COUNTING GREECE'S LIBERTARIANS

Veteran readers will know of my love affair with the European Values Study of 2008 - the last snapshot of Greek society's beliefs and norms before the crisis. It's heartening to know that Greece will also take part in the 2017 iteration of the survey, which will allow us to assess the impact of the crisis on the Greek psyche in more detail than has hitherto been possible.

Today I was hoping to use the 2008 study for a simple stock-take of Greece's libertarian population. The EVS does not discuss libertarianism as such but does ask a range of questions to help establish people's attitudes towards social mores, institutions and the role of the state. Many of these questions are scored conveniently on a scale of 1 to 10 and look into behaviours that respondents approve or disapprove of and their level of agreement with a range of statements about society and the economy.

Factor analysis can be applied to these variables to reveal some of the key attitudes underlying people's responses and score individual respondents based on the extent to which they share each of them (scores will follow a normal distribution with a mean of 0 and a standard deviation of 1).

In the case of Greece, seven core attitudes emerge:

1. Social Liberalism (tolerance for homosexuality, abortion, divorce, assisted suicide, casual sex, prostitution, adultery, soft drugs, suicide)
2. Dishonest Self-Interest (tolerance for lying in own interest, accepting a bribe, benefits fraud, paying bribes, tax evasion)
3. Preference for State Control of the Economy (tolerance for state intervention, competition seen as harmful, belief in state responsibility for the worse-off, preference for public ownership of enterprises, tolerance for less conditionality in unemployment benefits).
4. Distinction between 'victimless crimes' and behaviours involving obvious detriment (tolerance for joyriding, avoiding fares in public transport, tax evasion)
5. Appetite for controversial science (GM food, experiments involving human embryos)
6. Approval of the Death Penalty
7. Aversion to redistribution of incomes (Preference for rewarding effort over equal outcomes, self-identification as right-wing).

This analysis is based on 999 Greek responses (out of a full sample of 1,500 - each case had to have responses for all of the relevant questions to make it into the factor analysis).

If you run the exact same analysis on the pan-European version of the EVS2008, (using 38,218 out of 67,786 responses) the same factors emerge, with the exception of the 'victimless crimes' factor. This does not mean this way of thinking is unique to Greece, of course; only that it is not universally present throughout Europe. Note that 'Europe' for the purposes of the EVS includes all of the Nordics, as well as Russia, Turkey and the Caucasus. I'll try to use 'Europe+' where possible to remind you of the fact.

By design, the factors are orthogonal and standardised - ie they are not correlated. This means one must be careful and imaginative in interpreting them. For example, most people who want a redistribution of income also have at least some tolerance for state control of the economy. However, for the two factors to be orthogonal the concepts need some rewording so that they can be truly independent of each other. So the State Control factor is more about state ownership of the means of production and "to each according to his needs..." - classical Marxism in one sense - while the Redistribution factor deals more specifically with fiscal policy and the willingness to redistribute income through tax and benefits. A person can believe in public ownership and also not be convinced by redistribution of income - after all what's the point of taxation and a benefits system in the full-employment paradise of centrally planned production (and consumption)?

With this caveat in mind, it's fair to say that factors 1 and 7 are probably enough to identify potential libertarians, who should score high in factor 1 (socially liberal) and factor 7 (averse to redistribution of income), and low on factor 3 (against state control of the economy and redistribution of income). I realise I'm oversimplifying of course. It's possible to be a socially conservative libertarian; you may strongly disapprove of, say, adultery, or abortion, and even lecture people against them privately. However, if you always stop short of demanding that government legislate against such behaviours, or that they be penalised in some other mandatory way, you're a libertarian in my book. Unfortunately we don't have the kind of data that would allow this.

It's possible, using the pan-European version of the dataset, to position 2008 Greece in the spectrum of libertarianism: at .1 standard deviation above the European+ mean we were not doing quite so badly for social liberalism. We were marginally less averse to the redistribution of income than the average European+ country (at .16 of a standard deviation below the mean). But we were also one of the highest-ranked countries (at .32 of a standard deviation above the mean) in terms of wanting the government to have control of the economy. And that was in 2008. Commentators who dub Greece the last Soviet republic in Europe (and are routinely vilified for this) kind of have a point.

Now if we assume that libertarians need to be above the European+ average in terms of social liberalism and below the average in their appetite for state control and redistribution, then the number of Greek libertarians was small in 2008 - a mere 6.4% of the adult population and proportionately less than half the European+ average (13.6%). The leaderboard of countries with big libertarian populations is packed with notorious hell-holes like Denmark, Sweden, Norway, Iceland and the Netherlands. Nearly half of all Danes are libertarian by this grouping.

This is of course only a crude way of grouping people (I'll refer to it as the quadrant method for ease of reference). One could, alternatively, use cluster analysis to arrive at less arbitrary, more cohesive groups within which individuals have more in common. No method I've tried using the variables above creates a libertarian cluster naturally, whether in Greece or EU-wide. More skilled people might be able to produce better results (I'm looking at you @dimmu). The best I could do was a k-means clustering in which I forced SPSS to produce 8 clusters (the 'Octo-grouping'). The Octo-clusters are best interpreted as political tribes - the kind of people likely to take similar sides of a public issue. Often members of the same political tribe have significant ideological differences, but can put these aside for a common cause.

The results change a fair amount using this more cohesive grouping, and I find the way in which the results change particularly disappointing.
Under the 'Octo-grouping', the number of Greek libertarians rises slightly (to 7.2% against a Europe+ average of 10.9%). But the character or the group changes substantially - becoming less socially liberal and more extreme in their views on state control and income redistribution. In fact, Greek 'libertarians' under the Octo-grouping are not, on average, socially liberal; they straddle the axis instead. Only about 40% of the Greek octo-libertarians score against the Europe+ averages the way I described earlier; the bulk of the rest of the group is made up of individuals that I can only call 'free market paternalists' - people who hate state control and income redistribution but are socially conservative. Meanwhile, many 'quadrant' libertarians have more tribal ties with a very different political tradition - social liberals who believe that a certain level of state ownership can obviate the need for mass income redistribution by taking care of citizens' basic needs (think Singapore's policy on housing for instance).

From 2008 to 2015: who are we now?

Will the headline figures have changed much since 2008? On the one hand, some of the broad
attitudes described above surely correspond to stable personal values. On the other, it's been eight disastrous years for Greece since the EVS, and 'neoliberalism' has since been established for many Greeks as the source of all our misfortunes. This term (see here for one of the tortured, rambling definitions held up as definitive) has been applied indiscriminately to libertarians as well as others. Although not all of us identify with it we certainly know we're likely being talked about when it is used.

Well, two surveys of 1,000 Greeks each by DiaNEOSis found that around 10% self-identified as 'neoliberals' between April (10.6%) and November 2015 (9.3%). DiaNEOSis' 'neoliberals' are a fairly good proxy, I think, for my EVS (quadrant) libertarians, at least as far as their political affiliation goes. However, the Greek centre-right was twice as likely to be 'neoliberals' in 2015 as they were to be 'libertarians' in 2008, and at first I wondered to what extent that's because the Greek centre-right has largely emptied in the meantime. In reality, its share of the population has remained remarkably stable (18.5% in EVS, 19.3% in April DiaNEOSis and 20% in November DiaNEOSis). One explanation might be that the Greek crisis (or perhaps Syriza/ANEL rule) has shifted much of the Greek centre-right into the libertarian camp by convincing them of the dangers of excessive spending or state intervention. Or perhaps they've been drawn into the fold by the endless flow of divisive rhetoric of the past year. Or maybe, self-identification with the pejorative term 'neoliberal' suggests a confrontational attitude versus parts of the Greek political spectrum but few actual libertarian beliefs.

This section under contstruction

My original tables for this section were wrong. I am recalculating everything. Bear with me.

I need to provide some context here: EVS fieldwork in Greece took place between 12 September and 26 October 2008. This was before the mass protests of December 2008, and almost a year before the national elections of 2009. It followed the narrow passing of a pension reform bill (modest by today's standards but still strongly opposed) in March 2008, and the polls had already swung (narrowly) in favour of a PASOK win, with margins of anything between 0 and 3%. Syriza, or perhaps Ur-Syriza as it was still a radical, movement-based party at the time, was polling at anything between 8% and 10%.


