On Greek working hours and structural reforms

Did you know who the hardest-working Europeans are? Go on, guess. It's the Greeks. Crazy right? Don't you feel bad for thinking they were lazy until now?

Three times already I've looked into this subject (here and here and here), and three times the story has turned out to be fatally flawed; yet with each year's 'Weekly Hours Worked' release from Eurostat a new batch of clickbait articles pop up tantalising the few people left who haven't yet been exposed to this supposed mythbuster with some variation of 'you'll never guess who the hardest-working Europeans are!'

If you feel vindicated by such articles against unfair stereotypes of supposedly lazy Greeks, I can't blame you. A proper look at (appropriate) data confirms that we are not lazy. But if you actually take these articles at face value, you have been woefully misled. You've also missed out on an opportunity to understand the Greek labour market in more detail. The only lazy people here are content mills like Statista.

The latest iteration - 2013 working hours and the Independent

This time, the story made it into the Independent, after trickling down from other outlets (see here and the original, here), until the Greek edition of Vice ended up covering the story under the headline 'should we be proud that Greeks work the longest hours in Europe?' The Vice_Gr story featured an interview with one Mr. Poupkos, Youth Secretary of the Greek tertiary Union, who is actually not an entirely unreasonable guy - however, on this occasion his commentary focused on curbing illegal overtime and unpaid work; reading the stats and the interview together, one might be excused for thinking that the reason Greeks work so much more than other Europeans is because of unscrupulous bosses (of which, I do not dispute, we have no shortage).

In fact, the truth is very, very different. Comparing like for like, Greeks don't work insane hours at all. But the Greek labour market itself is deeply, structurally unhealthy - and the whopping working hours total is merely a statistical artifact of its structural defects. To understand why this is, you have to understand what figures these publications are quoting, how they compare across countries, and what drives them.

About the hours worked data

The comparative figures on hours worked in Europe come from three sets of publications - actual hours worked in main job; usual hours worked in main job, and actual hours worked in second job. In theory, usual hours for second jobs should be reported somewhere but I've struggled to locate them.

All three of these datasets are compiled by Eurostat on the basis of the Labour Force Survey, which is carried out across the EU, and you can see in minute detail how these were defined up to 2013 here. LFS is the same survey we rely on for employment and unemployment figures, and is carried out pretty uniformly across the EU member states. If you see anyone referring to OECD hours worked figures, like Statista does, note that these too are sourced from the LFS when it comes to EU countries. For non-EU countries, the data sources can vary, and the implications of such variation can be very significant, so country figures are not comparable (as the OECD duly points out). For some reason, Statista's figures seem to be aligned to 'usual' as opposed to 'actual' hours worked,  even though they cite 'actual' hours worked data as the source. The effect is to slightly overestimate the actual time worked by Greek employees - citing 42 hours per week in people's first jobs, as opposed to the 'actual' figure of 40.3. Adding people with second jobs yields an 'actual' figure of 41.2 hours a week (see here).

These hours are self-reported by individual respondents -not employers, as the LFS is a household survey. They include overtime but not lunch breaks or travel to and from work. They are not unduly seasonal, as they incorporate four quarterly measurements, with multiple survey waves per quarter.

Comparing like with like

Whole-labour-force figures like the ones published by Statista are very crude: they lump every working person together, add up their hours and divide by the number of people. So unless the economies being compared are very similar, these sorts of comparisons end up not comparing like for like. Full-time workers work longer hours than part-time workers. Men work longer hours than women. The self-employed work longer hours than employees, particularly if they own businesses of their own.

When you do compare like for like the differences don't look so huge anymore. The Greeks who genuinely work longer hours than their Eurozone counterparts are everyone with a second job (by a long stretch), and people who work part-time for a family business. Additionally, male part-time employees and part-time own account workers work longer hours than their German counterparts, though not their Eurozone counterparts.

So the contribution of unscrupulous bosses to hours worked in Greece is very limited, and the bosses in question are most likely to be business owners employing their own families, employers of second-jobbers (who are, presumably neutral with regards to whether their employees have another job but prefer more qualified candidates), and employers unable to offer their staff full hours, who end up employing people part-time when everyone would prefer a full-time arrangement.

Using usual v. actual hours worked where possible doesn't change the big picture, although it does tend to amplify the differences between Greece and other countries.

Note that the discrepancy that is so obvious when one looks at hours worked carries over to other areas of work that are far less documented - holidays, sick leave, retirement age, the lot. The self-employed and family workers, for instance, take fewer days off and retire later, if at all. 

A structural issue

So what accounts for the huge discrepancy in total hours worked, if not unscrupulous employers or workaholic Greeks? The structure of the labour market, that's what.

Simply put, Greece has fewer part-time employees* (less than half the EU average despite an upward trend); fewer economically active women (a participation rate ca. 12% lower than the EU average); more self-employed people (including the 25.4% of our workforce who are own-account workers, v. 10.8% EU-wide and the 6.6% who are employers, v. 4.3% EU wide); more contributing family workers (three times the EU average); but not more people with second jobs - in fact, the share of employed people with second jobs (deduced from here and here) peaked at 3.4% in 2009, 10% lower than the EU average, then fell to 1.8%, or less than half the EU average, by 2013; as might be expected when jobs are in short supply.

So the question of 'why do Greeks work so many hours', put in its proper context, becomes one of why we have so many unproductive family businesses, why there are so many own-account workers in our workforce, why our workplaces find it so hard to accommodate part-time workers, and why we can't get more women into the labour market. Not all of these are necessarily problems, but they are structural characteristics of the Greek economy. Changing them requires that magical catch-all phrase, 'structural reforms.'

* Note that LFS definitions of part-time employment differ among member states. 

What about productivity?

The usual counterarguments offered to the kinds of crude working hours  statistics provided by the Indepedent are a) yes, but productivity is lower b) yes but it is possible to spend hours at work without doing much c) yes but it's possible to work very hard producing products/services that no-one wants. All three are roughly, though not exactly, equivalent, and all three generally lead back to the structural questions raised above.

Since these objections are prompted by a discussion of hours worked, the obvious point of departure in comparisons of productivity is output per hour worked. As you can see here, the Greek economy produced about a quarter less per hour worked than the EU as a whole, even after accounting for our lower purchasing power.

However, this tells us very little about Greek workers themselves: individuals are not 'productive' as such, because labour is only one factor of production. The productivity of labour is a function of many things, including private and public capital. So while it is meaningful to ask how many hours the average Greek works, it is pointless to ask how productive he/she is and attribute this to him/her as a personal characteristic. To do that, we need to ask a different set of questions altogether, and there are two alternatives.

