From 1920 to 1974

The second period of Greek economics starts in 1920, when new universities and commercial schools were created and new economics professors were hired. Soon thereafter the number of academic economists rose from two to nine, and grew to thirty-seven by the late 1960s.

In general, out of the 37 economists who came to occupy university positions from the 1920s to the late 1960s, twenty had done their PhDs in Greece, 9 in Germany, 4 in France, 2 in the UK, 1 in the USA and 1 in Switzerland. After 1933 Germany lost its appeal as a place to study economics, and many PhDs began to be awarded by Greek universities. Three out of the 37 professors were already appointed in the 1920s; 4 became academics in the 1930s; 13 in the 1940s; 12 in the 1950s; and only 5 in the 1960s (Psalidopoulos, 2000). After World War Two, the Greek Society for Economic Sciences was founded and it had 25 members only, since membership was limited only to those holding a postgraduate degree in economics.

A decade later, the number grew to 123, 67 ordinary and 56 affiliated members, and the Society organised large conferences every three years.

During the interwar period the dominant approach to economics was interventionism and social reform. Interventionism reflected economic realities in the country. Economic policy­makers had to deal with the settlement and accommodation of refugees and had to find solutions to inflation after 1922. The increase in the supply of labour helped the industrialisation of the country, and the economy grew in the interwar years by a modest 1.8 per cent per year (Psalidopoulos, 1989). The Great Depression led to default in 1932 and to more regulation and protection. External economic relations, especially with the League of Nations, who inter­mediated for foreign borrowing, were based on the monetary orthodoxy of the day. Liberalism and Marxism clashed with the pragmatic interventionism of Greek economic policy but for different reasons.

The central figure in Greek economics in the interwar period was Andreas Andreades, Professor of Public Finance, who was active from 1901 to 1935. He was an eclectic liberal economist, who, as a senior academic, was appointed to all selection committees responsible for filling university positions in the 1920s. He believed that different schools of thought abroad were the products of certain political and philosophical ideas that had sprung out of the concrete historical and economic facts of foreign nations. Greek scientists should, in his view, apply these theories and test their relevance in their own country (Andreades, 1927: 237). This would assist them in creating a national economic theory suitable to the needs of the Greek economy in the future. He therefore followed a very pluralistic agenda and recommended the appoint­ment of such economists as Xenophon Zolotas (University of Thessaloniki, 1928—32, and University of Athens, 1932—67), Demosthenes Stephanides (University of Thessaloniki, 1928—44, and University of Athens, 1950—65), Kyriakos Varvaressos (University of Athens, 1918—20 and 1923—45) and Demetrios Kalitsounakis (Athens Graduate School of Economics and Commerce, 1920-60).

The most important of the four proved to be Zolotas. He was a liberal follower of Gustav Cassel, who dismissed abstract theorizing as practised then by Ludwig von Mises and Friedrich von Hayek. He became governor of the Central Bank, the Bank of Greece, from 1955 to 1967 and from 1974 to 1981. Furthermore, he became prime minister in 1990. Stephanides was a historicist, who applauded National Socialism in 1939. Varvaressos was an interventionist who became minister of finance in 1932, a deputy governor of the Bank of Greece in the 1930s, its governor in exile, and a deputy prime minister in 1945. After his (early) retirement, he lived in the USA and worked at the World Bank. Kalitsounakis also favoured state intervention and was centre left in his political views.

Zolotas and Kalitsounakis were the editors of two economic journals, the Epitheorisis Koinonikis kai Dimosias Oikonomikes [Review of Social and Public Economics] 1932-43, and the Epitheorisis Politikon kai Oikonomikon Epistimon [Review of Political and Economic Sciences] 1947-67) and also the Archion Economikon kai Koinonikon Epistimon [Archive of Economics and Social Sciences] 1920-70. Whereas the ‘Archive’ defined economics in a broader social sciences setting the ‘Review’ placed emphasis only on economics and public finance, and the bulk of its contributions mostly followed the then prevailing mainstream neoclassical paradigm. Greek economists hotly debated such issues as public works and inflation in these journals and also in scientific clubs. Marxist authors, such as Pantelis Pouliopoulos and Seraphim Maximos, offered analyses close to those of the Third International. But the world economic depression led to a de facto acceptance of interventionism by liberal and interventionist economists alike.

When Keynesian economics became known in Greece, its framework of analysis was rejected by both liberals and interventionists. Keynes was known in interwar Greece as a monetary theorist and as an authority on international policy issues.

In his review of The General Theory of Employment, Interest and Money, Zolotas condemned Keynes' attack on savings, the pillar of growth in his view. Other liberal academics disapproved of the new concepts introduced, the framework of analysis and the hypotheses put forward by Keynes. The conflict of Greek interventionists with The General Theory was explicitly articu­lated after 1945. The polarised political climate between conservatives and the left after the Civil War made such economists as Kalitsounakis and Professor Angelos Angelopoulos reject Keynesianism on the grounds that it espoused an interventionism that would preserve the free- enterprise economy centre-stage, whereas they both favoured an economy based on planning. This rejection of The General Theory in Greece did not change when Keynesianism established itself internationally after World War Two as the mainstream orthodoxy.

