It has been years since anyone said anything positive about the Greek economy. But as one Greek economist recently told me, there’s a local saying that when a spring is pressed down hardest, it can spring back the fastest. Let’s consider the country’s natural resources, or at least two of them. Feta cheese, which is increasingly popular throughout the world, is mandated by an E.U. ruling to come from Greece. The country also harvests arguably the best olives for making olive oil. Yet somehow Greece has only 28 percent of the global feta market and a mere 4 percent share of the international olive-oil industry.
How is this possible? In the last decade or so, companies in the United States, France, Denmark and elsewhere flouted the feta ruling and invested in their own food-science research and manufacturing equipment. They subsequently turned the salty, crumbly cheese into spreadable, grillable, fat-free and shelf-stable forms. In Italy and Spain, small olive-oil producers merged into globally competitive conglomerates and replaced presses with more efficient centrifugal technology. The two countries now provide nearly all the world’s supply. And the Greeks, despite their numerous inherent advantages, remain in the least profitable part of the supply chain, exporting raw materials at slim margins.
Tassos Chronopoulos, owner of Tassos, a Greek food importer based outside Chicago, says that the country’s disorganized agricultural business all but disqualified itself from partaking in the fancy-food craze of the past few decades. Greek growers never banded together to establish uniform quality standards and trade rules. (Chronopoulos often found bottles spiked with cheaper vegetable oil.) Frequent strikes at large ports damaged food and reputations. Until he found a reliable partner, Chronopoulos says that he constantly opened new shipments to see bottles with labels askew, wrinkled or missing. “They do not understand,” he says, “that a label not applied properly will make the sales suffer.”
In a recent report on Greece’s economy, the consulting firm McKinsey recasts these challenges, among others, as opportunities. With just a bit of investment, new management and quality control, it says, the olive and feta industries can increase their profitability significantly.
The same is true for Greece’s tourism industry, which, according to the report, remains stubbornly focused on budget travelers even though a yacht full of millionaires can bring a lot more revenue than a cruise ship of middle-class people.
Consulting firms are constantly issuing utopian national-economic strategies. What makes the McKinsey plan stand out is that it feels plausible. The greatest returns may come from investing in things the Greeks already know how to do — no matter how distressed or unloved they have become. This could have a significant impact. Greece is a small country with 11 million people and 5 million workers. Reasonable success in a few sectors could create decent jobs and more tax revenue. Greece could start to grow again.
The biggest challenge to this plan involves confronting a more distressing aspect of the Greek economy. It’s hard to believe now, but Greece outpaced the average European growth rate for much of the last 60 years. Its farmers turned bombed-out fields into modestly productive farms. The government rapidly shifted parts of the country from an agrarian economy into an industrial one that developed specialties in construction materials — concrete, aluminum, rebar — and generic drugs. Greece also benefited greatly from the rapid growth in global trade. Greece is now responsible for the largest shipping fleet in the world. No other nation besides Japan even comes close.
Yet Greece still joined the euro zone as the second-poorest country in Western Europe. That’s because the Greek economic miracle came during some disastrous governance from both left-leaning leaders and an anticommunist dictatorship. As often happens with unstable governments, a winner-take-all system developed in which new officials and private-sector cronies tried to capture as much money as they could during their time in office. Nikos Ventouris, an economist at Greece’s independent Foundation for Economic and Industrial Research, told me that during these postwar decades, the incentive structure went upside down. Business leaders learned that they could make a whole lot more money a lot more quickly through contracts with a “friend” in the government (who wasn’t particular about things like skewed labels) than by trying to compete globally.
One of the most destructive developments, Ventouris says, came when Greece joined the European agricultural-subsidy system in 1981. Money from richer European taxpayers flowed to Greek farmers to upgrade their farms, “but the Europeans and the Greek government had no control mechanism,” he says. Instead of investing in new tractors, “the farmers were taking the money and buying things like Mercedeses.” Entrepreneurs who avoided the easy riches of government contracts or E.U. subsidies were often punished by Greece’s nonsensical regulatory system. Megan Greene, of the research firm Roubini Global Economics, once famously recounted visiting a bookstore and cafe in Athens only to learn that it was not allowed to sell books after 6 p.m. or coffee — ever. At the same time, those breakthroughs in olive-oil and feta technology were taking place everywhere but Greece.
Ventouris, whose boss was recently named Greece’s new finance minister, also happened to advise McKinsey on its report. So I asked him if he thought the country might adopt any of its recommendations. He sighed and said that Greece was locked in a vicious cycle. After all, growth requires investing in the future, and investment requires faith in the political system. And right now, nobody has faith in anybody. Sales of olive oil and feta cheese and tourism packages might provide a short-term spark, but the McKinsey report is notably vague about who might be willing to provide the capital. “It would be very useful if we had an inspiring leader,” Ventouris says.
It’s easy to mock the Greeks with their inefficient businesses, lifetime government jobs and absurd public-sector projects. But average citizens have been beleaguered for too long by forces beyond their control. They were occupied by three different countries in World War II. Afterward, Europe’s richest countries subsidized Greek farmers. When Greece later joined the European Union, it was lent huge amounts of money. (As many Americans learned, debt-fueled spending can feel like hard-earned success, at least for a while.) Now Greece is again waiting for other Europeans — especially the Germans — to decide precisely how miserable their next decade will be. The problems are overwhelming, but it’s somewhat satisfying to know that the solutions might be based on things the Greeks have long known how to do themselves, like processing olives and brining cheese.
GO, GREECE LIGHTNING
Greece’s natural resources are profoundly underused. According to the pressed-spring theory, that may be good news for a recovery. Percentages are the products’ share of total Greek exports.
2%: Fresh Fish
Exports of fresh fish, mainly to neighboring countries, have grown by double digits, but fish exports are still a meager piece of the country’s export portfolio.
2%: Feta Cheese and Extra-Virgin Olive Oil
Rather than ship raw olives abroad, Greece could process and package the goods at home and sell them for a premium.
A mainstay of Greece’s export economy. The country has rich deposits of aluminum ore.
Source: The New York Times
*Thanks Tina D. for the information!