We can measure the quality of labour used by the Greek economy and its stock of human capital; or how much of its output cannot be explained by inputs such as hours worked and capital employed alone. Each question is methodologically fraught but attempts have been made to answer them.

With regards to human capital, sources such as the WEF's Human Capital Report, the WEF's World Competitiveness Report or the UN's Human Development Index are not terribly helpful because they include too many labour market outcomes in their calculations - what we're looking to capture are inputs, such as skills, motivation, resilience and self-discipline, and they only include education inputs up to a point. The best use one can put them to is in measuring the quantity and quality of education - where you'll find that Greeks do well for quantity but less so for quality - and even then a lot of the lag in quality comes in after one enters the job market - which is an employer's fault at least as much as it is the employee's.

One can also draw on social psychology research, and particularly comparative studies focusing on the Big Five personality traits, to measure some intrinsic qualities that make up the profile of a hard-working personality - conscientiousness in particular is a trait known to correlate strongly with work performance, and which fits the kind of attitudes involved in the 'hard working Greeks' theme. One comparison finds that Greeks score reasonably well and there is little difference in this regard between Greeks and Germans; in another, we score slightly higher. Similarly, the OECD PISA comparisons of perseverance and motivation among pupils show that Greek pupils do really quite well (check the data here, there is too much to summarise). 

TFP calculations are problematic because they require detailed data on the various factors of production (including different kinds of capital), which the Greek authorities do not produce regularly. Both the OECD and EU-KLEMS projects include no TFP calculations for Greece, although EU KLEMS provided enough data for others to fill in the blanks. We now know, for instance, that Greek TFP did not rise from 1999 to 2007, nor indeed did TFP in any PIIGS country, or in Belgium for that matter (but see here too for the opposite finding). Greek TFP was also losing ground against other developed countries from the early 80s onwards, possibly even the 60s, and continued to lose ground throughout the early part of the crisis. 

But TFP figures us nothing about the attributes of Greek employees - only that they appear to be saddled with crap technologies (in the broad sense) of production. Indeed, TFP is a residual - the measure of our ignorance.

[TO BE CONTINUED]

YOU TRIPPIN? NOTES ON GREECE'S HOUSEHOLD CONSUMPTION DATA

Ever wondered what the fastest growing category of consumption is in post-crisis Greece?

Well it's the same one as in pre-crisis Greece. Drugs. Reports of 'sisa' scything through the streets of Athens, booming HIV infection rates among injecting users and the setting up of Greece's first supervised consumption room back in November may have given observers the impression that drugs are confined to the fringes of Greek society.

The fact, however, is that the formal household sector is chasing highs too, and has been for years. Only in three out of the last eleven years have Greek households failed to clock up a double-digit increase in the use of 'narcotics' as defined here, with the total amount spent in 2011 equal to roughly EUR1.2bn (or EUR110 per person) in 2010 prices.

What you can see from the graph to the right, however, is that consumption growth was in freefall pre-crisis, and the trend has reversed since, despite (or possibly because of) falling incomes.

The figures, however, are confusing in several ways. For one, Greece appears to be better at collecting data on narcotics-related spending than any other country in the EU. You can see for yourselves - most countries are unable to publish figures, and those that do, publish unrealistically low figures anyway. Going by Eurostat's figures, Greece alone accounts for half of the EU's drugs consumption. Frankly, that is impossible.

On the flip side, Greece's own figures may be inaccurate too. 100 Euros' worth of drugs for every man, woman and child sounds a bit high, particularly so when one realises that regular drug users are in fact quite rare. In Greece, for instance, only about 15% of high school age boys and 7% of girls had ever used any illicit drugs in 2011 (data here). The figures are quite similar for adults, with recent users making up nearly half of all lifetime users (data here). So if, say, about 5% of the population (allowing for under-reporting) are responsible for 90% of the total spend, that means they would each spend about EUR2,000 per year on their habits. It's possible, but it's a big stretch - and in 2011 no less. Remember, these are people upstanding enough to sit through a household consumption questionnaire. A real problem user wouldn't be able to sit through that without a fix of something, I doubt I would either.

The consumption data of course come from Household Budget Surveys (HBS) run by national statistics agencies such as Greece's ELSTAT. Harmonisation and comparability are, unlike with some other datasets, not a huge priority, so it pays to look at the original questionnaire and methodology. In the case of Greece, you can check out the full documentation of the latest survey round (2011) here or a more complete version (with questionnaires) in Greek here. What really stands out to me is that none of the questionnaires actually include any explicit questions on the use of narcotics - which makes sense. But in that case, ELSTAT must literally be relying on respondents to volunteer information about their drug habits, and they must be much more willing to do so than their fellow Europeans.

Time to snoop around a little.

TO BE CONTINUED

THE BULLSHIT JOBS CONUNDRUM (UPDATE NO. 4)

Have you read David Graeber's blog on the phenomenon of  'bullshit jobs'?

I received a link to this the other day, not from a socialist, but from a dyed-in-the-wool libertarian friend. He and I briefly shared a job once that was not far from a bullshit job. We both left out of sheer tedium and disgust - and both of us took a pay cut to get out of there. His email included simply the link to the blog and the title 'That sinking feeling.' I suggest you read it before you continue reading my commentary.

While you're at it, read also the 'Attack of the Kling-ons' - the same critique, really, from the perspective of a technology journalist, and with an opinionated comment section below. Or maybe this brief self-interested discussion about whether travel agents should still exist. Then to top it all off, you can visit a Bullshit Job Generator here or take the test here.

The Economist, perhaps sensing that a critique of whatever it calls capitalism was about to go viral, was quick to respond to Graeber with a much less interesting take on the whole thing - most jobs have always been unsatisfying, new 'bullshit' jobs are mostly down to technology, and the jobs can't really be without value, otherwise profit-driven businesses wouldn't pay anyone to do them. Ever confident, the Economist writer(s) dismissed the original article as an 'amusing essay.'

I think the Economist did all of us who believe in the free market a disservice. A far more useful response is to concede that Graeber has a point on the existence of such jobs (if you've been in a bullshit job, you don't need proof), but probably a little wrong on which jobs they are and why, what 'value' they create, and for whom. To do that, it helps to have worked in a large organisation, and it helps to have existed, at least for a while, at the edge between market and non-market as my former colleague and I have.

