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Clientelism and Economic Policy: Greece and the Crisis

March 28, 2017

Credit - AP

By Aris Trantidis (SPS 2016-17)

In July 2016, I published the book ‘Clientelism and Economic Policy: Greece and the Crisis’ (Routledge 2016). I started this book project at the beginning of the Greek crisis in 2010, when I decided to explore what led to the crisis from a comparative historical perspective. This meant that I had to delve into the historical development of Greece’s politics and the Greek economy at different phases over the last thirty years, and use an analytical narrative and a comparative approach to explore the causes of the crisis and refine several hypotheses about the interplay between politics and policy.

How does party politics interfere with economic policymaking? Why is it the case that a government abstains from making reforms that are regarded beneficial for the economy? Why does it fail to curb public spending, even when there are warning signs of a looming fiscal crisis ahead?  A major part of the answer to these questions is clientelism. Clientelism refers to the allocation of selective benefits by political actors (patrons) to political supporters (clients). While the conventional literature views clientelism as a bilateral exchange that is more likely to appeal to poor voters in developing societies,

the book shows that clientelism is a collective mobilisation practice and can thrive in a long-standing parliamentary democracy in societies with high levels of socioeconomic development.

Clientelism is a powerful tool in the hands of politicians who want to cement political support and create a strong and loyal party network.

The book’s findings contribute to the literature on clientelism and inform what we know about the interplay between party politics and public policy. As a political practice, clientelism has a strong connection with Mancur Olson’s problem of collective action. In terms of party organization clientelist exchange helps political parties tackle the problems of political mobilization and internal cohesion. They can now create, control and operate a vast clientelist network. This party network is coordinated both vertically – with the rewards and sanctions the political leadership applies – and horizontally – as members of the group help one another while checking each other’s loyalty to the party. Moreover, the development of a clientelist network has implications for public policy. The political network is the ‘privileged’ group in terms of the benefits distributed via politics, and stands at the heart of decision making, being the very core of the party system itself.

My book’s main finding is that the practice of clientelism introduces a systematic bias in the design of economic reforms in favour of preserving clientelist supply. ‘Clientelist bias’, as I name it, is a pattern in politics that has both political and economic consequences. In game theory, the result can be described as a suboptimal equilibrium in which no political party can unilaterally reduce costly clientelist practices. This is because placing limits on the supply of clientelist benefits will upset relations inside the party and, ultimately, threaten its cohesion and capacity to mobilize.

A unilateral reduction of clientelist supply by one party would also leave a space for the other parties to occupy. This explains why spending for clients is still increasing, even when a country’s economic conditions are deteriorating and when it has undertaken strong international commitments for policy reform, like the case of Greece throughout the 1990s and 2000s.

Clientelist bias affects how a national economy adapts to pressures for reform under difficult fiscal and economic conditions. In a clientelist system the government cannot shift social alliances or forge new ones in order to pursue necessary reforms and revamp the economy. Clientelist politics may be both highly unpopular with voters and detrimental to the economy, but this practice endures because it serves as a vital strategy for party cohesion and campaign mobilization.

Parts of my book draw on my PhD thesis undertaken at King’s College London. I am grateful for the support and guidance of my then supervisor and subsequently colleague at King’s,  Professor Mark Pennington, Professor of Public Policy and Political Economy. I am also thankful to my PhD examiners, Professor Andrew Hindmoor and Dr. Stella Ladi, who encouraged me to publish the thesis as a monograph. Dr Stella Ladi described the book as ‘a thought-provoking account of the political economy of clientelism in Greece’:

Building on the theoretical tools of rational choice institutionalism and of historical institutionalism, Trantidis manages to outline the historical roots but also the actors’ responsibilities for clientelism in Greece. With a wealth of data from the recent political and economic history of Greece it covers the key elements of the way patron-client relations interfere with economic policymaking.  This study is likely to become an essential point of reference in the literature on Greece.

My book has already been placed in the libraries of some of the most distinguished universities across the world. It has also received favourable comments in a forthcoming book review. Six months after its publication, I am now working on two follow-up research projects. I am exploring the degree to which clientelism is a necessary ingredient for the successful consolidation of populist leaders in power. Populist political forces come to occupy power with an anti-elite, anti-establishment message but, sooner or later, they have to tackle high expectations and address any popular backlash relating to broken promises. My second field of inquiry is the Greek crisis from the perspective of the epistemology of economics. A key weakness of the economics literature is that it lacks the qualitative tools to explore in depth the behavioural adaptations of economic actors who experience policies of fiscal consolidation. Austerity is a shock to their economic calculations and can trigger a wide range of reactions that could deepen and exacerbate the crisis. What is missing is a full ‘mapping’ of the behavioural adaptations caused by austerity in an extreme case, and a theoretical framework with which to trace these adaptations in other ‘milder’ cases. In that respect, I try to document the unintended consequences of the austerity policies in the Greek case: patterns of disinvestment, non-performing loans, capital flight, a banking crisis, higher levels of unemployment and workforce emigration. Austerity produces uncertainty which, beyond the immediate demand contraction, pushes actors to adaptive responses that could trigger a vicious circle of economic downturn.

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