Which does more damage to the EU economy and jobs? a) immigration or b) imports?

Here are some thought on recent events:

1) The EU can open up export markets using its 500 million market as leverage via bilateral deals not WTO. WTO is fail (see eg Doha Round).

2) David Ricardo's theories don't apply 200 yrs later. Trade has to be balanced, reciprocated in a way. Not the case eg with Germany that wants the cake and eat it too (see its views on Barroso proposals on reciprocity in world trade).
After China joined WTO, US and EU kissed manufacturing goodbye. Plus there is only a limited world market for German quality products, not much room for more players or capacity.

3) So, which does more damage to the EU economy and jobs? a) immigration or b) imports? IMO, (b)

4) Wage cost is antique economics (IMF, etc). Modern biz competes on quality and/or branding not price. Which Eurozone, EU or third country's wages do Greek or Spanish wages have to match for eg Greece and Spain to achieve competitiveness in IMF/Troika's logic?

5) Germany, USA and China have been partying in the EU market while many of the EU members are "starving". Time to raise trade walls and lower immigration walls.

What's really wrong with austerity a la Merkel et al?

What's really wrong with austerity a la Merkel et al?
Greece is a good case study of that. Too much, rigid, austerity, without a growth element.
A result of Ordiliberalism? Still not convinced?
Or is it a result of the type of the philosophy Max Weber described in his 1905 book "Protestant Ethic and The Spirit of Capitalism"?
Or a result of austerity that focuses on such rigid targets that even the Dutch or Germany itself has trouble adhering to (thus opening Pandora's box, see eg the German and French violations of the Stability Pact in the previous decade)?

There is no question that not only Greece and other so called "PIIGS" as well as other Eurozone, EU and OECD countries need to consolidate their budgets.

The issue is how. How fast, how strictly,and with what policy tools and side-effects (including unemployment and social systemics).

A somewhat "fundamentalist" approach to austerity is what makes the so called Fiscal Compact, proposed by Germany in December and signed (but not ratified yet) by 25 in March such a hard pill not only for the PIIGS but also for NL and even Germany to swallow.

To paraphrase a slogan re taxes, too much austerity (planned) = no austerity, or failures of the austerity dogma all over Europe!

Ordoliberalism, with its insistence on separation of economic policy between fiscal (by governments), monetary (by 100% independent central banks) and macroeconomic (by market actors, eg social partners) , leads to un-cordinated economic policy, even at national level.

The capitalist dogma that to be helped, "sinners" must prove worthy, is another (faulty) fundamentalist element.

Fiscal fundamentalism is not going to help Europe. No fundamentalism ever did.

The proper economic and other policy mix is needed. But who knows how to get that mix right?

EU vs WTO

Compare and contrast an EU with a WTO membersbip.

Is the WTO the "free trade area" that some, many in Britain, want the EU to be?

Is it?

Let;s assume it is.

Then why should the EU copy the WTO? Those countries that want to belong to a mere free trade are a with the minimum transfer of sovereignty have the WTO.

The EU was intended, is and will be much more than a free trade area or even a common or even a single market (a status it has not really achieved yet though, Single Market, 19 years after "1992").

The WTO though is maybe just what The City needs.

What does Germany need? What does Germany want? Analysis of the former should come before analysis of the latter. Does not seem to be the case though.

From Merkozy to Merkollande to Merkoron: Merkel diversifying?

I read most  (link) and watched some (link) of Angela Merkel's interview to the BBC tonight (Monday, March 26) to Gavin Esler in BBC 2's well know program Newsnight. I had also read Gavin Esler's article "Germans can't escape their Lutheran past", posted on BBC News Online a few hours before the airing of the Merkel interview.

My comments:

It seems to me that Angela Merkel is trying to diversify, especially in anticipation of the May 6 election in France (and the potential political loss of the "Merkozy" partner Nicolas Sarkozy) as well as the fact that she will have to  get support from SDP, the German social-democrats, if she is to have her Fiscal Compact ratified by the German parliament and upper house.

To that effect:

1) She appears more humanistic (but not too, she also Mr. Elser's article "Germans can't escape their Lutheran past" ) re Greece and the PIIGS

2) She opens up more bridges with the UK, stressing the things they have in common (Germany-UK and/or Merkel-Cameron). Maybe a potential Merkel-Cameron "wild card" at hand should things turn out really sour in the Eurozone and the Fiscal Compact?

Germany and the UK, or at least the conservative parties, do indeed have a similar POV in international trade matters, although Germany is an export superpower, UK is not), one has to factor in Germany's most recent reactions to Barroso's plans for a more aggressive trade management policy for the EU.

Which makes me think again and write again how relevant Max Weber's Protestant Ethic and the Spirit of Capitalism is in EU Affairs nowadays.

PS. Now casual were the comparisions between Thatcher and Merkel? A pity Hillary Clinton is not conservative or pro-austerity too!

The EU aviation CO2 charge: Prompting the evolution of bilateral trade & economic agreements?

On Friday, the BBC reported that "the EU has directed Indian carriers to submit the emissions details of their aircraft by 31 March. But Mr Singh told parliament that "no Indian carrier is submitting them in view of the position of the government"".

I have been arguing for years now that bilateralism in not only trade but all 4 "freedoms" (capital, goods, services and labour) may be an option given the systemics and dynamics in the world, which include:

1) The failure of the Doha WTO talks which has been leading many countries or regional blocs towards bilateral agreements which cover not only trade but other economic areas as well.

2) The willingness to bring immigration inside the WTO agenda and bilateral agreements (India comes to mind)

3) The pressures placed on the US and EU markets (especially the Euro zone of the EU) due to China's WTO membership.

The Indian government has pointed out that there is no international agreement on charges of aviation CO2 emissions. Time for bileteral deals on all matters trade, economic and beyond to lick in?

