The Lessons Israel Can Learn From the Greek Economy

Greece, the democracy that turned into an oligarchy, is fighting for survival.

AP

Prediction is a pastime for fools, so there’s no telling where Greece’s extreme-left party Syriza will take the most miserable, bruised economy in Europe. Until a year or two ago, it had been unthinkable that the young radical party, established just 10 years ago, would win the reins of government in Greece. But two weeks ago it did. Syriza, which won just 5% of the vote in 2009, got 36% last month, giving it 149 out of 300 seats in the Greek parliament. And Alexis Tsipras, who named his second son Ernesto after Che Guevara, is the sitting prime minister in Athens.

You might think the story of Greece’s collapse is about its entry into the European Union and its collision with the EU over austerity. But Greece’s new finance minister, a professor of economics and influential intellectual named Yanis Varoufakis, says his first goal is to tear down the Greek oligarchy, consisting of tycoons who control the business sector and, through it, control government. In fact, Syriza has marked a very specific sector as the root of the oligarchy disease: the television networks and the press.

At this stage it is more interesting to investigate the change in sentiment and mainly how the veteran social-democratic party PASOK wound up with a mere 5% of the popular vote. Some quotes I shall bring below, from interviews in late 2012, may sound only too reminiscent of a country closer to home.

The Financial Times, a capitalist U.K. daily that believes in free markets and competition, wrote just before Syriza’s triumph that one of the extremist party’s biggest contributions was to expose the function of the Greek tycoons in the protracted collapse of the Greek economy, which had been a taboo subject in Greece – mainly because all the newspapers and TV channels were owned by a small group of tycoons.

The U.S. magazine Foreign Affairs analyzed the Greek system six months ago and showed that the TV and press played a special role in destroying the Greek economy, because it wanted to preserve the status quo that was so convenient to the two most powerful groups in the nation: unions in the public sector, which have grown to monstrous proportions in the last decade; and the tycoons and bankers. They constituted an alliance that ruled Greece for more than 20 years and were protected by the media, by commission and omission.

Taboo subject

The first time I grasped the degree to which the Greek press was part of the problem was during a visit just over two years ago. The press was ignoring, or burying, the huge story that broke in October 2013: the “Lagarde list,” which outed thousands of Greek tax evaders from the cream of the Greek business world. The Financial Times covered it extensively, as did another U.K. daily, The Guardian. The Greek press did not.

The way it ignored the corruption of the tycoons is reminiscent of Israel in 2011. In July and August of that year, the FT, The New York Times, and news agencies Bloomberg and Reuters began to report that Israel had a huge problem with economic concentration – a small group of rich people controlling the economy and politics, and corrupting the country. But most of the Israeli press ignored the story, minimized the problem or denied it outright.

In June 2012, the FT wrote in its editorial that Israel is lauded for the dynamism of its high-tech sector, but its economy has another side to it. Operating through pyramidal ownership structures, the FT wrote, less than 20 families control concerns together worth half the value on the Tel Aviv Stock Exchange. The result is monopolistic power that stifles competition and creates corrupt relations between businesses, politicians, government officials and the press – which in turn stain democracy, worsen inequality and undermine the legitimacy of the market economy.

This is what the FT wrote last week in regard to Greece: “‘The real enemy to market competition in Greece is the oligarchy, but it’s a taboo subject – politicians don’t discuss it and the media don’t write about it,’ said Aristides Hatzis, a professor of law and economics at Athens University. One reason is that Greece’s private television channels, along with influential news websites and daily newspapers, are, in many instances, controlled by oligarchs with editorial influence.”

The FT goes on to describe an American embassy cable outed by WikiLeaks, which explicitly wrote, “Greece’s private media outlets are owned by a small group of people who have made or inherited fortunes ...and who are related by blood, marriage or adultery to political and government officials and/or other media and business magnates.”