You see, Graeber offered the following two tests of a bullshit job.

First, the owner of a bullshit job will feel that the job is ultimately meaningless, regardless of how well they perform it or how well it pays. Yet passing this first hurdle of a bullshit job depends on your capacity for self-deception, confirmation bias and unearthing anecdotes. All humans are capable of twisting their outlook on the world until the hand that feeds them doesn't deserve biting. At my first job, some colleagues genuinely believed our work was helping some of the most disadvantaged young people in Britain earn valuable vocational qualifications. They could point to the success stories. Objectively, the qualifications were a government mandate, proven by repeated studies to yield negative returns - partly because they branded people as idiots until employers wouldn't touch them with a bargepole.

Second, if the owner of a bullshit job stopped performing it, no-one (apart from their colleagues and other people doing more or less the same job) would notice. This question is in reality an aggressive fantasy: union enthusiasts dreaming of industrial action that brings the world to a halt, fundamentalist Christians looking forward to the Rapture, libertarians reading about entrepreneurs leaving the world behind in Atlas Shrugged, unpopular kids fantasising about their own funerals, abusive husbands telling their wives no one else would want them. But it also comes with a kernel of truth - bullshit jobs don't deliver value to the people who pay for them - but to someone else entirely.

Passing the second hurdle of a bullshit job is almost too easy. As successive recessions have shown, there are few limits to how much 'stuff' we can do without - even in the so-called 'core economy'. And since many of our 'needs' are not 'core,' what people would notice on day 1 is not what they would notice on day 30. Millions of kids would notice (for a day) if Justin Bieber's PA's PA stopped tweeting for him - yet that MUST be a bullshit job if ever there was one. The real test is not 'who would notice' but whether, a few months later and with no other coercion involved, people would get over the loss and substitute the missing service with something else.

Of course, consistent with his audience, Graeber is trying a neat little reversal with this comment - by hinting that the meaningfulness of a job should be assessed based on the prospective impact of temporary industrial action. But he should instead consider the impact of permanent industrial action. Before long, another group will work around the gap unless the law is twisted to ban them from doing so (think Greek refuse collectors and their private sector counterparts).

What the data have to say

I cannot directly test Graeber's hypothesis. However, I do have weighted, nationally representative EVS data from over 30,000 interviews across the EU in 2008, detailing employees' job satisfaction and perceived level of autonomy by detailed occupation (both on a scale of 1-10) as well as the share of respondents who mentioned either achievement or public service as a characteristic of a 'good job'. To make double sure, I've also looked at what share of mentions these two characteristics took of each group's 'definition' of a good job. The only other possible options denoting 'meaning' would be mentions of responsibility at work. I chose, however, to leave this one out as it could confuse vanity and the desire for social status with the pursuit of meaning.

You can find the detailed findings by occupation group here. But more important, to me, is the chart below, which shows the correlation between a need for meaning at work and job satisfaction, at least for the bulk of jobs out there. The area of each bubble corresponds to the number of people working in each occupation in Europe, back in 2008. What is quite remarkable is that people who emphasise meaning in their choice of occupation also tend to be happier employees, and the vast majority of European employees rate their job satisfaction over 5/10. This cannot be the same world that Graeber is discussing.

The people suffering the most from Graeber's 'bullshit job' angst (i.e people who want a decent amount of meaning at work but are deeply unhappy at work) are most likely to be, not office workers with made-up jobs, but farm hands and machine operators - the traditional workers whose loss Graeber laments. Sure, customer services also emerge as a massive graveyard of hopes and dreams but the real rump of the market are these guys, plus maybe textile workers and miners. In short, the usual suspects since the industrial revolution. The biggest occupational group with far more longing for meaning than their job can accommodate are, in fact, high school teachers; but they're not nearly unhappy enough.

Another approach is to classify Europe's workers into clusters based on these two characteristics - desire for meaning at work and job satisfaction. The result is a system of seven 'satisfaction' groups, and by looking how many workers in each occupational group belong to each 'satisfaction' group we can perhaps infer the prevalence of bullshit jobs. My idea is that we should be on the lookout for people with medium levels of desire for meaning and low or very low job satisfaction. I've ranked the bigger occupation groups according to their propensity to produce such people here.

Again, Graeber strikes the opposite of gold. Turn the test around and search for occupations with the fewest people reporting high desire for meaning and extremely high levels of satisfaction - the same. His favourite occupations turn up more depressed, bullshit workers than the ones he rejects as meaningless.

You can also find a very detailed decision tree explaining the determinants of job satisfaction here. Hint - autonomy at work is by far the strongest determinant.

The reality of bullshit jobs

Still, as I said, I believe Graeber is right in asserting that bullshit jobs exist. I have my own set of tests for Bullshit Jobs, though:

Test one: Every bullshit job supports a rentier or group of rentiers.
Test one-and-a half: Progression in bullshit jobs is asymptotic: it forever approaches but never reaches a rentier position
Test two: Similar bullshit jobs across organisations cross-subsidise each other and each other's rentier masters, instead of competing with each other
Test two-and-a-half: Bullshit jobs give rise to greater network effects, thus creating more bullshit work, the better one performs them 
Test three: The content and output of bullshit jobs is opaque to the people that ultimately fund them, i.e. it is hard to know what one is getting for one's money
Rule three-and-a-half: Bullshit jobs provide ultimate value to internal stakeholders, but are paid for by external stakeholders who receive little or none of it.
Test four: Because bullshit jobs aren't about doing anything, they rely on bullshit skills and bullshitting skills far more than on real ones
Test four and a half: Any job in which a candidate's eventual performance can be predicted accurately by interviews is a bullshit job, although the inverse is not necessarily true.

The Pain of Bullshit Jobs 

Owners of bullshit jobs feel, among other things, shamed or guilty by association. Close contact with the rent-seeker they serve creates the sense of being soiled. How, precisely, the feeling is experienced is crucial. When it is experienced as guilt, it should not lead to the feelings of aggression towards holders of real jobs, as Graeber predicts. When it is interpreted as shame, it could, as long as the blame can be externalised. Whether the 'soiled' feeling will turn to shame or guilt can be shaped by the organisation itself, because feelings of shame and guilt are essentially mixtures of a simple affective element (a raw feeling) and a cognitive process (a 'knowing', I guess).

