Resolving the Greek Crisis Requires a Pro-Business Focus
John P. Calamos, Sr.
July 22, 2015
- Austerity and debt restructuring cannot overshadow pro-growth policies
- Increased privatization, a flat tax, and fewer hurdles for small businesses will sow the seeds of growth and reverse the brain drain
- Greece can achieve economic growth by drawing on its heritage of entrepreneurial spirit, perseverance and competitiveness
When people think of Greece, they typically focus on the events of recent years: government debts, failed austerity measures, and dissent with EU leadership. For many, the July 5 vote to reject the EU’s austerity measures and the fractious negotiations that ensued between Greece and its creditors support a narrative of intractable economic problems.
There is a road to recovery and growth, however. Greece can achieve prosperity through a rekindled focus on private sector development, entrepreneurship, and job gains. Austerity has been the dominant focus, but it cannot be the only one. The way forward requires pro-growth policies and new thinking.
A Commitment to Europe
From thousands of miles away, it is easy to view austerity measures dismissively and abstractly. Although many outside of Greece have advanced the view that a vote against austerity was a vote against EU membership, I believe that assumption is far from correct. The Greek people have weathered painful and unexpected changes in life circumstances. They would not have done so if they were not committed to the euro zone and to helping Greece achieve a larger role on the global stage. The Greek Parliament’s mid-July approval of the austerity measures required for a new bailout package is further evidence of the country’s commitment.
Moreover, while the magnitude of the problems facing Greece is certainly more severe than elsewhere in the euro zone, Greece is not alone among EU countries in regard to its struggles with protection programs, high unemployment, and a brain drain, particularly among younger workers. Greece is also not the only country in the EU where contentious internal debate rages about the pros and cons of EU membership.
Similarly, the prescription that I offer for growth is not unique for Greece. Greece has devoted considerable energy to refinancing government debt. However, history has shown that the road to prosperity is paved by a strong private sector, rewards for risk taking, freer capital markets, an appropriate level of government oversight, and tax policies that are reasonable.
- A Strong Private Sector Can Be the Foundation of National Prosperity
Greece’s public sector dominates its economy, but the absence of a strong private sector has limited its growth. During the past years, Greece took some encouraging steps toward privatizing businesses—steps that were rewarded by increased interest from foreign investors—but which regrettably have stalled more recently. Over these next years, I believe the country will be well served by re-focusing its policies on increasing the contributions of its private sector and creating an environment that is hospitable to foreign investment.
Many in Greece are wary of privatization, viewing it as a mechanism by which something will be taken from Greece. However, I would encourage the Greek people to embrace privatization and lay claim to the economic prosperity that a strong private sector can offer them, not only in their lifetimes but over future generations. Privatization should not be thought of as a loss for Greece, but rather as a mutually beneficial and profitable relationship.
The private sector provides an environment where entrepreneurship thrives, where hard work is rewarded, and sustainable jobs are created. In contrast, a public-sector led economy is unlikely to reward risk taking and innovation, and as a result there is little incentive to be competitive or improve. There is little inspiration for the entrepreneur. Capital goes to where it is treated best, including human capital, so growing the private sector could help reduce the brain drain.
- Policies Must Foster the Growth of Small Businesses
I believe the Greek people will achieve economic success and individual prosperity by coming together to champion regulations that support rather than hinder small businesses. Around the world, small businesses face added challenges in navigating bureaucracy and regulation. However, the hurdles have been particularly onerous for small businesses in Greece over recent years, with banks hesitant to provide credit and cumbersome documentation requirements.
The ramifications of these headwinds are especially consequential for Greece: Nearly all businesses in Greece are small enterprises—more than 99%, according to data from the Hellenic Confederation of Professionals, Craftsmen and Merchants, as cited by the OECD.1 Additionally, more than 35% of civilian employees in Greece are self-employed, far higher than the euro area as a whole.2 This data underscores the far-reaching impact that small-business-friendly policies could have on the country. For example, if policies become more supportive of entrepreneurship and the private sector, small Greek business are more likely to grow into larger ones over time. Eventually, this should allow more Greek businesses to extend their reach across the competitive global economy.
In countries all over the world, many members of the Greek diaspora have successfully created wealth through entrepreneurship. To me, this proves that businesses can thrive in Greece if the environment becomes more hospitable.
- Sensible Tax Policies
Simplifying, rather than raising taxes, can encourage further business development and may attract more foreign capital. I believe that a straightforward and fair “flat tax” would be welcomed by the Greek people and result in more robust government coffers. Poland, for example, followed the lead of other Eastern European countries and replaced a complex tax code with a flat tax and catalyzed economic growth by privatizing government enterprises.
- The Brain Drain Must Be Reversed
As I have noted in past writings, I know firsthand that Greece is a country rich in human capital and entrepreneurial spirit. My frequent travels to Greece consistently affirm my view of the economic potential that exists there. Last month, I participated in a conference in Athens hosted by Capital Link, and I was impressed by the young entrepreneurs that I met and the many creative and viable business ideas they brought forth. Indeed, one of the country’s greatest resources is its highly educated, multi-lingual younger generation that is equipped with the knowledge and drive the global economy requires. Greece’s economic future hinges on finding ways to leverage this talent.
Success Stories: Pro-Growth Policies Open the Door to Prosperity
No matter how Greece and the EU decide to address balance sheet issues, history has shown that countries can sow the seeds of economic growth in relatively short order. Poland, as discussed, serves as an example, as do Chile and Mexico. Chile has benefited from policies that reduced government spending and money supply, privatized businesses, and reduced impediments to free enterprise and foreign investment. Mexico, meanwhile, is on an encouraging trajectory of growth after political parties came together to forge the Pact for Mexico, a sweeping agenda of economic reforms. Among developed markets, Canada has benefited from its moves in the 1990s to reign in profligate spending, implement free market reforms, and reduce taxes.
There are many variables relating to the course that Greece will take from here, over both the near and longer term. No matter which route is chosen, I believe the road out of the Greek crisis will be paved by policies that encourage the expansion of the private sector, as well as entrepreneurship, risk taking, and business growth. To be successful, Greece needs to pivot and focus foremost on economic growth, and this pivot needs to be supported not only within Greece—by its citizens and leaders—but also more broadly by EU leaders.
Achieving economic stability will not be easy, but the Greek people have demonstrated their ability to persevere—through history, over recent years, and around the world. Private sector growth is built on competition and individual liberty, and I am confident that the Greek people can rise to the challenge of a highly competitive global economy. After all, the national identity of Greece is anchored in the honorable competition of the Olympics—a tradition that extends not through decades or centuries, but through millennia.
About the Author
The son of Greek immigrants, John P. Calamos, Sr. is the chairman, chief executive officer and global co-chief investment officer of Calamos Investments (NASDAQ: CLMS), the company he founded in 1977. Calamos Investments is a global asset manager that serves institutions, families and individual investors, through strategies that include equity, fixed income, convertible and alternative investments. Mr. Calamos is actively involved in a variety of philanthropic endeavors in the Hellenic American community. He serves as the Chairman of the Board of Directors of the National Hellenic Museum in Chicago.