Annex: Code for the factor analysis

The factor analysis is easy to reproduce if you have the raw EVS data, and the code is identical for both the Greek and the full EVS datasets:

FACTOR

  /VARIABLES v193 v194 v195 v196 v197 v198 v199 v233 v234 v235 v236 v237 v238 v239 v240 v241 v242 

    v243 v244 v245 v246 v247 v248 v249 v250 v251 v252

  /MISSING LISTWISE 

  /ANALYSIS v193 v194 v195 v196 v197 v198 v199 v233 v234 v235 v236 v237 v238 v239 v240 v241 v242 

    v243 v244 v245 v246 v247 v248 v249 v250 v251 v252

  /PRINT KMO ROTATION

  /FORMAT SORT BLANK(.40)

  /PLOT EIGEN

  /CRITERIA MINEIGEN(1) ITERATE(999)

  /EXTRACTION PC

  /CRITERIA ITERATE(999)

  /ROTATION VARIMAX

  /SAVE REG(ALL)

  /METHOD=CORRELATION.

e-Petition: Μετρήστε πόσο από το χρόνο τους αφιερώνουν οι Έλληνες πολίτες στο Κράτος

Αγαπητοί αναγνώστες:

Ετοίμασα το παρακάτω ψήφισμα στο Avaaz και θα σας ήμουν ευγνώμων αν διαθέτατε μερικά λεπτά για να το διαβάσετε, και να υπογράψετε εφόσον συμφωνείτε.

Μπορείτε να υποστηρίξετε την προσπάθεια να μετρήσουμε το αθέατο κόστος του κράτους ψηφίζοντας εδώ.

ΕΛΣΤΑΤ - Ελληνική Στατιστική Αρχή: Μετρήστε πόσο από το χρόνο τους αφιερώνουν οι Έλληνες πολίτες στο Κράτος

Γιατί είναι σημαντικό;

Κανένας δεν γνωρίζει πόση από την καθημερινή ζωή των Ελλήνων Πολιτών αναλώνεται στο να εξυπηρετούν το ελληνικό Κράτος - να του παράσχουν πληροφορίες, δικαιολογητικά, δηλώσεις, μεταφράσεις, πιστοποιήσεις ή απλά να περιμένουν στην ουρά.


Η Έρευνα Χρήσης Χρόνου (ΕΧΧ) της ΕΛΣΤΑΤ που ήδη προγραμματίζεται να διενεργηθεί το 2021 είναι μια καλή ευκαιρία να μετρηθεί χονδρικά αυτός ο χρόνος χωρίς πρόσθετο κόστος για το φορολογούμενο. Η ημερομηνία του 2021 φαντάζει πολύ μακρινή αλλά λογικά ο σχεδιασμός της έρευνας θα αρχίσει αρκετά πιο σύντομα. Χρειαζόμαστε επίσης χρόνο για να ενημερωθούν οι πολίτες και οι πολιτικοί παράγοντες ούτως ώστε να στηρίξουν την έρευνα και να αξιοποιήσουν τα ευρήματά της.

Προς τί η μέτρηση;
Ο χρόνος των πολιτών έχει αξία κι ανήκει στον ίδιους, όχι στο Κράτος. Το Κράτος έχει την εξουσία να χρησιμοποιεί ή να δεσμεύει το χρόνο μας, αλλά όχι χωρίς λόγο και όχι χωρίς προϋποθέσεις. Πρέπει είτε να λογοδοτεί (όπως αν πχ μας φορολογούσε) είτε να μας αποζημιώνει (όπως πχ αν είχε απαλλοτριώσει την περιουσία μας) είτε να μας ανταμείβει (όπως πχ αν είχε υπογράψει σύμβαση μαζί μας).

Αυτό κατά βάθος το γνωρίζουν και οι απλοί πολίτες και οι πολιτικοί. Κάθε σχεδόν κυβέρνηση (και αντιπολίτευση) υπόσχεται ένα πιο ευέλικτο και φιλικό προς το χρήστη Δημόσιο. Πώς όμως αξιολογούμε το αν ο στόχος τους έχει επιτευχθεί, και αν οι όποιες μεταρρυθμίσεις αρκούν για να αλλάξουν την καθημερινότητα των πολιτών; Για την ώρα, δεν μπορούμε να το κάνουμε παρά μόνο πολύ αποσπασματικά.

Πώς μπορεί να γίνει;

Το βασικό εργαλείο της μέτρησης μπορεί να είναι η Έρευνα Χρήσης Χρόνου, που διεξάγει η ΕΛΣΤΑΤ. Στην πρόσφατη ΕΧΧ του 2013/4 (που ήταν και η πρώτη του είδους της) συμμετείχαν 7.137 άτομα από 3.371 νοικοκυριά. Για τη μέτρηση που ζητούμε αρκούν μερικές μικρές προσαρμογές στα ερωτηματολόγια της ΕΧΧ του 2013/4, τα οποία (μαζί με τα αποτελέσματα της έρευνας) μπορεί κανείς να δει εδώ: http://www.statistics.gr/statistics/-/publication/SFA30/-

Στο ερωτηματολόγιο της ΕΧΧ, κάθε δραστηριότητα των ερωτηθέντων αντιστοιχεί σε έναν κωδικό. Οι κωδικοί προέρχονται από την Ευρωπαϊκή ταξινόµηση ACL2008 (Activity Coding List for Harmonized European Time Use Surveys) και ακολουθούν τις κατευθυντήριες οδηγίες του 2008 (HETUS 2008). Οι κωδικοί 362 (εμπορικές και διαχειριστικές υπηρεσίες) και 371 (διαχείριση υποθέσεων του νοικοκυριού) θα μπορούσαν να διασπαστούν ούτως ώστε να διακρίνονται ξεκάθαρα οι συναλλαγές με δημόσιες υπηρεσίες και η προετοιμασία τους κατ' οίκον από τις διαχειριστικές ανάγκες του νοικοκυριού.

Κάθε τοποθεσία αντιστοιχεί επίσης σε έναν κωδικό. Ο κωδικός τοποθεσίας 19 (Άλλη συγκεκριμένη τοποθεσία) θα μπορούσε να διασπαστεί ώστε να διακρίνονται ξεκάθαρα οι δραστηριότητες που λαμβάνουν χώρα σε δημόσιες υπηρεσίες.

Αν χρειαστεί η ΕΛΣΤΑΤ να καταβάλει εναρμονισμένα στοιχεία με βάση την ACL2008, είναι σχετικά απλό ζήτημα το να αθροίσει τους επιμέρους κωδικούς που προήλθαν πχ από τη διάσπαση των 362 και 371 (ας τους πούμε 362/1 και 362/2 ή 371/1 και 371/2).

Και τί θα αλλάξει;

Τα στοιχεία της ΕΧΧ μπορούν να μας πούν πόσο χρόνο αφιερώνουν οι πολίτες στο κράτος, αν αυτός αυξάνεται ή μειώνεται, και ποιές κατηγορίες πολιτών επιβαρύνονται περισσότερο – ανά ηλικία, φύλο, σύνθεση νοικοκυριού, τοποθεσία, βαθμό αστικότητας και θέση στην εργασία. Γνωρίζοντας αυτές τις λεπτομέρειες είναι πιο εύκολο να σκεφτεί κανείς λύσεις για τη δημόσια διοίκηση αλλά και να παρακολουθήσει, σε βάθος χρόνου, την αποτελεσματικότητά τους. Πιθανώς γι αυτό το λόγο και η πρώτη ΕΧΧ του 2013/4 χρηματοδοτήθηκε από το Επιχειρησιακό Πρόγραμμα «Διοικητική Μεταρρύθμιση 2007-2013.

Η ΕΧΧ χρησιμοποιείται ήδη για να παράσχει συμπληρωματικές μετρήσεις στον υπολογισμό του ΑΕΠ (πχ εκτιμήσεις που σπάνια βλέπουν το φώς της δημοσιότητας σχετικά με της αξίας της απλήρωτης εργασίας των νοικοκυριών.) Η μέτρηση του χρόνου που δεσμεύει το Κράτος μπορεί κι αυτή να βελτιώσει, πχ τις εκτιμήσεις για την προστιθέμενη αξία της δημόσιας διοίκησης.

Σε βάθος χρόνου, μπορεί να πειστούν και άλλες Ευρωπαϊκές χώρες να διεξάγουν τις ίδιες μετρήσεις – με αποτέλεσμα να προκύψουν συγκρίσιμα στοιχεία.

