A New Romantic Comedy: When California met Greece

Harry and Elizabeth are Americans. They have several grown children, three grandchildren, and have become over the years since her retirement from the banking industry cruise veterans. They are lovely and charming people and have become our table mates this week in the Carribean through fate or grand design. Harry and Elizabeth are also very Greek. She from the Bronx and native born New Yorker, he originally from a small island in the northern Aegean sea who naturalized his US citizenship years ago. He doesn’t read much English it is clear after two meals, deferring to her “common sense to order for me after so many years” however he is a very intelligent and charming man who I think understands the language quite well but simply prefers not to read it. They prattle in Greek during lulls in table conversation. I try my best to be cordial with the occasional “Kali spehra”. My wife smiles.

When Greece met California.

It took only two nights, a couple of glasses of wine, and a looming euro zone payment with constantly streaming images of riots on Sky News, before the topic of the Greek economy hit the table. Harry in his eloquent and heavily accented English moved in to the conversation. His wife could order the dinner entree for him, clearly politics and economics were his domain.

“So let me tell you something, and it’s okay since we talk about this. Greece is no more like America because there is no constitution.” I thought about Greece as the cradle of democracy and I asked what did he mean by this. In a dissertation that continued from the soup, through the salad and into the entree he laid out with simple eyes how the European Union was so ill-designed based on the fact that there was no binding constitution between the nations. I wasn’t exactly sure where this was going but I listened and realized that I could have been listening to the story of my own native California and its transformation to welfare state.

The accounts of California’s transformation are well documented and have been made even more prominent by the book Boomerang by Michael Lewis. California has an unsecured border which – albeit combined with other factors such as a dysfunctional state legislature – has swollen the unofficial population of the state over the past 20 years. The state, requiring more services in the form of education, health services, and correctional institutions, was limited in the amount of money it could ask the federal government since the adult members of the migrant communities were undocumented. While some funding was and still is available for the children who are native-born Americans, the state of California could not manage its entitlement and basic services programs and has been running huge deficits for years. Even the recall-enabled former Governor Schwarzenegger could not restructure the debt obligations or change the culture of the state legislature.

My dinner accounting of the nation of Greece – a nation with the population the size of my current state of Michigan and who arguably had a Enron-esque experience with the now-defunct accounting firm Arthur Anderson to present its economic application to the euro zone – was all too familiar. I have through business dealings and my international management studies been made aware over the years that Europe had opened its borders in much the same way that the United States had to immigrant groups from all over the world. Turks and Vietnamese came into Germany (particularly in the former eastern side) to provide low cost labor, northern Africans spilled onto France in a second “Moorish invasion,” and other ethnic groups found their ways into other countries. The Greeks had two sources of immigration, both of and without their control. In the 1990s The Balkan Wars sent streams of Slavs, Albanians, and Bosnians into their borders. Ten years later and with freedom of movement now granted to second-generation European immigrants with an EU passport, these Turks, Vietnamese, northern Africans and other groups found their way to Grecian beaches. With an equally dysfunctional national parliament as the California state legislature, the Greeks kept handing out more money to more people. Unlike California it had a fraction of the economy to do this for many years.

Harry’s comment about the constitution suggests that while California has a guarantor of last resort – the US government – Greece has no such backstop. In a way this current bailout crisis is less about a Greek problem than it is about who pays for the federal results of a European decision when there is no federal european government. Similar to California, the workforces in both California and Greece have become unrecordable. Payments are made in cash to immigrant workers or workers that prefer not to pay taxes in places and areas where it is difficult to observe, trace and enforce an “off the books” economy.

While the workforce and population swells in both California and Greece and continues to be less transparent and traceable, both will continue to drive more services to its population it cannot justify by census and tax records. And while my native California can continue to ask Uncle Sam for help, the Greeks find themselves in a mess that they must now contend with.

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