On the 1974 transition of Greece to democracy: A non-conventional assessment

Abstract

The political stability achieved since the transition of Greece to democracy in 1974 has been accompanied by a huge slowdown in economic growth. In particular, the average annual growth rate over the period 1974-2022 declined to ≈1% from ≈7% in the previous 20 years. This constitutes a puzzling development because based on the relevant literature we would expect economic growth to accelerate, especially during the years that followed Greece’s integration in the European Union. It didn't and the question is why. The answer given and documented in this essay is that the political stability resulted from an administrative mechanism for redistributing income and wealth, which was embedded in the 1975 Constitution in the form of provisions that established a wide range of new "social" rights and changed those that pertained to "property" rights. By catering to these social rights through the public budget and ad hoc burdens on the private economy, redistribution enhanced political stability. But in an open market economy like that of Greece, this process is futile because it leads to stagnation of economic growth, and hence to the possibility that the political stability may be disrupted. Therefore, as long as citizens do not pressure the political parties that alternate in power to proceed with the major structural reforms that are long overdue, or as long as the said parties avoid exercising the leadership, which is expected of them in this crucial regard, political stability will remain weak and unstable, with all risks for democracy and the national interests that inaction entails.

Keywords: Democracy, Political stability, Economic growth, Social rights, Property rights, Redistribution, Leadership, Structural reforms

JEL Classification: E02, F43, I38, O17, O43, P16