Visionary economist stands test of time

Analyses, proposals and observations made half a century ago by Kyriakos Varvaressos in his «Report on the Economic Problem in Greece» are amazingly pertinent to today’s conditions, even though nothing appears to be even remotely similar to the postwar period. Everything – people, the international balance of power, institutions – has changed. On the other hand, the basic issue remains the same – Greece has not dared undergo a deep structural transformation, it has avoided establishing a deeper democratic process, it is averse to pure business activity and accepts the unequal distribution of incomes. In other words, it has put off dealing with the main issues that Varvaressos had already drawn attention to. Varvaressos’s proposals were attacked by his contemporaries of both the Left and Right, some of whom had not gone to the trouble of taking a closer look at them, as was the case with so many other sincere attempts to deal with modern Greek reality. Jealousy, political expediency, party coteries and the established order of the day resulted in these ideas being pushed aside by those already laying the table for the postwar feast. In his excellent prologue to Varvaressos’s book, Athens University Professor Costas Kostis points to three functional goals which Varvaressos saw as prerequisites for growth, the first being the acquisition of monetary stability and the containment of inflation. As has been the case in more recent times (fortunately), this was the only goal that was dealt with seriously, although the value of this simple rule was forgotten after 1972. In the 30 years that have passed, Greek governments have often put off dealing with inflation, reaching compromises by linking wages to the consumer price index and by devaluation. Even today, they are prepared to rehash the same measures on the flimsiest of pretexts – and would do so were it not for the restrictions of being in the eurozone. The second goal Varvaressos set had to do with public finances. Major deficits, waste and inefficiency on the part of state services, tax evasion and partisan corruption are still major problems. Varvaressos called for the reorganization of the State. «We are absolutely convinced that in the future, no real improvement in the country’s finances will be possible if this basic problem of the inadequate functioning of the state apparatus is not dealt with,» he emphasized. Varvaressos started from a position that was diametrically opposed to that of many of his contemporaries, explains Kostis. He wanted Greece to disengage itself from dependence on foreign aid, as he was aware that the the flow of American (at that time) money would soon come to an end. He also realized the political repercussions of maintaining any form of dependence. Varvaressos was worried about the poor state of the civil service for two more reasons: the poor exploitation of foreign aid, which he felt only benefited businesses that were already wealthy and the State’s inability to direct development projects, to found and administer heavy industries. He was criticized for not wanting industry and energy projects, but he clearly called for the participation of business owners, with their own capital, in industries which would be founded with state support. These businesses would not «demand» protection from international (or local) competition. New industries should produce goods that were competitive on a global level, he said, warning that anything else would lead to high production costs and greater profits, that is «an increase in the prevailing inequality in the country in the distribution of the national income, the intensification of social conflicts and the creation of continual pressure for wage increases and protection for the farming population.» Kyriakos Varvaressos was a realist; his goals were moderate. He saw a poor country with a small market and did not hesitate to admit it. «For there to be a large market, the businessman must content himself with a small profit margin and make coordinated and continued efforts to reduce the cost of production, for that is the only way for products to be accessible to a wide spectrum of people,» he wrote, and this was the main focus of his proposals. As Kostis points out, Varvaressos did not view Greece’s economic problem exclusively as a process of accumulating capital, but as a need to improve the country’s living standards, due to a low national income and high unemployment. His third goal was to prioritize the need to improve and considerably increase farm production and farming incomes. «[This goal] should have pride of place in every program to develop poorer countries if the goal is to raise the living standards of the working classes,» he said, proposing ways to improve productivity and expand the total area of land under cultivation, while at the same time increasing industrial production. Meeting the first goal, then, would nurture the need for domestic consumption, while the second would employ more people, above all directed at increasing exports. The insistence of many – at that time but also later – on establishing heavy industry was perhaps the main reason the report was rejected. Yet in order to understand exactly what Varvaressos’s reservations signified, it is only necessary to consider the incalculable price paid by the Greek people in the form of tax breaks, subsidies and loan settlements, even disasters, to support the development of heavy industry, without a plan for gradual adaptation to a higher production model. For the same reason, his support for construction activity was also prophetic. «If we mange to double [construction activity], we will have almost solved the problem of worker employment,» he said, since in this sector «there is greater use of direct labor, and less need for mechanical means.» Varvaressos was not unaware of the benefits of heavy industry, which nearly all international and domestic authorities were in favor of, chiefly because the prevailing view then was that smaller countries should resemble larger industrial nations. However, Varvaressos drew attention to the fact that high production levels are not only due to the use of modern technology but to the existence of «an entire range of favorable conditions lacking in the poorer nations» since the use of this technology «is the result of, not the reason for, the existence of favorable production conditions.» Economic progress, he aptly commented, requires not «only material means but trust, optimism, creativity.» Living standards are not only determined by material goods, but by the «quality of the services provided by the State.» «A citizen who has a difficult time with government ministries suffers just as much as one who does not get enough to eat,» he famously remarked. Varvaressos wanted to deal with the situation that would arise after American aid was cut off, a fact which «requires us to radically review our stance regarding economic growth.» He criticized those who could not see the existing problem due to habits and a mentality carried over from the WW II occupation, who «present Greece as a country where greed and indifference to the needs of the whole are combined with fear and pessimism regarding the country’s future.» «I do not believe in this image… I believe in another Greece, the Greece of honest, hardworking and oligarchic Greeks. I also believe that this Greece will eventually prevail and for that reason I am optimistic with regard to the country’s future,» he said. One wonders if there is a politician who, 50 years later, could rise to this challenge with conviction, sincerity and determination.