Annual EBHS Conference, 39th Annual Economic and Business History Society Conference

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Post-Second World War Greek Economy and Taxation from a historical perspective
Zoi Pittaki

Last modified: 2014-03-10

Abstract


This paper derives from the first chapter of a thesis analysing the way entrepreneurship was affected by the system of taxation in Greece, from the immediate post-Second World War years to the 1980s.  In this context, the paper analyses the development of post-Second World War Greek economy, presenting some of its basic characteristics as well as the evolution of its fundamental macroeconomic magnitudes, but also having a special focus on manufacturing, the secondary sector’s most rapidly growing industry until the mid-1970s. As far as the tax system is concerned, a part of the public sector that has been traditionally considered a major obstacle for entrepreneurial development in Greece, the effort is to not only present its main characteristics, but also to demonstrate the ways in which such characteristics emerged as a response to developments in the broader economy, such as the continuous increases in public sector expenditures. In such terms, and with regards to periodisation, this paper extends beyond the 1980s, to the years preceding the economic crisis currently affecting Greece, in an effort to show that what brought the Greek economy to its present status was merely a deepening of weaknesses that existed in previous decades.  

As far as its structure is concerned, the paper is divided in two broad parts: the first one regards the stage characterised by the literature as one of rapid economic development, lasting up to the mid-1970s, whereas the second one refers to the period of downturn that followed the international financial crises of the mid-1970s. It emerges however throughout the analysis that even the first period was characterised by severe structural weaknesses, expressed mainly through the continuously widening Current Account and Budget Deficits. Through such a perspective, the period following the mid-1970s merely brought to the fore such deeply entrenched weaknesses, which were exacerbated by the great increases in public outlays during the 1980s and continued to exist even after the country’s accession to the European Monetary Union in 2001.

Within such a context, it is shown that the relative progress in industrial performance during the 1950s and 1960s was followed by a period of decline since the mid-1970s onwards, in which investment in the industry as well as the latter’s share over the total product of the economy started decreasing. As for taxation, this latter period was marked by an increase in the level of tax evasion, but also continuous decreases in the corporate income tax rates, and more generally, in the tax burden imposed upon the entrepreneurial classes.

 On the whole, and apart from analysing the characteristics of the post-war Greek economy, this paper shows that the level of corporate taxes per se is  probably not the factor to blame for the post-1970s decline in industrial performance. More disruptive seems to have been a combination of a broadly unfavourable economic climate with the serious administrative deficiencies characterising the public sector, expressed mainly through the existence of corrupt tax auditors and public servants in general.