Systems Theory and Greece

In a MBA-course I’m currently teaching I recently introduced Systems Theory, with the help of a brilliant video lecture by the late, great Russ Ackoff, entitled ‘From Mechanistic to Social Systems Thinking.’   Starting in the Middle Ages, Ackoff takes his audience through the Renaissance and what he calls the Machine Age into the still developing Systems Age.   He explains how ‘analysis,’ breaking objects or events down to their smallest component parts to gain knowledge of the whole, was the dominant way of thinking of the Machine Age, resulting in such intellectual products as the Periodic Table of Elements and Frederick Winslow Taylor’s Scientific Management.  But the thrust of Ackoff’s lecture is that analysis alone can never explain reality, and needs to be complemented by ‘synthesis,’ the determination of the impact of a larger, containing whole on the object, event or social system that needs to be understood.

Just before I got to this point in the course my class was joined by two Greek exchange students who are completing their MBA degree from the University of Athens in the US, and it struck me that the Greek debt crisis is a good case to illustrate the difference between mechanistic and systems thinking.  Mechanistic thinking, as it is in this case mainly practiced by the EU authorities, blames all the Greek problems on internal causes.  Their ‘analysis’ is the identification of the dysfunctional parts of the Greek socio-economic system: tax evasion, a large government bureaucracy, high pensions, corruption etc., all this resulting in unsustainable debt.  From the beginning their remedies have been:  more austerity, deregulation, fewer government workers, cutting pensions, making it easier to fire workers etc.  Having visited Greece some thirty times I know that at least part of their analysis is correct (I don’t think my Cretan friends ever paid a lot of taxes on the money they made in their tavernas and hotels), but systems thinking would tell a slightly different story.

A ‘synthesis’ of the Greek situation, putting Greece in the larger, containing system of the EU, would show that when Greece entered the Euro zone it didn’t meet the EU standard for debt-to-GDP ratio (the EU standard was 60%, the Greek ratio was 126%), so the problem already existed, and it was enlarged by two consequences of the Euro:  entering the Euro zone made it easier for Greece to borrow money, thus sustaining its propensity to amass government debt, and Greece lost its ability to have its own monetary policy, and thereby the ability to significantly reduce its debt, wages and pensions by devaluating the drachma.

And possibly the strongest impact of the containing system on Greece, caused by the never relenting pressure from the EU – Germany in particular – and the ECB for more austerity, is the refusal of the Greek people to be slowly bled to death, which gave them and the EU Syriza, pretty much like Bush and Cheney gave the world ISIS.  So there are both internal and external causes for the Greek debt crisis, a point that Paul Krugman makes consistently, but the Greeks are expected to solve it all on their own, because God forbid that the Germans or for that matter the Dutch, who benefitted greatly from the creation of the Euro, would have to pitch in.

As Krugman recently wrote, if a ‘Grexit’ would occur and after a couple of lean years British and German beer bellies would return to Greece the containing system may have hurt itself pretty badly, because countries like Spain, Portugal and even Italy might follow the Greek example.  In the meantime I could finish my class by telling the students that as long as the sun shines on the Psiloritis early every morning and then descends to the beaches Greece will be OK in the long run.

Hugo Kijne


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