Which is more important for Europe's anti-austerity dynamics?

Both are important factors, but which is more important for Europe's anti-austerity dynamcs?

a) Hoillande win on May 6
or
b) Obama re-election?

The biggest barrier to European political union is ...

 The biggest barrier to European political union (ie a United States of Europe or a Federal Republic of Europe) is not Euroscepticism. It's Europessimism.

In other words, as is the case with social systemics and dynamics -  as opposed to physics or chemistry -  the more people think that European political union is a nice idea but it will not work or happen, the more likely it is (ie the probability increases) that indeed this will not happen or work.

Will the Fiscal Compact self-destruct?

The Irish referendum on the European Stability treaty aka Fiscal Compact is scheduled to take place on Thursday 31st May. But given the dynamics that have emerged in the Eurozone and the EU in the last 2-3 weeks, against the "growth via austerity" dogma and the potential election of F, Hollande in France on May 6. which may cause seismic effects to the Fiscal Compact (as well as the decision of the SPD whether to vote in favour of the ratification of the Pact in Germany,which may come in May or later), is it a good idea for Ireland to vote on May 31sr instead of waiting to see what happens. In other words there is a good chance the Fiscal Compact may self-destruct. A No in Ireland, unlike EU Treaties, would not block the adoption and coming into effect of the Fiscal Pact by other Euro or Europlus members. 

By the way, let's note the following No votes in EU history:

Denmark voted No to the 1992 Maastricht Treaty and Yes in a second referendum. It rejected the Euro in 2000. 

The Netherlands voted No to the Constitutional Treaty in June 2005. 

Ireland has voted No and later Yes to a) The Treaty of Nice (2001) b) The Lisbon Treaty (2008). In both cases later referendums said Yes.

France rejected the Constitutional Treaty in May 2005, It had voted for the Maastricht Treaty with the narrowest of margins (51.05%). But France has also, caused the empty chair crisis and the veto to UK's EEC entry (DeGaulle) as well a killing off the European Defense Community after a vote of it Asssembly in 1954 (which also caused the abortion of the European Political Community)!  

Sweden rejected the Euro in 2003 (n spite not having an opt-out from the EMU, since it was not a member of the EU in 1992 when the Maastricht Treaty was signed).

Now, back to the Fiscal Pact (not an EU treaty). Although Merkel has said that the Fiscal Pact will not be set aside, there is a good chance it may or at least be revised. or at least a growth pact added. Which of the three? The French election seems super crucial. As well as SPD's stance.

 

Want EU and Eurozone growth? Then ...

Markit data for Germany, France and Italy for April shiowed in all 4 surveyed post lower sales, with record decline in France. UK is recession again, based on GDP on Q4 of 2011 and Q1 of 2012. The situation in Greece, Spain, Portugal is also well known.

And while there seems to be a a shift in the dynamics of austerity (see my April 19 post), in my opinion, what the EU and the Eurozone need, for growth, is a neither Merkelian austerity nor good old Keynesian spending, but a combination of:

a) Curbing of over-legislation at national and EU levels (polynomia) and the resulting red tape that suffocates EU and Eurozone firms, especially the SMEs (exception from curbs: some sectors including the Financial one which actually needs heavier EU legislation-regulation even w/o G20 agreement)
That does not cost a lot of money, but requires lots of work.

b) Raising the trade walls of the EU by art at least a few meters. No need to go chasing growth via exports to the other 4 continents (especially given the narrow scope of WTO rules) when the EU has 500,000,000 at home and the Eurozone 330,000,000 (more than the USA). Abandon the WTO in favour of bilateral agreements with China, ASEAN, USA, Brazil or Mercosur, India, etc (agreements that include not only trade and other econ but econ immigration as well, etc)

c) Revamping of the Fiscal Coimpact, removing fixed and sclerotic targets and increase the co-operation of EU and EZ economic policies w/o transfer of sovereignty. Based on targets that are realistic given the global and European conditions.

d) Spending for growth, but wisely and within reason, probably less than you would be required without (a) and (b).
.
Part of my above post I also posted as commentary to the 27 April 2012 "Plan B for the Eurozone – it's not what you might hope for" article in The Deep End of Conservative Home. 

Agoromania?

Agoromania: So ir does not matter how well a company or economy performs per se, but only (how ell) compared to (market or analysts' expectations?

O tempora!

