Greece featured prominently in economics lecture on “Globalization and Growth Strategies”

I just came back from a talk given by Dr. Dani Rodrik (Rafiq Hariri Professor of International Political Economy at the JFK School of Government, Harvard) at a meeting of the Harvard Business School Club of Greece. I was left with several impressions, among which were the following:

(1) Dr. Rodrik very articulately concludes from his economic research that, in a situation like Greece’s, historically the most successful way out has been through economic growth, NOT austerity measures. In fact, he put up a supporting chart which was extremely interesting in that it came from the IMF’s own research and showed without a doubt that growth scenarios were much more successful than austerity scenarios. So it seems that even the IMF know that what they are doing is not the approach which has historically proven to be the most successful one. One has to ask the question then (in fact, someone did ask that question, but did not get a very satisfactory answer), why are they doing it?

(2) He outlined all the possible ways a country could produce a growth scenario, and unfortunately it seemed that none of them were viable options for Greece. The only one that could have been a viable option, and historically the one which has had the fastest impact on a country in a liquidity crisis – currency devaluation – is being kept off the table for Greece due to a political decision. Dr. Rodrik concluded that it could be less costly in the end for the EU and for Greece if the country were to be allowed to negotiate a temporary “leave of absence” from the single currency. It would thus have the macroeconomic policy options necessary to pursue economic growth without provoking the political turmoil that would be caused by the historically less successful austerity options currently being pursued.

(3) The next impression did not come so much from Dr. Rodrik but from some of the other audience members, among whom were members of parliament (though whether they were active or retired, I don’t know). The impression was that they are so far out of touch with the reality on the ground among the Greek people, and so cynical in their ideas, that if they were representative of the government’s thinking, there really is no way out short of a total meltdown which forces change. In fact, they reminded me of the TEPCO management in Japan during the earliest days of the Fukushima crisis, denying the existence of the problem, and then when forced to grudgingly admit the reality of the situation, engaging in all kinds of fantastically wishful thinking that it would all just go away.

(4) And the last impression, which came as I left the Karatzas Auditorium of the National Bank of Greece and headed back towards Constitution Square and the metro station, was that of the thousands upon thousands of Greeks from every walk of life lining the streets, crowding themselves into Constitution Square and making their voices heard – finally.