Ανεξαρτήτως όμως από το πώς χρησιμοποιούμε τα στοιχεία, κάθε φορά που γίνεται αναφορά σε αυτά θα είναι και μια υπενθύμιση στους κυβερνώντες και στο πολιτικό προσωπικό της χώρας ότι ο χρόνος μας δεν τους ανήκει.

Δεν είμαστε παράλογοι…

Ο σκοπός αυτών των στοιχείων δεν είναι ο εντυπωσιασμός αλλά η μέτρηση. Δεν θέλουμε να νοθεύσουμε τα νούμερα με συναλλαγές ή εργασίες κατά τις οποίες ο πολίτης δεν παρέχει
ουσιαστικά την εργασία ή το χρόνο του στο Κράτος, ούτε με δραστηριότητες για τις οποίες ήδη υπάρχει λογοδοσία. Είναι σχετικά εύκολο να γίνει αυτό.

Για παράδειγμα, αν ο ερωτηθείς είναι δημόσιος υπάλληλος, εννοείται ότι η εργασία του θα συνεχίζει να εμπίπτει στους κωδικούς (δραστηριότητας και τοποθεσίας) που σχετίζονται με την κύρια εργασία. Και είναι λογικό – ο συμπολίτης αυτός πληρώνεται για την εργασία του και το Κράτος ήδη δίνει λογαριασμό και για το χρόνο εργασίας του και για την αμοιβή του.

Παρομοίως, ο χρόνος κατά τον οποίο ο πολίτης απολαμβάνει υπηρεσίες του Δημοσίου δεν έχει νόημα να μετρηθεί ως χρόνος που του ‘δεσμεύει’ το Κράτος. Για παράδειγμα, δεν
είναι προσφορά χρόνου στο Κράτος το να παρακολουθεί κανείς διαλέξεις σε ένα δημόσιο πανεπιστήμιο: αρκεί να μετρηθεί όπως και ως τώρα κάτω από τους κωδικούς 211-212 (Μαθήματα – Εργασία στο σπίτι). Η υποβολή μηχανογραφικού όμως και η συλλογή των δικαιολογητικών για την εγγραφή σε δημόσιο ΑΕΙ μπορεί να είναι διαφορετική υπόθεση.

Τέλος, όταν οι συναλλαγές με το δημόσιο συνδυάζονται με άλλες δραστηριότητες (πχ ψώνια), δεν πρέπει να χρεώνεται το δημόσιο όλες τις σχετικές δραστηριότητες και μετακινήσεις. Εφόσον υπάρχουν τα υπόλοιπα σχετικά στοιχεία, είναι σχετικά εύκολο για οποιονδήποτε ερευνητή να κάνει έναν απλό επιμερισμό.

Τι λέει η ΕΛΣΤΑΤ για όλα αυτά;

Το αίτημα απευθύνεται στην ΕΛΣΤΑΤ όχι επειδή έχει δείξει κάποια απροθυμία να ασχοληθεί με το θέμα (δεν ισχύει κάτι τέτοιο) αλλα απλώς επειδή είναι η αρμόδια αρχή. Η ΕΛΣΤΑΤ συλλέγει και αξιολογεί τακτικά προτάσεις από τους χρήστες της - δείτε πχ την πιο πρόσφατη έρευνα ικανοποίησης χρηστών:

http://www.statistics.gr/user-satisfaction-survey

Ο συντάκτης του ψηφίσματος έχει επικοινωνήσει μέσω email με ένα από τα αρμόδια άτομα και εισέπραξε μια ευγενική απάντηση, την υπόσχεση καταγραφής της πρότασής του και μερικές χρήσιμες πληροφορίες.

Όταν έρθει η ώρα να σχεδιαστεί η έρευνα του 2021, όμως, θα είναι παράλογο να αποφασίσει η ΕΛΣΤΑΤ μια σημαντική αλλαγή με βάση τα σχόλια ενός μόνο χρήστη. Ένα μαζικό αίτημα θα τη βοηθήσει να αξιολογήσει καλύτερα πόση ζήτηση υπάρχει γι αυτά τα στοιχεία και αν αξίζει τον κόπο να γίνουν οι εν λόγω αλλαγές.

The contribution of the Greek shipping industry: I agree with Reuters

To celebrate the blog's 6th birthday I proposed to take suggestions for fact-checks from the audience on Twitter and Facebook. This is the first of the two winning fact-checks (a recommendation from my friend P.S.) and it deals with the contribution of shipping to the Greek economy.

The starting point for this fact-check is a Reuters special report, The Greek Shipping Myth, which cast doubt on the employment and GDP contribution figures cited by the Greek shipping industry (and echoed by much of the domestic and foreign press - eg the FT here). The core claim in this report is that the industry's contribution to the Greek economy is inflated because ELSTAT calculates the impact of shipping firms differently than the statistical agencies of other countries do - in particular, it includes in its calculations value added and employment that arise (and possibly stay) in other countries.

In brief: Reuters' claim is correct in its essence. Shipping contributes less to the Greek economy than the industry lets people believe, if by 'economy' one reads 'gross national income' or 'domestic employment'. It is also likely that it contributes a lot less to GDP than the industry claims, although without further input from ELSTAT on the 'domesticity' of its product this is very hard to assess. The treatment of shipping in Greek national accounts is not as unique as Reuters claims - to some extent, countries such as the UK and Cyprus also appear to record it in similar ways. It does, however, contrast sharply to the way in which German statisticians measure the industry, and which is completely aligned with Reuters' preferred approach.

'We're gonna need a bigger boat'

At the risk of flirting with conspiracy theories, it is worth explaining the context of the Reuters publication and the FT coverage cited above. The last few years have seen sustained pressure applied on Greek governments to raise taxes on the shipping industry. It's not just parts of the Greek left gunning for oligarchs that are behind this, either. The German shipping industry is said (see BBC article above) to be lobbying for a review of the taxation of Greek shipping and the IMF appears to have been mulling proposals for further taxation for some time. Parallel to this, the European Commission has recently submitted a set of proposals to Greece on reforming maritime tax; basically asking us to bring some activities out of scope of our tonnage tax system as niche sectors were looking like they were gaming the system.

There is a big obstacle to taxing the shipping industry further, as a forty-year old law (27/1975), given a kind of special status by direct reference in article 107 of the Greek Constitution of 1975, exempts any company that pays tonnage tax in Greece from paying any other corporation tax or capital gains tax on sales of vessels. The exemption even extends to individual shareholders; see more details on p 173 here. This is pretty heavy stuff; it means it's not just difficult to apply income tax to the shipping industry and its owners - it's virtually unconstitutional. The last Greek government got around this problem in 2013 by establishing a voluntary agreement with the industry for an additional levy, and then formalising aspects of this into law. This idea had originally been mooted in 2011, during negotiations on the second Greek bailout, and effectively means that Greek-owned shipping companies (regardless of flag) will have paid an additional EUR420m between 2014 and 2017 (and no less than EUR105m in any given year). It's a steep increase from the amount of tonnage tax receipts which bring in a risible EUR12m per year (in 2012; historical data available here under the 'EL' tab), but clearly this amount still looks relatively modest.

In short: there's a hell of a lot of money to play for; national statisticians are swimming with sharks and Reuters' claim is that they've long avoided being eaten but cutting a deal.

Shipping in the ocean of data

It's not easy to pin down shipping in national statistics. This is because the full suite of relevant sectors are only really identifiable at the 4-digit level of the European Union's revised standard industry classification (NACE rev. 2). The NACE rev. 2 codes we're potentially looking at are as follows:

C: MANUFACTURING
30.11: Building of ships and floating structures
30.12: Building of pleasure and sporting boats
33.15: Repair and maintenance of ships and boats.

H: TRANSPORTATION AND STORAGE
50.10 Sea and coastal passenger water transport
50.20 Sea and coastal freight water transport
52.10 Warehousing and Storage activities for transportation
52:22: Support activities incidental to water transportation

N: ADMINISTRATIVE AND SUPPORT SERVICE ACTIVITIES
77.34: Rental and leasing of water transport equipment

Even then, there is room for discretion. I would be careful, for example, about counting anything other than codes 50.20, 52.22 and 77.34 under 'shipping,' though I would count almost all of the rest as part of the 'maritime cluster.' Even then, I would be careful about including code 52.10: it's likely that warehousing support for shipping is only a small part of this activity, and it's impossible to disaggregate it further. The 'maritime cluster' sectors are a unit of sorts because they share skillsets and specialisms, not to mention historical, corporate and family ties. But it's fair to say that the industries of the broader cluster respond to completely different sources of demand - demand for yachts, ferry rides and cruises isn't really driven by the currents of world trade, except perhaps in the very long term. And you wouldn't really expect to tax these sectors by tonnage, would you?

