Political Strategies for Economic Manipulation: Democratic Elections in Greece 1960-1985

Date01 March 1991
Published date01 March 1991
Subject MatterArticles
IN GREECE 1960-1985
JOHN M. ROBERTS, Uniaersity of Chicago
KEITH R. LEGG, Uniaersity of Florida
history of Greece since 1960 provides a fine opportunity for
placing economic manipulation in comparative perspective
JL (Clogg 1979: 166-200). From the 1960s to the 1980s, there
have been regime changes as well as significant changes within regimes.
The postwar preeminence of the right ended in November 1963 with
the victory of the moderate Center Union over the National Radical
Union. Center Union control faded into a period of instability with
minority governments from mid-1965 until the military coup in April
1967. This military regime produced a new constitution in 1968, a
referendum on the monarchy, and also a short-lived move toward civil-
ian rule in 1973. Finally, the collapse of the military in July 1974
brought a restored democracy, repeated the referendum on the mon-
archy, and renewed the ascendancy of the right in the form of New
Democracy, the National Radical Union renamed. Right-wing control
was attenuated in the 1977 election and finally terminated by the vic-
tory in 1981 of PASOK, the Pan Hellenic Socialist Movement, a party
most aptly classified as center-left. PASOK once again achieved vic-
tory, although with lesser majorities, in 1985.
Economic models of political behavior typically rely on
macroeconomic variables; they generally omit variables measuring
income and resource redistribution. We tailor our methodology to the
specific political context of Greece, examining not only the
RECEIVED: September 1, 1989
NOTE: Data on monthly expenditures and tax receipts were acquired from the Monthly
Statistical Bulletin published by the National Statistical Service of Greece. The base
year of 1974 was chosen in order to control for inflation. Monthly data for the
entire period was adjusted accordingly. Additional data were secured from the
Quarterly Bulletin of Public Finance and the Statistical Yearbooks of Greece. The OECD
Economic Survey of Greece supplied much of the data concerning monetary growth
and the review of policies for the 1970s and 1980s. Election results were found in
the publications of the Ministry of Interior.

macroeconomic levers of money supply and credit expansion, but also
disbursements of state funds at the micropolitical level. 1
This essay uses data from the Greek experience to explore a range
of governmental strategies for political manipulation of the economy -
an economy that was generally robust at the beginning of the period
and far from healthy at the end. First, we recast the two types of polit-
ical manipulation reported by previous researchers into four types. We
then examine six elections for evidence of manipulation falling into
these four categories. Since the focus is on elections, economic manip-
ulation by the junta is only incidentally reported. Finally, we explain
the logic of governmental choices and assess changes in the behavior
of Greek political parties and leaders over time.
Existing models of political manipulation of the economy, usually
termed models of political business cycles, fall into two categories. The
macroeconomic approach assumes that peaks and troughs can be syn-
chronized with elections through the use of fiscal and monetary instru-
ments. A second model focuses on the micro-level of policy instru-
ments such as transfer payments and tax receipts. Edward Tufte utilizes
these variables to argue for the existence of an American political
business cycle.2
The model emphasizing macroeconomic variables has been sub-
jected to substantial criticism. David Golden and James Poterba hold
that political factors such as elections and public policy decisions pro-
vide little explanation for business cycles. Lags in the execution of
macroeconomic policy, and the political costs of error weigh heavily
against the use of such political manipulation (Golden and Poterba
1980: 696). Nathaniel Beck reaches a similar conclusion.3 The dual
Similar research along these lines is advocated by Vani Borooah when he argues that
the state of the economy may impinge upon the government’s ability to improve
its electoral chances on the macroeconomic level. He says the proper focus is
therefore the micro-level where politics can provide incentives for voters (Borooah
1985: 32).
By charting increases in transfer payments, Tufte finds a cycle that peaks immedi-
ately before presidential elections (1978: 29). He also shows that tax collections
decline in presidential election years and are, in fact, postponed until after the
election (1978: 34). Tufte has conceded validity to a part of the macroeconomic
model, for he finds some manipulation of the money supply in the two years prior
to the presidential election (1978: 51).
Beck argues that an American president lacks the power to spur monetary expansion

