A crisis of grand proportions: Britain and the Greek economy after WWII

The interplay of economics and politics often shapes periods of transition and of crisis. Greece in 1944-47 was a classic case of both. This era has been picked apart many times before, but mostly by works focusing on ideological factors. Now a book has appeared that offers a welcome shift toward the political consequences of (mis)management of a runaway economy, and to Britain’s efforts to right the badly listing Greek ship. Athanasios Lykogiannis’s «Britain and the Greek Economic Crisis 1944-1947: From Liberation to the Truman Doctrine» explores the brief but crucial period between World War II and the Greek Civil War, which offered a window of opportunity for a new start in Greece that successive governments grievously mishandled. In untangling this web of relations, and by focusing on the overlooked economic side, he methodically explodes any number of long-held myths from those times in a relentless, thoroughly footnoted way. Books based on doctoral dissertations usually do their best to hide the fact, but Lykogiannis’s, from 1999, states it right up front. The University of Missouri Press has edited it well and the English is admirably clear and succinct. The text is based on thorough primary research (including Bank of Greece archives, where the author works), with concepts and background material employed usefully. Though specialized and detailed, the work can be appreciated by general readers, while historians and economists will find it a valuable resource. All will appreciate its scrupulous search for truth purged of ideology. With over half a million Greek dead in WWII, liberation in the fall of 1944 brought a badly needed interlude. The period, however, was hardly one of good cheer and overdue holidays. Instead it was one of unwarranted expectations, managerial incompetence, and frittered opportunities; and unlike Germany’s harsh wartime occupation, much of it could have been avoided – or at least ameliorated – by some decent policy choices and political decisiveness. Dollops of blame Clearly there is plenty of blame all around. Lykogiannis fingers successive Greek governments for inaction, countering the more usual blame put on manipulative foreigners; second, he attributes the worsening situation primarily to economic mismanagement rather than political extremism. Governments of various stripes failed to stem a growing economic and human crisis. Even worse, most failed even to try. Price controls were shunned despite an inheritance of hyperinflation – in November 1944 an egg cost 500 million drachmas – currency printing presses ran non-stop, while the budget was treated cavalierly. The laissez-faire model espoused by Xenophon Zolotas suited most political and business interests as the path of least resistance. A stricter approach involving price and wage controls that Kyriakos Varvaressos tried to impose was widely and vehemently opposed. Outside help did come, via the UN Relief and Rehabilitation Administration, the Red Cross and also bilaterally, but the endless expectation of such aid itself hindered reform. This is London Much of the book focuses on the British role in Greece and the Greek element in British postwar policy. Britain’s initial involvement was strategic (to check the Soviets) and brought Prime Minister Churchill himself to Athens at Christmas 1944. The UK had 75,000 troops in the country early in 1945. Later, however, this shifted to a (losing) struggle to achieve political and economic stabilization. Lykogiannis does away with the myth that the British were only interested in imposing rightist governments to combat the leftist threat, citing their creditable efforts to forge centrist alliances in Athens to give non-extremism a chance. In fact, early postwar British policy was riven by Whitehall politics, divided over focus (economic vs strategic aspects), and doubtful of its overall involvement given the difficulties at home, especially after the US terminated the Lend-Lease program in August 1945. The author points out that, contrary to much previous criticism of British high-handedness in Greece, «the record shows that such (UK) control was largely illusory.» It was characterized by a «total hollowness,» whereby they had «neither carrot nor stick» to push the outcome, so London opted to finesse the situation. Greece was never as vital to the British as the Greeks thought. One bright spot Varvaressos, the Bank of Greece governor who later doubled as a cabinet minister, emerges as a pillar of strength in this devastating catalog of weakness. He vigorously initiated a version of the tried-and-tested British war economy strategy on Greece, including price and currency controls and restrictions on gold sales to the public, but the «Varvaressos experiment» ran afoul of the bureaucracy (which he labeled «sick»), competing politicians, a context totally different from the UK, and worst of all, a prevailing mindset that Greek inaction would make a bailout from abroad more likely. The George Papandreou government simply «chose to ignore his ideas, instructing him instead to travel the world with a begging bowl on the country’s behalf.» Another problem was an anti-authoritarian streak in postwar Greece, which doomed anything perceived as an outside economic diktat. The Varvaressos plans were ignored by Right and Left alike, although his own rigidity and failure to enlist popular support didn’t help. This allowed centers of wealth to «exploit the crisis on a scale scarcely imaginable anywhere else in postwar Europe.» However, most of the blame lay with politicians who allowed such excesses to go unchecked. And today’s dithering can create tomorrow’s problems: «While bemoaning foreign interference, the refusal of Greek governments to act inevitably prolonged the [country’s] dependency on foreign capital.» A subsequent effort, the «London Agreement» of early 1946, marked the high point of British involvement, but was undercut by a lack of sustained commitment, especially to provide relief supplies, and, the writer says, by British naivete about Greek realities. All this hastened their replacement by the Americans from 1947 as the main foreign influence in Greece, and his last chapter looks comparatively at the British and American experiences. The real tragedy was that 1944 offered a golden opportunity to break with past practices – the political grandstanding, economic non-policy, pandering to interests, reliance on foreign capital but refusal to adhere to any loan conditions – and find a more viable path for postwar Greece. It was the worst possible time for comfortable continuity, but the chance was fluffed. «Clear out the politicians and let the best technocrats act» might be a vaguely Platonic sum-up of this enlightening and professional, but sometimes troubling work.