There is a shortcut that researchers can and do use to get round all of this detail. NACE rev 2 code 50 (water transport) is a 2-digit sector and therefore a lot more statistics are publicly available for it; and intermediate demand for water transport from other industries is a half-decent proxy for shipping output, because it strips out demand for passenger travel and other non-trade related things.

Using Eurostat's supply and use tables here it's relatively easy to see what the top line is for 'water transport services.' Some EUR15bn per year, as of 2010, almost all of it from exports. These are the latest and only figures on intermediate consumption of shipping that are available to us, but happily they are not the only figures we can rely on.

A missing middleman?

Contrary to what the Reuters piece might have you think, Greece's ELSTAT does not publish regular releases specifically on the contribution of the shipping industry, the way it might do with say, manufacturing or services as a whole. It does, however, quietly prepare estimates of value added and employment in the industry for the purposes of compiling national accounts - which in turn feed into estimates of Greek GDP and productivity.

You can see ELSTAT's breakdown of GDP components for 'water transport services' here. This roughly confirms the topline figure I cited above (15.8bn in 2010 but EUR12.8bn in 2014) and suggests that the industry contributed EUR5.7bn of value added in 2014, down from EUR6.6bn in 2010. ELSTAT provides the same figures on its own website here. Accounting for the sector's own demand for goods and services, in turn, produces this table, which suggests value added of EUR6.1bn in 2010.

That the two sets of figures are not identical is a little odd. They ought to be, yet you'll notice a difference of EUR460m in the industry's value added, as well as the fact that the water transport sector seems to buy almost no services (a puny EUR28m!) from itself. Now what could that be? It's rare, after all, for a broad (2-digit) industry to not use some of its own product as inputs. This to me is a first hint that there might be a missing middle-man in the GDP figures.

The impact studies

Unlike ELSTAT, the shipping industry and its observers in academia and think tanks are far from quiet about these estimates, and so the relevant figures have, in recent years, found their way into three widely-cited and to some extent overlapping assessments:

• The BCG Assessment of 2013 
• The IOBE assessment of 2013.
• The Oxford Economics Assessment of 2014.  

It is these studies that provide the chief lobby fodder of the industry, and they are genuinely loyal to the ELSTAT estimates. In fact, there is not much wrong with them at all. Like many 'impact' studies of course, they tend to bulk up their value added estimates with estimates of 'induced demand' and multiplier effects - ie value added in other industries that would not occur if it weren't for shipping. This tends to inflate the industry's contribution to a normally running economy, but might be a good approximation of what the country would miss out on if the entire industry were to decamp to other shores. This approach to impact assessment is not my main concern, or that of the Reuters investigation. Rather, I am concerned that Reuters may be right and that the core ELSTAT figures are probably wrong.

A Waste of Money at Reuters 

Reuters comes to this conclusion by looking at a sample of company accounts for the Greek offices of shipping companies - which account for only a fraction of the value added and employment claimed by the industry. This must have been a heroic effort - but also a wasted one, as ELSTAT had already done this work for them, The results can now be found in Eurostat's annual detailed enterprise statistics, and have two advantages: first, they go to enough detail to identify shipping extremely closely; second, they are limited to shipping enterprises registered in each member state.

• You can check out the service components of the maritime cluster here, along with their (very detailed) income, employment* and value added figures. 
• You may also want to add, for completeness, the activities of shipyards and dockyards, available separately here. 

*You need to be cautious and patient when it comes to the employment figures cited here. Unfortunately, quality control of the detailed enterprise statistics is relatively poor - on two occasions I've come across errors obvious to the naked eye, and shipping employment is one of them. Eurostat has a good record of acting on tip-offs about such errors but this is the holidays so it might take them a while to respond to my complaint.

Whatever the quality of the overall dataset, I believe there is no doubting the value added figures, which tally well with Reuters' estimates. The narrow shipping sector's value added (at factor costs) is barely EUR380m, based on output of EUR 735m. The broad maritime cluster produces a more respectable EUR936m of value added, on turnover of EUR2.2bn. Even this is miles away from the over EUR5bn that ELSTAT counts towards Greece's GDP. It's not just a question of inter-group transfers to companies outside Greece (like the ones, eg, that result in Starbucks' extremely low taxable income). If it were, then the top-line at least would presumably be the same regardless. It really looks like Reuters is right - the value added by shipping businesses registered abroad is being routinely included in the Greek GDP figures.

Then again, look again at the 2010 figures from enterprise stats - we may have our missing-middleman right there. At just over EUR400m, the sea freight sector's 2010 turnover from detailed enterprise statistics fits quite well into the gap between the two value added estimates for 'water transport' that we saw earlier - suggesting that the Greek-registered businesses (local management offices, in Reuters' article) produce nothing but intermediate inputs into an international industry that is somehow considered to be Greek in our annual accounts. Depending on whether the estimate is run top-down or bottom-up, they disappear into opaque group accounts, instead of being tallied up as intermediate inputs, which produces the two separate value-added estimates we saw earlier.

Whose billions?

But what of the other EUR5bn? Is that Greek domestic value added or is it foreign value-added? And if it is foreign value-added, does it give rise to Greek incomes? Consistent with Reuters' theory, it looks like ELSTAT treats all value added from firms of Greek beneficial ownership as domestic, and adds it to GDP. There may be some basis for this. The question of when a transaction can be said to arise in a country's territory and therefore to be domestic is not one of economics but of statistical convention, for which we turn to the wisdom of the ESA2010 manual:

Exports of goods occur without the goods crossing the country’s frontier in the following examples: (a) goods produced by resident units operating in international waters are sold directly to nonresidents in foreign countries. Examples of such goods are oil, natural gas, fishery products, maritime’s salvage; (b) transportation equipment or other movable equipment not tied to a fixed location; (c) goods after changing ownership, which are lost or destroyed before they have crossed the frontier of the exporting country; (d) merchanting, i.e. the purchase of a good by a resident from a non-resident and the subsequent resale of the good to another non-resident, without the good entering the merchant’s economy. Analogous cases occur for the imports of goods. 

Is Greece as unique in this treatment as Reuters alleges? It's easy to test this by comparing the contribution of water transport (remember, this is not quite 'shipping'!) to gross value added under the national accounts with its contribution under enterprise statistics. Here I'm keeping passenger transport in the calculation so that we're comparing 'water transport' with 'water transport' and can therefore isolate the effects of statistical treatment, country of registration and ownership structure.

The entire EU water transport sector makes about 26.5bn of value added under the detailed enterprise statistics approach (2013 figures here) but 34bn under the GDP approach (see here). Greece, the United Kingdom, Cyprus and Romania have enormous shipping sectors in their national accounts compared to detailed enterprise statistics, while Germany, Norway, Denmark, the Netherlands and Italy provide roughly the same figures under both datasets. Finally, Belgium, Portugal and Estonia seem to have larger shipping sectors in enterprise statistics than in their national accounts.

But where does the money end up?

Whether you think their view of domesticity of shipping product is right or wrong, it's worth noting that ELSTAT makes no claim as to whether this domestic product produces national incomes. The industry claims this, on the basis of GDP figures, as it shouldn't. This is a fine distinction that Reuters fails to make but it does point to the true villain.

I make this introduction because there is a difference between GDP and Gross National Product (not to mention GDP and Gross National Income), and I wouldn't expect the two to be identical in the case of Greece .[I spoke too soon; in 2013 they were. But they don't have to be]. If shipping value added arises within Greece's borders, then there's no reason not to count it towards GDP. If it then immediately leaves the country to swell the coffers of foreign firms, then it won't count towards GNI, but that does not make the GDP calculation incorrect. Clearly, industry lobbyists have an interest in conflating GDP contributions with GNP/GNI contributions, but it is the latter that would give their argument against further taxation weight with the Greek authorities. Hence Reuters, despite a light mixup in terminology, is essentially right to question the numbers. The argument, however, cuts both ways. If so little of the sector's value is created in Greece, on what basis would the Greek government tax it?