(Agoromania, part of Agorocracy)

What can European integration learn ...

1) What can European integration learn from the German Confederation (1815-66) and the German unification (1871)?

I mean both positive and negative lessons.

2) What can "united Europe" learn from the United Kingdom (1801-present)?

The morning after April 22: EU27 politics: If, then, else!

Monday morning, after the first round of the French Presidential elections.

Does Le Pen showing decrease the probability of Hollande success in Round 2, on May 6? The polls I have read seem to suggest yes, but only by a little. But let's try an if, then, else exercise.

If Hollande wins the Presidency, then he will dispute the Fiscal Compact and the German social democrats (SPD), will have political impetus to decide whether to defeat the ratification of the Fiscal Compact by Germany (since 2/3rds are needed in both houses of the German federal parliament).

If Hollande loses on May 6, Sarkozy is re-elected, then the Merkozy pair remains (almost, see eg Sarkozy's pre-election views on immigration as opposed to the German - Merkel's stance on the subject) and it is strictly up to the SPD, still trailing the CDU/CSU in the polls, to decide whether to bring down the Fiscal Compact and face the positive and negative effects of such decision in the German political arena and public opinion, else negotiate some growth spending in return for voting for the Fiscal Compact.

Is the Dutch situation, the inability of austerity and Fiscal Compact most "hardcore" supporter next to Merkozy, the current Dutch government, to meet fiscal objectives this year and next, an ace in the hands of the German SPD or the socio-political forces in the EU that are against the super austerity of the Fiscal Compact? Could be, especially if there is a new election that yields a new government that includes the Dutch Labour party (and D66).

EU27 politics are complicated, huh? Imagine if the EU had 50 states as the US does. But the US has political union, the EU?

Good houskeeping, the European social democratic way

Good "housekeeping" in the EU member states is always a must but Sarkozy, the current Dutch government, Merkel and others must be sacked for obsessing about it!

For setting targets that are too unrealistic, in terms of the actual numbers as well as the whole philosophy of setting strict targets and obsessing about reaching them. That is also a problem with inflation (the 2% "magic" target), even the targets of the Europe 2020 "growth Strategy". Economics, including fiscal and budgetary ones, are not like Physics or Chemistry, they are part of social sciences and as such they must be treated with a grain of salt. People are not robots, neither are their economic, social, political and policy  actions.

Some politicians are willing to bend to the demands of financial markets.

Since many years ago I have written about the demands placed on listed companies by the financial market. The pressure to meet specific targets on a quarterly basis. And the negative impact that this has on the medium term performance of the corporation.

In recent years, the same pressure is being put on countries, their economies.

Time for that to stop! That should be one of the philosophies of the social democrats in the EU27.

Of course states, as companies do, need to improve their accounting procedures, know what they are spending and why (the why part is management accounting as opposed to financial accounting). To keep their finances solid but without "human sacrifices" of the obsession austerity kind. The preservation of the European Social Model and the need for the recognition of the positive role economic immigrants can play in the funding of the social model of an ageing EU27 (instead of scapegoating them).

To make a humanist EU the beacon for others in the world, since the American beacon has been dying out in recent decades (see also the resistance to not only HillaryCare of the Bill Clinton 1st term but also of Obamacare, especially the public option).

In a secular Europe, economic religions such as growth via austerity, classic, neo ir ordo liberalism and of course neo-Marxism have no place! Policy must provide solutions for real problems of real people.

Is the UK the "Austria" of European unification (in 1871 analogy)?

Is the UK potentially the "Austria" of European unification (in 1871 analogy)?

By European unification I mean not the current state of the EU but the potential political union, that would count of a unification analogous (to be compared AND contrasted) with the Germany unification of 1871 and the 20-30 years after that.

One of the policy issues coming out of such analysis is whether the UK can potentially be the "Austria", ie left out of the unification.

Another issue is whether European unification of the depth of the 1871 German one, will lead to stringer or weaker large members of the EU, namely Germany and France. And of course for the United Europe as a whole, and all its components 25 or more or less of the current member of the EU27.

On enterprise and legal certainty in the 2012 world

"Argentina's "unilateral and arbitrary" decision amounts to an attack on the exercise of the free enterprise and the principle of legal certainty" says a resolution adopted by The European Parliament on Friday.

