Greece's New Political Economy: State, Finance, and Growth from Postwar to EMU (review)

George Pagoulatos opens a new chapter in the analysis of Greek political economy. The author avoids the rather common pitfall of national exceptionalism. Instead, he convincingly demonstrates the ways in which Greece—a small policy receiver state—fits into more general policy patterns and allows for broader observations. Pagoulatos intertwines economics and politics and artfully combines the analytical perspectives of international political economy, developmental economics, the institutional and structuralist outlooks, and the "varieties of capitalism" approach.

The book describes Greece's political economy during the fifty-year transformation of the country from a poor, weak, and incomplete version of a postwar developmental state into a middle-income, fully fledged stabilization state and Euro zone member. The distinctive feature of the author's compelling formulation of Greek political economy is his focus on the state-finance connection. Pagoulatos traces the origins and evolution of the pre-1974 state-driven developmentalism. He argues that developmentalism was "eclectic," combining a protected market (Import Substitution Industrialization), and state finance (administered within a framework of political clientalism) with a foreign trade orientation and a commitment to monetary stability.

In analyzing the Greek response to the post–Bretton Woods era, the book demonstrates how the political use of expansionary developmental finance and credit interventionism turned to a factor of prolonged stagflation and eventually entrenched the financial and industrial decline. Pagoulatos then goes on to explain the momentous implications of the new political economy of financial liberalization in the second half of the 1980s and the 1990s. He sketches how Greece graduated from its developing country status and how—within the context of external pressures—it transformed into a full-fledged stabilization state by prioritizing macroeconomic stabilization and disinflation. The author concludes by reflecting that the post-1993, more orthodox economic policies and the "salutary" entrance into the European Monetary Union (EMU) found the organization of state-society relations at the moment of its highest maturity compared to the entire postwar period.

The account of the historical continuum and the paradigm shifts of the Greek post–World War II political economy is based on a plethora of data and a highly sophisticated analysis. The book discusses in detail the ideological complexities of economic policies, the gaps between economic ideology and administrative organization, and the incoherencies of the state bureaucracy. Pagoulatos describes the incremental nature of institutional changes and the ways in which the state-finance connection crucially served the main political economy and government priorities of each period. Moreover, the state's turnover from a developmental to a stabilization economic mission is not presented as a simple mirror image of the external environment. On the contrary, the author reveals how the impact of external factors and the dominant international policy paradigms have been mediated by the domestic institutional framework: the organizational attributes of the state, the market, the political system, and civil society. In addition, he portrays how the different institutional configuration of each phase generated its own winners and losers. Industry was the champion of the period up to 1974, whereas labor was a relative gainer between 1974 and 1985, and the EMU era marked the powerful rise of internalized financial capital and, through that, of the domestic banking sector.

What are the lessons to be learned from this analysis of the Greek case? First, interventionism breeds its perverse effects, but noninterventionism may lead to other kinds of undesirable consequences. Second, with the hindsight of relatively successful economic adjustment of the 1990s, the era of increasing globalization and interdependence, unilateral divergence came at a heavy financial price. Third, different stages of capitalist development are also associated with distinct ideas and images of capitalist vigor and success.

Although Pagoulatos could have provided in the final chapter some more details on the comparative scope and implications of this case study, his book is well placed in the context of the major debates...