Wow! So the people of Greece are taking back control of their future. The referendum is crowd wisdom governance and that is how the nation’s economic future will be decided next week. How's that for trusting crowd wisdom? Is it a wise decision? Time will tell. In the meantime, let's see what we can learn from the most interesting crowd wisdom field experiment in history.
Step back. Greece is in debt. €370 billion to be exact. The country's creditors have refused funding to save Greece from defaulting on a €1.6bn IMF repayment. On 5 July 2015, a referendum to decide whether or not Greece should accept the fiscal measures proposed by the European Union (EU), the International Monetary Fund (IMF) and the European Central Bank (ECB), will take place. The Greek prime minister Alexis Tsipras announced the referendum in the early morning of 27 June 2015, and parliament ratified the move the next day. Although Prime Minister Tsipras is a fierce 'nay' opponent, he has decided to entrust the decision to the people and excuse himself of the huge responsibility involved.
Prime Minister Tsipras has given us an unprecedented opportunity to witness crowd wisdom in action. Is the Greek crowd wiser than its government? Can it be as responsible as a committee of senior monetary and financial experts? Can it distill the diverse set of social forces, geo-political ramifications, academic research and policy recommendations into a simple, responsible decision with a positive outcome?
One cannot exaggerate as to the gravity of the issues at stake. On the one hand rejecting the European Proposal will most likely result in Greece dropping out of the Eurozone, to be likely followed by economic pandemonium. However with that comes the hope for Greece to regain control of its own destiny while maintaining its social and national integrity. On the other hand, accepting the deal would mean imminent and profoundly negative effects on the lives of many Greeks, especially for the elderly and less fortunate. Greece would be forced to abruptly deal with its core economic weaknesses - widespread corruption, low worker productivity and a high dependence on social welfare - all in conjunction with unprecedented unemployment and general economic uncertainty.
Supporters believe the choice is accept the deal or die. Detractors claim the proposed deal would kill all possibilities for actual rehabilitation. No one knows, and it is keeping the elite economists and politicians of the continent awake at night. Now the crowd is going to make this decision and vote either 'yes' or 'no' on the specific question of whether to take the deal or not.
Can taxi drivers, hair dressers, dentists, teachers, factory workers, college students and everyone else collectively make better decisions than the government? Let's examine the signals and history.
Initial crowd sentiment to the referendum was extremely negative. World markets tumbled and the Greek Stock Market is suspended until further notice. High cash withdrawals have prompted Tsipras to announce a 'Bank Holiday' to be in effect until July 7th at the earliest.
Surprisingly though, opinion polls show most Greeks support the agreement. In a poll conducted by Alco for the Greek newspaper Proto Thema, 57% of the participants said they would vote 'yes' in the upcoming referendum, in favor of a deal. Another poll conducted by Kapa Research for ‘To Vima’ found that 47% of the population will vote in favor of approving the agreement, while 33% will vote against.
It's very insightful to look to the betting markets for indicators. Memories are still fresh of March's Israeli election and last year's Scottish independence referendum, when the betting sites were right and the opinion polls were way off. In Israel, 2 weeks before the elections, while opinion polls where all favoring the Labor Party, 81% of gamblers were betting on Netanyahu to come through as the victor. In Scotland, while most opinion polls were split down the middle, political betting lines have unanimously experienced much higher "NO" volumes. In this case the current betting jury is out. Predicit is leaning towards a 2015 EuroZone exit while other betting sites are pointing at no EuroZone exit anytime soon.
History shows there is a big difference between how people classify themselves politically and what they actually support in times of crucial decision making. Tsipras' anti austerity Syriza party won the the election handsomely five months ago, but here we are with Tispras himself, the most vocal detractor of the proposed agreement, passing the buck back to the populace. Yet the crowd itself may surprise everyone and prove itself as the responsible adult on the block.