chapter  7
23 Pages

The Politics of Privatisation: Redrawing the Public–Private Boundary

Of all policies that impact on the state-market balance (financial deregulation, market liberalisation, reduction of public expenditure, etc.) privatisation is probably the most salient and direct. Not only does privatisation amount to a radical redrawing of the public-private boundary (Mu¨ller and Wright 1994), but it also constitutes a momentous reversal of the entire post-war policy paradigm. As in most other Western economies, the public enterprise sector in

Greece was built gradually during the twentieth century through successive waves of state consolidation. Except for certain public specialised credit institutions (including the Agricultural Bank, the National Mortgage Bank and most notably the Bank of Greece, the country’s central bank) established in the late 1920s, the first notable wave of state initiative in the public enterprise sector occurred after the

end of the Second World War and through the 1960s. This developmental wave of public enterprise creation (rather than nationalisation) included public utilities such as telecommunications and electricity, a national tourism organisation, and several development institutions aimed to advance the country’s industrialisation, offsetting private sector inability or market failures. The second major wave of nationalisations took place during the post-1974 transition to democracy, as was also the case in Spain and Portugal (Maravall 1993). Aiming to assert national economic control over key sectors, to emit a message of government resolve to major capital-owners, and to appeal to wider radicalised social strata, the New Democracy (Νέα Δημοκρατία, ND) government of Constantine Karamanlis in 1974-77 nationalised Olympic Airways, a number of major firms such as refineries, and most notably the country’s second largest banking group, Commercial Bank, through which an additional group of industrial subsidiaries came under state control. This could be labelled the democratisation wave of nationalisation. The third major wave of nationalisations occurred under the first Pan Hellenic Socialistic Movement (Πανελλήνιο Σοσιαλιστικό Κίνημα, PASOK) government of Andreas Papandreou. To a certain extent, this socialist wave of nationalisations (‘socialisations’) reflected a government strategy of assuming control over ‘strategic’ sectors of the economy, as with the nationalisations of Larco (mineral exploitation), Pyrkal (munitions industry), the Lavrion lead mines and the Heracles General Cement Company (Georgakopoulos et al. 1987; Teitgen-Colly 1987). By 1983, 19 out of the top 50 industrial concerns in Greece were controlled either directly or indirectly by the state – a single-year increase of eight very large firms (Bermeo 1990: 4). This dirigiste rationale was subsumed under a broader job-saving effort to rescue a large number of faltering, over-indebted industrial firms. Thus the Industrial Reconstruction Organisation (Οργανισμός Ανασυγκρότησης Επιχειρήσεων, OAE) was established in 1983 as a holding company for an initial 44 larger-sized ailing firms, to which many others were later added. Though OAE was supposed to overhaul the ailing firms and preferably return them to the market, any privatisation intention was frozen until 1990, by which time their debts had multiplied. Thus the state of the wider public enterprise sector in 1990, when

privatisations began, reflected the outcome of these three major successive waves of nationalisation. In that sense, privatisation represented a reversal of the entire post-war policy paradigm of state expansion. It signified the conclusion of the three corresponding waves of the post-war period (economic development, democratisation and socialist transformation), the third less successful than the previous two. In reality, the process of expansion of state ownership was slowed down or halted during the second (1985-89) PASOK government, but policy paralysis and electoral politics eventually prevented a full economic policy shift

from materialising, despite the 1985-87 stabilisation programme. Thus privatisation (along with a major economic policy shift to orthodox policies of disinflation, public deficit reduction and market liberalisation) was initiated by the 1990 ND government.