A New Age of Development in Greece

A Reuters article today discussed the potential for monopoly in the Grecian aeronautical industry following the merger of two large airlines, Olympic Air and Aegean Airlines. If my description of the transaction ended there, perhaps the merger sounds like a dangerous economic move that should be resisted by the government. And to an extent, it was; the government in Greece has made several attempts in the past few years to curb the newly monopolistic Aegean Air from dominating the industry. And while some of these sanctions were passed, the merger eventually went through. Why? Most importantly, Greece needs the business. Greece’s well-documented debt has required the bailout of international institutions in order to stave off insolvency, a move that many questioned (especially those in Germany who have worked hard to create a thriving economy in the wake of post-WWII sanctions of its own).  Because of this desperation, because Greece needs all the help it can get, monopolies are, for the moment, an acceptable form of industry because they foster at least some economic activity.

Perhaps I’m stretching the comparison, but I was annoyed a little by Joseph Stiglitz’s commentary on the need for new debt regulations between developing and developed nations. He insists that “money should flow from rich countries to poor, but partly because debt repayments have become so large in some years the flow of funds has been moving in the opposite direction” (212). This clearcut assumption is certainly true in some instances, but the episode with Grecian monopolies provides a necessary caveat that international economic relations are not nearly as obvious as Stiglitz would like to portray. Suggesting that poor developing countries are “often” unnecessarily blamed for their economic instability seems to me too general to apply to even most cases. For instance, another Reuters article from today talks about Poland’s recent economic successes as they try to garner support for a bid to join the EU. The article references political turmoil in Venezuela as reason for slow growth, while in the Middle East the Arab Spring developments last year meant a decrease in investments coming into the country. Stiglitz attributes developing countries’ poverty to their constant attempt to pay off their debts, and yet this purely economic solution ignores the political circumstances that shape economic policy.

First article: http://www.reuters.com/article/2012/10/22/us-olympic-aegean-idUSBRE89L11P20121022

Second article:http://www.reuters.com/article/2012/10/23/worldbank-business-idUSL1E8LMIFS20121023