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Or apples and oranges. While the EU partners of Greece and the IMF are putting the pressure on our government to reduce our (already low) wages in order to “increase our competitiveness” I’ve been trying to make sense of this demand. Do they really believe that this move will help improve the deplorable state of our economy?

I think not. But that is another matter. The real question is: how can our undoubtedly low wages result in a high salary cost? So high, in fact, that it rivals that of Germany? Since I am no economist, I decided to look for hard data on the Internet. And there I found about the term “unit labour costs“. I also found that these costs include factors which have little to do with actual salaries.

Most importantly, they include productivity. And how can one measure productivity? Generally speaking, by the value of the goods produced or of services rendered. And then I stumbled upon a key factor which many analysts conveniently ignore: quite simply, for the EU the measure of comparison is… Germany.

So what these “experts” are doing is comparing the world’s second most complex economy and second largest exporter with Greece, which is in the 51st and 65th place respectively. Our main exports include food and beverages, manufactured goods, textiles, chemicals and petroleum products (with mostly imported oil). Germany, on the other hand, exports several of the most complex products in the world.

Including  photon beam process machine tools. Don’t ask. Effectively, they are comparing the output of a factory building stealth bombers to that of a factory producing apple juice. Not that I have anything against apple juice. It doesn’t kill people (as much).

Regardless, the comparison is moot and you don’t need to be an economist to understand that. Greece is being compared to a country with which it could not possibly compete, because our products are entirely different. China would be a much more valid comparison.

But we can’t compete with China either, because we could never lower our wages that much and survive. In fact, the 20% wage decrease (part of the additional measures demanded now in exchange for the next bailout package) is probably the death sentence of the Greek economy.

Lowering wages would diminish tax returns, which means even less money for the already struggling social security system, public services and government spending. Reduced tax income would trigger more cuts and more taxes. It’s a spiral leading straight to total collapse.

To quote a very interesting working paper of the Levy Economics Institute our problem is that we “are stuck at middle levels of technology and we are trapped”. It would take several years of careful planning and restructuring to truly make our economy competitive again.

Killing the twin monsters of Greek bureaucracy and rampant corruption would go a long way towards that goal. So would exploiting our (so far inexplicably) untapped natural resources. But nobody trusts our corrupt politicians to carry out these tasks. And with good reason.

Today, our Parliament is supposed to approve the new memorandum of brutal austerity measures, which will only serve to plunge Greece deeper into recession. If they do approve it, it would probably stave off bankruptcy for a few months. In the meantime, there is no provision for any measures that would help promote economic growth.

Unless the Greek government takes urgent steps to truly reduce corruption, tax evasion and the insurmountable non-salary costs for businesses, no one will invest in Greece. No one in their right minds builds on a swamp.

Inevitably, we will be asked to take even harsher measures by summer. And as anyone living in Greece can see right now, that is not a viable option.

The bottom line is this: statistics (such as the unit labour costs) are a tool. And just like any tool, they are not inherently useful. It all depends on the manner of their use. You can use a hammer to drive a nail into a wall. You can also smash your thumb with it or use it to crack open someone’s skull.

In our case, statistics are being used to set goals that Greece cannot hope to achieve. Whether the EC/ECB/IMF troika are unaware of this fact or actually betting on it is a matter of debate. Personally, I don’t believe they are naive.

The real irony is that we are desperately trying to once again become part of a system that ultimately does not work. But that is a story for another time.

Intermission #2

What can one possibly say about Pink Floyd and not sound trite? Rock music (or music in general for that matter) would not be the same without them.

But if you ask for a raise /It’s no surprise that they’re giving none away


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