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F - 131 : The Explosion of Athens

King Otto, Greece's first Monarch, arrives in his new Capital Athens in 1837

Standing in the summer heat on the Acropolis, you wonder how Athens became so large. Its size compared to the country's total population is unheard of in Europe. More than 30% of Greeks live in Athens. Higher percentage numbers are only found on a few islands in the Pacific. How was such growth possible? We remember the words of Greece’s new King Otto when he arrived in Athens “there are only ruins and stones in my kingdom”. At that time, only 10’000 people lived in Greece’s future capital.

View from Lycabettos Mountain over the Acropolis towards the Saronic Gulf

Everywhere in the 19th century towns were growing fast. London and New York were a good example. Driven by commerce and manufacturing, thousands of jobs were created in these urban clusters. Urbanization as we know it results from the rapid industrialization of societies. More goods could be produced by fewer, the division of labor or specialization of craftsmen increased, buildings could be built faster and higher. The first wave of food commoditization with fish & chips and tea time fed large numbers efficiently, progress in sanitation and waste water management made life in densely populated places possible without the ever-looming threat of diseases.

Athens around 1800

None of this applies to Athens though. It was neither an important global trading centre, nor an early centre of manufacturing nor a place where urban innovation took off. Its growth was the results of wars, the displacement of large numbers of people and the failed industrialization after the 2nd World War.

Athens around 1900 with about 200'000 inhabitants

The first big wave of settlers arrived in 1922 from Anatolia. Athens’ population quadrupled from 200’000 to around 750’000 people within a year. The displaced people came primarily from Smyrna. There they run successful import/export businesses, shipping companies and banks. The import/export business could not be rebuilt at a time when Europe"s trade barriers went up. But Athens became a dynamic and powerful centre for freight shipping. The fusion of Petraeus’s and Smyrna’s interests laid the foundation for the Greek merchant marine which emerged in the 1950 and is still present today.

The next big wave of Athenians arrived with the civil war from 1946 to 1949. Living in the country side - more or less controlled by the communist DSE (Democratic Army of Greece) - was dangerous. 150’000 civilians were killed, about 1 million displaced. Many took refuge in Athens. The Greek capital was safe and under government control. These internal refugees set up mom and pop shops. They had left their belongings behind in the guerilla-controlled area and arrived with little to nothing. Some of them found employment in government. During the civil war, Greece received significant financial help from the United States to fend off the communist threat. However, the departure of so many from the countryside depleted it from industrious people who could set up factories and businesses once the war was over.

View from the Acropolis towards the Lycabettos Mountain

This pattern solidified during the 1950s to the 1970s. Anybody who was entrepreneurial and wanted to make money went to Athens. The Greek economy had deep structural flaws as the European Commission noticed early. Since 1961, the Greek government tried to become a member of the European Economic Community (EEC). A customs union agreement was signed the following year. It included a 22-year transition period for the Greek economy to adjust. In 1962, 26% of Greece’s working population worked in agriculture compared to 8% for the EEC. Greece’s GDP per person was 50% lower than in the EEC. Europe feared to be flooded with cheap agricultural products, the inflow of thousands of unskilled workers and competition from the Greek merchant fleet. In 1976, the European government overrode the concerns of the EEC Commission though and started membership negotiation. Greece wanted guaranteed prices for their agricultural goods and significant structural aid. They got both and acceded in 1981. It did Greece no good. It cemented structures which should have been abolished. Most structural aid was used for other things. It got worse once Greece was admitted to the EURO area in 2001. Now the country could also binge on cheap debt without any structural reforms.

Athens today needs Water from as far as 100 km away

Thanks to the inflow of so much foreign money, the country started to grow. But mostly in Athens where the funds were distributed and allocated. People got better salaries and could afford to live more comfortably. The middle class started buying houses and apartments. From 1980 to 2000, Athens was a giant construction site The construction industry became one of the key growth factors in the Greek economy.

Another decisive element of Athens’ development was the end of the Junta dictatorship in 1974. With its fall, EU money returned. It allowed the Greek governments to generously reform social welfare and retirement programs. But they went beyond the country’s taxation capacity. Labor laws also became restrictive and ever more economic activities required approvals from multiple ministries. Greece became the EU's most business unfriendly state. Nonetheless, the bureaucracy grew larger as this was the only way the government could create jobs. Not surprisingly, it stifled economic activity. The only place you could run a business from was Athens where the bureaucrats resided and where political connections could move things. You could call it corruption. The borderline between the two is fluid.

Athens 200 years ago in 1825 still under Ottoman Rule - barely anybody spoke Greek

It all ended in tears. Already in the year 2’000 , growth slowed. With the sovereign debt crisis of 2011 it reversed. But Athens is now a city larger than 3 million people and any future Greek government will have to deal with it. It won’t be easy.

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