Food for thought!

My social media statistics - March 23

Of 2029 followers of @npanayotopoulos on March 23, 2012, according to http://tweepsmap.com:

USA 22.34% X 2029 = 453
UK 13.29%
Greece 11.23%
Belgium 8.51% = 173
Ireland 4.71%
Germany 3.26% = 66
France 3.14% = 64
España 2.54%
Canada 2.11%
Netherlands 1.69%
Australia 1.33%
Italy 1.03%

Dear Mrs. Merkel what's the point of a Single or even Common Market if .....

World Trade & the EU Single Market:

The German reply to the Barroso proposal re the EU's trade policy can lead one to ask the German government (and the UK one of course) the following:

What is the point of a Single or even Common Market or even a Free Trade Area (Cameron's dream for the EU) if the members of it do not have some benefits from it compared to non-members?

Seems that some EU members (eg Germany) want to have the cake and eat it too, ie fully exploit the EU Single Market and the Eurozone market (60% and 40% respectively of German exports in 2011) while fully exploiting WTO free trade to outsource production to ...?

It is accidental that German and Chinese domestic consumption is relatively low?

Or that China's WTO entry took place 1 month (December 2001) before the introduction of the Euro coins and notes?

Are German governments "team players" in the EU or Eurozone "team"? Which ones, in the last 10-20 years?

There is no I in team nor in Eurozone.

Euro myths busted!

In the past 2-3 weeks but especially the past few days, popular (and populist) Euro stereotypes of the last 2+ years have been falling like the deck of cards they really were! Myths busted!

The Fiscal Compact and its failures (already): Ordoliberalism or Weber's "The Protestant Ethic .."?

So it is now clear that

a) not only has a conservative (EPP) Spanish PM, Rajoy, has been allowed by the Eurozone's key body, Eurogroup. and the EU's Council of Economic and Finance/Treasury Ministers (ECOFIN) to divert from the austerity - budget deficit previously agreed for 2012

and that

b) The German PM Merkel is going to need the support of the social-democratic opposition (SPD) for Germany to ratify the famous/infamous Fiscal Compact deliberated by the European Council in December and signed by 25 of the 27 in the recent March European Counci (of EU heads of states and governments)

But on top of that:

c) The German magazine SPIEGEL reported on March 12 that "the German government didn't reach even half of its planned savings in the federal budget" (a case of do as I say rather than do as I do re other Eurozone members)

d) As Louise Armitstead reports today for the UK's The Telegraph "the Netherlands Bureau for Economic Policy Analysis (CPB) said the country’s budget deficit could increase to 4.6pc of GDP during 2013 and 2014"! Adding inter alia: "helpfully the Dutch prime minister and finance minister have already laid out their own punishment", "Europe’s leaders have become obsessed with setting targets and punishments rather than solving the crisis. Quite how far removed they are from both economic reality and possibility is now becoming clear: they can't even meet the hurdles themselves".

So:

Have Europe’s leaders have become obsessed with setting targets and punishments rather than solving the crisis? Or it is "some of Europe's leaders" or is it "Eurozone leaders" or is it "some Eurozone leaders" or is it "Europlus leaders" or most of the conservative (EPP members) leaders? Those I have branded "Euro economic neocons"?

Or is an obsession for setting (often unrealistic) targets that is embedded in the so called "Western culture"?

As per the "punishment" part should one look for understanding in Max Weber's 1905 book "The Protestant Ethic and the Spirit of Capitalism"?

Are these obsession held by leaders or whole nations (as part of the national/cultural/philosophical "ID")? Eg which is more relevant and determining a factor in the Fiscal Compact? German "Ordoliberalism" or Weber's book?

Food for thought!

PS. Months ago I wrote that Europe had become a financial analyst's dream.

Seems now that Europe is on the way to becoming a dream for sociologists and psyschologists.
To parahrase Shakespeare's King Richard:
"A couch, a couch, my PM throne for a couch"?
O tempora .....

Models: The Fed vs the ECB

Does the Euro crisis show that the Fed (US Federal Reserve) model is more effective than the ECB model?

The latter focuses on minimization of inflation, a "single directive" (think by analogy "The Terminator" robot and its single directive) inherited (mainly) from the Bundesbank whereas the Fed's model cares about employment and other economic parameters, not just inflation.

Food for thought!

Extra question:

Why did the makers of the Euro give such a narrow mandate to the ECB?

No more economics - and especially finance - please, we are humans!

I am paraphrasing the title of a well know British theatre play of decades ago to reflect the following.

Muhammad Yunus, the inventor of micro-finance has given a most interesting video interview to the Guardian today: 'Economists have misunderstood human beings' is the title and he proposes that humans are multi-dimensional, not one dimensional money making robots!

He also proposes that social enterprises can offer solutions in a world where the profit making ones and the social ones co-exist.

Meanwhile, the Merkozy fiscal pact is having adoption issues not only in Germany (see recent posts of mine) but the Netherlands as well! My POV is not that good fiscal "housekeeping" should not be an element of national and Eurozone policy but that this must not turn into the sclerotic and rather rigid thing that the Merkozian fiscal pact has become! So much that not only a Spanish convervative PM (Rajoy) is having trouble abiding to, but also the Netherlands. Yes the NL which is the closest "ideological" ally Merkozy has to its philosophy,

Via Twitter, I continue to ask my German followers/friends if indeed "Ordocapitalism" is the philosophy that drives the policy thinking of Merkel and her advisers (many of them of CB and/or banking mindset). I continue to get very mixed replies. Too early to write a post on that.

So capitalism and its problems, which was the topic of thus year's WEF at Davos, the Euro crisis, the vendetta between Financial Agorocracy and Democracy, and many other such issues continue to be the core of European, EU, US and world affairs and policy.