The EP also says that the European Commission should use all appropriate dispute settlement tools available at the WTO and G20 to respond to Argentina's "unilateral and arbitrary" decision to expropriate the YPF energy company.

Whereas I am not taking sides because I am not aware of the full details of the specific issue that involve a private company (and a formerly private one), here are my POLICY related comments.

1) Does Cristina Elisabet Fernández de Kirchner's (Argentina's President) concept of national sovereignty vs David Cameron's one. Compare and contrast.

2) Not sure WTO rules cover such issues (as well as many other global economic ones). Is the EU asking the WTO to become an agency of global economic "governance" (compare and contrast issue with the issue of "economic governance in the Eurozone). What can G20 do or can do withiu its present and appropriate role? This case is maybe one more reason in favour  what I have been arguing re EU and US exit from the WTO and reliance on bilateral full topic agreements (covering trade, investment, economics, immigration, etc) between eg the EU and Argentina or EU and Mercosur or UNASUR.

3) Re the EP's claim that "Argentina's "unilateral and arbitrary" decision amounts to an attack on the exercise of the free enterprise and the principle of legal certainty. Are there not many many other factor that "attack" free enterprise and especially legal certainty inside the EU and the Eurozone? Such are polynomia (over-legislation) and red tape? Eg the absence of EU direct tax competency and laws?

4) I have commented before that the G20 membership is high on anti-protectionist rhetoric and low on reality,  with many and significant hidden protectionist practices and barriers to trade.

Thus, no matter who is "right" in this case, this case serves as yet another food for thought stimulus for the policy issues I raised above.

PS. I have argued that given the global dynamics it is maybe time for the EU to raise its walls (economic fortress), rely on bilateral agreements, not WTO (see China effect) and develop a common and humanist immigration policy for economic immigrants (after all, the EU27 population is ageing and needs external population boost, for reason including the viability of its Social Model). Bilateral economic agreements are a good place to include bilateral economic immigration agreements.

Like in the movies

The latest piece of biz news from Hollywood, Disney film boss Rich Ross resigns after John Carter flop, reminds me of a report I must have read or heard, I think it was BBC Worldservice, some 10 years ago but has resided in my mind ever since.

Only one out of 10 films a Hollywood studio produces makes it bog.

Maybe 3-4 others make a profiit

The rest lose money, one of them a lot.

The 1 out of ten though makes or has to make enough money to also cover for all the losing ones!

I like the movie business, when a kid I wanted to study film at UCLA and go to Hollywood. Was not meant to be, because I considered the odds of success vs the cost of college to my parents, Anyway

It's about risk and return, both expected (risk and return) and real, the ex past facto.

That type of risk the average .man, woman or household does not fancy taking. Wants an as stable as possible life,, an environment to have and bring up kids.

Some, the "knights" are willing to live lives of more risk. For the expectation of extra return or some, for the thrills. Some because of the nature of many times of business, venturing or even trying. But those who take the risks should be the ones who incur the costs when the project turns sour, not the average people.

Knights in suits. Once upon a time, wearing a suit meant something. Especially a dark grey one. For years now that is not the case. That is why I have not worn one in years.

My point is: Should more (employees, managers, stakeholders, media, et al) realise that doing business in many sectors nowadays is like in the movies (ie they are like film studios)?

A shift in the dynamics of austerity?

The tsunami of austerity hawkishness seems to be weakening.

There are many factors

1) The expected Hollande win in the French Presidency elections (round 2, May 6)

2) The needs for Merkel to secure SPD support in both houses of the German federal parliament in order for her brainchild, the Fiscal Compact, to be ratified by Germany.

3) The troubles of the conservative governments in Spain and the Netherlands (one of the drivers of the euro austerity rhetoric) to keep their deficit targets,

4) The social reactions not only in Greece but also Italy, Spain, Portugal and Ireland regarding the austerity policies being implemented there.

5) The electoral successes of left-center parties or coalitions in Denmark (in 2011, which now holds the Presidency of the Council of the EU until June 30) and more recently in Slovakia.

6) The caution expressed by organisations such as the IMF

7) The press reports from the "Greek front" that have alerted people to the human effects (sacrifices) of too much austerity and have offered ample evidence that growth via austerity is not a realistic theory or dogma.

All the above, to some extent each, have in my opinion contributed to a recent rise in the number and intensity of intellectuals, economists or others, who are speaking out against the expansionary effect of austerity and other related theories or dogmas! Even some members of the financial world have to expressing concerns.

