What the demise of the soviets teaches us about modern day Greece

soviet collapse
How can a weak tyrant wreck your life? One would think that a weak state is ripe for subversion or evasion, therefore, so long as one is not reliant on public services, survival should not be imperiled by the presence of a tottering regime. Yet, the experience of the soviet twilight years demonstrates how wrong this assumption can be.

The soviet state was pervasive, yet weak; predatory yet powerless. It could -and did- undermine its citizens’ ability to lead a safe and predictable existence. How does one explain this paradox, of a weak, but dangerous predator? A long developed literature on post-communist transition reveals that layers of over-regulation at multiple levels of government, coupled with corruption and general subversion hurt the weakest in society the most. It is those who cannot afford to bribe the officials, shield their incomes, move their funds to foreign accounts that get caught in the nets of the state-predator and are either taxed to insolvency or buried under mounts of bureaucracy. Now, before you dismiss all this as the predictable complains of orthodox economists against a command economy, I assure you I am not one of them. I even wrote a book decrying the neoliberal advice given to Russia in the early 1990s and its consequences. Nonetheless, the horrid consequences of the command economy and Stalinist planning cannot be denied, nor can its human impacts.

How is the soviet experience relevant to modern day Greece? This month, a massive bill has gone through the Greek Parliament. It consists of a long set of documents that MPs were supposed to read, understand and debate during 3 days, before a decisive vote for the government. The bill contains a raft of new increases in taxes -including an increase in VAT to 24%- and a controversial fiscal adjustment mechanism that will automatically trigger contractions in state spending if primary surplus targets are not met. This is reminiscent of debt break tools present in federal states, something discussed (but never implemented) in earlier phases of the Greek crisis. This debate is taking place in a country that exhibits many of the worse traits of the soviets, and is incidentally run by a government containing a significant number of self-proclaimed Marxists.

Reflecting on the appropriateness of the measures proposed in order to deal with the Greek crisis, or their origins, is not the point of this article. We can however note the following: Such a significant assault of tax measures on a population can only have two effects, an increase in attempts at evasion and the destruction of legitimate economic activity. This is not unprecedented, nor unpredictable. It is exactly this creation of a predatory, yet weak state that prompts comparisons with the Soviet Union in the 1980s. The crippling tax burden on Greek businesses means that those capable of evading, by relocating abroad (Bulgaria has proved to be a popular destination for fleeing Greek manufacturers), or by hiding assets abroad, or bribing their way to a friendly settlement, will do so. Those who cannot, pensioners and employees are the usual example, will suffer the consequences of yet another desperate scramble to squeeze funds out of a nearly broke population, 6 years into an unprecedented crisis.

Is it inevitable that crisis turns a state into a wounded monster that seeks to devour the weakest, while those who can outrun its clutches flee? Perhaps the soviets were unable to change course, bankrupted by the arms race and shaken by the effects of the Chernobyl nuclear disaster. Perestroika came too late to redirect an economy crippled by the distortions of central planning. For Greece, the current descent into wilful self-destruction seems to be a choice by an elite that has chosen to preserve (for as long as possible) the privileges of a dying clientist state. Yes, in Greece’s 6 year existential crisis many mistakes were made by local policy makers and by the country’s creditors. A corrupt, predatory, weak state captured by client groups and political interests prevented modernisation and reform (in whichever direction). An unwavering focus on fiscal adjustment and last-minute fixes from Europe stretched out a crisis that other states with similar problems managed to overcome. However, the current bill presumably debated by the speed reading Greek MPs (the bill spreads over more than 7000 pages), offers the worst mix of disincentives to economic activity and offers absolutely no reason for optimism that Greece is getting anywhere near overcoming its difficulties.

The demise of the soviets tells us that a wounded beast can only go on for so long. The Greek beast will stop devouring itself eventually. The question is what will be left of the population when that happens.
soviet collapse_2.jpg



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