It’s a warm December day when we meet Elias Papaioannou for lunch at a popular restaurant in the downtown Athens district of Pangrati. The multi-award-winning professor of economics at the London Business School and recently named fellow of the British Academy is one of the stars of Greece’s academic diaspora. At the same time, though – and perhaps because of his background as the son of former minister Miltiadis Papaioannou – he has always taken a keen interest in the practical applications of economic theories and ideas. He also hasn’t shied away from taking a public stand on critical issues, as he did in the summer of 2015 when he spoke out for the “yes” side at a rally before the referendum over Greece’s third bailout agreement.
‘The Greek crisis contributed to the rise of populist parties, which peddled quick fixes and tried to divide society… These parties attempted to influence institutions too, but I do not believe that they were inherently undemocratic’
Papaioannou started out studying law at Athens University and did a brief stint as an intern at a law firm but was not drawn to the profession. His immersion into economics came with his master’s degree at Columbia University, while his doctoral dissertation at the London Business School focused on the relationship between democratization and development.
“There are people who believe that democracy has a negative impact on economic growth; it is an unfortunate misconception that fuels authoritarian populism,” he says. “In reality, the wealthiest countries are democratic – and they became wealthy as they democratized. This is not a coincidence.”
How resilient is the democratic culture in times of economic hardship, though? Papaioannou refers to a recent paper by Daron Acemoglu, in which, he says, the Turkish-American economist “demonstrates that a democracy where there is a widespread perception of corruption or where there is no intergenerational social mobility will gradually lose public support.” That said, he adds, “economic crises are particularly destabilizing for dictatorships. They also affect democracies, but democracies have the significant advantage of allowing citizens to remove those they hold responsible for the crisis from power.”
Our conversation turns to Greece and to the belief of many Western Europeans that had they experienced what Greece went through in the crisis, they would have had a dictatorship or a revolution. Yet democracy withstood the economic shock here. How does he explain that?
“The Greek crisis contributed to the rise of populist parties, which peddled quick fixes and tried to divide society. When they found themselves in power, these parties attempted to influence institutions too, but I do not believe that they were inherently undemocratic. Golden Dawn, which was undemocratic, never got within reach of power. The parties that governed had no intention of changing the political system or making major institutional changes – even though, of course, being ousted from the eurozone would indeed have been a massive institutional shift.”
The populist wave in Greece subsided in 2015 and the country “has definitely changed for the better,” says Papaioannou, though he goes on to note a seeming lack of ambitious targets and a vision for the future.
Internationally, though, the surge of authoritarian populism has been gathering speed. I asked Papaioannou why the systemic parties and media seem to be constantly on the defensive in recent years and why the elites of liberal democracies appear helpless in addressing the burgeoning anger of the masses.
“There’s no need to be pessimistic. The crucial thing is to get a sense of the scale of the problem – and to have politicians with a vision and an applicable plan,” he says. The conversation about inequality 40 years ago, he observes, was about the chasm between developed and developing countries. “That chasm has been greatly reduced now – thanks to globalization. But this also came with a massive increase in inequality, especially in the United States and the United Kingdom, from the extraordinary accumulation of income and wealth in the top 1% of the top 1% of the population,” says Papaioannou.
This, he adds, has made a lot of people “incredibly skeptical” of globalization in all of its forms – and also of the elites who have benefited from it. This is not just about billionaires either, he adds, but also all kinds of experts and insiders, from economists and epidemiologists (during the Covid pandemic) to journalists. I remind him of former UK justice secretary Michael Gove’s memorable comment during the Brexit campaign, that Britain had “had enough of experts.”
“Yes, and what was the result of Brexit? Economic growth slowed down, investments stopped, productivity dropped and immigration to the UK – which Brexit was ostensibly aimed at limiting – hit record levels last year.” He notes that the success of the “Leave” campaign was due to a combination of misinformation and outright lies from politicians. Which brings us back to the question: Where does his optimism stem from, in an era in which technology, which is evolving at an increasingly rapid pace, is exacerbating the inequalities that breed populism and creating weapons of mass communication destruction that are crushing the notion of objective truth and accountability.
“I believe that the demand for truth will make a comeback and that either the existing tech giants will respond to this or new players will emerge who will,” says Papaioannou.
“America was probably in worse condition before the Sherman [Antitrust] Act and Teddy Roosevelt’s major reforms, which broke up the big monopolies of the Gilded Age,” he notes. “There is a sense of pessimism [in the US] today regarding rights and institutions because of Trump’s re-election. But I believe society will move towards greater oversight and regulation [of Big Tech] now that the harmful impacts of their practices – for both competition and social relations, as well as democracy – are increasingly evident.”
Athens Global Experience
Papaioannou was in the Greek capital for the Athens Global Experience, a program for London Business School MBA students. “It’s a very innovative program that we started 11 years ago, where students are required to visit one of 15-20 cities for a week, engage with the local business community and learn about the unique characteristics of doing business in that location.”
The initial goal of the Athens program was “to document the transformation of Greek businesses during the crisis – how they survived by shifting from the domestic market to outward-looking strategies […] I don’t know if we’ve reached critical mass, but we’re seeing more and more very positive stories,” he says.
Beyond Athens, he speaks extensively about visits to Johannesburg, where his students interact with microenterprises in the Alexandra township. “More than a billion people live in slums or favelas today, and their purchasing power is increasing,” he says. “A good business school shouldn’t only prepare its students to become executives at McKinsey or Goldman.”
Two special projects
There are two projects that stand out from Elias Papaioannou’s rich body of research in recent years, both collaborations with his colleague, Professor Stelios Michalopoulos of Brown University. The first examines the impact of European colonialism on Africa’s economic evolution.
“Influenced by the findings of Acemoglu, Robinson and Johnson, we set out with the goal of measuring what role national institutions played in growth,” says Papaioannou, referring to this year’s Nobel laureates in economics.
One key finding was that in instances where colonial powers drew borders that divided ethnic groups across multiple states, national institutions had minimal influence on development. Instead, it was the institutions of these ethnic groups that proved to be more significant. “The traditional approach of economics to regions like Africa was deeply flawed – it was entirely Western-centric,” he notes.
There are a lot more African and, especially, Latin American academic economists around today, but that is only a partial solution: “The global elite has become far more representative in terms of ethnic origin, but the problem of a homogeneous, undifferentiated worldview persists,” says Papaioannou.
The other fascinating project he’s working on with Michalopoulos is “Anatolia Imprints,” which seeks to chart the social and economic development of refugees from Asia Minor after they came to Greece in 1912-1922.
“There’s an enormous amount of interest in the international academic community […] about what this will tell us about the so-called uprootedness hypothesis. This is the idea that refugees, as people who lose their capital, put a lot more emphasis on human capital, on becoming educated, which is something no one can take away from them,” he explains.
“In the Greek case, we see that refugees had a higher illiteracy rate than the native population when they first arrived. They achieved convergence almost immediately and, by the next generation, those born in the 1930s and 40s, they had already surpassed the educational level of the native population,” says Papaioannou.