From independence in 1830 to 1920

During this first and longest period, the community of economists was very small. Economics was embedded in law, and the circle of economists in academia, parliament, business and public life consisted mainly of lawyers by training; most of the nineteenth-century economic policy­makers who sat in parliament and made decisions (Psalidopoulos and Syrmaloglou, 2005) had law degrees, and those who had studied abroad had gone to Paris or Pisa, and later Heidelberg or Munich.

British influences on economic thought remained minimal until the post-World War Two period. A possible reason for this lies in the policy-oriented approach of French economic theory and its considerable diversity as compared to the strictly analytical approach of British classical political economy, an analysis moreover based on the existence of three distinct social classes in the economy, classes not being so clearly defined in Greece at that time.

The dominant name in Greek economics in the nineteenth century was Ioannes Soutsos, the sole economics professor at the only Greek university, the University of Athens (he taught from 1835 to 1890). Soutsos was a liberal who placed great emphasis on the institutional reforms needed for the country to embark on a sustainable developmental path. Influenced by his Genevan mentor, Pellegrino Rossi, and by Say's approach to economics (Ithakissios, 1992), he participated actively in public life and wrote articles and pamphlets on economic policy issues (Psalidopoulos and Stassinopoulos, 2009). He rejected Ricardian rent theory, finding it inapplicable to the conditions prevailing in the Greek economy.

Despite their small number, Greek economists created a short-lived ‘Society for the Freedoms of Trade' from 1865 to 1867, a group with close links to free trade associations in Belgium, Britain, Spain, Italy and the US (Psalidopoulos, 2005). Former judge turned economist and university lecturer Aristides Economos edited the monthly journal Oikonomiki Epitheorisis [Economic Review] from 1877 to 1890 and sat briefly in parliament. He criticised Greek economic policy as being incompatible with the postulates of classical economics (Psalidopoulos, 1996a).

What prevailed in the realm of ideas was liberalism of a South-East European variety. Liberal economic thought was seen as a complement to political democracy. Liberal ideas were at the service of social justice and hostile to the privileges given by an illiberal political class. The middle classes favoured liberalism as a weapon to defeat the higher echelons of power and policy­making, until then open only to a small group of people and the king. The realisation of nationalist goals demanded an active government in the economy, a potent military and good foreign policy relations, the last dependent on state contracts to British, French or German businesses. In short, economic policy was a tool to be used for political goals.

The first King of Greece, Otto, governed the country along cameralist lines and was expelled in 1862. His successor, George I, was made over the course of time to respect the will of Greek citizens. Government regulations and mistrust towards private initiative were the norm up to the 1870s. Property rights in agriculture remained confused until 1871 (McGrew, 1985); the infrastructure remained in a primitive condition until the 1880s; the enforcement of law and order in the countryside was inadequate; the tax system and its reform in 1881 were arbitrary; and the tariff systems of 1857 and 1884 neither induced growth nor were protective of local industry. To top it all, budget deficits and reckless public borrowing, especially after 1878, undermined efforts for sound monetary and fiscal policies. They led to the 1893 default and to the imposition of international financial control over state finances. This made Greek economists more accustomed to government regulation.

Throughout the nineteenth century and up to the 1970s, the Greek economy was mainly agricultural, but some sources of growth were shipping, commerce and the banking sector. Monetary issues were hotly debated among Greek economists (Stassinopoulos, 2000), as was fiscal policy (Syrmaloglou, 2007). After a century of moderate growth (Kostelenos, 1995), Greece almost achieved its foreign policy aspiration to expand its borders in order to include all Greeks living in South-East Europe after the end of World War One. However, due to foreign policy mistakes, in 1922 everything was lost with 1.2 million refugees from Asia Minor migrating to mainland Greece, a land of 4 million people.