Now, back to Yunus. I have many economists friends but as an MBA I agree with Yunus on this argument taht economists have misunderstood human beings.

As per the profit vs social entrepreneurship, I think that there is also a "third kind". The for profit but not profit (shareholder value) maximising one, the one that my father practiced, ie for profit business that does not operate with a single directive: "Maximise Profit, Maximise Profit" (flashes of The Terminator, The Walking Dead and other zombie and vampire movies and series, parade inside my mind for a few seconds). What I call "noble capitalism" (mind you: my father was not a "royal", he was a product of the middle class, the good old middle class that credit capitalism has destroyed in recent decades, IMO).

After all there is such thing as "Socially Responsible Investment" where investors can participate in funds that choose their portfolio based not solely on performance but environmental, social and other non direct profit parameters!

But is it economist who have misunderstood human beings or is Max Weber's 1905 book "The Protestant Ethic and the Spirit of Capitalism" that is more relevant in understanding a) the faults of capitalism and b) Merkel's philosophy?

Food for thought, mes amis!

My social media statistics

7 Days into March, the 2000 mark in the number of my followers was passed. As we speak it stands at 2027 but it fluctuates, much as an index. The @npanayotopoulos Twitter account has passed way beyond 1000 days with 38,906 tweets to show for.

As any follower of my tweets knows, my tweets are usually my thoughts or comments on EU and other policy and affairs. I also do tweet links to my new npthinking blog posts as well as RT interesting posts of others. I am not a believer in links. I use them but I believe that the essence of Tweeting is personal views on, in my case, policy and public affairs matters, in 140 characters. That's in my opinion the beauty of Twitter.

As a vlogger, I do tend to ramble. As a blogger, the Twitter experience (in tweeting) has also helped me cut down on the essays in "proper" blogging (as in this npthinking blog) and write blog posts that are brief and to the point. My most read post is a mere 2 lines!


Based on http://tweepsmap.com data (in %) I have just calculated that (roughly) of my 2020 followers 440 are in USA, 254 in UK, 220 in Greece, 151 in Belgium, 90 in Ireland, 57 in Germany, in 44 France, in 43 Spain, 40 in Canada.

According to the blogger.com statistics provided for free to this blogspot account, in the past month, France, Belgium and USA dominate npthinking pageviews while Germany and Ireland also show significant pageviews.

Hence, whereas the US is in the top in both following of my tweets and in reading my posts, and Belgium also has a strong showing in both, UK and Greece follow my tweets whereas France and to a lesser extent Germany, my posts.

Or so it seems.

PS. There seems to be a 25% of my Twitter followers (500) whose country of viewing seems to be not accounted for.

------------------------

Are you an avid reader of my tweets and/or my blog posts. Feel free to comment on aspects of my tweeting and blogging you like or not like!
Thanks, merci, gracias, grazie, bedankt, danke, tak, takk, ....

From 1952, to 1992 to 2012: Europe 4212?

The 264-319 rejection of a 1950 proposal for a European Defense Community by the French National Assembly on 30 August 1954 brought down with it a 1952 proposal for a European Political Community.

A second opportunity for political union was missed when the EEC 12 failed to gather enough impetus for it during the deliberations for the EU Maastricht Treaty in December 1991 and February 1992 thus establishing only an an Economic & Monetary Union that turned out to be only a monetary one.

In 2012 can Europeans dodge the issue of a European political union again?

Will they follow the steps of the Ancient Greek city states that failed to established a federal union, thus de facto delaying the establishment of a Greek state by some 2200+ years (1830)?

Will Europe have to wait until 4212? And by analogy to the Greeks, what will Europeans have to go through in the next 2200 years? Have they not learned from the Greek city states or the checkered history of the continent of at least the last 1000 years? Or even the last 100?

On the occasion of rare earths, 2 world trade reminders

On the occasion of USA, EU and Japan jointly making a complaint to the WTO Trade re China limits on export of "rare earths":

Reminder (1): WTO Doha failed partly because some countries wanted to have the right to restrict export of basic foods in crisis cases

Trade Reminder (2): WTO Doha also failed because some developing countries didi not want to open their markets to US & EU industrial products (and compete with theirs).


·

Competitiveness in Economy/Biz vs Sports

Why do the sports clubs and national teams of the European periphery (in geographical terms), ie Eurozone and EU as well as European in general, tend to do so much better in European and world competitions compared  to  the majority of companies and national economies of the same countries?

Analyse this!
And feel free to comment here or via Twitter (@npanayotopoulos)

Will May be a turning point in EU and Eurozone politics?

With French election round 2 (May 6), the German Bundestag and Bundesrat votes on the Fiscal Compact and now the North Rhine-Westphalia elections, May can prove a turning point in EUropean politics, stopping the tide of Merkozian politics in the EU and the Eurozone/Europlus.

PS. In the meantime, reading a most interesting article on Spiegel re the Pirate Party, I could not help thinking that maybe The Pirate Party is the type of real social democratic party that Germany needs (instead of the FDP, who are nowhere near such standing, at least in recent decades).

PS2. With Slovakia, the number of left of center governments or government coalitions in the 27 of the EU has reached 6, 5 in the Eurozone.

Got 500,000,000! Use it!

The EU is the 3rd largest entity in population, after China (1,300,000) and India (1,200,000). USA is a distant 4rh, at 310,000,000. Brazil, another one of the so called BRICs, is 5th with 192,000.000 and Russia 8th with 143,000,000. Among other fast developing ones, all members of the WTO, are Japan 148,000,000, South Africa with 51,000,000 and South Korea with 49,000,000.

In terms of GDP, the EU ranks slightly higher than the US, at No1, with 16 trillion USD, USA 14.5 trillion. China is distant third with 5.8 trillion and Japan 4th with 5.4 trillion.

What do these above numbers mean?