Thus the dynamics are shifting.  To what exact direction, that is not clear.

a) Less sclerotic targets in budget consolidation efforts ie a rethink of Fiscal Compact's targets
b) Growth oriented spending initiatives to act as a balancing act to the austerity (eg a possible sweetener offered by Merkel to SPD to ratify the Fiscal Compact??)
c) A wider change of direction and "model" in economic policy in the Eurozone/Europlus/EU

We shall see.

Sacrifices in 2012

The Incas  (see article) and other ancient civilisations were sacrificing humans to the gods, the modern world to the "markets" esp. the financial one. O tempora!

Until when?

Who's the Boss?

Weird weather today in much of Europe. Nothing new, in my opinion.

It's simply Nature, reminding us who is the real boss, her, not the "markets" (aka the financial markets), or other "gods" of our 2012 "Western culture".

She (Nature) often does that with earthquakes (been in a few, big ones), tsunamis, etc.

That is why I recently tweeted that I am "atheist" when it comes to modern "religions" such a Capitalism, liberalism, Communism, ordoliberalism, Merkelism, etc etc.

EU issues: Balance?

It's 20.5 years, since when I first get involved in EU issues, when I accepted a post in Brussels with an NGO-social partner organisation. Since then I have monitored EU issues via various jobs and with only small breaks. 

Based on my experience, I can say that in this period, 1991-2012, EU issues have, in different sub-periods, been a) over/too political b) too economic c) too social d) too legal e) too financial. The recent years can of course be characterised as too financial in terms of EU issues. 

What is best? 

A balance, the right balance.   

What would the world today be like if ...

(food for thought)

1) The Ancient Greek cities had united politically into a one country in the 5th century BC, or if Athens not Sparta had won the Peloponnesian War.
2) Alexander the Great had not died but had lived 20 more years and deepened his multi-culti Empire.
3) Carthage had beaten the Romans
4) Julius Caesar had lost the battle of Alesia
5) Constantine had not moved the Roman Empire's capital from Rome to Byzantium.
6) Columbus had landed on the (then) USA
7) The siege of Vienna or the battle of Vienna has had a different outcome
8) The English Puritans and Separatists had not sailed to America in 1620
9) The winter of 1788-1789 in France had been milder
10) Napoleon had not been sent to military school in Paris
11) Adolph Hitler had become a successful professional painter
12) Winston Churchill had not lot the 1945 elections and thus had a stringer position in the Potsdam conference
13) The French Assembly vote had not rejected the creation of the European Defense Community in 1954

and/or more

To provide real leadership in the EU and EZ, Germany should ...

To provide real leadership in the EU and EZ, Germany must among other things:

1) Stop using, explicitly or implicitly, the "paymaster" argument. Why? See my post "The EU will not be a democracy until .."


2) It must adopt English (the world's lingua franca) as a second official language (see why in (3) and (4))

3) Become a European and to some extent global hub for ideas and debate thereof (take share away from UK & US). A hub where Germans and other Europeans and thinkers of all kinds (economic, political, sociologists, et al) can debate new ideas and challenge existing ones.

4) For that to happen, the German government must cease depending on ancient ideas and use the product, new ideas, of the European and global hub in Germany. In a way, it can learn from the Hellenistic Times, where the area formulated by Alexander the Great was a melting pot of ideas and traditions, not only from Ancient Greece but also from Egypt, Persia and other parts of the area. That is why they are called Hellenistic Times, they were a blend of Greek and the other ideas and traditions (see also my post "Globalisation, today and in 300 BC: Hellenism, Globalism and "Americanism"", April 20, 2008).  In other words, some sort of "Germanistic Times" can become a periods of progress in European unification, as long as the rigid ideas of Merkel and her advisers as well as ordoliberalism etc are set aside in return for what the "hub" produces.

Comments?
(in English bite)

From Mar del Plata to Cartagena.

George W. Bush Jr. had his, in Mar del Plata, in 2005. Now Obama has his, in Cartagena.

What?

Failure to create consensus in the Americas.

"Principled"?

The PM of Canada claims Canada and USA block on Cuba membership in Summit of the Americas was a "principled position" (see eg press report by the Ottawa Citizen)

But one may ask: Cuba is not democratic enough to be a member of the Summit of the Americas but China is, to be a member of the WTO and the G20?

