Wednesday, February 29, 2012

Excessive Bureaucracy: Choking Greece's Economy

Greece has more economic problems than just excessive government debt and a 21% unemployment rate, it's got an excessive government bureaucracy that is choking off private enterprise and small businesses.  Or maybe it's more accurate to say that it's because of the excessive government bureaucracy that Greece has excessive debt and 21% unemployment.

Here are two anecdotes of excessive bureaucracy in Greece that "get at the very heart of how Greece landed up in its current condition and why rapid change is unlikely":

Anecdote 1: "It took 10 months, a fat bundle of paperwork, countless certificates, long hours of haggling with bureaucrats and overcoming myriad other inconceivable obstacles for one group of young entrepreneurs to open an online store. 

Fotis Antonopoulos, one of the co-founders of Oliveshop.com, and his partners spent hours collecting papers from tax offices, the Athens Chamber of Commerce and Industry, the municipal service where the company is based, the health inspector’s office, the fire department and banks. At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples.

Once they climbed the crazy mountain of Greek bureaucracy and reached the summit, they faced the quagmire of the bank, where the issue of how to confirm the credit card details of customers ended in the bank demanding that the entire website be in Greek only, including the names of the products.

“They completely ignored us, however much we explained that our products are aimed at foreign markets and everything has to be written in English as well,” said Antonopoulos.

Eventually, Antonopoulos and his associates decided to use foreign banking systems like PayPal, and cut the Greek bank, with which they had been negotiating for three months, from the middle. “It’s their loss, not ours. We eventually solved the problem in just one day,” explained Antonopoulos."


Anecdote 2 (via Tyler Cowen): "A number of contacts in Greece described their experiences trying to open a business or buy property, which involved high fees, several trips to different tax offices and months of navigating bureaucracy. This gets at the very heart of how Greece landed up in its current condition and why rapid change is unlikely.

This is best encapsulated in an anecdote from my visit to Athens. A friend and I met up at a new bookstore and café in the centre of town, which has only been open for a month. The establishment is in the center of an area filled with bars, and the owner decided the neighborhood could use a place for people to convene and talk without having to drink alcohol and listen to loud music. After we sat down, we asked the waitress for a coffee. She thanked us for our order and immediately turned and walked out the front door. My friend explained that the owner of the bookstore/café couldn’t get a license to provide coffee. She had tried to just buy a coffee machine and give the coffee away for free, thinking that lingering patrons would boost book sales.

However, giving away coffee was illegal as well. Instead, the owner had to strike a deal with a bar across the street, whereby they make the coffee and the waitress spends all day shuttling between the bar and the bookstore/café. My friend also explained to me that books could not be purchased at the bookstore, as it was after 6 p.m. and it is illegal to sell books in Greece beyond that hour. I was in a bookstore/café that could neither sell books nor make coffee."

13 Comments:

At 2/29/2012 11:31 PM, OpenID Sprewell said...

Wow, what a shithole. It is amazing that they are even at the level they're at and aren't dirt-poor.

 
At 2/29/2012 11:42 PM, Blogger Ron H. said...

From Anecdote 1: "At the health department, they were told that all the shareholders of the company would have to provide chest X-rays, and, in the most surreal demand of all, stool samples."

Wow. that IS bizarre. One can only surmise that they plan to keep track of these people using some method that involves dogs.

 
At 3/01/2012 12:04 AM, Blogger Che is dead said...

We are well on our way ...

... try to jump through the legal hoops required to open a simple lemonade stand in New York City. Here’s some of what one has to do:

1) Register as sole proprietor with the County Clerk’s Office (must be done in person). 2) Apply to the IRS for an Employer Identification Number. 3) Complete 15-hr Food Protection Course! 4) After the course, register for an exam that takes 1 hr. You must score 70 percent to pass. (Sample question: “What toxins are associated with the puffer fish?”) If you pass, allow 3-5 weeks for delivery of Food Protection Certificate. 5) Register for sales tax Certificate of Authority. 6) Apply for a Temporary Food Service Establishment Permit. Must bring copies of the previous documents and completed forms to the Consumer Affairs Licensing Center.