The categories of Bullshit Jobs

Bullshit jobs, in my view, come in the following flavours (the list continues to grow):

1. Template populators: A template is an abstract structure or order into which relatively simple information or actions can be inserted in order to produce complex but standardised outputs, meeting the template designer's specifications. When you prepare statutory financial reports or regulatory returns, write contract tenders (or invitations to tender, for that matter) for the private or public sectors, if you manage a standardised 'evaluation', 'impact assessment', or 'consultation' process, if you're a UK solicitor involved in conveyancing, a health & safety inspector, or an HR employee taking applicants through a structured behavioural interview, then you are a template populator.

Templates allow complex processes to be standardised and parcelled out, so that individual populators can be allocated tasks they are able to perform, even if they are incapable of efficiently carrying out the whole process. The entire task can thus be performed with the lowest possible level of skilled labour input while meeting the given specification - not what the client wanted necessarily, but what they can be proven to have asked for.

Templates create and protect elites in two ways. First, by making the work of the skilled individuals who design templates scalable. The designer of the template creates a saving by substituting more skilled (designer) labour with less skilled (user) labour and reducing (user) distraction - thus making unskilled (user) labour more productive and releasing skilled (designer) labour to more productive uses. The more they can effectively 'own' the template, the more the designers of the template can capture at least some of this saving as rents.

Second, a template allows the extraction of rents by insulating both its designer and their immediate reports (middle management) from risk, at the expense of pretty much everyone else. After all, a template approved by the principal is almost incapable of producing an outcome the agent can get into trouble over. Which is why, for instance, audit firms rarely get into trouble every time a business they audit fails spectacularly.

When designers aren't effectively able to keep users from replicating their valuable templates elsewhere, it is still possible to restrict usage of the templates, by law or convention, to a relatively small number of users. These user-designers are known as professionals, and they are forced to share the collective rents extracted through templates fairly equally.

2. Junior Lobbyists: a Senior lobbyist in the wider sense is a person who creates 'value' for a constituency by bending the coercive powers of the state in their favour - delivering legislation or, even better, institutions, that allow them to either capture rents, or avoid conceding them to other parties. A corporate lobbyist is only the most obvious example. But the sprawling 'policy' industries of the Anglo-saxon world, the corporatist institutions of Europe, and the well-connected mega-corporates of Asia and Africa, are the preserve of senior lobbyists as well.

Now, a junior lobbyist does none of these things. Junior lobbyists create 'value' by supplying the senior lobbyist with legitimate means of getting close to the people they need to influence, and overcoming initial resistance. They create audiences, venues and props that enable the senior lobbyist to do their job.

Through their work, the constituency cross-subsidises other constituencies' senior lobbyists in return  - especially once one considers that government ministers are themselves senior lobbyists to some extent, and their department staff are themselves junior lobbyists.

Finally, the existence of junior lobbyists provides reassurance to their constituents, who typically cannot observe the senior lobbyists at work, that their money is being spent in their best interests.

3. Outsourced compliance clerks, and their handlers: People usually speak of 'compliance' if they are in a regulated environment, and a specialist department has been given the role of checking that the business can be demonstrated to toe the line or better yet, stay off the regulator's radar altogether. I'm not too worried about them because they are essentially Template populators as per no. 1 above.

But compliance in practice can be more about internal policies than external regulations. Ever worked in a company that employs frequent travellers? I have. Our travel was ostensibly booked by a departmental PA, but in reality the poor lady was merely the first point of contact - she was required, by company policy, to forward our travel requests to a travel agent, who then came back with a quote. In all my years working for the company I was never able to get a quote from them that I couldn't beat with a simple search. They were costing, rather than saving, money. So the company, and our customers were getting negative value.

Why did this job exist? Because back in the day someone decided (correctly) that our department was spending too much on travel, with no one checking whether the travel was actually value-for-money and that people weren't treating themselves to the odd cheeky upgrade. The tough way to fix this would have been to speak to line managers and tell them it's their responsibility to keep travel costs down. Even better - give them a team budget each and end the tragedy of the commons. The easy way was to write up our policies, forward them to a contractor and say 'don't book anything that isn't compliant.' The travel agent isn't saving us money, or even making us waste less money. They simply ensure that we waste only within the boundaries of what is approved; and they skim a little bit of value out of this.

Our departmental PA (otherwise a highly competent person) wisely moved on to a better job. She didn't mention the word 'bullshit' but I think it was mostly out of courtesy.

4. Organisational Placebo Buttons

A placebo button is a button (e.g. on an elevator or a train door) that isn't actually wired to do anything, but exists in order to create an illusion of control. Placebo buttons exist because automation has advanced faster than the users it seeks to serve - and its purpose is to keep the latter content.

Organisational placebo buttons are created when senior decisionmaking bodies in organisations are stripped of their power or are forced to capitulate to an executive office. Alternatively they may be needed when decisionmaking bodies are ultimately powerless but their memberships aren't ready to admit this. This doesn't usually happen in purely commercial organisations, but it is very likely to happen in any kind of membership organisation, where the tension between management and membership needs to be management. The 'placebo button' is a person whose job it is to liaise with the fallen ex-decisionmakers for the sole purpose of assuring them they still matter.  The purpose of all this is to allow management to run the organisation according to its own interests and yet appear to be paying close attention to the membership, for whom the organisation supposedly exists.

The placebo button job holder serves management of course, but, as long as they are junior enough, will tend to be flattered by the opportunity to rub shoulders with the senior 'stakeholders' they are meant to reassure and soak in their wisdom. Once again, the progression is asymptotic - the placebo man or woman will almost certainly never become one of the stakeholders, or one of the senior manager rentiers they are covering for.

5. Scar tissue

Ursula LeGuin's The Disposessed  offers an interesting thought on how anarchist societies might fail; in LeGuin's world, crises, in her case natural but I guess also man-made ones, can have a lasting effect on even an ideal anarchist society. They do this by building a 'scar tissue' of control around the affected area, in order to resolve the crisis quickly and prevent it from arising again. The scar tissue never fades completly, and successive crises only add new, differently shaped layers to it. Commercial businesses, public sector bodies and non-profits act in much the same way.

When a product fails to click with its intended audience, you know a new layer of market research will e required before any further products get approved. When a newsletter or report prompts an angry response from important people, you know future editions will tend to require additional senior sign-off. When colleagues complain about being excluded from meetings, you know the organiser's response will be to copy them pre-emptively into everything remotely of interest in future.

Everyone's job incorporates scar tissue over time - eating away at the essence of their jobs even if they show no obvious signs of being bullshit jobs. The more 'stakeholders' and 'internal clients', the greater the potential for crises, and the faster the buildup of scar tissue. The scar tissue protects senior management by helping the organisations draw less of its stakeholders' attention - which is essential if they are to continue to believe they call the shots.

