Because Greece has had this bad reputation since before the start of the new millennium, it can be difficult to recall that there was a time when the Greek economy was working well, as historian Aristides Hatzis writes:
Greece used to be considered something of a success story. One could even argue that Greece was a major success story for several decades. Greece’s average rate of growth for half a century (1929-1980) was 5.2 percent; during the same period Japan grew at only 4.9 percent.
The prosperity during those years is even more significant if one recalls that the time segment in question includes WW2 and several domestic power struggles among Greek politicians.
What were the causes of Greek prosperity? The fact that few industries were owned or operated by the government; a low national debt; government spending was a small percentage of GDP; and a low level of business regulation.
These principles led Greece into economic success.
Greece’s decline began with the reversal of these principles.
The Greek government took ownership of various businesses; borrowed large amounts of money; spend a large percentage of GDP; and regulated industries and financial transactions.
The history of Greece took an about-face in a distinct manner. Nearly every policy trend was turned into its opposite, as Aristides Hatzis explains:
Modern Greece has become a symbol of economic and political bankruptcy, a natural experiment in institutional failure. It’s not easy for a single country to serve as a textbook example of so many institutional deficiencies, rigidities, and distortions, yet the Greek government has managed it. The case of Greece is a precautionary tale for all others.
Greece was once welcomed happily into the European Union — or the “European Community” as it was called back then. But by the first decade of the new millennium, the EU saw Greece primarily as a problem to be solved: a problem which was the result of government intervention which greatly harmed the freedom of the marketplace.