That in spite of all its problems, eg the Euro crisis, the fact that Germans tend to save than consume, compared eg with the Americans, its expensive currency that is shared by 17 of its 27 members (330,000,000 population, in the Eurozone), the EU is the wrrld's most lucrative market, for the world!

The EU is the largest export market for the world's No1 exporter, China, in value, larger even than the US now! The world's number 2 exporter, Germany, exported 41% of its exports (in value) to the rest of the Eurozone in 2011 and 60% in the EU! Only 40% outside the EU!

What do the above mean?

That the EU could take better care of its Internal (aka Single) Market for the benefit not only of its consumers and China, US, South Korean, Canadian, Indian, Brazilian, South African et al exports which are imported in the EU!

The PIIGS, the French, the Brtish, the Austrians, the Dutch, the Belgians, all 27 EU and 17 Eurozone contribute to making the EU market so important for the US, Chinese, German, Dutch, and other exporters.

What do they get in return? By allowing more or less every economy in the world to export to the EU more or less everything, the EU has undermined its own Internal-Single market, in return for some exports to these countries but at the cost of its less competitive, for various reasons, parts.

Should the EU raise its trade barriers a bit or the Eurozone lower the Euro some so as to give products and services from its less competitive regions a better chance inside the EU market?

Maybe. But at least, it should acknowledge the cost the EU's and Eurozone's less competitive regions pay as a result of the EU's near open door policy to the world's products and services!

Bonds and chains!

"The things you own wind up owning you" is my most memorable line from "The Fight Club" film and one of the most pertinent philosophical quotes of our era, in my opinion.

It does not apply to material goods only though, it seems to apply to financial ones as well. In other words we do not only become chains to things but bonds etc as well.

Food for thought!
(Does it apply to intellectual property, for example?)

A good solution for the 27 or so "NHS" of the EU

A good solution for the 27 or so "NHS" of the EU is not to dismantle or privatise them but to merge them into one (economies of scale). That was in my opinion one of the rationales of the Single Market (merge national "utilities" into EU ones).

What the EU needs: Single Laws but National/Regional Policies & Strategies

The EU member states need to have common laws in everything, instead of national or local laws, so the EU Single Market can work properly especially for the average citizen and the average company (SMEs). In other words, the optimal level for legislation is the EU level instead of national and local level.

But one must realise that that does not mean one-fits-all policies eg economic policy or competitiveness policy/strategy!

That IMO shows some of the irrationality of the Merkozy Fiscal Compact and in its thinking in general.

Centrism: Moderate and Radical at the same time!

Centrism is radical in its dynamic pursuit of policies and solutions in general that provide solutions to not only the problems of the economy and Society (the "forest") but the individual as well (the "trees"). Centrism assumes that people are neither powerless or minors (communism) nor superhumans (liberalism).

Centrism is moderate in that it ideologically flexible in searching for policies and solutions to the problems of the economy and Society (the "forest") but the individual as well (the "trees"). In other words Centrist lacks the ideological and intellectual simplicity of communism, liberalism, conservatism etc because its aim is to seek solutions not ideological purity.

The potential for an alternative to the Merkozy way (Part 2: Competitiveness)

This is a follow up to my post "The potential for an alternative to the Merkozy way (Part1)" of March 10, 2012.

The so called "Fiscal Pact" or "Fiscal Compact", that Merkozy conceived and 25 of 27 states signed in early March is too rigid in scope, in philosophy and in targets to be of benefit to the participating states (we shall see how many will actually get the OK from their national parliaments or their citizens, eg Ireland).

It introduces fiscal only interventions to the sovereignty of the members that not only justify a national referendum in Ireland but a 2/3 majority in the two houses of the German parliament (the Bundestag and the Bundesrat) too, etc.

Theoretically, the Europe 2020 strategy that was decided in 2010. But that IMO is not nearly enough.

According to the Europe 2020 webpages of the European Commission, "the 5 targets for the EU in 2020 are:
1. Employment
75% of the 20-64 year-olds to be employed
2. R&D/ innovation
3% of the EU's GDP (public and private combined) to be invested in R&D/innovation
3. Climate change / energy
greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than 1990
20% of energy from renewables
20% increase in energy efficiency
4. Education
Reducing school drop-out rates below 10%
at least 40% of 30-34–year-olds completing third level education
5. Poverty / social exclusion
at least 20 million fewer people in or at risk of poverty and social exclusion"

It seems to me that this "strategy" is more of a plan that a strategy. Plus IMO it relies too much on R&D as a source of EU competitiveness. Plus it does not allow for specialised strategies and competitiveness models for each state or regions thereof.


What is needed is the establishment of a Competitiveness Agency for the Europlus ie the participating members.

This agency must be the sum of 25 think tanks of the member states and daily monitor and analyse the competitiveness strategy of each member states and regions within the states and seek to coordinate those into an overall "conglomerate" strategy.  It should operate mainly in an inter-governmental way but with cooperation and support from the Services of the European Commission, committees of the European Parliament and councils of the EU. With a very lean infrastructure and secretariat. Also consult with the national parliaments of the participating states.

It should include technocrats who will be personal appointees of the member governments as well as the key national social partners.

The Competitiveness Agency should have the right to express opinions on any action or policy of EU institutions and bodies that affect the competitiveness of not only the Europlus as a whole but the EU and most importantly the participating states!

Eg it should be able to criticise the ECB if its interest rates lead to Euro exchange rates that hurt the competitiveness of the Eurozone/Europlus or some of its members or regions!

Issue opinions on the impact on the competitiveness of eg Greece or Portugal from TENs, evaluate the so called structural funds with respect to their impact on the competitiveness of the recipient economies or regions, even have the right to suggest EU policy vis-a-vis its WTO membership, FTAs, or even argue for EU  exit from the WTO if that is seen as the only way of improving the competitiveness of enough members of the Eurozone/Europlus! Propose EU laws the removal of which would improve competitiveness!