The same attitude was shown to Keynesianism by economic policy-makers in the 1950s, 1960s and 1970s, such as Minister of Economic Coordination Panagis Papaligouras, who served in the (conservative) governments of Constantine Karamanlis. For Papaligouras, nineteenth­century liberalism lacked a moral dimension and ignored social policy, whereas twentieth-century liberalism, the ‘realist liberalism' he espoused, was a system where the administration intervened wherever the government felt it appropriate, in order to fix socially unacceptable circumstances for the poorest strata of society and the unemployed. The limits to such action were set by government revenue and productivity increases in the economy.

The opposing political party of these times, the Centre Union, on the other hand, with Andreas Papandreou, the son of its leader, as its main speaker, was committed to a different agenda, namely, structural reforms in the economy. With due respect to Keynes, his theories were regarded by the Centre Union as relevant to already developed countries, but not to Greece (Psalidopoulos, 1996b).

Greece fared well economically after World War Two and the Civil War, especially from 1955 to the late 1970s. Growth rates were around 7 per cent annually, and the inflation rate was as low as 1.8 per cent. The share of industry in GDP reached 30 per cent in 1970. Zolotas rose to the height of his fame in this period. In his Monetary Equilibrium and Economic Development (1964), he defined monetary stability as the primary goal of economic policy. Low inflation achieved after past hyperinflations had to be defended at all cost. The budget of the central government had to be balanced. Because the need for public investment was high, Zolotas recommended the introduction of a new account — the budget of public investment — that could run a deficit, but would be covered by foreign loans and public savings. Zolotas was a practical liberal, a moderate monetarist and a believer in sound regulation and oversight of the economy. The most prominent of his critics was Professor Andreas Papandreou, who, after a successful career at the universities of Harvard, Minnesota and California at Berkeley in the 1950s, served as a consultant to the (conservative) Greek government and raised money from Greek as well as US sources to create a Centre for Economic Research in Athens in 1961, which was renamed the Centre for Planning and Economic Research (KEPE) in 1964.

The economic development of the country was the most important issue for Greek economists in the post-1945 era. Intertwined with economic development was the question of Greece's association with the European Economic Community (EEC) from 1962. In the early 1960s, as well as in the late 1970s, shortly before full Greek membership of the EEC in 1981, debates took place on whether Greece would sustain high rates of growth and its political independence if it became a full EEC member. In general, three schools of thought can be identified: liberal-dirigiste, structuralist-interventionist and Marxist.

The liberal camp considered economic development as an inevitable process, if the institutional framework of the Greek economy adjusted to the logic of markets. Reliance on foreign technical and financial assistance was important in the development process, because of the lack of native capital willing to invest in big, growth-inducing projects. However, Greek liberals always kept in the back of their minds the idea of strong government action in the economy, if needed. As expected, this liberal camp espoused Greece's association with and, later, full membership in the EEC, minimising in various degrees the possible negative effects of the gradual loss of protection of Greek industry and the right to autonomous economic action in future circumstances. A major figure in this camp was Zolotas.

The structuralist-interventionist group identified Greece not as a less-developed European country, but rather as a Third World one, finding itself in a vicious circle of ‘political dependence on the Great Powers' and of economic underdevelopment. What was needed, according to these economists, was strong government action in all fields of social life and investment in human capital. External economic relations in this scenario were crucial, and this camp espoused the findings of Raul Prebisch's study for the Economic Commission for Latin America: that the terms of trade between rich and poor countries favoured the former. Democratic planning on a large scale, it was claimed, could make the vision of a modern industrialised Greece a reality, rather than through joining the EEC. An important advocate of this camp in academia was Angelopoulos, editor of the monthly Nea Oikonomia [New Economy]. Papandreou, as a Centre Union politician in the 1960s, was close to these ideas.

The Marxist camp had nourished a whole generation with the idea that Greek under­development was due to the political dependence of Greece on foreign countries. In the early post-war period, Greek Marxists argued that there were enough financial sources and technical skills in Greece to build up heavy industry, provided that there was the political will to tame the bourgeois class that opposed the project. After the Communist defeat in the Greek Civil War, the Marxist camp was not in a position to articulate its views explicitly. Synchrona Themata [Modern L.o/c.j was a Marxist review of letters and social sciences. Economic contributions therein applauded economic successes in ‘real existing' socialism and were critical of all aspects of government policy in Greece. Consequently, Greek Marxists were vehemently opposed to Greece's association with the EEC, with the noble exception of the Eurocommunists, who voted in parliament in 1979 in favour of Greece's accession to the EEC.