Some of these jobs are set up in order to artificially create an 'owner' for a diffuse risk, or an owner for the metrics of said risk. Suppose you hire somebody, a third of whose job it is to 'co-ordinate' action on hospital waiting hours. They will collate, analyse and present figures on hospital waiting hours; they will 'liaise' (that word again) with people who actually can make a difference to the situation. But when responsibility is diffuse, these people are likely to be too senior, too remote, or too culturally silo-ed to reach. The 'waiting hours' person will know within a month that their job is not to improve the waiting hours metric, but to own the metric, so that it can be somebody junior's fault when it's out of line.  

THOSE INEVITABLE EUROZONE CURRENT ACCOUNT IMBALANCES, REVISITED

Health Warning: See Manolis’ comment below and my response regarding the figures. By the looks of it, Eurostat didn't mess any figures up.

One of the core narratives employed in an attempt to explain the Eurozone crisis has always been a variant of the 'global imbalances' theme - the Euro peg puts member states on a treadmill, on which the weighted-average speed of the group sets the pace. If you can't keep up, you rack up current account deficits until you are unable to finance these and fall off. If you can keep up easily, you rack up current account surpluses at the expense of everyone else.

Since most of the trade carried out by Eurozone members is intra-Eurozone trade, the argument goes, it is impossible for everyone to achieve surpluses. The Eurozone treadmill is a zero-sum game, and unless you can lead the race, your best option is to exit.

Well the latest data can be found here, and they show that, at a price, current account deficits can come down within the Euro straitjacket. 

The detailed sources of Greece's adjustment can be seen here. It's mostly down to an improved goods balance, while a reduced net income balance is a distant second. 

'That's a recession for you' I hear some readers snort. Since Greece is in a deep downturn, imports must be falling and therefore the goods balance is improving. Except that's not the case. Looking at the goods balance in detail (data here), reveals the following:

And since better economists than me occasionally read this blog, a puzzle for you. Can you explain what happened to Greece's income debits in 2012 (data here)?

To my regret I was originally unable to, but my reader Manolis spotted the difference - Greek government interest payments. These fell by 2.2 percentage points as a share of GDP between 2011 and 2012 (see p 51 here), so they can probably account for most of the 2.7 percentage points loss of income debits during this period (data here).

My original guess, which I will keep up for historical reasons, was that the change had something to do with tax reform, since income debits spiked in mid 2002, following what was then called the 'mother of all tax reforms'. I theorised that the 2002-3 reforms had forced companies to change the way they used offshore companies to avoid tax, sending an increasing amount of money 'abroad.' I also thought that regulatory uncertainty around the tax reforms of 2012 might have momentarily stopped this flow of income. In fact, following Manolis' contribution, I would still offer my conspiracy theory to anyone trying to understand the remaining 0.5% drop.

For details of the 2002 reforms, and the pre-reform environment, see p. 26 onwards here and the image below:

A VERY DIFFERENT VIEW OF THE FAILED GREEK STATE

I love Google Scholar.

Like all things hyperlinked, Google Scholar's number one unintended attribute is that it makes serendipity not just possible, but inevitable. You look for X, you find Y along the way.

Tonight I found myself looking, for the umpteenth time, for and at papers explaining Greece's record of Total Factor Productivity Growth after the 50s, as part of my efforts to expand this article. If you'd like to follow that thread, the best I found for you tonight was this paper on the incomplete convergence of Total Factor Productivity between Greece and other European countries.

Anyway, as I was leaping, monkey-like, from citation to citation with about 30 tabs open, I stumbled onto this paper, a review of about 60 years of productivity growth in Europe. In itself, it seemed to me like  the EU-KLEMS stuff I've read so much of, only a little out-of-date. I know I'm doing some solid researchers a great disservice in saying this but hey, it's my evening, I demand something slightly more interesting.

Then suddenly I stumbled on this phrase, which sounded eerily familiar:

"Harrison (2002) considers a game between the Dictator (D) and the Producer (P) to investigate when it will pay both parties to maintain a high coercion, high effort with monitoring equilibrium."

I love that phrase: 'high coercion, high effort with monitoring equilibrium' - it implies there's an opposite equilibrium involving low coercion (well, by the standards of an abstract Dictator), low effort and monitoring. And that, my friends, sounds a little like Greece.

You see, Greece is a paradox of both over- and under-regulation, where an overbearing, omnipresent state coexists with a truckload of employer misconduct, poverty, rent-seeking, anticompetitive practices and cronyism. You can't call it socialism because profits (often in fact rents) are widely tolerated and the state's safety net was full of holes in the best of times. You can't call it capitalism, because price signals are either supressed or hopelessly distorted by state intervention. So here's my hunch: the low-coercion, low effort and monitoring equilibrium that Harrison blames for the collapse of the Soviet Union is in fact also responsible for the failure of the Greek State, which, despite undisputedly democratic elections, remained unreconstructedly authoritarian in its function except where it was forced by outside stakeholders (usually the EU) and the threat of a popular backlash to act otherwise.

Harrison (2002) is in fact this paper and I urge you to read it. Some of it is game theory; most is in fact economic history illustrated by facts, figures and equations. Harrison, as we've seen, set up a game with two agents: the producer and the dictator.

"The dictator maximises a payoff made up by the value of rents less his costs and losses, while producers maximise their income received in wages and bonuses and appropriated through theft, less the costs of effort and punishments."  

In the Greek case, for 'producers' read 'businesses and the self-employed' - the mix of 'wages' and 'bonuses' would be different to what Harrison expected under this reading but I doubt this changes much. For 'Dictator' read, of course, the State, but in a broader sense, reflecting the particular social classes and interests that hold the State captive for a particular period of time. Output theft relates to entrepreneurs' failure to render the tax and social contributions and regulatory compliance expected by the State, whether through avoidance (legal) or evasion (illegal). Of course calling these things 'output theft' is not the libertarian view of tax, but it definitely fits the authoritarian view quite well. For a quick analysis of how regulation is a tax, I would refer you to pg 14 here. You might argue that Harrison doesn't have regulation in mind when speaking of Dictator's rents, but actually he does - just check out page 21 here.

"The dictator sets coercion high or low by deciding whether or not to monitor. Without monitoring the dictator cannot stop producers stealing output. The dictator raises coercion by monitoring output, which efficiently eliminates stealing, but monitoring is costly and is a deduction from their rents. When output is monitored, high output can be rewarded and low output punished."