A Eurozone/Europlus "MITI" (as in Japan)? Not quite, simply a body that cares for the competitiveness of the Eurozone/Europlus AND its constituent member states and regions thereof.

The key concept is that the competitiveness of the Eurozone/Europlus is not a one-fits-all policy, but a spectrum of policies that as a whole have to accommodate the competitiveness needs of each state and even region.

To be continued.

The potential for an alternative to the Merkozy way (Part1)

The need for a 2/3 majority in both houses of the German parliament which became known last Saturday and the potential power it gives to the SPD and the Greens, have altered the potential for an alternative to the Merkozy way. In a more positive way that before.

Before, a win by Francois Hollande on May 6 in France, would be the beginning of a comeback of the progressive political and social forces in the EU, the Eurozone and the Europlus.

Since the need for 2/3 majority to adopt the Fiscal Compact has arisen, there is potential for more than that. Today, Saturday (March 10) Reuters reports: German SPD wants concessions for backing fiscal pact

One of the questions that arise is: Is the SPD waiting for the May 6 result in France to determine its exact stance on the Fiscal Compact?

Why?

Well, according to The Guardian's "Left, right, left: how political shifts have altered the map of Europe" graph, on March 10, only 5 governments or government coalitions in the EU are characterised as  "left wing", 2 (Greece and Italy) as "neutral" and the rest, ie 20 as "right wing".

Those 5 are: Denmark, Belgium, Austria, Slovenia and Cyprus,
 The Slovak elections today seems that it will add one more to the 5.

Thus of the 25 that  have signed the Fiscal Compact, 17 are conservatives, 2 technocratic and 6 progressive.
Among the Eurozone 17, the split is 10, 2, 5.

So at this time, is there enough potential for a change of political momentum, against the Merkozy way and in favour of a more "balanced" and less austerity-obsessed way?

Well, among the 25, the split is heavily in favour of the conservatives, 17-6,  thus a rejection of the Fiscal Compact in Germany would provide major political embarrassment for Merkel, kill the plan but not pave the way for an alternative plan.

Yet on May 7, if France "goes Socialist" ob May 6, and with the problems already in Spain and potentially in The Netherlands, there may be enough momentum for a radical amendment to the Fiscal Compact, more radical than today. Maybe a new Pact altogether, with less hardcore fiscal austerity and much more keynesian.

Now, if Sarkozy emerges victorious on May 6, austerity and fiscal compact will have won a major battle. The SPD and Greens will still be able to get some offsets for adopting the compact but the compact will go through, since even an Irish No in theory does not prevent a majority of the members to adopt the compact. Of course those who turn it down, will not have access to bail outs etc.

Complicated, huh? Not a dull moment in EU Affairs!

Analysing the EU: Beyond "Western Europe" (Part 1)

Europe, the EU and the Eurozone are much more than Western Europe. In other words, Western Europe is but a part of Europe, the EU and the Eurozone.

EU27 has different systemic, dynamics & experiences than EEC6 did.

What does that mean?

For example, it means that analysing the systemics and dynamics of Greece using a let's say Dutch or British mindset can lead to very faulty analysis and thus faulty conclusions. Much evidence of that in the last 2 years, in my opinion as a native of Greece.

Let's see:

Out of 27 EU member states and the 17 Eurozone ones:

1) About 9 are part of "Western Europe" (albeit a loose concept, Western Europe)

2) 10 of 27 members (plus part of GER) spent 40+ yrs under Soviet rule

3) 3 EU - 3 EZ experienced military dictatorship within last 50 years

4) At least 3 of 27 EU members spent hundreds of yrs under Ottoman Empire rule

5) How many have NOT been colonial or superpowers sometime(s) in last 1000 yrs?

To be continued ...

The difference between an Economist and an MBA is ..

The difference between an Economist and an MBA is like the one between a Physicist and an Engineer.

PS. In my opinion, beyond its fancy models and math formulas, Economics is a part of Sociology that decided to break away and act like Physics or Chemistry!

Should the SPD ask for changes or offsets to the Fiscal Compact or simply vote it down?

This is a follow up to my post: Who will raise the progressive flag in the European political battlefield? Hollande or SPD - Greens?

It is being reported that it is doing the former.
In my opinion, it should do the latter.
If the Fiscal Compact ratification fails in Germany then many other of the 25 will follow. And a proper Pact, not simply fiscal, can be negotiated.

Mentions

Nice to see that the March 3 edition of Brussels blog round up by the blog of the EUROPP of the LSE mentioned not one but two posts of this blog.

Who will raise the progressive flag in the European political battlefield? Hollande or SPD - Greens?

Will Hollande or SPD - Greens put an end to the neocons (Merkoz et al) destruction of Europe?

1) 2011 was politically a very good year for European conservatives, EPP or other. With the exception of Denmark, all the national elections of 2011 brought conservative EPP member parties to power!

At present only 4 EU (3 Eurozone) member states are not governed by conservative governments or technocrats (the cases of Italy and Greece): Cyprus, Austria (a grand coalition but with a social democrat PM), Slovenia and Denmark.

Hardcore austerity has been a key element of the conservative domination of  EU and Eurozone politics.

Until Saturday, the French Presidential election in France and the potential election of Francois Hollande was where the Eurozone's "battle for Middle Earth" was going to be "fought". The next day of the second round, May 7, could be the one that marked a new tide in Europe, a progressive one!

2) But the Art 23 issue in Germany (see my previous post: "Merkel's fiscal compact evokes article 23 of the German constitution: a) An own goal by Merkel or b) A clever plot?") offers SPD and Greens the chance to reverse the tide, bfore Hollande. By rejecting the fiscal compact! 

