How the size of government promotes entangled interests

The government is the country’s biggest employer, biggest financier and biggest client. These roles alone suffice to explain the phenomenon of intertwined business interests, the name given to the practice of public procurements or public projects being preferentially secured by businessmen favored by politicians, including cases where they are in fact business partners. Undoubtedly, this is a diseased situation and today everyone is finally in agreement that we must do away with it. Yet the problem is basically economic. Financial resources managed by the government represent a large percentage of total available resources. The value of public procurement tenders officially published in the Government Gazette annually amounts to more than 5 percent of the country’s gross domestic product. In fact, it was 5.77 percent of GDP, compared with a eurozone average of just 2.33 percent, in 2002. It is certain that the Greek figure has increased further since then. It is worth noting that official statistics include only large public project expenditure and leave out such important items as the purchase of defense equipment (considered confidential) and large procurements of certain state companies which operate under private economic criteria. Comparatively, public procurements and projects in the Greek economy carry more than double the weight of other European Union countries. Until a few decades ago, preferential access allowed to public procurement deals was sanctified by the «need to support local production.» In order to preserve jobs, local companies were treated preferentially, sometimes openly. In practice, such policies, supposedly aiming at the promotion of «national champions» yielded nothing as none of the intended champions saw much reason to strive to become internationally competitive. Most of them were able to excel for as long as they were afforded preferential access to the public coffers. Afterward, they simply turned into loss-makers, sucking away precious investment resources. Yet it was this tradition which provided the basis for what we have come to call today entangled or intertwined interests. «Our own» contractor, «our own» supplier, became the chosen ones. Such preferences were rarely associated with true ideological or political motives; they were simply mutually beneficial relationships. To date, the solution to the problem has been mainly based on an approach which sought to maintain the pretences. Laws were enacted which did not strive to deal with the essence of the problem; which allowed the continuation of the practice while ostensibly observing certain rules and leaving the nexus of entangled interests intact. This essence of the problem lies in the huge sums of money managed by the state, which is not particularly concerned about rates of return. For this reason, the current discussion of the problem does not «weigh adversely on the economy,» as was argued by the president of the Federation of Greek Industries (SEV), Odysseas Kyriakopoulos. On the contrary, the economy can only benefit if public resources are put to better use. And of course, the best way to achieve that is by limiting them.