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Transcript: Incentives the best way to fix what’s ailing Greece

People holding shopping bags full of fruits and vegetables pass a Greek flag during a protest by farmers’ market vendors in the Athens’ suburb of Gerakas on May 5, 2014.


KARL MOORE – This is Karl Moore of the Desautels Faculty of Management at McGill University, talking management for The Globe and Mail. Today, I am delighted to speak to [associate professor of strategy and entrepreneurship] Michael Jacobides from the London Business School.

So Michael, what's happened in Greece? You are Greek. Could you tell us why and what has happened in the crisis?

MICHAEL JACOBIDES – We could be speaking for a very long time. The short version of it is that Greeks were able, because of the euro, to borrow a lot and also, because of the euro, they started importing, and that wasn't the problem in terms of the exchange rate.

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For a while, nobody really noticed and when problems started hitting, it wasn't a surprise that, rather than addressing the problem, we started fixing the numbers. Now, eventually the moment of truth arrived in the midst of the financial crisis and all hell broke loose.

The problem isn't what happened. I think that people, by and large know that. The question is what do we do or what do we not do? What we are not doing, and what we are only now starting to do, is to go to the root cause of the problem, which is a deeply inefficient public administration. That is an ailment of Europe, and that is an ailment of the European South.

That is, that we have allowed an administration that has justified itself to itself and that does not really focus on providing the services that it could and, certainly in these difficult circumstances, should provide, to the population.

What happened is that everyone focused on the balance sheet, on the debt, and then when the state didn't have money, it just cut the salaries or increased the taxes, raising the unemployment to nearly 28 or 29 per cent, more than 50 per cent for young people.

But what we really should be fixing, if we want to ensure that Greece is able to turn around, and it has been remarkably steady up until now, so it just might be able to pull that through, is to fix the public administration.

KARL MOORE – How would you go about fixing the Greek administration?

MICHAEL JACOBIDES – You have to do that bottom up.

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The problem is that the European Union has sent a bit of technical assistance, which basically consists of bureaucratic employees that may know some Greek – not quite the change managers either with the mandate or the skills to transform the administration.

The other issue is that even the people who are in there and might be able to drive change are actually powerless, and they do not have a mechanism to be heard. That is an initiative that we are now starting, and we that we will hopefully be formally announcing soon, working with the redesign minister and the finance minister and the support of the government, which is to create a set of awards that is going to be tailored to specific needs of the Greek administration, combining the principles of crowdsourcing, combining the objectives of change that we have seen in the XPrizes [innovation incentives], and helping bring up the potential latent abilities that exist within the administration.

Because what you need to do, in order to make change happen, is to make it accepted from within. In order to do that, you need to remove the bottlenecks that are part of the existing structure. So the creation of this independent panel, that will be an international panel judging proposals that are coming from within, might be able to start this transformation process.

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