Will they do it or prove they are "Ordoliberal" too as Ulrike Guérot and Sebastian Dullien seem to suggest in their article "Why Berlin is fixed on a German solution to the eurozone crisis" in The Guardian last Friday?

In other words the Art 23 issue forces the SPD and Greens to take a stand. Are they part a) of the conservative or b) the progressive Europe?


The progressive social and political forces of Europe are looking at SPD and the Greens and wondering. Are they ready to raise the flag of progressive politics in Germany and the Euroaone and EU by rejecting Merkozy's Fiscal Compact in the votes in the Bundestag and the Bundesrat or will they contain themselves with minor growth trade offs and wait for Hollande to make the difference?

Merkel's fiscal compact evokes article 23 of the German constitution: a) An own goal by Merkel or b) A clever plot?

I was very surprised when a fellow tweeter, from Germany, told me on Sunday of Merkel's (sudden?) need for a 2/3 majority in both German houses (Bundestag and Bundesrat) for adoption, by Germany. of the fiscal compact that she conceived and heaavily promoted in the firstplace!

Here is a press report (Reuters) that well describes the issue and Merkel's sudden predicament!

Theory 1:

At first reading it seems like a major own goal for Merkel and her team. How could they have missed that when drafting the compact (btw, who has actually drafted and finalised the text of the fiscal compact, German or EU experts/officials)?

One that could lead to her political demise, even, since she is bound to get more support from the opposition than the CDU (as happened with the Greek bail-out).

But now it is certain that to adopt her fiscal compact in both houses, the SPD and the Greens will get a growth counter-balance in return (which is good, for many, including yours truly)/

Theory 2

Now, this is an alternative theory. One that is more consistent with the German tradition in quality design in anything from cars to policy! A but sneaky, but hear it out!

Having to get the votes of the opposition could actually be in Merkel's benefit.

a) If the SPD and Greens turn her fiscal compact down, she can blame them, to the German public opinion.for its demise and possibly get major points for 2013! Never too early!

b) If the SPD and Greens vote the fiscal compact, then, unlike Francois Hollande in France, will not have legit cause to recall it later. Thus Merkel politically "chains" a future SPD or Greens containing German government  to her fical compact, in return for growth measures that she would probably want to enact anyway!

Choose whichever scenario suits your POV!

Comments?

Whatever happens on May 6, they will always have Greece

According to Wikipedia, a "work spouse" is a co-worker, usually of the opposite sex,[1] with whom one shares a special relationship, having bonds similar to those of a marriage (but platonic).

By analogy, the relationship between Angela Merkel and Nicolas Sarkozy could be called "political spouses" or "Euro-spouses".

And if Sarkozy emerges non-victorious on May 6 at the sec9nd round of the French Presidency elections, the two will always have Greece (not sure what Greece thinks of that though).

Yet for those who monitor European, EU and world affairs (what a choice of terminology!!) this Euro  political love affair and "marriage" seemed as plausible as Greek growing by 20% next year, only a few years ago. I can still recall the press reports on how Angela Merkel, always wanted to be prepared at meetings etc, could not tolerate Nicolas' brainstorming style, and neither did her "court".

So many press reports on how much they could not stand each other. And then, political Eros (aka Cupid) striked! Maybe it was Greece that brought them together. Frankly, I cannot recall when the thin line into love was crossed.

They do not call it EU Affairs for nothing. But one of the morals of the story, IMO, is that EU affairs, like romantic affairs, can be unstable.

Nick and Angie will always have Greece. Hope that Greece will not always have austerity though.

For the past 2+ years Europe & the world have been analysing Greece. It's time they start analysing Germany too.

The following thoughts were promoted, partly, by my post yesterday on Ordo-Liberalism and the question of its influence in modern (2012) Germany (NPthinking, March 3, 2012, "Is Ordoliberalism the key to understanding a) the German or b) the Merkel way in Euro-economics"), but the issue has been lingering in my mind for quite some time.

Since the beginning of the so called Greek crisis, more than 2 years ago, economists, financial analysts, journalists of various specialisations and commentators of all kinds in Europe, the US and the rest of the world have been analysing Greece. Its economic, political, policy, social and other systemics and dynamics, some in a systemic, some in even anecdotal ways.

In addition, the economic, political, policy, social, pop cultural and other systemics and dynamics of the US, the UK and maybe a small number of other countries/economies are also a popular subject of scrutiny by   economists, financial analysts, journalists of various specialisations and commentators of all kinds. France is one of them. China is another. Russia, in mostly political matters (not too much economic analysis, IME at least in the non-specialised media). Maybe the rest of the BRICS. The rest of the "PIIGS", ie Ireland, Portugal, Spain and Italy as well.

Of course the "lights" of publicity and the ensuing commentary focus on most countries periodically, in other words, for a day or at most a few days, depending on other news/current affairs.

So, other than Greece in the last 2+ years,  the US and the UK are the perennial "champions" of world  attention. Their political, economic, social, pop cultural and other dimensions are always in the news, someway, somehow. Part of the reason is that English  (be it US, mostly, or UK) is the lingua franca and in spite of the rise of English speaking media in all countries around the world in recent years, plus blogging, tweeting, etc, most of the most read media in Europe and the world remain American and British at least in terms of HQs. Plus the US and English speaking ads are still dominant as markets in the world. These and many other parameters have led to a situation where the "global  community" has or thinks it has a pretty good idea - knowledge of the US and the UK.

Recently, Germany has been an often mentioned word in the world media and public opinion agendas, but to a large extent the topics are IMO narrow. Too narrow and not enlightening enough for a country of 82 million, ie 16% of the EU population and  25% of the Eurozone population and about 20% of the EU's GDP (adjusted for PPP, purchasing power parity).