approach we utilize is in response to the criticisms of Tufte’s incom-
plete comparisons (Whitehead 1979: 567). First, we attempt to address
the confusion over the salience and efficacy of macroeconomic expla-
nations of political outcomes (Keech 1980: 346; Amacher and Boyes
1982: 198; Stigler 1973: 163). Second, we address the need to analyze
changes in income redistribution as a possible determinant of political
behavior (Stigler 1973: 167; Kramer 1971: 141).
The partisans of each model assume a single strategy for political
manipulation rather than several. They also assume that electoral or
popular preferences are constant and similar. The apparent contradic-
tion can be resolved using the work of Nordhaus, and an elaboration
put forward by Alt and Chrystal. Nordhaus proposed an appropriate
strategy for political manipulation, given fixed preferences for eco-
nomic outcomes by the electorate (Nordhaus 1975: 175-77). Alt and
Chrystal went beyond this, categorizing electors’ preferences as fixed
on the one hand, variable on the other. Government’s propensity to
manipulate the economy was similarly divided into either responsive
or strategic manipulation (Alt and Chrystal 1983: 105).4 We have
expanded this configuration in Figure I below.
It must be emphasized, however, that we are dealing with a
government’s perception of voter preferences. This perception may be
based upon rather incomplete information from a variety of sources, it
may be badly distorted by the ideological predispositions of the gov-
ernment itself, or it may be completely accurate. In any case, &dquo;a uni-
directional flow of information from citizens to parties,&dquo; the typical
assumption of most economic models of political behavior may not
represent reality (Dunleavy and Ward 1981: 357). Not only is the
&dquo;purity&dquo; of the flow questionable, but the government itself may be
manipulating public opinion.
and that the Federal Reserve responds to normal economic forces regardless of
the electoral cycle (Beck 1987: 214).
Of course, Alt and Chrystal recognized that preferences can vary with changing
circumstances and in response to media presentations. Government persuasion
may also affect changes in public perceptions and thus alter preferences for eco-
nomic outcomes. An important point to note is that allowing for varying prefer-
ences permits a variety of preference-accommodating and preference-shaping strat-
egies (Dunleavey and Ward 1981: 368). These authors consider a policy strategic
in nature if it is based on a calculation that its benefits are likely to attract the
greatest number of votes. A responsive policy merely reacts to economic condi-
tions rather than attempting to create them.

Types of Political-Economic Manipulation
An additive policy is designed to utilize fixed electoral preferences
(Alt and Chrystal 1983: 106). Nordhaus argues that in this situation, a
government can and does produce policy to exploit economic condi-
tions and, consequently, to gain support from a &dquo;fixed&dquo; set of voters.
Macroeconomic aggregates are the targets of policy, and their effects
are economy-wide. Policy-makers believe they can manage the econ-
omy successfully because the preferences of the voters are known and
fixed. Their decisions focus on short-run policies to produce immedi-
ate electoral gains and ignore long-range adverse consequences.
programmatic policy characteristically responds to economic con-
ditions and faces the fixed preferences of its supporters (Alt and Chrystal
1983: 112). Though policy-makers may know with some certainty the
preferences of their supporters, they do not believe their policy tools
can adequately create the desired conditions. Fixed voter preferences,
they believe, constrain government policy making; in fact, a change in
policy may cause a decline in party support. Policy, then, is program-
matic ; it reflects the economic preferences of the past minimum win-

ning coalition. Officials will enact only those policies known to be
acceptable to supporters. Short-term defeat may actually be acceptable
in order to maintain long-term ideological goals.
A particularistic policy emerges when a government which be-
lieves that manipulation is possible faces varying electoral preferences.
This is essentially the American pattern, studied by Tufte (Alt and
Chrystal 1983: 118). Electors’ preferences vary and politicians seek
to produce future majorities by manipulating policies to affect

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