These magnates are tied, by blood or marriage or sex, to government officials and to politicians, to media barons and others, the FT adds, and restraining them isn’t going to be easy. Greece has been in the throes of economic crisis for seven years now and not one single member of the oligarchy has gone down, though they are believed to be responsible for some two billion euros in unserviced bank loans, “as advertising revenues collapsed and handouts from state-controlled companies disappeared,” the paper wrote.

The unaffiliated Greek journalist Kostas Vaxevanis, who exposed the Lagarde list, told The Guardian in November 2012, “Greece has a tremendous problem, a democratic one at its core. The country is controlled by a poisonous combination of politicians, businessmen and journalists who cover one another’s backs.”

A self-muzzled press

Another Greek journalist, George Kapopoulos, told me that same month that Greece had plenty of financial newspapers, and most, if not all, were losing tons of money. How did they survive? Because they belong to people who have other interests, mainly to influence the banks and government, he said. “Most of the journalists and news networks censor themselves. They know exactly where the boundaries are and who not to mess with. We have six or seven families that control most of the economy, and we don’t have a press that can write about them. They don’t compete with one another, either.”

They’re like the mob: they divided up the market and even the left-wing press doesn’t report about it, Kapopoulos told me.

Kapopoulos proved prophetic. He foresaw the rise of an extreme left party that would expose the real face of the social-democratic party as it served the powerful interest groups in the public and private sectors. He also noted that the problem isn’t confined to Greece: a lot of European countries have the disease. “We’re just a testing ground. If they continue with their austerity measures, you will see extremist parties from both sides gaining strength,” he predicted.

Greece doesn’t have a high-tech industry like Israel does. Its debt is double Israel’s; it doesn’t have gigantic foreign exchange reserves like we do; and its public expenditure has been racing toward 60% of GDP – which was Israel’s level at the height of the 2002 financial crisis.

But the political structure of Greece in recent decades is highly reminiscent of Israel. Kapopoulos explained how in Greece, two big political parties control the big public-sector unions. That is how the left, in the form of PASOK, controlled the country. Then the right discovered that was the road to government and embraced the unions too, Kapopoulos said. “In Greece, the public sector is like India’s sacred cows – you can’t touch them.” Five years of talk about cutbacks resulted in practically no layoffs, because it’s impossible; the ones hurting the most in Greece are the people who work in the private sector or who own small businesses, he said.

Greece’s left isn’t “left” in the European sense of the word, he adds: it’s mainly engaged with protecting the privileges of the unions. The left’s leaders hail from the unions and can’t understand the problems of other Greeks, he said.

There are social-democratic countries where a big public sector is the foundation and power of the welfare state, and of prosperity, I told him. “Don’t believe the statistics we publish,” Kapopoulos responded. “The problem is much worse. We have the most bloated public sector in Europe. France also has a big public sector, but it’s efficient and provides good services to the people.” The Greek public sector acts like a private one and sits on the taxpayer’s neck, he concludes.

The unions that support the social-democratic state and the unions in Greece are different, Kapopoulos said, noting that, for instance, the German unions agreed to pay cuts. And other countries, such as Spain, Italy and Portugal, are likely to go the same route as Greece, which featured the rising neo-Nazi Golden Dawn party, he said in our 2012 conversation.

Kapopoulos is right that Spanish politics has been changing drastically, with the rise of Syriza’s “sister,” Podemos, a left-wing party founded in 2014. He was wrong about the neo-Nazis: the power that rose in Greece was Syriza.

Greece is not Israel, but it would be a mistake to assume we can’t go that route, moving along an axis that runs between powerful interest groups in the public sector and big business and their desire to maintain the status quo. But the Israeli public has been waking up in the two years since I visited Greece, and here’s a final thought, from a lawyer, Harris Ikonomopoulos, also from late 2012, which tells the story of Greece in terms every Israeli could understand: Look around you. It’s an amazing country, with an amazing history. We could be in a completely different place; it’s up to us. This is a country betrayed by its elites, who also betrayed its people and themselves. The politicians, the business people, the academics were all preoccupied with themselves and their own interests and privileges. I hope we wake up before it’s too late.