The culture of Speaking, Thinking, Discussing, Conversing, Synthesising:

"Suddenly Europe is speaking German" argued Volker Kauder, conservative parliamentary group leader, at the  CDU's annual party conference in Leipzig last November (see eg coverage by Spiegel Online). Although it seems that his comment refrreed specifically to the adoption of "budget discipline" as a policy philosophy by other member states, his statement, as can be expected with such remarks, was more widely interpreted,, as Germany wanting to have its Euro and EU partners adopt its "language" (actually thinking) in most/all matters Euro and EU!

For Germany to wish to be heard in all matters Euro and EU, that is a fully valid wish that should be the right and reality for every member state, large or medium or small!

That is though quite different than expecting Germany or any member state to have its way on all or any issue courtesy of mere "size", be it population, GDP or contribution to the EU budget (the "paymaster" rhetorical premise or the "our taxpayers one").

So I think that Germany has to up its efforts in presenting, explaining, discussing with an open mind (in human relations terms as they used to call it in team dynamics and HR) its ideas, its thoughts, its concerns. In other words, an extroverted approach to EU affairs. Capitalising on the art and science of synthesis too. There is after all decades of experience by now in the meetings of the Council of the EU (Ministers) as well as their working groups, staffed by national admin officials mostly posted at the country's Permanent Delegation to the EU, just to mention a few "forums" of discussion, synthesis, and co-decision in the EU and EZ.

But I argue, there is one more thing that needs to be done not only in reference to Germany but all the 27 of the EU. It is even more imperative in Germany's case because of its weight in population and GDP in the EU and the Eurozone or the Europlus: The rest of Europe (and the rest of the world) must start investing more time and effort in analysing - understanding Germany, economically, sociologically, politically, philosophically, etc. Language is an issue, compared to the cases of analysing the US, the UK, Ireland, Australia, Canada, New Zeeland, but  not one that cannot be bypassed.

The other issue is that Germany and all Germans, much like the Greeks in that respect, must get used to the idea of being the subject of monitoring, examination, analysis by other Europeans and other humans. In the way that Britons are, to some extent, and some of the Americans. To get used to having their personal views and thoughts asked by media, researchers, analysts, bloggers, tweeters, et al. Like the Greeks these past 2+ years!

But there are 27 different countries in the EU, soon 28! Well it could be harder, the US has 50! The language issue? It exists and can be bypassed and after all, IME, the best kept secret is that most Germans speak English quite well. Maybe more programmes in VO on TV and cinema would help!

Can Germans expect other Europeans to learn German? Well, after English, maybe. Maybe more cultural products like music can help the average European get acquainted with the German language.


PS. As I have tweeted in the past, US and UK business school rank mostly at the world top but it is German businesses that are masters at exporting. By the way, one of the issues that I wish to research more and in  detail (after all I am a geek) is that SME manufacturing exporting model. Germany does have enough interesting things that are worth the analysis of other Europeans as well as the rest of the world, including German rock!

German unification of 1871 vs European unification of .....

The German unification of 1871 did not include the most Germanic of states at that time, Austria. Plus within a few years, Prussia's dominant role inside the unified Germany diminished.

What kind of food  for thought does this, by analogy  (comparison and contrast), prompt re the EU and the Eurozone as well as its political union?

PS. Plus does it offer any potential insight as to what some German strategists want to avoid with Germany's participation in the Eurozone or political union? Just thinking!

Is Ordoliberalism the key to understanding a) the German or b) the Merkel way in Euro-economics

A very interesting article by Ulrike Guérot and Sebastian Dullien, "Why Berlin is fixed on a German solution to the eurozone crisis', in The Guardian on March 2.

The authors refer to Ordoliberalism and inter alia argue that: "..Crucially, its importance in German thought also suggests that a change in government in the next general election in 2013 is unlikely to change Berlin's approach to the big issues" and "These central tenets that lay out how to run an economy are largely an article of faith across Germany. Even the Greens have strong support for ordoliberalism".

To be honest, I had never heard of the term and I was and still am one of the critics of the ECB inflation policy in much of the 2000s that led to a Euro worth 1.3, 1.4 or even 1.5 USD and suffocating, IMHO, a large part the Eurozone's firms while benefiting greatly Eurozone imports from China, USA, even UK. And I do blame a German obsession, driven by Weimar Inflation traumas as well as JC Trichet's inflation minimisation philosophy.

I am also not a fan of the independence of central banks for reaaons that, it seems run 180 contrary to the Ordoliberalist philosophy (see below).

But I have also argued that the ideology that drives economic thinking in the Eurozone if not the whole EU nowadays has its foundations on a neo-conservative philosophy/ideology that is not German but shared by many of the current conservative governments in the EU/EZ, especially but not limited by any means to the Dutch one. In other words, that the problem behind Euro-austerity mania is not Germany per se, but German, Dutch and other economic neocons. And that Max Weber's "The Protestant Ethic and the Spirit of Capitalism" book (see a Wikipedia article on the book) is quite relevant to this austerity - neocon thinking.

In their Guardian article, Ulrike Guérot and Sebastian Dullien, in effect argue that there is a German way of thinking, Ordoliberalism, that drives German Euro-policy inter alia, and that it is a German not only a Merkel or CDU/CSU-FDP only philosophy.

I need to find out a lot more about this Ordoliberalism before I can comment on that.

As the Wikipedia article on Ordoliberalism suggests:

a) "Ordoliberalism is a German variant of neoliberalism[1] that emphasises the need for the state to ensure that the free market produces results close to its theoretical potential"

b) "Ordoliberal ideals (with modifications) drove the creation of the post-World War II German social market economy and its attendant Wirtschaftswunder"

but that:

c) "Since the 1960s ordoliberal influence on economics and jurisprudence has significantly diminished"

So are there fans of Ordoliberalism in Germany in 2012?