"Output depends on both effort and the scale of punishments. Producers decide whether effort is to be high or low. When effort is low, the value of output is positive and the producer cost of effort is zero. When effort is high and has a positive cost, the value of output is raised by the value of effort. Output depends also on the scale of punishments, because firing and forced labour reallocate workers towards employments of lower intrinsic productivity. Output is high when effort is high, low when effort is low and low output is unpunished, and lower still when low output is punished. (Because planners know who is being punished, the dictator can discriminate between the output loss arising from low effort and that arising as an indirect cost of the punishments he has imposed, so he does not try to punish the latter twice." 

In the long run the scope for high coercion depends positively on the dictator’s return from high effort, the cost to the dictator of not monitoring, and maximum feasible or credible punishments, and negatively on the costs of effort and monitoring. It also depends positively on the excess of the dictator’s discount factor over that of producers. The more the dictator is orientated towards the long run, the more he will pay to sustain coercion in the present; the more producers are orientated towards the short run, the less they will sacrifice to persuade the dictator to abandon coercion. 

So how does the system collapse? For Harrison the two key variables are the cost of monitoring the economy and the Dictator's reputation. He argues that post-industrial economies are much harder to monitor than agrarian or industrial ones, making it unsustainable for the command economy to maintain a high-monitoring equilibrium. Some reforms can, of course put things back on track rather than undermine the Dictator - but in Greece's case the reforms would have had to increase tax administrative capacity - which never worked. In fact, even to this date the reaction to every effort at increasing the State's capacity to monitor is staggering, as the IMF's most recent review of the Greek bailout reveals:

To cut a long story short, here is a summary of Harrison's findings:

• The system remains stable right up to the point of collapse.
• Command economies can secure stable high output through artificial incentives, under given historical circumstances.
• Coercion can be legitimate socially but not legally. Authority that rests on coercion cannot make binding commitments. Rather, the credibility of commitments rests on the Dictator’s reputation, which is fragile and may be lost if coercion is relaxed once. The absence of binding commitments results in a time-consistency problem for central planners.
• In exercising coercion the dictator is rationally secretive. Both the dictator and producers may exploit information asymmetries to shift payoffs in their favour. Specifically, the dictator will conceal monitoring and punishment costs, and producers will exploit the difficulty of observing effort to overstate its subjective costs and secure improved rewards.
• Command economies may be undermined by adverse trends in monitoring costs. Changes in the means and complexity of production can raise the costs of monitoring producers. When monitoring becomes unprofitable, the dictator will abandon high coercion.
• Command economies may also be undermined by bad policy. Too much and too little coercion are both destructive. Too much means overreliance on penalties. Too little means tolerating rent–seeking and erosion of the dictator’s reputation. Both can undermine the profitability of monitoring.
• Command economies can be undermined by economic reforms. Moreover, the cycle of reforms and counterreforms can harm the dictator’s reputation.
• The dictator’s surrender, not workers’ resistance, triggers the system’s collapse.

  

ABOUT THAT "ODIOUS" DEBT ... A FURTHER CRITIQUE OF #DEBTOCRACY

Note 1: I am incredibly grateful to Aristos Doxiadis for citing this article in his excellent book, Το Αόρατο Ρήγμα.

Note 2: This blog was updated on 5 Dec 2014 to reflect new data on the size of bribes

Veteran readers will remember my epic slugfest with our new wave of defaultniks, a propos of the release of #Debtocracy. A central bone of contention was the defaultniks’ claim that much of the Greek debt was not attributable to the will of the people and was in fact odious. The defaultniks purposefully refused to offer even an approximation of what percentage of the debt they considered to be ‘odious’ in this way but pointed to excesses in public procurement and public investment costs as indirect evidence. When pressed on the matter of how much of the debt is odious, they flitted from ‘all of it’ to ‘some of it, surely we deserve to know how much!’ depending on their audience in any given moment. 

I argued, on the other hand, that with nearly two thirds of all spending going directly to the people in the form of direct transfers, pensions and public sector wages, it is very unlikely that most of the public sector’s debt in Greece was odious. Still, I acknowledged that someof it probably is.

The months have rolled past and the defaultniks are by now so convinced of their moral and intellectual superiority (or at least the physical muscle they can command) that they see no point in following up on this argument. If they've managed to put together a self-styled Debt Audit Committee, answerable to no one and selected by buddy-up, it has made no attempt at a figure and will likely not attempt one until after La Revolucion. Yawn.

Government, of course, has no interest in such calculations so I can’t count on them. 

So screw everyone. I have to do this myself. Like the defaultniks themselves, I will start with procurement because that's where the bodies are chiefly buried. 

First, I need an estimate of the actual procurement spending of the Greek government, going back as far as possible. Eurostat provides this (if you bother to divide % of GDP by % of total contracts) from 1995 to 2009, and you can find a link to this and other interesting datasets here.

The result – about 9 to 13% of GDP (about a fifth to a quarter of all government spending) went on public procurement annually. On a typical year, roughly 60% of this was under the radar spending that was never published in the official procurement journal of the EU because the contracts were (whether really or artificially) too small. The estimated amounts spent on everything, from the Rion-Antirrhion bridge to felt tip pens, are as follows:

Now we need an estimate of the percentage of this that went on bribes. The World Bank generally calculates that 3.7% of all procurement spending globally is spent on bribes, but I prefer to use the percentage admitted to by Siemens, whose executives have had their own run-ins with the greasy outstretched palm of the Greek government official. The typical Siemens bribe is 5-6% of the contract value. Let’s take 6% just to be on the safe side. According to this ratio, the Greek state must have paid between EUR1.5bn and EUR2.2bn per year on bribes. 

But of course bribery isn’t just about paying the actual bribe, it’s also about buying inferior services or paying over the odds. The bribe is meant to convince officials to allow this. These additional economic ‘capture’ costs come up to anything from 20% to 188% of the bribe itself.  Combining this calculation with the estimates on bribes it is possible to estimate an upper and lower bound for the cost of bribery and corruption in public tenders for Greece.

Now I realise that in applying these rules to all public tenders I am making a heroic assumption – some contracts will have been pimped to death, with contractors making incredible capture rents, and others will have been done by the book. I am also assuming that bribery and capture costs remained constant as a percentage of procurement spend every year, which can’t be true as there have been procurement bonanzas that will have been milked to death during this time, as well as some years when rents from bribery were low. 