Still, the industry claims that the disputed EUR5bn of value added somehow finds its way back to Greece. But in what way? There is no massive net inflow of funds to Greek business in the 'water transport' sector that would account for this difference. You can see this for yourselves here - a trifling EUR40m at last count, and net outflows in most years. There is, to be sure, a huge flow of remittances and wages earned abroad into Greece - nearly EUR1bn on last count. Unfortunately, it's hard to know how much of this is attributed to the shipping industry, and even if all of it were money from shipping employees abroad it wouldn't account for the full EUR5bn anyway.

Or does the money return as private flows of savings, consumption and charitable donations? The industry's flow of charitable giving is unrecorded but clearly massive. A single shipping-family foundation, for example, has been responsible for about EUR900m of easily-traceable charitable giving in Greece over the last ten years, of which at least a third has come post-crisis. It is said that much of the Greek ambulance service runs on donations from the shipping industry, and that many individual charities have benefited.

Without much more transparency from the notoriously secretive shipping families, it is impossible to answer this question. My guess is that the contribution of shipping to Greek national incomes is overstated by something in the order of EUR3-4bn. It also reflects very poorly on ELSTAT that they are not able to answer a straightforward question on how their value added figures are derived, and that they provide two different estimates of value added in the water transport sector (one in I-O tables and one in the national accounts, never mind the one in enterprise statistics). At the very least a methodological note would be very useful. Like, yesterday.

THE GREAT UNPAID

Acknowledgement 5/1/2016: This post, and the mixed income post that triggered it, owe much to the thinking of A. Doxiadis and his book, Το Αόρατο Ρήγμα, on the structural characteristics of the Greek economy. That's not to say he has endorsed the post of course. All errors etc are my own.

Are You Into Detailed Sector Statporn?

Veteran readers know that I am a big fan of the Eurostat website. I have no interest to declare here; I am not an employee or contractor or associate of Eurostat or any of the national statistics agencies it oversees. I do, however, perform regular fact-checks and so I appreciate two things that Eurostat does to make my life easier.

One is of course their database's bookmark function - the ability to capture a set of tables as I have customised them and share them in the precise same layout to anyone else. I'm amazed at how rare this is (eg the Bank of International Settlements publishes Bankstats with almost the same functionality - the OECD is nowhere near), and how little it is used by commentators.

The second thing I like about the Eurostat database is the sheer coverage of national-level statistics. Greece's ELSTAT produces a shit-ton of data that the average Greek can never access except through Eurostat. Of these, my firm favourite is the SILC dataset on poverty and living conditions (see eg here) - as grim as it is to read the findings. However, I have recently found a close second to SILC in Eurostat's annual detailed enterprise statistics.

I urge you to consider this dataset because it really exposes the guts of the economy - both by providing rich data (number of businesses, employment, value added, investment, etc) but also by providing data by 456 detailed sectors (4-digit NACE, not including agriculture, government and social and community services). Want to find out how many call centre workers there are in Greece, and how much they get paid? Done. Want to know what the finances of Greek newspapers look like? Done. Maybe how much was invested into Greek winemakers (because allegedly much of this activity was money laundering)? Done.

I started looking into these data again the other day a propos of my post on mixed income and its relationship with tax revenues. The figures on mixed income are very interesting, but where do they come from? Who are all these self-employed people? What do they do? More importantly, does the decrease in mixed income as a share of GDP represent structural reform as I had originally suggested? Or was there something else at play?

A Mixed Income Scoreboard

So I ran the detailed tables for industry, construction, trade and services - and prepared a comparison between 2009 (the last pre-Memorandum year) and 2013 (the latest available data). I would ideally have picked 2008 but there are substantial gaps in that year's figures. Even with 2009 I have had to extrapolate once or twice (eg taking averages between 2008 and 2010).

The sectors included here accounted for 2.54m of 4.6m working persons in 2009 (of which 37% were unpaid) and 2.11m of 3.5m working persons in 2013 (of which 36% were unpaid). Two notes: first- these figures do not include the entire private sector, as explained above. Second- the 'unpaid' counted by Eurostat were not employees who hadn't been paid what was owed to them. They were people not drawing a salary from the business - working proprietors and their families, perhaps a few volunteers too. That's not to say they weren't earning an income from the business, however: their income might eg be a share of the profits of the business, as opposed to a salary.

So I ranked all of the 456 detailed sectors according to the absolute number of unpaid workers in each of them and kept the top 20 in each year. I avoided a ranking based on relative ranking because a) in turbulent times a small, niche sector's workforce can change more dramatically than that of a major sector and b) my intention is to track Greece's reliance on household mixed income - so the larger sectors are a priority.

As you can imagine, there's a big overlap betweem the 2009 and 2013 rankings; there have only been two movers in each direction; so I've opted for a top 20 + 4 leaderboard.  These 24 3-digit sectors (see list below) accounted for 21% of all employment in 2009 (971k). Of this 971k, 499k were unpaid (51%). Not one of the 24 top sectors had more than 64% of its workforce on the payroll in 2009. In 2013, the top 24 sectors accounted for 23% of all employment (798k); of this total, 427k were unpaid (54%). Only one of the top 24 had cleared the previous 64% ceiling for payrolled workers (the sector in question being the Greek equivalent of off-licences or 7-11s, which now had 69% of its workers on payroll).

This is Not the Reform Proxy You're Looking For

The key outcome here is that the industries that are core users of unpaid work (ie producers of mixed income) have not reformed quite so drastically. The improvement in the balance of mixed income to GDP seems, instead, to have come from the reduced income of these sectors. That's not really what I had in mind when wondering whether the fall in mixed income as a share of GDP could be a possible proxy for structural reform.

This is clear if you look at the supposedly 'reforming' sectors, in which reliance on the unpaid fell: bakeries, homeware stores, architects' practices, off-licences, and legal practices. The relative share of the unpaid fell by more than 38%. Yet only construction companies and law firms improved their labour productivity at the same time. On the other hand, a number of the top 20+4 sectors saw the role of the unpaid expand: look at hotels, specialist retailers, car repairs. All of these saw their reliance on the unpaid grow by 43%  or more, as business grew too tight for anyone with a payroll. All of them also saw labour productivity fall.

Now for the big picture. In 2009, the top 20+4 produced EUR16bn of value-added* (7.5% of all gross value added). clearly underperforming the rest of the economy. In 2013, they underperformed even further, producing EUR9.5bn. (5.9% of all gross value added). Their apparent labour productivity fell by 27%.

What does this mean? Far from reforming, Greece's mixed-income generating industries are withering on the vine. It's unlikely that one explanation alone can account for this, but clearly turning failing, near-informal businesses into companies takes substantial amounts of credit, which Greek banks still struggle to provide, and equity, which even well-off households are running out of. Moreover, an antiquated insolvency framework and treacle-slow courts make it harder to dissolve failed businesses. Perhaps, of course, the fall in apparent labour productivity is simply a reflection of subsdued demand, and a recovering economy will reveal structural reform of the kind I was hoping for. We will have to wait and see.

*I've had to tweak one figure in all of this - the value added number for bakeries, which may or may not have been inflated by money laundering. I'm not sure but the numbers don't stack up. See for yourselves. The difference between my 'extrapolated' figure (average of 2008 and 2010) and the one Eurostat records is about EUR200m.

TO BE CONTINUED

UNDER-TAXING GREECE

Acknowledgement 5/1/2016: This post owes much to the thinking of A. Doxiadis and his book, Το Αόρατο Ρήγμα, on the structural characteristics of the Greek economy; as well as to conversations on tax with Gregory Farmakis. That's not to say either has endorsed the post of course. All errors etc are my own.

One of the stylised facts of the Greek crisis has been that Greece never truly overspent (barring perhaps 2009); if anything, it under-taxed. It's not hard to understand where this argument comes from - just compare revenue and spending as a % of GDP between Greece and the EU or the Eurozone average - the data are available here.

Clearly, in 1995 government spending in Greece was well below the EU average. It caught up quickly, but even so was still very close to the EU average around the 2005-7 period, especially after allowing for higher interest costs. Revenues, on the other hand, lagged the EU average by a persistent 4 percentage points each year since accession. On the face of it, it's more credible to look at Greece as a story of under-funding of the state than one of overspending.

