The Economist blogger Charlamagne has written an insightful post on Greece:
The Greek civil war, and the bloody score-settling that followed, is a living memory for many Greeks. Any consideration of Greek nepotism or clientelism needs to be seen in that light. So for example, it is not enough to say that Greek civil servants enjoy jobs for life, and that is a big problem. (Though it is a big problem, not least because many Greek civil servants are paid pitiful wages—partly because there are so many of them. That means they will resist austerity measures all the harder, because they feel like victims in this crisis, not fat cats.) But the bloated public sector is also a function of history. ...
Newspapers here in Belgium talk all the time about the government needing to "buy social peace" by paying off some interest group or other. In Belgium, the alternative to "paix sociale" is a strike. In Greece, plenty of grown-ups remember when the alternative to social peace was their neighbour, or their loved-one, vanishing in the night into a jail cell or worse. The current clientelist truce between right and left is the price (albeit a horrible, wasteful price) established for the current version of social peace enjoyed in Greece.
Douglas Muir adds to it:
I’ve always had a very low opinion of Papandreou pere; it hadn’t occurred to me to think of him as a post-conflict figure, trying to restore social comity to a country still riven by its past. I’m still not sure that was really the case, but it’s an interesting perspective. ...
Here’s a random thought: this blog has seen a lot of posts recently talking about economic problems in Greece, Spain and the Baltic States. All of these are countries that were, within living memory, governed by brutal non-democratic authoritarian regimes. Accident? Or is there something else at work here?
It is an interesting question and maybe there's something to it. On the other hand, almost all of Europe and much of the rest of the world has been governed by brutal non-democratic regimes within living memory, yet not all countries are at risk of sovereign debt default. It seems like there's a missing variable somewhere, and I think it's incentives built into the EMU.
More generally I think it's worth thinking about how the evolution of the concept of "liberal democracy" since the end of World War II has left many states in difficult positions. All democratic states have embedded liberalism in a web of social welfare institutions in order to build consensus and maintain social stability, but the price of those compromises has varied cross-nationally. As I've argued before, democracies are exceptionally prone to the sort of time inconsistency problems that lead to things like debt crises. As such, there is a huge potential for moral hazard built in if states are able to escape their debt obligations without pain. Just ask California. It's an internal contradiction of democracy, if you like.
I have empathy for the citizens of Greece and other states that find themselves in difficult positions. But I have even more empathy for the future citizens of Greece and other states who will surely suffer more if their governments cannot get their house in order. I'm not quite sure how to escape this trap without austerity.