ECONOMY

How the system rewards the worst performers and hinders the best

A twisted and paradoxical logic seems to prevail in the game of survival for Greek enterprises. The most gainful example to be followed also seems to be the most egregious. The worst-performing firms seem to be more efficient, those avoiding real investment are proved cleverer, and those with higher operating costs are vindicated. On the taxpayer front, meanwhile, the dishonest emerge as the most prudent. This is the actual picture of a system that rewards the worst – under various pretexts. And in this way, a strong long-term trend is maintained, dragging everyone into lower standards and quality. A bright example of this flight to lower standards is the provision banning «loss leaders,» that is products sold below cost at supermarkets. In this case, cost is considered the price written on the invoice which the supplier issues to the retailer, without the discounts which the former grants the latter depending on the size of the order. Because of the ban, the consumer does not gain from these discounts, it is the retailer who pockets it; the bigger the size of the chain, the bigger the benefit. However, the «populist» rule of the small prevails. Those with lower costs are not allowed to compete on the price so as not to hurt the small shopkeepers with higher costs. Therefore, in order to protect the comparatively inefficient, the Greek economy is burdened with higher consumer price inflation. This is a solution that ultimately benefits both big and small, and the consumer pays the price. No one has a reason to reduce the cost of products and compete through lower prices. All adapt to the higher cost structure. To be sure, competition has also been institutionally eliminated from another, entirely different domain: Coastal shipping, which, despite the formal abolition of regulations in the industry, is under a «greenhouse» regime. There are routes that continue to be subsidized and the government, therefore, sets the rules; but this protection is extended to the sector as a whole. Earlier this month, the Merchant Marine Ministry approved fare increases below inflation. However, the ministry also determines many factors that influence the cost of operation for vessels, such as the composition of crews and the cost of fuel. So, the government both hinders the growth of competition, on one hand, and on the other it sets fares low. The ferry operating companies which invested huge sums, borrowed in order to buy newer and better ships, made a mistake. The Merchant Marine Ministry will not allow those offering better services to reap higher revenues. No one, therefore, has an incentive to invest more and look forward to seeing his revenue rise. The «smart» ones in this sector will invest only in painting their ships; the system punishes real investment. As it does with the honest taxpayers. When in need of more revenue, the State announces it will not bother firms and self-employed professionals with their books for past fiscal years, and will grant irrevocable absolution for any sins – at a small price, and regardless of whether they have actually committed any sins. These firms and professionals also belong to two categories; there are those who actually have no outstanding items. They have submitted their statements properly and these have been found in order, but if they wish to avoid the hassles of an inspection they have to pay. The State does not reward consistency. The second category are those that were unfortunate to have been found with minor or serious violations of the tax code. They too, will be rid of the anxiety of inspections and often unreasonable fines if they pay a small sum. The «smart» taxpayers, again, are not those who diligently observe tax laws; even if they are caught, some special arrangement of the revenue-hungry government will rid them of the extra cost. Meanwhile, the naive ones pay without delays. Indeed, the system rewards the worst performers so much that some upstanding examples may cause surprise but remain examples to be avoided.