Much has been written about the aftermath of the Greek
crisis, but a key point raised in a recent Wall Street Journal article is the
significant distrust of politicians and divides among people following the
contentious politics around the referendum on the bail-out package that was
offered Greece from the EU (but actually withdrawn before the vote date).
Greeks on the left and far right don't trust EU, and many would like to leave
the Euro. Greeks along the political spectrum believe their politicians cannot
be trusted to govern competently.
Distrust and divisions matter because the Greek recovery
will largely be determined by how much Greeks believe in their country.
Currently, others do not. Even worse, many of the wealthiest Greeks have moved
their money abroad and may well decide to keep them there until they see how
the economy is doing. But an economic recovery requires someone to invest in
business. Will the citizens of a nation with distrust and divisions invest?
A useful comparison for Greece might be Kenya, for two reasons. First, Greece is now a developing economy, and Kenya has been one for
a while. Second, while the distrust and divisions in Greece are recent, Kenya has
long been divided ethnically and politically, and distrust of the state runs
deep. In recent research published in Administrative Science Quarterly, Chris
Yenkey examined the spread of stock market investment in Kenya. Stock market
investments are now wide-spread after the exchange in Nairobi opened, and it is
spread nationwide but with some areas seeing more investment than others.
What drives investment under these conditions? Success. The
strongest driver of investment by a Kenyan is how much profit others have had
from their investments. That is not surprising, but there are many other
results that are very interesting, and informative for Greece. First, divisions have strong effects. The investment results of others matter much more if they belong to the
same ethnic group. People pay more attention to similar others, even if they
are looking at objectively the same thing – stock market gains. Second,
distrust matters. People living in towns with political leadership from a rival
ethnic group paid less attention to the profits of those from different ethnic
groups.
Equally important, the divisions can be bridged. In Kenya,
people who lived in neighborhoods or worshiped in religions with a mix of
ethnicity paid more attention to those who were different from themselves. People
who saw much national (rather than ethnic-political) advertising were less
likely to see only the gains of same-ethnicity others. Division and distrust are in the minds of people, and differences can be thought of as harmful division or helpful diversity.
The result is some old fashioned advice for Greece. Do whatever is
necessary to bring the people together. Do whatever is needed to help them
think of the nation rather than its politicians. The new part is that these
actions are not just for reducing conflict and increasing confidence in life.
They also help investment, and can be important for improving the economy.
Fidler, Stephen. 2015. Greeks, Economists Part Ways on Benefits
of Eurozone. Wall Street Journal,
23/7/2015.
