As the Constantine G. Karamanlis Chair of Hellenic and Southeastern European Studies, Professor Michalis Psalidopoulos is the man to ask for lessons learned from American economists’ experiences during Greece’s post-World War II reconstruction. On December 1st, Professor Psalidopoulos delivered his annual chair lecture to a mainly Greek crowd, treating his listeners to a preview of the work he conducted at the Truman Library Institute.
Psalidopoulos is married to an international relations specialist who helped inspire his lecture. Having read his wife’s research materials strewn across the home office they share, Psalidopoulos stressed that leaders of present day interventions in Iraq, Haiti, and Afghanistan can learn from successful historical interventions like the one Americans lead during post-war Greece.
The annual lecture began with an outline of post-war Greece’s economic history and development process, including the role American economists played in the reconstruction, before turning to lessons learned. In a nutshell, Greece in 1945 found itself in a state of hyperinflation after suffering great physical losses in agriculture, industrial capacity and shipping capital. Greece lacked raw materials, and had decimated transport and communications facilities following its liberation in 1944 and amnesty in 1945. Indeed, Psalidopoulos described a bleak situation not unlike what conflict zones today face. Severe shortages in food supply, particularly in urban centers, coupled with the challenges listed above meant that American intervention, when it arrived, had to be all-encompassing.
Psalidopoulos put leading Greek economists of the time into three camps: 1) the liberal camp championed by Xenophon Zolotas promoted a free economy integrated into the world order, 2) the interventionist camp, led by Kyriakos Varvaressos, argued for a New-Deal type of free economy, and 3) the Marxist camp guided by Dmitris Batsis, advanced the ideals of Marxism. These economists were credited with working with their American counterparts to formulate a national policy for the struggling nation. For the economy to even implement these policies however, Psalidopoulus explained that it was necessary to gain the public’s confidence in Greece’s currency. As a result, the drachma had to be convertible into gold sovereigns. Due to the Greek Civil War in the late 1940’s however, convertibility unfortunately resulted in pressure on gold reserves of the Greek Central Bank in London.
Against this stormy backdrop, several foreign missions to Greece launched aid missions, which from 1944 onwards, helped ensure that the country could once again stand on its own feet. Aid was extended through 1962. While presenting a favorable view of the aid packages, Psalidopoulos did point out that at least 40% of the aid was directed towards military expenditures, and noted that this was one problem which may have protracted the period for aid disbursement.
According to Psalidopoulos, there were three main phases of aid distribution. Phase one resulted in grim assessments of the Greek economy. There was no real economic policy on hand at this time and the consensus was that the Greeks needed a program of industrialization to become economically self-sufficient. Phase two led to the articulation of a dominant economic strategy and the emergence of two camps among American economists: 1) developmental/structuralist, which emphasized development, production and investment, and 2) monetary, which emphasized ending inflation, balancing budgets and the balance of payments. Finally, phase three saw Greece grappling with drastic cutbacks in aid, rigorously enforced fiscal stabilization, and taming inflation. Thanks to the comprehensive program of technical aid and economic assistance, Greece achieved on average 6.5% annual GDP growth from 1955 through 1978.
While Psalidopoulos had a generally favorable view of American aid (he cites such accomplishments as the land reclamation project, electrification, balance of payments relief, Corinth canal clearing, water and land development, and technical assistance), he also elaborated on conflicts which stemmed from aid. By taking such a hands-on approach towards development, history tends to unfavorably view American actions in Greece’s development trajectory. Given incidences like the prohibition of a steel mill, the forced elections favoring certain candidates preferred by the U.S., and the lack of a transparent aid system (loans were given only to certain individuals and some loans bore additional foreign exchange risk), this attitude is understandable.
In conclusion, Psalidopoulos believes that American economists are unappreciated for the work they did on behalf of Greece. He said, “American economists deserve Greece’s respect and gratitude.” In terms of lessons learned, Psalidopoulos exhorted leaders currently facing intervention measures to use an inclusive approach that considers everything about a country’s status quo. To Psalidopoulos, merely securing physical safety in a country is ineffective. Presenting a complete solution to a country’s needs is what counts. America’s efforts in Greece after World War II provide an illustrative example of this strategy’s efficacy.
Kim Liao F11