to have a better future and a safe place within the European fold.


This essay is adapted from Takis Pappas’s “Why Greece Failed,” which appears in the April 2013 issue of the Journal of Democracy. The full essay is available here.


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