Advocates of the under-funding hypothesis also point to the (unfortunately, now discontinued) dataset of tax by economic functions. This generally suggests that Greece has been taxing, eg., consumption more than the rest of Europe, while taxes on capital, once above the EU average, have fallen steadily and payroll taxes on employers have been persistently lower than the EU average (data here and here). Greek governments, the narrative goes, gave tax breaks to some industries, turned a blind eye to avoidance and evasion of social security contributions by others, then let taxpayers foot the bill.

This narrative eventually made its way, via the Trade Union movement, to the Greek Parliament's debt audit report - the definitive account of that kangaroo court that called itself the 'Debt Truth Committee.' It was one of the better-documented claims made in the report.
And it is wrong.

1. Greece is not what you think it is

Upset about Greece's low government revenues? Spare a thought for Tunisia's government, whose revenues are only ca. 24% of GDP- just over half the EU average. Is Tunisia's government under-funded? To be sure, it is less good at extracting tax from its population than the average EU country; but no one would dream of using an EU average as the yardstick for Tunisia.

Yet, by virtue of being an EU country, Greece is often benchmarked against the continent.The assumption is that Greece is a similar sort of country as its EU peers and the Greek state should rightfully expect similar revenues. If there is a difference in revenue, it is due to lower tax effort: a combination of lower tax rates or a lower level of tax compliance, which the state tolerates. In reality, this comparison is invalid. Greece may not be like Tunisia, but it is also not a mini-Germany, a mini-Spain or a large Portugal for that matter. It is structurally less well placed to yield large tax revenues.

The reasons are simple. All other things being equal, it's harder to tax the self-employed; of whom we have proportionately many more than other European countries. It's harder to tax the poor; of whom we also have more; and harder to tax retirees, of whom we also have more; finally, it's hard to tax chronically unprofitable micro-enterprises; of whom we also have more.

To illustrate how big the effect of these structural characteristics is, I wanted to focus on one example. Let's look at the components of market output that a government can reasonably expect to tax - the operating surpluses of financial corporations; the operating surpluses of non-financial corporations; the operating surpluses of organisations serving households; and the mixed income of households. You can find all of these figures here; unfortunately the figures are not expressed as % of GDP, which has to be done manually by comparing with these figures.

Once you run the figures, one set of numbers stands out - household mixed income. As pg 200 of Eurostat's ESA2010 manual explains, this is the income of self-employed people working in unincorporated businesses (ie not companies); it includes the income of business owners and their families. Hence the term 'mixed': these are part wages and part profits, and the two can only be separated arbitrarily.

Greece, as you might expect from my introduction, has the second-highest share of mixed income as a share of GDP in Europe, and had the highest bar none pre-crisis. But, whatever lazy journalists tell you, this structural issue is not common to all of the PIIGS countries. Greece stands alone amongst peripheral Euro countries in having its operating surpluses distributed in this way. At 23.7% of GDP in 2008, mixed household income as a share of total output was over three times higher than in Cyprus; more than twice as high as in Spain; nearly twice as high as in Portugal; and over 40% higher than in Italy. Spain was more or less on a par with Germany on this metric. In fact, to find economies similar to Greece's in their dependence on household mixed income, you need to go as far as Poland and Slovakia.





But what does this mean for tax? Well, there is a good correlation in Europe between mixed income as a share of GDP and the amount a government can raise from taxes on income and profits (data on this here). In fact, all of the high-tax/high spend Nordic economies have tiny mixed income contributions to GDP; while those with high mixed income contributions tend to be recent accession countries. The correlation isn't perfect of course, and I am guilty of cherry-picking; the correlation becomes less neat after 2008. I believe the reason for this is the increased tax effort of some economies over others during and after the crisis; as tax effort rose most amongst those countries with the lowest tax revenue, it makes sense for the correlation to weaken. In fact, in later years the curve tends to flatten as all countries apparently aim to raise at least 5% of GDP in income and corporation tax.

Now look very closely at the revenue/mixed income graph. First- it suggests that tax effort in Greece may, if anything, have been relatively high pre-crisis. In a slightly different study looking at structural influences on tax revenues, the World Bank's researchers have found much the same thing, although for completeness I should note their colleagues at the IMF and IGC have found the opposite.

Yet another way of approaching this would be to consider how far along the Greek laffer curve we were in 2010. As veteran readers know, we have an estimate of this from Trabandt & Uhlig (2012), who found that 2010 Greece could only increase its tax take by 2.4% of GDP by raising capital taxes before it started falling again. It could increase it by a maximum of 4.8% of 2010 GDP by also maximising labour taxes. True enough, Greece has never since managed to get to that peak, but even without a major recession it seems the best we could ever do would be to catch-up to the EU average.

Now the tax to mixed income graph we discussed earlier suggests that, if the mixed income contribution in Greece were to fall to where Spain's is (ie by 12 percentage points - which is to say, very substantially), we might expect income and corporation tax revenues to rise by a good 4% of GDP - incidentally the same margin by which our government revenues have chronically lagged those of the rest of Europe.

Does all of this not sound familiar? This over-reliance on self-employment and very small businesses is precisely the same distortion that is responsible for the bulk of Greece's lead over the rest of Europe in terms of hours worked per person. Isn't it time we reviewed this properly? I know you've heard it said a million times that small businesses are the backbone of the economy, and that entrepreneurs will save Greece/Europe/the world; I have worked in small business advocacy for years and I have some sympathy for this view. But not all self-employment is enterprising and not all small family businesses are small and family-run for the right reasons. A Greek self-employed pharmacist may be an entrepreneur; but some of their colleagues are also effectively civil servants with a profit margin. A Greek freelancer may be a flexible go-getter; or they may be an employee whom the employer doesn't want on their books so they can avoid national insurance contributions.

Here's a heretical proposal; why not adopt the change in mixed income as % of GDP as a simple indicator of structural change? Whether it is a good thing, I cannot say. But it is worth noting that, by this token, Spain, Croatia and Bulgaria are the star post-crisis reformers; much more so than Greece.

UPDATE 22/12: I've looked into why the mixed income of Greek households has fallen as a share of GDP here. In summary, and with the exception of construction and law firms, there is no evidence that this is a sign of 'reform' - Greece's mixed income-generating sectors are withering on the vine rather than formalising.

An ideological aside

I don't wish for readers to interpret the above as a suggestion that the Greek economy must be reformed into a shape that maximises tax revenue. Paying taxes is nobody's idea of the meaning of life or the purpose of economic activity. But we need to accept that the current setup leads to low revenues, almost inescapably. We can choose to accept a low-revenue, low-spend equilibrium; tax ourselves to the gills to achieve a high-spend, high-ttax equilibrium with very low output, or aim for a low-revenue, high-spend and high output equilibrium and accept the hardship that will surely come whenever the credit line next dries up. There is no other choice.

2. Tax revenue is not what you think it is

In addition to misunderstanding what kind of country Greece is, the discussion of Greek tax effort also ignores what tax revenues are, and why ours are different than many other EU countries'.

Tax revenue isn't just money the state takes. Some tax revenue is also money the state makes. It is a return on past public investment. By this I don't mean tax revenues resulting from fiscal multiplier effects, which should be small on a cyclical basis if the public finances are consistently well managed. I am referring to tax revenues resulting from the deepening of physical, social or human capital as a result of public spending.

Essentially, when a government invests productively, it builds public capital which in turn boosts the productivity of the private sector. Better roads and ports enable trade. A nation-wide electricity grid makes appliances more reliable and homes more valuable. A fibre-optic network brings more people within reach of their peers and of online retailers. More educated, informed, empowered or healthier people are both more productive and more demanding. Simply- and well-regulated industries are more trustworthy and productive. At the extreme, the state can sometimes build entirely new kinds of intellectual capital; it can become a venture capitalist of sorts, creating whole new fledgling industries for the private sector to explore - the premise, after all, of Mariana Mazzucato's Entrepreneurial State.

The better an investor the state is, and the more it allocates funds to investment rather than consumption, the more its tax revenue will tend to grow as a share of GDP, holding tax effort and state capacity constant. The share of its tax revenue that reflects returns on investment will grow, while the share of revenue that reflects coercion and rents will shrink. If, on the other hand, government spending fails to build valuable capital and improve productivity across the economy, then over time returns on public spending will fall as a share of GDP - forcing the state to increase its tax effort or its capacity just to stay still.

