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Part I – This conversation is not with a banker in recovery, but rather an old friend of mine named Mihalis who comes from a prominent Greek family. Greek finance is the tail currently wagging the European dog, and Mihalis is one of the most insightful people I know. I figured he could explain what’s going on. I started by asking him about recent Greek Parliamentary elections.
Mihalis: Maybe it’s my personal bias but you know Parliament the way it works it’s really like the HR department of Greece Incorporated.
Mike: The HR department employs as many people as possible?
Mihalis: Yes, its votes in exchange for jobs and that’s the root of the problem.
Mike: you are saying the Greek Parliament is an HR system essentially for the country.
Mihalis: Yeah the whole public finance was used to give salaries to people. If you looked at the workforce of Greece, basically you have 1 million employees directly or indirectly dependent on the state. You have 1 million self-employed people and 1 million people who work in companies as employees. In Greece you have about 800,000 companies, so the average FTE – you know full-time equivalent – is something like 2 1/2. In Europe or America that’s like 100.
So essentially out of these 3 million you now about 1 million unemployed. So the situation is really, really bad.
MIHALIS BEGAN TO EXPLAIN TO ME THE CORRUPTION AND BLOAT OF THE GREEK GOVERNMENT, AND THE UNHOLY ALLIANCE BETWEEN POLITICIANS AND THEIR BANKING ENABLERS, AND THE CAPTURE OF THE POLITICAL SYSTEM BY BANKERS.
Mihalis: Half of the people… You know, you walk into a government building and you see half of the officials, they are honest people, they would like to work, they have some ideals they have some skills. But, they are completely demoralized, by the other half, which are jaded lazy, they bought their position because of a vote, and they pollute the whole system. So, you can’t easily distinguish the two, so you’ve got to let a little bit of the forces to weed out the good from the bad. And the only way to do that is to reset it. They been trying to cut down the state, no one has really wanted to do it so they haven’t succeeded. All they did was to displease the people. Because they lowered their salaries, they’ve cut their benefits. They started saving, doing a little bit more oversight on things. But all they’ve ended up doing is creating an even higher resistance to change.
Mihalis: The voters suddenly said well…So long. We’re not going to vote for you anymore. We’re going to vote for somebody who promises us even more jobs. The guy promised 100,000 more jobs after the election if he wins the election. Crazy. Right now the Greek government could function with 100,000 people. And it has 800,000 people.
In many ways, you know you have a few bankers, mostly of Greek origin, in the Greek desks of the big banks in Europe, maybe about 100 people, and they were just lending money to corrupt politicians. For nothing, just to cover up the problems of every year’s budget. And this happened for like 15 years in a row at least. And then you had a collusion, with the politicians that want to appear you know with numbers that are smooth, attractive, and you start lying with statistics and blah blah blah and again Greece in the periphery was not a problem to worry about it was too small. And that’s a recipe for disaster.
It’s a matter of popularity yes, in order to be a politician you need to be popular. To be a good politician you need to actually make some wise decisions. The problem is today politicians are neither wise nor make decisions. They’re sort of dragged along by bankers. The banking system is the backbone of the world, and they’re driving political decisions today. And it’s sort of putting the carriage before the horse, in many ways.
Mike: as an ex-banker myself I always, well, one main motto “Follow the money.” Or if you’re wondering why the politicians are doing certain things, it’s generally wise to figure out what are the bankers asking them to do. It’s a good rule to follow. Wondering why people are acting like they’re acting, I find.
I ENJOYED HEARING MIHALIS, WHO I KNEW TO BE A PROGRESSIVE, LEFT-OF-CENTER GUY, SOUND LIKE WHAT WOULD BE IN THE AMERICAN CONTEXT A TEA-PARTY TYPE APPROACH - RADICALLY SHRINKING WASTEFUL GOVERNMENT TO ONE EIGHTH OF ITS CURRENT SIZE. I WANTED TO CHECK WHETHER HE HELD SIMILARLY RADICAL VIEWS ON THE IMPORTANCE OF ENTREPRENEURSHIP AND SMALL BUSINESS AND GETTING THE GOVERNMENT OUT OF THE WAY OF THE ENTREPRENEURIAL SPIRIT TO REVIVE THE GREEK ECONOMY. IT TURNS OUT, IN A STRONG SENSE HE DOES.
Mihalis: You know, the Greek are realists. With a built-in distrust for the state. Because the state treats you as a liar and as a thief and you treat the state back the same respect. You know I don’t respect you. I don’t expect that you give, that you will protect my wealth. I actually expect that you will take away my wealth because in Greece since the 1980s the whole notion of entrepreneurship has been demonized and we haven’t reached the point yet where we de-penalize entrepreneurs.
Mihalis: There was a model in the 1960s of entrepreneurs that were [taking advantage] of the laborers, and taking the money out, and not paying taxes. There were a few examples like this but they were ruined. This became one of the popular themes of the Socialist government that we don’t like business people, we don’t like capitalists. Because they keep all the wealth for themselves and keep everyone else unwealthy. Again that was an abuse, that was Greek hyperbole. Deep down if you don’t have entrepreneurs you cannot have growth. And that has been part of the stifling of the Greek economy. Rather than boosting or helping entrepreneurs, it’s always there fighting against them. So you have then entrepreneurs fighting back. Evading taxes, trying to find any kind of way to protect themselves.
Because they know sooner or later that the state is going to go against them. Because it’s a small market as well, the scale is so small. In the US if you’re an entrepreneur you have such a big market. You don’t have to fight over the stakes. Fighting is fierce when the stakes are low. You fight over nonsense because there’s little to go around.
And we’re talking about the key problem. Let the economy run. The Greeks can do very well in a very, very chaotic environment. They don’t need a society. They don’t need the comfort of the state like the Germans do, or the Chinese do. Greeks can survive no matter what. All you need to do is get the big state out of the way. Because the Greeks were like, they chose the easy way. The easy way which is o, the state can feed me and I can give my vote to it. And everything can’t be fine. But this doesn’t work and somebody has to publicly say that the people. And if the money flow has to stop, it has to stop.
TO MY TEA PARTY FRIENDS WHO THINK AMERICAN FREEDOM UNIQUELY SUPPORTS AMERICAN ENTREPRENEURSHIP, MIHALIS SEES THAT GREEK ENTREPRENEURS HAVE A SIMILAR CULTURAL CALLING.
Mihalis: It’s a byproduct. Freedom was born in Greece. Greeks are free and I think that’s a byproduct.
MIHALIS AND I SPOKE EXTENSIVELY AFTER THIS ABOUT HIS OTHER SOLUTIONS TO THE GREEK CRISIS, EUROPEAN INTEGRATION, AS WELL AS THE ROLE HIS FATHER CURRENTLY PLAYS ON THE NATIONAL POLITICAL SCENE IN GREECE. I’LL LEAVE THOSE FOR A FOLLOWUP PODCAST IN PART II. IN THE MEANTIME, MIHALIS WOULD NOT LET ME PAINT HIM AS A RADICAL RIGHT WING GUY IN THE TEA PARTY MODE.
Mihalis: I mean you’re talking about an abuse of things. There’s been an abuse of the state. Of the welfare state. I’m definitely pro-welfare state, because I feel that the world is not perfect. The right wing guys are privileged, strong, they never had to suffer, and that’s why they see the world in their own eyes. And the world is not like that. You need a welfare state.
There are ways and ways of funding it. In the Greek case it’s been abused.
In PART II of this conversation, Mihalis discusses further European integration, and his father’s role in Greek politics today.
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