Do not think about, write about or deal with human behavior without determining the effects of incentives.
Europe is suffering from one of its coldest winters. the lines are burning up to make trades in the carbon trading exchanges–oh wait, they’re aren’t any of those anymore. Not quite true–the price has gone from .62 to .08 in whatever bizarre units these things trade for. The volume for some days is zero. Trading carbon credits is like trading for the rights to name leprechauns.
One of the Greek problems is that its bloated government bureaucracy was what supported more government expansion, spending and special privileges for government employees. Apparently, only a few people a crash coming from this.
¶ ATHENS — For nearly two years, as the debt crisis worsened, Diomidis Spinellis led a team that devised innovative software to help Greece crack down on tax cheats. He sent daily reports to his superiors showing which regional tax offices lagged in closing cases and collecting tax revenue.
¶ But last September, Mr. Spinellis, who interrupted a brilliant career as a computer science professor in 2009 to work for the Greek Finance Ministry, resigned, frustrated that officials did little or nothing with the data he generated.
¶ “I cannot remember getting an enthusiastic response,” Mr. Spinellis, 45, said with characteristic understatement in an interview in his tiny, book-filled office at Athens University of Economics and Business, where he has returned to teaching.
¶ In exchange for the bailout money that Greece needs by March to avoid what could be a catastrophic default, the country’s foreign lenders have demanded radical changes to make the state more efficient and bring in more tax revenue. But as Mr. Spinellis’s experience showed, good intentions and directives can easily be evaded or sabotaged by the political class, if its members have not signed on.
¶ In Greece, the government of the technocratic prime minister, Lucas Papademos, is proving powerless to transform an inefficient public administration that has long served as a power base for the same political leaders — including most of the current government’s ministers — who are now being asked to dismantle it.
¶ It is a formula for gridlock that virtually guarantees, political and financial experts say, that the Greek government will never carry out the kind of basic changes that are being demanded of it.
¶ “In Greece, the real power is the power of resistance, the power of inertia,” said Giorgos Floridis, a former member of Parliament from the Socialist Party who recently founded a reform-minded civic movement. Today, he said, the main power centers in Greece — political parties, business leaders, professional guilds, public sector unions and the media — are fighting to preserve their privileges, blocking structural changes that could make the economy more functional.
¶ The slow pace of change is one reason the government and its so-called troika of foreign lenders — the European Union, the European Central Bank and the International Monetary Fund — have relied more heavily on swifter measures, like hard-to-evade tax increases and across-the-board wage cuts, that have helped push the economy deeper into recession.
¶ Change is all the more difficult when corruption appears to be woven into the fabric of the Greek state. Last month, Yiannis Kapeleris, the Finance Ministry’s general secretary for tax and customs affairs — and Mr. Spinellis’s former boss — was forced to resign after being placed under criminal investigation in a complex case involving failure to collect fines imposed on fuel companies. He denies the charges.
¶ Also last month, the man in charge of the Finance Ministry’s Financial Crimes Unit in the northern city of Salonika, Christos Papachatzis, was among 53 people arrested on charges of extortion and leading a protection racket that lent money at usurious rates. According to a wiretapped telephone conversation reported in the Greek news media, he reassured the leader of the gang, Markos Karaberis, that he would not act on a complaint against him.
¶ Asked about the arrest in an interview, Pantelis Economou, a Finance Ministry official who is also a high-ranking member of the Socialist Party, said: “He’s alleged to be a member of a gang, and it seems it’s true. He was the chief there. He was also my party’s member. I sacked him the next day.”
¶ Mr. Papachatzis denied the charges through his lawyer, who said his client was the target of politically motivated prosecutors intent on demonizing the finance minister, Evangelos Venizelos, who is widely seen to be vying to become the leader of the Socialist Party.
¶ In another sign of the nexus between the criminal underworld and Greek politics, all those arrested in the Salonika investigation had ties to the three parties supporting Mr. Papademos’s coalition: the Socialists, the center-right New Democracy party and the hard-right Popular Orthodox Rally, known as L.A.O.S. (Mr. Karaberis ran for a regional office last year with L.A.O.S., using the campaign motto “Clean hands, clear ideas.”)
¶ Mr. Spinellis was supposed to be part of a new generation. He was hired through an open government initiative started by the Socialist Party to promote meritocracy over cronyism, but which critics now say was largely cronyism under another guise.
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Cronyism in government. What’s next, corruption and inefficiency?
Things started out well for Mr. Spinellis. He led a team of 800 people in creating databases to crosscheck property ownership or large money transfers abroad against declared income and to help digitize a tax collection system that still relies on paper. Unable to hire, fire or give performance-based bonuses — that sort of thing is simply not done in the Greek government — he rewarded productive workers informally, with better parking spots.
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Can’t fire and hire. How can that go wrong?
But as time went on, he felt thwarted. His reports clearly indicated which regional tax offices were performing poorly, but no action was taken.
He recalled a meeting in May when he and George Papaconstantinou, then the finance minister, and another ministry official were working to set tax rates that would balance the budget. “I remember wondering why we were doing the work that was the responsibility of the secretary general for taxation and customs,” he said, referring to Mr. Kapeleris and his deputy. “I then realized that we were on our own, and that the cards were stacked against us.”
Mr. Kapeleris did not respond to a request for comment.
Last September, Mr. Spinellis decided to resign, citing personal reasons.
But in a speech in December he stirred up controversy when he spoke openly about corruption, describing a “4-4-2” system in which Greek tax collectors would traditionally lop off 40 percent of a taxpayer’s outstanding tax fine, ask for 40 percent under the table and send the remaining 20 percent to the state.
Mr. Economou, who oversaw Mr. Spinellis’s department, said it was easy for Mr. Spinellis to talk after leaving. “If I quit, I’d be a hero tomorrow, too,” Mr. Economou said. “Sure, there’s bribery, there are moral offenses,” he added. “But our job is to face them, to oppose them and face them.”
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Coercion and corruption–the daily double of government.
Mr. Economou said that it was difficult for the ministry to act on Mr. Spinellis’s data because the ministry’s infrastructure was simply not up to the task. “It’s correct he was generating reports every afternoon,” Mr. Economou said. “These reports came to my office” and to others’, he added, “but there’s no system to manage this phenomenon.”
He said that the ministry was doing its best to create such a system, but that radical administrative change took time.
According to one database that Mr. Spinellis helped create, the tax office in the Athens neighborhood of Zografou closes only 13 percent of its outstanding tax cases. But on a recent afternoon, the challenges there were clear. A few taxpayers came in, confused about which forms to fill out. Boxes of paper files were piled up around the office. An unused dot-matrix printer sat gathering dust.
“We’re supposed to be a country in Europe, but the way things work it’s like a third world country,” said Jenny Sakka, an employee. Her computer was powered by the outdated Windows 2000 operating system, she said, and austerity-induced reductions in office staffing had created a larger backlog of cases.
Making matters worse, she said, wage cuts imposed by Greece in agreement with its foreign lenders meant that some people simply were not able to pay their tax bills. She said she believed that wilier people could use connections to help reduce what they owed. “We have a punishment system only for the poor and the honest,” Ms. Sakka said.
There is one note of optimism, experts say: the whole system under which politicians used state money to dole out favors and hire supporters is collapsing under the pressure of the economic crisis.
“When the money stops flowing, things change,” Mr. Spinellis said.
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If you don’t plan for the collapse–the collapse will plan for you.
Cheerio and ttfn,
Grant Coulson
Cui Bono–Cherchez les Contingencies