The right amounts, the wrong places

Is there reason to believe that this has happened to Greece in the run-up to the crisis? Yes. We invested broadly the right amounts, but got very little by way of returns. Government gross fixed capital formation was not low in the pre-crisis era, and with the exception of the year 2005 it was almost unwavering at ca. 3.5% of GDP (Eurostat claims that none of this was defence spending, by the way). That put us ahead of places like Norway or Sweden, but just short of Spain or Ireland and way behind Portugal.

The problem then was not the allocation of public spending between consumption and investment, but rather the quality of public investment and its complementarity with private investment.

• Both pre- and post-crisis, our welfare state has consistently given us the lowest social returns on investment among the OECD countries .
• Public investment in Greece was for years allocated based on regional voting patterns - and because of this decisions have remained stubbornly centralised. 
• A great deal of public spending is misdirected. Our own citizens suspected corruption was rife even pre-crisis, more so than in any other PIIGS country.
• Our spending on education, on the other hand, seems to have yielded consistently good returns. The Conference Board's Growth Accounting Database suggests we've got more growth out of skills since the 90s than any other developed country, bar Singapore. 

There are some very good long-term calculations for Greece, in two studies in particular. Kamps (2004) finds very strong returns on public investment between 1961-2001, more so than in other EU countries; but these are what are known as partial returns - ie they look at the returns on public spending without considering the losses from crowding out of, or by, private investment. Using data from 1960 to 2005, Alfonso and St Aubin (2008) confirm the finding of strong partial returns on public investment, but find negative total returns due the negative response of public investment to private investment. The actual, total effect of public investment in Greece was negative .

 A second ideological aside 

In discussing the money that government makes I do not pretend that all government spending builds capital; that all of it is efficient, or has high or even positive returns; or that the private sector would not, left to its own devices, have used the same funds better. All I am saying is that, undeniably, some tax revenue is a return on public investment.

WE NEED TO TALK ABOUT GREEK PRIVATE EDUCATION

In the early years of the Greek crisis, I used to feel a stirring of guilty pleasure when foreign media were forced to take deep dives into Greek politics. I would imagine young journos doing their meticulous research with a smug look on their faces and then suddenly being hit with a depressing realisation: "wow, this story goes so deep and so far back; I don't know who to trust; and every policy decision past or present hurts someone! - is that how it feels to be Greek?"

I rarely feel this way anymore, but the Economist's recent piece on Greek private education brought it all back for a moment.

VAT on Private Education: the story so far

As readers may know, in the aftermath of its capitulation in July and as details of the Third Memorandum were being ironed out with the Troika Institutions Quadriga, the Greek government found itself looking for alternatives to a VAT hike on beef. This idea, nominally popular with creditors, had run into stiff opposition within the ruling party, and speculation persists that pressure was being applied on the government by the French, eager to protect their beef exports (context here and here).

The Greek counter-proposal was to raise VAT on private education to an eye-watering 23%, and the story offered to the electorate at the time - that this was a specific demand from Greece's creditors - turned out to be a lie. On 'discovering' this in September, Syriza (now campaigning for re-election) pledged to reverse the measure if re-elected. However, on returning to power, they found little to offer the creditors in return and mooted a counterproposal for a three-tier VAT regime (0% for primary and pre-primary, 6% for vocational and cramming schools and 13% for private secondary schools). Unfortunately, the three-tier proposal was illegal. The VAT Directive lists services to which a two-or three-tier VAT regime may apply but this does not include education (for the entire context, read Articles 98, 132-133 and Annex III here). Effectively, the Greek government has only ever had a choice between applying a full VAT rate or a zero VAT rate to all private education.

With opposition to the VAT hike growing, and a number of private schools already in significant difficulty as a result, the Greek government will now, perhaps more appropriately, raise equivalent from gambling instead. Turns out the owners of newly-privatised OPAP aren't as good at lobbying as private schools, or maybe they did their lobbying too early.

Unfortunately, too little actual evidence was used in debating this issue; which is a shame because the facts on the ground tell us a fascinating (and often tragic) story about Greek society and how it's coping with the crisis.

An objection in principle

Before I go into the statistics, I need to clarify one thing: I believe that true education should not be taxed, and definitely shouldn't be subject to VAT of all taxes. Education, whether private or public, is not consumption; it is an investment. The time to tax is is when the human capital it creates starts generating income. There is a significant debate about how good the returns on investment in education are and whether any of the mechanisms that we assume produce its returns actually work (see this gem from Pseudoerasmus for example), but there is no doubting the purpose of most such spending; it is an investment in human capital.

I say most because not all spending with education providers purchases education as such. Parents may eg pay a premium for kids to be looked after a little while longer while they're at work. This extra schooling might build no human capital, but instead simply buy employers and employees additional flexibility. Rich parents might pay for access to a social elite - an investment in social capital but also (in less meritocratic societies) in future economic rents - which many libertarians would happily agree should be taxed. Parents afraid of the stiff competition their kids will face in getting into university or finding a job market may be paying for teaching-to-the-test even though they know it does not build human capital; as a kind of insurance for their children.

How education spending should be taxed or subsidised, whether it is investment or consumption, and whether it ought to be promoted or suppressed through better co-ordination really depends on these questions. It is perhaps natural for the ideological Left (whatever's left of it in Syriza) to despise private provision of a public good. However it's also worth bearing in mind a historical irony: in Greece's modern history, the expulson and, later, exclusion of teachers with open communist sympathies from public schools contributed strongly to building the supply of private tuition; this may also help explain its ability to specialise in serving lower-income groups.

How many Greek households use private education anyway?

The obvious starting point is the actual share of pupils enrolled in private education. 'Private education' is a very wide term, so it helps to speak more precisely by level of education, and to distinguish between provision in private schools and tuition in private institutions such as frontistiria, or by private tutors. Each of these sectors is a whole different kettle of fish, and taxability varies. Private one-on-one tutoring in particular can go underground in the blink of an eye - good luck collecting VAT on that.

About 7% of Greek pre-primary and primary school pupils go to private schools (see p 416 here or raw data here). The percentage falls as children grow, from 5% in lower secondary (gymnasio) to 4% in upper secondary (lykeio). By most countries' standards this is actually a small share of the population - only three OECD countries have (marginally) less privatised education systems. On last count (2012) there were ca 75,500 pupils in Greek private schools excluding nurseries and pre-schools (on which more details will follow), and an additional 11,500 in the latter.

Not only is the Greek private school population small in relative terms, it's also not growing; in fact (again, excluding nurseries) it peaked in 2003 and has fallen relatively consistently over the years, both in absolute numbers and as a share of the pupil population. Demand for upper secondary schools is positively falling in the long term. Overall, the private school population was down 12% from its peak even in 2007, and down 18% in 2012. This suggests to me that, all other arguments aside, private school fees make for a rather poor tax base, unless they are somehow a fantastic proxy for undeclared income (which I expect they are not).

But schools are not the only kind of private education out there. Private foreign language tuition is common. Over half a million Greek children were enrolled in 6,500 language schools as of 2013 - roughly one in three Greek children in education of any kind.

Then there is private tuition across a range of academic subjects, whether remedial or as a top-up for students cramming ahead of their final exams. PISA findings reveal that the majority of Greek secondary school pupils attended private lessons outside school in 2012 - 56% in the case of mathematics, though fewer when it came to other subjects. That might sound like a lot but the equivalent figure was 74% in 2009 and 2006; clearly parents cut down during the crisis. Possibly because of this, the overlap between different kinds of private lessons isn't as big as one might think. If you can get hold of the raw PISA 2012 data (I did) you can combine these figures to reveal that 72% of Greek high school kids had private lessons of some kind or other in 2012.

Shockingly, this included 69% of Greek kids in single-parent households. This is shocking because half of all single-parent households in Greece were, by that time, struggling to afford food. Let me repeat this in case it did not penetrate; in 2012 a good percentage of Greek single parents (38%, if you assume single parents have on average as many kids as two-parent households) were to some extent willing to prioritise paying for private lessons over food. One does not do this sort of thing on a whim; these people were no doubt convinced that private lessons were crucial if their children were to have any hope of getting out of poverty.

What about primary education?

There is one type of private education that is in particular demand among Greece's lower middle class: private nurseries, primary schools and pre-schools. As already demonstrated, the percentage of pre-primary school children going to private institutions doubled during the peak of the crisis (2011-12). As early as 2010, spending on primary and pre-primary education was already shooting up among the top 20% highest-earning households.

