360° Coverage : Greece Is Getting Its Business Model Right

2 Updates
Greece Is Getting Its Business Model Right
Photo Credit: Forbes Business

Greece Is Getting Its Business Model Right

Feb 23 2014, 11:19am CST | by

Disclosure: I own GREK shares Anyone who has visited Greece recently will probably have noticed that behind the gloom and doom of the GDP and unemployment statistics, there is a ray of hope. The...

Filed under: news

 
 
 

29 weeks ago

Greece Is Getting Its Business Model Right

Feb 23 2014, 11:19am CST | by

Disclosure: I own GREK shares

Anyone who has visited Greece recently will probably have noticed that behind the gloom and doom of the GDP and unemployment statistics, there is a ray of hope.

The country is changing. Planes, trains, and ships are on time. The streets of major cities are peaceful with very few protesters. Empty stores in commercial districts begin to re-open with new owners and new business concepts.

Greece is beginning to get its business model right.

For years, Greece had the wrong business model—A Semi-Soviet, semi-Latin model that was backwards – it applied markets and governments in areas of the economy where each institution fails rather than excels. This resulted in a large and corrupt government that lacked the resources to finance its multiple roles in the economy.

/>

With the former Soviet Union as a model, the Greek economy was subject to the excessively intrusive presence of government in the business and professional lives of citizens, directly controlling more than 50% of the economy.

As discussed in a piece I published in Barron’s in 2010, government was present in utilities, telecom, transportation, energy and banking — as owner, financier, entrepreneur, and manager — keeping inefficient enterprises afloat.

Government was active in the pension fund industry, as manager of employer-employee contributions, deciding who would retire, when their retirement would happen, and what pension they would receive.

Government was present  in commodity markets, as regulator and gatekeeper, deciding who could be in what kind of business and for how long; and in labor markets, setting labor compensation and employment standards.

In common with the Latin American model, the Greek economy lacked a fair and transparent method for setting the rules of the economic regime – resulting in vague interpretations of the law, and frequent disruptions of business and public life in the form of political protests.

Greece’s semi-Soviet, semi-Latin model can be traced back to the early 1980s, when Andreas Papandreou sought to establish a mixed-market system that combined the best features of markets and government. But he applied the two institutions backwards, in areas of the economy where they fail rather than excel. He extended the role of government in the ownership and management of business enterprise, and he limited its role in the management of commons — patrolling of the streets and the highways, maintaining public order, enforcing city planning rules and protecting the environment.

This backward mix of institutions had far-reaching consequences in the everyday life of Greek citizens, and in the financial future of the country.

The results speak for themselves.

But now, in the aftermath of the most recent crisis, the Greek economic model has begun to change. The country seems to have gotten its economic model right: the size of government has been reduced, state-owned enterprises have been privatized, transparency is improving, and calm is returning to the streets of major cities.

Result? Government deficits are turning into surpluses, exports and tourism are soaring, shipping leads the world, and real GDP is turning the corner. Slowly, Greece is rebuilding its brand image.

Simply put: Greece is headed in the right direction, applying the right institutions in the right sectors, releasing the ingenuity and creativity of its people. And markets have taken notice. In the last six months, the Global X FTSE Greece 20 ETF (NYSE:GREK) has outpaced nicely the S&P500 (see Exhibit). The Athens Exchange topped the list of the best performing markets in the first ten days of 2014, as we wrote in a previous piece.

Source: Forbes Business

 
Update
2

3 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (N ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

One dead after drinking contaminated water in Bangladesh
Dhaka, Sep 21 (IANS) A female worker died and scores of others fell sick after drinking water at their factory in Bangladesh Saturday.
 
 
UN sets up mission to combat Ebola
United Nations, Sep 20 (IANS) UN Secretary-General Ban Ki-moon has announced to have established a UN mission to combat Ebola with the advance teams to be deployed to West Africa by Monday.
 
 
Chinese may need 98,000 new pilots in 20 years
Beijing, Sep 20 (IANS) China will need 98,000 more pilots and 101,000 maintenance technicians in the next 20 years, according to latest estimates of Boeing.
 
 
Medvedev slams EU sanctions against Russian banks
Moscow, Sep 20 (IANS) Russian Prime Minister Dmitry Medvedev Saturday criticised the European Union (EU) over its ban on Russian banks, warning that the 28-member bloc will pay the price.
 
 
 

Latest from the Network

Toll in Nigeria building collapse reaches 86
Abuja, Sep 21 (IANS) The toll in a building collapse at a church complex in Nigeria's commercial capital Lagos climbed to 86 Saturday, authorities said. While confirming the casualties, Nigeria's National Emergency...
Read more on Politics Balla
 
Kuwait beefs up security against IS threat
Dubai, Sep 21 (IANS) Kuwait has undertaken new security measures to combat the militants of Islamic State (IS) Sunni extremist group in the Gulf nation, media reported. Kuwaiti Deputy PM and Interior Minister Shaikh...
Read more on Politics Balla
 
One dead after drinking contaminated water in Bangladesh
Dhaka, Sep 21 (IANS) A female worker died and scores of others fell sick after drinking water at their factory in Bangladesh Saturday. "We have come to know that a female worker died and some 100 workers were treated...
Read more on Business Balla
 
Egypt to host Gaza ceasefire talks
Cairo, Sep 21 (IANS) Egypt will host Gaza ceasefire talks between Israel and the Palestinians Wednesday in a bid to consolidate the truce reached last month. Indirect talks between the Gaza-ruling Hamas movement and...
Read more on Politics Balla
 
14 killed in Libya's Benghazi city
Tripoli, Sep 21 (IANS) A series of targeted attacks have claimed the lives of 14 people in Libya's eastern city of Benghazi, security sources said Saturday. A total of 14 people, including a journalist, security...
Read more on Politics Balla
 
Polly Bergen dead aged 84
Polly Bergen has died aged 84. The legendary actress - who was best known for her role in 'Cape Fear' - passed away today (20.09.14) surrounded by her friends and family at her home in Southbury, Connecticut, from...
Read more on Movie Balla
 
Polly Bergen dead aged 84
Polly Bergen has died aged 84. The legendary actress - who was best known for her role in 'Cape Fear' - passed away today (09.20.14) surrounded by her friends and family at her home in Southbury, Connecticut, from...
Read more on Celebrity Balla
 
Kim Kardashian West's naked photos leak online?
Kim Kardashian West has become the latest celebrity to allegedly have naked photographs leaked online. The 33-year-old reality TV star may have fallen victim to the recent hacking scandal after explicit images, believed...
Read more on Celebrity Balla
 
Pete Wentz is 'great' at diaper changing
Pete Wentz believes he's ''great'' at changing diapers. The Fall Out Boy rocker has picked up a new skill since he welcomed his son Saint Lazslo into the world with his girlfriend Meagan Camper on August 20. Speaking to...
Read more on Celebrity Balla
 
Jennifer Lawrence and Chris Martin move in together?
Jennifer Lawrence and Chris Martin have ''pretty much moved in together.'' The couple - who have been dating since late June - have been ''inseparable'' over the past few months and have been spending a lot of time at...
Read more on Celebrity Balla