I can’t help this miscalculation given the tools at my disposal. It’s just the best estimate I have. And it looks as follows. The total costs of capture (bribes and mispricing) ran up to anything from EUR900m to EUR5bn per year.

Now, in determining the extent to which these rents contributed to Greek Government debt, I must make some assumptions about their financing. To ensure I cannot be accused of bias I will make the most defaultnik-friendly assumptions possible, in the understanding that they may be biased in favour of overestimating the odiousness of the stock of Greek debt.

First, I will assume that all of this money came from the Greek public coffers. This is patently not true as EU money flooded into the country from 1995 to 2009 and much of it went towards procurement.

Then I will assume that all of this money came from excess borrowing and thus a) we are still saddled with the interest to this date and b) this debt is indeed odious. This is a very strong assumption and one that is moreover heavily biased towards the defaultnik case.

This means I need to calculate an acceptable interest rate for the excess borrowing. Given that Greece never paid down any debt but simply refinanced existing obligations throughout this period, I feel justified in calculating our effective interest rate by dividing the total stock of debt for each period with the total interest expenditure for each period. Both can be found here. I assume that costs before 2000 (when the Eurostat series begins) were constant at the same level as 2000, i.e. 7.2%. (Note: they were actually higher).

Now all that remains is to calculate compounding coefficients for each year based on the product of the (interest rate+1) for that year and all following years. They look as follows:

Now all that remains is to add up the up-to-date figures. The Grand Total comes up to a range of EUR29.8bn to EUR71.6bn, or alternatively 9.1% to 21.8% of our total stock of debt as of end 2010. 

 

Remember, these are very generous figures, and yet even on these assumptions, the amount of potentially odious debt is almost certainly less than the nominal 21% haircut agreed in July.

With procurement out of the way only straightforward graft and over-compensation of officials remain as possible avenues for the creation of odious debt. However, I believe that the contribution of these two is negligible compared to that of public procurement as indeed it is in almost any country not run by warlords.  

UPDATE: I realise in defending these estimates that there's just no pleasing some people. If you're not happy with my figures or my assumptions, let's at least agree on this: That it is possible, in theory if not in practice, to come up with a good estimate of the amount of debt attributable to things other than the will of the people; that carrying out such estimates is desirable; and that the extent to which Greece's debt is odious is a matter of fact, not politics. My assumptions are no doubt flawed but they are transparent, they come with some justification, and they are there for all to evaluate. In fact, you can just plug in your own assumptions and try to get an estimate that works for you.

2013 UPDATE: How fair is @talws' objection in the comments below? I explore the topic here.

2014 UPDATE: How accurate was my 6% assumption on the size of bribes, on which so much of this exercise depends? There is a new dataset for the researcher to draw upon: the recently released OECD estimates on the size of bribes as a % of contracts, based on records from 55 actual cases brought to justice between February 1999 and June 2014.

The average OECD estimate is 10.9%, which is significantly higher than my assumption. Bribes, of course, range widely by sector, from 14% for health- related spending (one of my Big Five deficit-drivers) and 17% for admin services, to 6% for scientific and technical consultancy, and 4% for construction. Ironically, the types of projects most commonly cited by defaultniks back in 2010 (Olympic construction for instance) attract relatively small bribes (less than my original estimate), while services- and consultancy-based projects are much worse. Anyway, please note these figures are based on a vanishingly small sample, involve foreign bribery only and do not seem to include any cases involving Greece. Still, if this estimate is accurate, then my estimate of our odious debt should grow by 81% to roughly 16.5% to 39.5% of Greece's 2010 debt. The mid-point of this range is now above our original creditors' haircut, but nowhere near the total debt jubilee defaultniks were after.

Once again, the facts simply don't bear out the Debtocracy story. They do reveal a good amount of debt we could have done without; and I wouldn't mind defaulting on that even now. But at least we would be seen as credible and honest, as opposed to opportunistic and hypocritical.

I CAN HAZ GUNZ AND GUCCI JEANS?

Another big news item this week was Greece’s continued slide down the scale of Transparency International’s Perceptions of Corruption Index to the dubious accolade of ‘most corrupt EU country.’ I simply cannot summarise my impressions on this better than the inspired Twitter user @divinejudge1 [note by ‘lower corruption’ he means ‘lower transparency score]:

But that’s just perceptions. How about a stab at the facts? Well, there's no facts to be had about corruption but as readers may recall, I am particularly fond of a particular methodology for measuring the size of the shadow economy, which I also cite here.

According to Schneider (here), after a bumper year in 2009 when it grew by 0.3%, the Greek shadow economy is due to shrink by 3.2% this year, on the optimistic assumption that GDP is going to fall by 4%. Schneider’s estimate is that Greece’s shadow economy should reach 25.2% of GDP this year – still comfortably the largest in the EU in relative terms but also just barely over 2007 levels.

These figures underscore the point made by the IMF in its recent review of our adjustment programme: the resilience of the shadow economy is no insulation from the pain of recession or fiscal austerity. When the informal sector is large enough, it invariably comes to depend on the formal sector for demand. Fans of decoupling narratives always come to grief in this way and when they are governments the implications can be severe. I remember being subjected to this narrative by some of our leading lights back in 2008 – the same people that told me to stop worrying and learn to love the deficit.

Of course some academics will rush to explain that these ‘perceptions of corruption’ are just another bourgeois construct, or a way for the Americans to put us down and that the formality of economic activity is irrelevant. 

To this I can only say: try to read through this without rolling it into a joint.

YO'MAMA-NOMICS 101

The last few months have been very hard for Greece, with not only the sustainability of our public finances but also the moral fibre of our people coming into question. The response of many Greeks to this has been a tribal one: ‘so-and-so can’t call us corrupt/insolvent/a failed state! What’s so great about them anyway? We all know about their dirty little secrets!’ This kind of response is typical not only of the great unwashed but also of many MUPPETS among our political elite (such as this one and this one) and of course a number of economists for hire.

I call this type of analysis YO’MAMA-nomics. In a YO’MAMA-nomic argument, the issue quickly becomes not how badly Greece needs to up its game but how we can avoid losing face right now. Note that most of the accusations leveled at Greece regarding corruption or the parlous state of our public finances were things that one could have heard mentioned casually around dinner tables around the country for years and years prior to the IMF bailout. Indeed, one of our best-ever comedy series established the caricature that everyone is now so familiar with all of 21 years ago.

