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Saturday, 15 January 2011

I CAN HAZ STATEHOOD?

Foreign readers may not have noticed a key piece of Greek news this week, amidst coverage of the 'successful' Spanish, Portuguese and Greek debt auctions (courtesy of the ECB, Japan and friends), Portugal's direct sale of EUR1.1bn to the Chinese, as well of course as the news that all of the Maghreb and beyond is in flames over sugar and other commodity shortages. This is of course important news as it demonstrates that the world is about to go to shit big time, but the news coming out of Greece should worry people just as much.



The cover story is that TV-heartthrob-cum-mayor Apostolos Gletsos has taken it upon himself to tear down a toll barrier with a tractor after realising his constituents had to pay tolls to travel within the municipality. Clearly an absurd proposition to which the good mayor rightly objects, but his very photogenic piece of activism comes in the context of a nationwide movement against tolls, amply supported by Greece's abundance of orange blogs. Members of the movement need only shove the toll barriers aside.

At first I did not realise how many people were involved in the movement, until I heard that toll operators had applied for permission to photograph and invoice maverick drivers and that the government had announced they intend to renegotiate road maintenance contracts. Before I knew it, all manner of institutions had thrown their varying weights behind the movement, from the Communist Party to a popular football club and even some elements within our ruling Socialist Party.

The arguments employed by the movement vary substantially, but those that make sense tend to be as follows:

  1. The original licences granted for the building or maintenance of roads were abusive - allowing contractors to levy tolls long after their original outlay plus reasonable profit had been recouped and refusing to reward frequent users with a monthly or annual scheme. This is probably a fair point as fixed-term concessions have been shown to have this effect under demand uncertainty. There is also fairly robust evidence that, at 85% of total motorway costs, capital accounts for a larger share of the cost of running Greece's roads than those of other countries. But the solution, as this study proves, is to adjust the concession terms, not to refuse payment.
  2. The Greek Constitution guarantees the free movement of citizens in the Greek state and any infrastructure built with the people's money should be free at the point of use. This argument is faulty to the extent that all arguments in favour of free-at-the-point-of-purchase are: it is simply a demand for subsidies which may or may not be justified by the externalities produced by road transport. However it does raise the valid point that road regulation is only a partial substitute for public ownership and cannot ensure universal coverage. In fact, even though roads are a classic public good, their benefits even through externalities are much more likely to accrue to their users and neighbours. Therefore, some element of tolling and local authority funding needs to be maintained at all times.
  3. Each driver pays road duties, ostensibly in order to buy access to the road network. This should cover all roads in the land. This would be a reasonable argument if tolls hadn't been common in Greece for decades. A person my age has known tolls to exist all of their lives and older drivers will have known them as long as the fancy motorways they helped finance. It is not part of the social contract, so to speak, that road duties equal access to all roads.
     
  4. The toll system creates abusive monopolies as there are few safe alternatives to the tolled motorways. This is also a fair point, and in fact it has been proven that tolls can reduce road safety outcomes overall.
  5. The system whereby these contracts were allocated is corrupt and therefore all contracts are null. While corruption is undoubtedly a problem in Greece, much more evidence would be required before the contract for an individual section of motorway can be challenged, and it should be up to the law to decide when and to what extent such challenges can take place.
  6. The quality of Greek motorways is very poor and thus current toll levels are not justified. Perhaps; subjective evaluations for the Global Competitiveness Report suggest that Greece's roads are, at no. 57, worse than Rwanda's. This would be a good argument for renegotiating contracts; in fact, periodic quality assessments should have been incorporated into the incentives provided by the original contract. But it's not a good argument for not paying at the point of use, unless the road is in fact unsafe or unusable.
     
The problem with this movement is that, frankly, the Greek state needs to honor its contractual obligations. We collectively chose, at some point in the past, to saddle our future selves (and our children) with the cost of paying for these roads rather than pay tax for them. Now we don't want to pay the tolls either. Well, roads don't fund or maintain themselves.  If this movement manages to do what it has set out to do, it will demonstrate that, in some cases, the people can effectively repeal the signature of the Greek state and default on any collective obligation. This is not a statement to be made lightly: our credibility depends on an implicit commitment not to abuse our ability to default.

The state's credibility also depends on its ability to impose its commitments upon the people - this is essentially equivalent to its ability to regulate or levy tax. Anything that weakens investors' perception of these two is bad for Greece because it means fewer people will be willing to finance our continuing deficits.

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