Then, at least 21 days before opening your establishment, you must: Arrange for an inspection with the Health Department’s Bureau of Food Safety and Community Sanitation. It takes about 3 weeks to get your appointment. If you pass, you can set up a business once you: Buy a portable fire extinguisher from a company certified by the FDNY and set up a contract for waste disposal. We couldn’t finish the process. Had we been able to schedule our health inspection and open my stand legally, it would have taken us 65 days. -- John Stossel, Fox News

 
At 3/01/2012 2:17 AM, Blogger Methinks said...

This is very sad.

The stories are bad, but the sad part is how similar they are to what businesses in the U.S. have to go through.

In heavily regulated U.S. industries (and is there there one that isn't anymore?), 10 months, endless circular logic and unreasonable demands are becoming the norm for starting even small, basic companies. I know - I went through that again three years ago.

By contrast, the same simple BD that took me 10 months (and in the end, I had to rely on connections at the regulator to make it happen) to get approved would take 2 weeks with delays to open in Singapore. It takes longer for a 10 year old to get approval for a lemonade stand in the United States.

 
At 3/01/2012 4:57 AM, Blogger Ian Random said...

I was trying to think of the worst bureaucratic rules as an idea for a story and then I heard of Greece. This stuff beats everything I could think of.

 
At 3/01/2012 10:10 AM, Blogger morganovich said...

but wait, i don't understand.

keynsianism says that such business requirements ought to stimulate the economy by driving demand for x-ray techs, stool samplers, etc.

how has this not turned greece into an economic superpower?

if bastiat were alive, he'd throw up.

 
At 3/01/2012 10:33 AM, Blogger morganovich said...

perhaps the problem was that they did not require chest x-rays for enough greeks.

surely if they made the whole population do it, that would provide significant stimulus...

 
At 3/01/2012 11:43 AM, Blogger NormanB said...

A month or so ago AP reported that Greece is giving disability compensation to pedeofiles and keleptomaniacs.

 
At 3/01/2012 12:17 PM, Blogger Benjamin said...

Here in the USA, we find incredible state and local regs that throttle business---including the most basic one: Requiring people to have a law license if they want to do legal work.

Once we de-license law, it will simplify---and I suspect many paperwork blizzards will simplify too.

And don't forget what they do in North Dakota---they stop farmers from pulling trailers onto their own private property to rent out to oil workers who need housing.

And try building a sky-rise condo in Newport Beach.

 
At 3/01/2012 12:18 PM, Blogger Benjamin said...

Here in the USA, we find incredible state and local regs that throttle business---including the most basic one: Requiring people to have a law license if they want to do legal work.

Once we de-license law, it will simplify---and I suspect many paperwork blizzards will simplify too.

And don't forget what they do in North Dakota---they stop farmers from pulling trailers onto their own private property to rent out to oil workers who need housing.

And try building a sky-rise condo in Newport Beach.

 
At 3/01/2012 1:46 PM, Blogger morganovich said...

bunny-

you do not, in fact, need a license to practice law.

anyone is free to represent themselves in court or to draft and sign legal contracts etc.

it is only to represent others that you need to pass the bar.

i agree that it ought to be voluntary accreditation, but you act like it's a guild system.

you don't even need to go to law school to practice law, just pass a competence test that is cheap and easy to take.

again, i see no reason for it as a requirement, but you are vastly overstating the problem here and misattributing causality.

you cannot possible believe that we have too few lawyers.

the blizzard of idiocy stems from a badly broken tort system, not a lack of lawyers.

if anyone could practice law, that blizzard would accelerate, and badly informed newbies stepped into bear traps. how does more lawyers solve anything or lessen any complexity?

 
At 3/01/2012 9:25 PM, Blogger The Bitter Guy said...

Mind bending.

The end of the first anecdote was that the young pioneers were thwarted by a Greek bank.

Sounds like stodgy flows through the veins / system / culture / tradition, government and financial.

Even worse than the Japanese.

 
At 3/02/2012 10:37 AM, Blogger Donny Baseball said...

It's not just the small fries that get this treatment. Shipping magnate Vassilis Constantakopoulos tried to build a world class resort in Greece to the tune of hundreds of millions of Euro. He broke ground in 1998 and hoped to be open by 2002. Costa Navarino opened in 2010.

 

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