A SERVICE ECONOMY IN DISARRAY
The Service economy of Greece accounts for roughly 80% of GDP. So one would think that with so much riding on this crucial sector of the economy that the nation would excel in its delivery of service. Alas, that is not the case. Service across the board in key industries, from energy, to telecommunications; from transportation, to tourism is mediocre at best. The one bright light in this very dark tunnel is international shipping where Greece remains the preeminent power in the world.
Greece faces profound impediments that get in the way of delivering even the most basic service to customers. Bureaucratic inefficiencies, fiscal indiscipline, corruption, crime, untrained workers, haphazard urban planning – which routinely desecrates the environment – regulatory overreach, confiscatory tax rates, and unions run amok all set the stage for what is perhaps the thorniest problem facing the service sector: Cultural hang-ups which confuse serving the public with servility to a master – the chip-on- his-shoulder and snippy attitude of many Greek service workers leads many consumers to simply vote with their feet. At best, it is doubtful that the service sector in Greece will lead the country out of its profound economic malaise in the near term. At worst, the combination of these factors has the potential to arrest any hope the nation might have of clambering out of its economic black hole. And, if the service economy doesn’t get it in gear the nation is likely to sputter for a long time to come: Exporting pistachios and olives simply will not pick up the slack.
IS TOURISM THE ANSWER?
Tourism, the bread-and-butter component of the service economy in Greece, accounts for nearly one-sixth of the nation’s GDP and one in five employed workers. Over twenty six million foreigners – including passengers on cruise ships – visited Greece in 2015. But Greek tourism is, by and large, a magnet for cheap vacationers. The affluent and educated tourist does not countenance a vacation spot for he and his family where he has to contend with dumpsters filled to overflowing for weeks, ubiquitous and vile graffiti sprayed on building and monument walls, stray dogs and cats everywhere, gypsy panhandlers, and throngs of rowdy teenagers shouting obscenities at the top of their voices. The rule of law and order has been cast to the wind as was further evidenced when the chief of the Athens Traffic Police was attacked by a gang of thugs.
The contraction of the economy which began at about the time that the Lehman Brothers collapse in 2008 rocked the worldwide financial markets, and the severe austerity measures imposed on this small nation of eleven million people by the Troika – the International Monetary Fund, the European Central Bank, and the European Union – has clearly made things worse. But slapdash service is nothing new. Greece now ranks 31 out of 141 nations in the Travel and Tourism Competitiveness Index for 2015. This index measures a country’s ability to sustainably develop a business in the tourism sector.
Now comes the deleterious effect of the Middle East refugee crisis adding another toxic element to Greece’s cocktail of woes. In sum, it should come as no surprise that tourism revenues for the first half of 2016 are off almost 5% compared to 2015 despite last year’s economy being saddled by capital controls.
CAN ANYTHING BE DONE?
The ancient Greeks – and until not so long ago most Greeks – were strong adherents of the precept of philoxenia. The term, nominally, translates into English as hospitality. But the meaning of the term runs much deeper than that. In its full meaning, the term is understood as the attitude that a host exhibits in being friendly, generous, courteous even loving to strangers whether they be from the next village or the next continent. In my experience, philoxenia has been replaced in many quarters by provincialism, xenophobic fears, and protected interests.
Greece enjoys sensational seascapes, landscapes, archaeology, and history. But for tourism to snap back as an important catalyst for the growth of the economy it will take much more than that. A key government priority, in partnership with private enterprise, must be to break the back of the culture of bad service which has become institutionalized in Greece. This will be a long slog but it can be accomplished through education and training programs, as well as through incentives and penalties designed to ensure the necessary behavior modification of service providers whether they be public or private.
The implementation and enforcement of these measures are also apt to be conducive to raising the level of foreign investment in the country. Greece currently ranks dead last in Europe in attracting foreign capital as a percentage of GDP. And, according to the Economic Freedom Report published by the Fraser Institute for 2014, Greece ranks 86th, out of 159 nations, in the world. This ranking puts Greece one notch ahead of the African archipelago of Cape Verde, and two slots behind the landlocked Central Asian nation of Tajikistan when measured on the basis of five broad metrics of economic freedom. Clearly, a foreign investor seeking political and economic stability, market size, transparency, above-average labor skills, conformity with the rule of law, and regulatory compliance will look to risk his capital elsewhere.
As a philhellene, it saddens me to say that I am not optimistic that the Marxist Prime Minister of Greece, Alexis Tsipras, who is unabashed in his praise for Che Guevara – his son’s second name, Ernesto, is a tribute to the genocidal maniac of the Cuban revolution – and Venezuelan Dictator, Hugo Chavez, whom he attributes as “an inspiration for the ideas of democracy…” and whose funeral he attended in 2013, will rise to what is an economic challenge requiring the working together of government and business. In the end, however, service and related problems in Greece require a largely free-market solution.
If Mr. Tsipras’ model of a sovereign nation’s success is his idol Chavez’ Venezuela, a country currently riven by world-leading homicide rates; widespread shortages of food, water, electricity, and medicines and quite literally on the verge of anarchy – despite having the largest proven oil reserves in the world – then an involuntary exit from the Eurozone is probably the opening chapter in what is likely to be an epic Greek tragedy.