I have now found my favourite example of YO’MAMA-nomics and I’d like to share it with the world. It comes, as you might imagine, from a Greek academic with substantial activist credentials. The treatise in question can be found in an old paper by one Dr. Peter Bratsis, formerly of LSE and now of Salford University, that perfectly encapsulates the YO’MAMA-nomic mindset. Remember, this is not the rantings of a tro(ma)ktiko reader, but rather the abundantly referenced thoughts of a professional social scientist:   

“The point of departure for the present paper is to reverse the gaze, to not look to Greece in order to discover the source of its ‘corruption’ problem. Rather, this paper looks from Greece outwards in order to uncover why it is that people judge Greece to be corrupt. The paradoxical position of this paper is that the sources of the problem of corruption in Greece can not be found in Greece, they are to be found in the seemingly less corrupt states of the West (particularly the United States), in those concepts, rituals and myths that enable countless instances of private regarding within the public to be judged normal and acceptable and which shape our perceptions of Greek political life as being pathological. Although I do not doubt the presence of clientelism or bribery in Greece, I do question why these things (and not many others) should be considered a corruption. For example, why is it that clientelism should be a corruption but not corporatism or interest group politics? The spontaneous understandings and categorizations that we hold in our heads and which lead us to characterize some phenomenon as a corruption and others as not are what this paper seeks to uncover.”

Did you get that? Later in the same paper, he gives an excellent example:

“The tendency to give ‘envelopes’ [ed: a reference to bribes in the health sector] in order to receive preferential or attentive service is well known. From the typical western perspective, such endemic ‘bribery’ is sure to be labelled an example of corruption and this form of allocating medical care is likely to be judged undesirable. Indeed, I suspect that most Greeks would consider it a corruption and something that should be done away with. However, if we ignore the informal nature of the exchange itself and focus on the larger questions of how egalitarian the distribution of medical care is and how much money (bribe included) this care costs compared to other systems – we may very well judge the Greek medical system to be superior to many that are perceived as ‘uncorrupt’. Is an informal exchange between doctor and patient really more troubling than the power that the American Medical Association or the pharmaceutical industry have within the U.S. legislature? It could be, but the point is that an argument has to be made, the labelling of something as corrupt cannot trump real political discussion and analysis. What if we formalized ‘envelopes’ and called them co-payments? They would then likely fall under the category of not being corrupt, but would the Greek medical system be any better than it was before?”

You read correctly. The intuition that there is something deeply wrong with one’s doctor requiring an additional payment behind closed doors in order to do their job is irrelevant. Corruption is a Western gimmick, another word that the Americans use to put ‘us’ down. Bribery is the Greek way and who is to say it’s an inferior way? At any rate, what is desirable and what is not is a matter for ‘political discussion and analysis’ – i.e. for the good Doctor and his socialist circle-jerking friends to decide.

At any rate, the suggestion that people in ‘the West’ do not see most forms of corporate lobbying as corruption is naïve (whether one considers ‘the West’ in terms of its elites or in terms of the man on the street) and, one suspects, simply an assertion made to fit Bratsis’ narrative. More to the point, the contention that formalising bribery into a registered transaction would make no difference is so fantastically ignorant that it brings me to tears. The quickest rebuttal I can offer can be found here. I suspect the good Doctor would resent the suggestion that a price can be placed on public services, but I can’t win them all, can I?

A simple (economist’s) test that might help people gauge the relative toxicity of corruption in Greece vis-à-vis lobbying in the West would be the following: how easy is it to claim a piece of the action in each of the two processes? It ought to be the case that, the more rent-seeking the function of each group, the tougher the barriers to entry that incumbents will erect, and the higher the premiums that intermediaries will be able to charge. How hard is it for an ‘outsider’ to become a lobbyist in Washington or Brussels as opposed to a ‘fixer’ for corrupt civil servants or politicians in Greece? How expensive is it to hire each of these? How hard do Western politicians fight to ensure exclusive use of their lobbyist connections, and how hard do Greek politicians fight to maintain exclusive access to clientelist networks or shelter their corrupt henchmen? How much do these politicians ask in return for their services?

The first test is simple. There is an obvious entry point to the lobbying industry. You can apply and be interviewed. There is none in the ‘fixer’ industry in Greece. You have to rely on unique personal connections, usually built over many years of putting up posters for a political party, manning the phones at a pre-election call centre, carrying somebody’s briefcase or performing sexual favours (you laugh? Greek readers may remember this. That’s a former secretary-general of the Greek Ministry of Culture and his secretary). 

On very rare occasions, 'social partners' will put out an ad when they run out of lackeys who understand statistics or speak English, but even then they do so under cover of anonymity. All of the above suggests to me that ‘fixers’ are much more rent-seeking than lobbyists.

As for how expensive it is to hire a corrupt political fixer, the notorious case of Siemens gives us an appropriate benchmark – having paid a very substantial amount in bribes to Greek government officials from 1999 to 2006. According to insider accounts, the typical Siemens bribe would be 5-6% of contract value but could rise to 40% in especially corrupt countries.

Compare this to lobbying firms in the US, which earned a very modest $3.47bn in 2009, or 0.025% of US GDP. 

The champion lobbyists of the health sector paid only 0.046% of the sector’s GVA in lobbying. The notorious financial services sector paid only 0.015% of its GVA. The communication and electronics sector, arguably the most suitable comparator to Siemens, spent 0.024% of its GVA on lobbying (GVA of US industries available here). 

Fair enough, most of this business would have gone on without lobbying, as opposed to Siemens’ dirty dealings, but while the return on Siemens’ corruption spending was between 150% and 2,000% (assuming the figures quoted above refer to Siemens’ profit from the deal, not the amount quoted to the client), the return on individual firms’ lobbying spend in the States appears to be much higher, with figures of 600% to 2,000% and even a much as 22,000% mooted in some cases. Or even higher, if you’re willing to go out on a limb. In fact, management almost certainly foregoes more than the extra cost when using bribes as opposed to lobbying: first there is the risk of substantial penalties, and then there is the fact that, whereas the future returns from lobbying are partly factored into share prices, which makes money for clever managers, the future returns from bribery can’t be.

Clearly, it is much cheaper to promote one’s interests through western-style lobbying than Greek-style corruption, because bribery is a much more rent-seeking industry than lobbying. The rest of my economic test I simply don’t have the data for, for obvious reasons. But I suspect it would yield the same results. Corruption can subvert institutions in a way that no amount of lobbying can do. We know this because people are willing to pay the kind of money to corrupt officials that they wouldn’t dream of paying to lobbyists.