Even the staunchest Eurocrats have to admit that the Greek intervention has been a disaster. Bailouts, debt write-downs, solemn agreements: nothing works and after two years of concentrated effort, Greece is still on the brink of default. A strong piece in this morning’s NYT by Rachel Donadio explains a big part of the problem.Look under the hood of the Greek government, and it’s easy to see why. For decades — actually, centuries — government power in Greece (and in the Ottoman and Byzantine states that ruled what is now Greece in the past) has been feudal rather than modern. It is about loyalties, obligations, patron-client relationships.This nexus reflects the way society works. Political parties work this way; business has to work this system to survive. Almost everyone in Greece benefits in some way from “connections” with the power machine, and without those connections, not much can get done.The EU’s understandable and even laudable desire to help Greece reform is about trying to replace this tangled and deeply nested system with something modern: transparent institutions in which people do things by the rules. The technocrats in Brussels and Frankfurt want to rip the old system up by the roots because they know how inefficient and costly the current system is.But this is a social and cultural revolution, not an economic reform. Those revolutions must come from within; societies change deeply when they want to, not when foreign bankers put conditions on bailout agreements. As Donadio’s story puts it:
In Greece, the government of the technocratic prime minister, Lucas Papademos, is proving powerless to transform an inefficient public administration that has long served as a power base for the same political leaders — including most of the current government’s ministers — who are now being asked to dismantle it.It is a formula for gridlock that virtually guarantees, political and financial experts say, that the Greek government will never carry out the kind of basic changes that are being demanded of it.
Correct. The structures that make Greece work reflect powerful forces and assumptions at work in Greek society, and they can’t be changed quickly. In some cases, they can’t be changed at all.Donadio is pointing to a theme I wrote about in God and Gold. The laws of economics may be true everywhere, but culture shapes the way people respond to these laws. Culture changes over time — China’s response to capitalism is very different than it was in the nineteenth century — but these changes come in their own way and in their own time. They cannot be whistled for, or imposed by decree.It is hard to say whether one culture is more moral or ‘better’ than another in an absolute sense, but nothing is more clear than that some cultures are more effective than others when it comes to capitalism. Greek culture is an ancient and venerable edifice that has seen the Greek people through difficult times; it is, however, not very good at developing the kinds of institutional and market arrangements required for success in an era of competitive liberal capitalism.The mismatch between the strengths of Greek culture and the requirements for capitalist success isn’t absolute; ask the Greek shipping magnates. But on the whole, countries like Greece don’t thrive under capitalism the way countries like Germany and the Netherlands do. Other countries — think of Russia, Argentina and Egypt — have similar problems.Greeks can’t — and shouldn’t — stop being Greek simply to make themselves more effective capitalist competitors. They need to find new ways of being Greek that work better in a liberal capitalist world, but they need to do that at their own pace, not at one dictated by the ECB and the IMF.Technocrats everywhere like to ignore the importance of culture in human affairs. Europe today is learning just how painful and expensive it is when culture isn’t given its due. More lessons are coming.