Cyprus: A Case Study on how to Get an Economy into Recession and Keep it in the Muddle

Abstract

Efficient and properly-run economies also enjoy the trust and respect of citizens, the international and local business communities, investors and others. Badly-run economies suffer from luck of trust that keeps them in morass and economic muddle for long periods before experiencing any revival. Trust is not easy to regain once lost. It takes years to build trust and days to lose it. A major event, such as the collapse of the banking system, can literally shred trust to pieces. But catastrophic events do not just happen. It takes countless bad decisions and years of bad economic management before all these can build up to a catastrophic strike. Effective economic planners view the economy as a unified system rather than as individual and independent functions and industries. Quality management is not interested in ad hoc decisions but rather in decisions that form part of a well-thought-out plan. Healthy economies produce quality goods and services and manage to export these because they are competitive. Uncompetitive economies have little of value to export and enjoy, amongst others, seeing land change hands repeatedly under the illusion that “everyone is making money.” How can everyone make money? Sound economies work on hard facts and authenticity whilst less than serious economies rely on airy-fairy talk and short-termism. In reviewing the Cyprus economy the author concludes that it took 30 years of bad decisions (that benefited the narrow self-interests of some groups and individuals) to bring the economy to its knees and at the same time ruin trust comprehensively. It will take a miracle to reverse this situation because trust is a multi-factor construct that is not easy to rebuild once lost. Public relations, glib talk, short-termism and grasping at straws do not restore lost trust. Trust calls for seriousness, acknowledgment of bad decision-making, sincere remorse, change of mind-set and abandonment of catastrophic behaviours. Trust can be restored with honest, sound and authentic behaviour and effective and creditable action.