In his article "The eurozone will pay a high price for Germany's economic narcissism" in the Guardian (Jan 6, 2012) Hans Kundnahi suggests that:

"Merkel's economic advisers are deeply influenced by ordoliberal ideas – particularly on the role of the European Central Bank. To them, the role of a central bank is above all to maintain price stability – and thus promote growth only indirectly – rather than intervening to expand the money supply as the Federal Reserve and the Bank of England have done in the past few years.


Thus the former ECB chief economist Jürgen Stark – who called Eucken's book Principles of Economic Policy "a constant source of inspiration throughout my career" – resigned last September after it purchased Italian and Spanish government bonds. Bundesbank president Axel Weber quit last February for similar reasons. His successor, Jens Weidmann – formerly an adviser to Merkel – is equally opposed to the ECB's bond purchase programme."

So it does seem that OB is a dominant philosophy in the CB and Merkel camp today.

But is it (more widely) a German philosophy (affecting the whole country/political parties/Society, eg the Greens or SPD)? That is IMO the key question.

If indeed according to Stephen Padgett: "A central tenet of ordo-liberalism is a clearly defined division" of economic policy between the agents 1) monetary policy (the central bank) 2) fiscal policy (the government) and 3) macroeconomic policy (the social partners - employers and trade unions), and while I am in favour of collective bargaining for wages (yet it should be noted that Germany has no national horizontal minimum wage (unlike the USA and many EU member states, set either by government or the national social partners (Greece, NL)), only sectoral and other levels of collective bargaining), I can see a very wide rift between my POV and that of Ordo-liberalism's. A rift may actuially be an understatement, an "ocean" is more like it.

Why? Because I am of the opinion that economic policy must be comprehensive and thus formulated by a single source, ie the government. Otherwise, the costs of non or bad co-ordination between fiscal, monetary and macro-economic policies can be very high (see what is happening in Europe today). At least the US and UK central banks seem to be more "willing" to coordinate their monetary policies with government economic policy and that is better than nothing. Yet I still do not see the need for a central bank that is more than a mere department of the Ministry of Finance/Economy.

By trying to be a "restrained liberalism" as Hayek called Ordoliberalism, Ordoliberalism may have actually managed to become a model that is worse not only compared to middle of the road economic thinking but liberalism (libertarianism) as well! Worse than libertarianism or market anarchy? Is that possible? Well, there is good evidence it is!

I do see one positive element in Ordoliberalism: "The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power". Because there is much more work to be done in the EU and Eurozone to make sure that competition works well and that there are not restrictive practices in the EU Single Market.

But the big questions, crucial for the future of the Eurozone and the EU, are: Is French, Spanish, Irish, Italian, Slovak et al thinking potentially compatible with Ordoliberalism? Can common ground be found? 


Or, alternatively, are there enough Ordoliberals in the rest of the Eurozone other than in Germany?


Is Ordoliberalism indeed going to be a driving or an infleuntial ideology in eg an SPD-Greens government coalition after the 2013 elections?


Much food for thought for those who care about the future of Europe.

PS. If Diogenes of Sinope was alive today, he would go live and critique the dominant way of thinking in Berlin, it seems (rather than NYC or LA or DC or London or Paris or Brussels). And he would have quite a challenge. Can one imagine a dialogue between Diogenes and Angela Merkel (by analogy to the one between Diogenes and Alexander the Great)?

Mass vs Niche; Local vs National vs Regional vs Global

For some people (and companies) open spaces, are a challenge. For some a threat. They prefer straits and; local squares or alleys etc.

Some though "suffocate" in small, closed, markets. They need the open space, the seas of Europe or the ocean of the world to breathe!

Which brings me to a new chapter in this morning's rambling: Can small vessels compete in the ocean of globalisation or open sea of Europe?

Well, targeting a segment or even a "niche" of the global or European market is advisable.

The challenge of being global: 29 433th out of 21 558 090 in global ranking of followfriday (and 16 849th English speaking ranking).

Compared to being ranked 50th eg in Belgium or 300th in the UK or 1000th in the US, being, as a company or professional or anything, .

29433rd out of 21558090 (ie global) is in many ways harder psychologically. Even if that means "doing better" than 99.96% of the rest!

That explains IMO why the average firm has trouble being global or even European instead of competing nationally or locally.

It is easier to feel and to tell to your investors, employees, market etc that you are No1 or even 30th in country X than 29433 globally

That is partly why globalisation and European integration have relatively few fans.

Western culture pays very dearly...

Western culture pays very dearly for its need for measurability & "stability".

And it seems US is converging towards Europe in risk aversion

Logic 101

"Greece is", "Germany is:: It's logically faulty to treat a whole country as if it's a person.

Other logically faulty syllogisms: "Greeks are X", "Germans are Y".

One can say "some Greeks are X" or "some Germans are Y" or even "Many Greeks are" or "most Germans are Y" BUT a syllogism saying "(all) Greeks are X" or "(all) Germans are Y" is by nature faulty reasoning.

One can say that "Greeks (Germans or Brits or ..) tend to".

Thus

Greek are, Germans are, Greece is, Germany is, even for the economy of words, is FAULTY reasoning! but a syllogism that has more chances of non being faulty is eg: "Greeks tend to X (or be Y) more than Germans"

Everyone deserves

A key philosophical (and socio-political) issue of our era:

Do those in need have to "deserve it" in order to be helped?

IMO, No.

In a humanist Society, everyone deserves a roof over his/her head, basic food and healthcare.

Libertarianism and Communism

Libertarianism is as dogmatic as Communism (was).

And, by the way, neither Marx nor Ayn Rand were right

Economics: 0 for 2

Most of Economics relies on 1 of 2 assumptions:

1) perfect information


2) perfect competition.


Neither holds in real life, though.


After all is said and done, Economics is a social science, unlike Physics or Chemistry.
It has no laws, like Physics does, only theories (and dogmas). But no laws.