The demand of Greece’s international creditors, the so-called troika, for a lowering of Greek salaries and wages is not just devoid of substance but also dangerous.

By Takis Lainas

It is dangerous because no one can guarantee that even if labor costs fall for a given enterprise, it will not be soon followed by something else that offsets  the benefit, such as a rise in the price of fuels or imported materials.

It is also dangerous, even disastrous, because in the present situation any further erosion of workers’ incomes will exacerbate the recession. But even more unproductive is the argument that competitiveness will boost growth. This would make sense if one compared like with like, that is, economies that are based on relatively efficient public administrations and have dependable political personnel and  tax systems, economies with common characteristics that vie to make their products competitive one way or another.

In Greece’s case few dare mention something much more basic and fundamental than competitiveness: productivity. Just to recall some of the basic notions of Economics, productivity refers to the measure of productive capacity, which takes into account the type and volume of production in relation to the factors required for its realization. In the broader sense of the term, productivity is the ratio between the attained results (outflows) and the resources (or factors) employed for their attainment.

And so the essential question is posed: What does Greece produce and in what way? With what quality of resources in both public and private sectors?

To be sure, the distribution and waste of resources only show we are building castles on sand: fruitless projects, with minimal real contribution and added value to the economy. The fact that even today everyone involved pretends not to notice shows the real  deficit  which no bailout loan will cover. The intended or unintended lack of awareness of our weaknesses inescapably leads to senseless and fruitless efforts, and catastrophic turnabouts. Much ado about nothing.