This is due to a combination of push and pull factors. The crisis forced more Greek women to become economically active, most of them working part time or only occasionally (on which much more detail here). This added, over exactly the years of the pre-primary boom, between 3 and 4 hours of childcare per week for the average household. This increase did not come from existing users taking on more hours, but from more families leaving their kids (especially those under 3) with nurseries. An even more important factor was the pilot operation of 801 all-day schools (see p 40 here) supported by EU structural funds. The pilot was meant to have a demonstration effect, with the Greek government taking over the cost of the scheme once it was convinced of its practicability and benefits. It did not, and the private primary education boom proved to be short-lived - in fact since 2012 the numbers have been slowly reverting back to normal as fewer and fewer people can afford nurseries, or alternatively fewer women can find part-time work.

Is it true that private schooling makes up for failings in the educational system?

There are two ways to approach this question. One is a matter of efficiency, as assessed by Koutsampelas (2015). I cite this study with apologies to the authors, who clearly are still working on the paper and don't want it used as is by other researchers until it has been finalised. They find [...] household willingness to pay €2,182 (annually, in 2009 prices) in 2009 and 2,517 (annually, in 2013 prices) in 2013 per school-age child for substituting state for private education. The corresponding figures for government cost per school-age child is €4,33915 and€ 3,70716 or 2009 and 2013 respectively, suggesting that from the consumers’ point of view the public provision of education in Greece might be inefficient.

You can check Koutsampelas' sums here. If you combine Eurostat's data with the OECD's figures on pupil numbers, the result is ca EUR3600 per pupil for primary and pre-primary and EUR4400 per pupil for secondary school as of 2012. Of course these figures are down from a peak of EUR4100 and EUR5600 respectively in 2009 and, assuming no change in pupil numbers in 2013, they would be 3300 and 3900 respectively.

The second way is to ask whether private school pupils do better than their state-educated peers, and why. The OECD's PISA assessment finds a persistent, statistically significant difference across all areas, with private schools performing better. However, the PISA 2009 assessment also found that, once the effects of pupils' social backgrounds, school independence and competition for pupils are taken into account, private school pupils actually do marginally worse. Adding 'independence' to the mix is not trivial though. Greek schools have probably the least discretion in deciding on their own curricula in the developed world (see IV.4.2. here).

Then there is the question of whether private out-of-school tuition makes up for failings of public schools specifically as opposed to those of the educational system. The answer is likely to be no. Going back to the PISA 2012 data, you can see that pupils in private schools still use private tutoring as much as public school students. When it comes to non-traditional subjects (ie not language, science or mathematics) they arguably use more private tuition.

UPDATE 15/11: PISA 2012 included three trick questions, in which pupils were invited to rate their familiarity with the made-up concepts of "proper numbers"; "declarative functions"; and "subjunctive scaling." Only ca. 3% of Greek pupils claimed to understand all three concepts well, but about 37% claimed at least some familiarity with all of them. This isn't bad by international standards. However, what is really interesting is the correlation between such 'overclaiming' and out-of-school tuition. Greek pupils that received out-of-school tuition in mathematics in 2012 were significantly more likely to over-claim (ca a quarter of a s.d.), and pupils that received 6 hours of out-of-school tuition per week or more were even more so - a full s.d above average. It could be reflex: when taught to the test, a pupil knows it's best to try some answer and show familiarity than none at all. It could be psychological pressure; a child taught on the insistence of parents may be eager to please. Or it could be confusion: a child desperate to keep track of new concepts may genuinely feel one is vaguely familiar, even if it is not.




Do poorer Greeks use private education?

The latest data we have suggest that, in 2010, and among Greek two-parent families with children, education made up ca. 5% of consumption spending. Among single parents, this went up to 10%. This generally includes all spending on education; books tend to be free but a wide range of accessories are not. Even so, private schools and tutoring are likely the major driver.

Eurostat doesn't break these figures up by income bracket and household composition at once, but there is a breakdown by income quintiles across the whole population here. This suggests that the top 20% of households by income spent 2.3 times as much on education as the bottom 20% in 2010 - but the differences are greatest for pre-primary and primary education, where the top 20% spent 6x as much. So we know that private education spending is skewed towards higher incomes - but is it the top end of the distribution driving this or the bottom end?

PISA confirms that private schooling in Greece is skewed towards higher incomes - more so than other countries, but suggests that this is mostly due to the exclusion of the very poor, not exclusivity to the privileged (see fig. 2.1 and 4.2 here). Private lessons and cram schools are, as we saw, widely used by lower income families and even charitable shadow education is becoming increasingly common. But again this is a story of the very poor missing out on a near-necessity, not the well-off enjoying a luxury: on PISA's standardised socio-economic status index non-users score a very significant 0.4 of a standard deviation lower than users.*

It's worth noting that Greek society is changing rapidly during the crisis. The findings of Koutsampelas (2015) suggests that Greek state schools are now receiving an influx of children from newly-poor, once middle-class families. This group dominates the flow out of private education to such an extent that the progressiveness of public education spending has actually increased during the crisis even though the class composition of state schools has widened to include better-off people.
The downside of this is that the government has rarely been able to budget for the increased demand for public schooling, leading to widespread teacher shortages and putting the Greek education budget under further pressure.

Epilogue

In Greece, attendance of private schools is rare, and falling. In fact, the crisis has pushed previously middle-class families into state education, leading to mass teacher shortages. Use of private daycare is more common and an important, if dysfunctional, contributor to labour market flexibility. But private lessons, cram schools and tutoring are extremely common, even though they too have taken a hit during the crisis. There is no suggestion that private tutoring in Greece is economically efficient; it is a bad, path-dependent solution to a poor education system. Because of this function, it's also a desperate necessity. Private schooling, on the other hand, is efficient up to a point; it does not make up for failings in public schools as such, simply for the lack of school autonomy and choice in the educational system as a whole.

The cases of private nurseries and of single parents using private tuition make me think of all the times critics have told me to put 'people over numbers' and check my figures against their (sometimes atypical, and almost always second-hand) slice-of-life anecdotes. The numbers are people, guys. The numbers are always people. Telling their story well is the same art as that of putting a tearful first-hand account into context. And if you can't be bothered to do the one, you probably can't do the other correctly either.


* [Bear in mind, PISA's index is a composite, and uses posessions, immigrant status, parents' jobs and parents' education to create a status proxy; this means it is not as variable as family income - if neither parent has become unemployed it is likely that a child's PISA status will not have changed throughout the crisis.]


PS: What if private schools do not confer an advantage after accounting for socio-economic status?

I can't know without running the OECD's regression whether school independence makes more of a difference ot the private/public performance gap than socio-economic status. But what if its impact turns out to be negligible? What would that mean? I have three pet theories.

1. Some of the Greek private school system may not be in the business of producing 'education'. It may be efficient in terms of meeting parents' actual requirements, which may not match a reasonable person's idea of 'good education.' Parents may be willing to spend money in order to ensure their kids are supervised while they work long hours; or are allowed to coast or get away with poor conduct; or are spared from mixing with 'the wrong sort' or have a chance to make their way into the elite.

2. Demand for private schooling could be compensating specifically, but inefficiently, for the lack of independence and competition among state schools. Parents may be willing to pay for a more tailored curriculum, or for non-mainstream teaching methods. This tailoring, however, may be inefficient because of Greece's fragmented geography and relative scarcity of children - which means that parents can rarely find exactly the 'alternative' education they need, and the schools may themselves struggle to find the specialist labour that they need. In other cases, parents with a demand for tailored schooling may genuinely want a good education but have preferences as to what this entails that don't prioritise academic achievement (eg they might want an education that provides religious indoctrination; or an environment that nurtures creativity).

3. Greek private schools may, by virtue of being private, have access to inferior inputs. If people who train as teachers in Greece value secure jobs more than marginal differences in pay and are willing to wait and/or relocate to get such jobs, they might prefer to pass up offers from private schools, especially if they are highly qualified on paper. Similarly, people moving into teaching (or a specific kind of teaching) after switching careers out of necessity may also be more likely to go into private schools for similar reasons. Parental effort is also an input. Parents who opt for private schooling because it helps them trade off money for working time may have less time to devote to supervising or encouraging learning.