"Principled"?

Prussia after German unification vs Germany after European unification

A historical comparison - contrast exercise:

Is Germany afraid re European (political) unification of the same/similar thing that happened to Prussia after a few decades of the German unification in the 1870s?

Addition (15/4/2012): In other words, will/can a (political) unification of Europe have )within a few decades) the same effect on Germany that the 1870s German unification had on Prussia?

The EU will not be a democracy until ..

The EU (or Eurozone or Europlus) will not be a democracy until there is a federal income tax (US style).

Until then the richest people (via their national governments - "paymasters") demand a bigger or almost total say in EU affairs. That would not fly in a real "European Union". It does not fly at national level of course (although some try it at that level too).

Time for EUropeans to get their act together and be consistent!

According to my fellow European tweeter @peresuau, the new 2012 Spanish budget: (includes) a 25% drop in research and education and a 34% in R&D projects. He calls it a big mistake.

My comments:

While I have argued, when the Europe 2020 (see 1) the official European Commission pages on it and 2) my submission to the public call for comments that preceded the finalisation of the "strategy" (long post) on January 15, 2010) (1) that R&D, especially academic one, is not the panacea that will save the EU economy or the only or even main way to innovation or entrepreneurship by EU companies, I cannot but note the inconsistency between the Merkozian Fiscal Compact and the EU2020 "growth strategy" to which the Spanish case serves as a great case study!

Isn't that drop in Spanish R&D a violation of the EU2020 growth strategy/plan?

In addition to the current sacrifices, which include salaries, pensions, potentially the European Social Model, what else will be sacrificed due to EU leaders' (at this time mostly conservatives) inability to stand up to the global finance "bully", be it for  ideological (German ordoliberalism or classic or neo liberalism) or other reasons (see Max Weber work of the spirit of capitalism)?

Who can blame Spanish and other researchers if they move to other Euzozone or EU states or the US to seek work and "research content"?  Of course who should blame any citizen of Spain, Portugal, Italy or Greece who is moving to Germany or the UK practicing one of the core freedoms the EU was based on (mobility)? Well, to my surprise  in the spirit of nationalism and anti-EUism that is string around the EU27 nowadays, some do or even make fun of!

Europe - the EU must get its act together ASAP. The result in France on May 6 may help. But it won't be enough. And yes, intellectuals have to do their part, in a world and Europe that needs to rethink and redefine its values, its common senses, its golden rules, its paradigms, its narratives, etc etc etc. Just do it!


(1) By the way, can the European Commision at least decide if it's EU2020 or Europe2020? The Com doc that we commented on referred to a EU2020 Strategy. I see that the European Commission pages refer to Europe 2020!

From Remember Doha to Europe after May 6

Remember Doha (the Doha Round of WTO talks)? What happened to it?

Or even "Doha Lite"?

Some 6 years ago (December 2006), before the subprime led crisis, the Euro crisis, a few years after the dotcom crisis (bubble), and before the real estate bubbles in the US, Ireland and Spain (et al), before the global oil and staple foods prices crisis, I was proposing that: The "kingdom" of economic liberalism is not "grounded" that well on this earth! The ongoing troubles of the Doha Round of world trade talks are evidence to that. What do people prefer, to work as blacksmiths in a fair trade based job market or as knights in a free market based job market? (from my post "The Pirates of the Globalean and the curse of liberalism?", 4/12/2006).

The "rest of the wordl" compared to the US and the EU (and its (so they think) developed grand economies of the G7 (UK, Germany, France and Italy)) plus Japan and Canada, has been claiming its fair share on world GDP and wealth in general. That means (see rough calculations in my recent post, 3/2/2012: "If GDP per capita in USA, EU, China, India was to converge then ...") a decline in the US and EU's share of the world GDP and their GDPs per capita. Which is already happening and one can expect acceleration in the near future, unless:

As I have argued in many posts and tweets, the WTO "global trade league" does not seem to work for the US and the EU anymore since China entered (December 2001) and showed its communist-capitalist muscle. The troubles of the WTO talks in 2003 in Cancun prompted the EU, the US and others to sign bilateral trade (and sometimes wider "economic" or even wider) agreements. Also, it prompted the establishment of new or the evolution of existing "regional" entities (see eg ASEAN, ASEAN-China, Mercsur and UNASUR, even the African Union project) and the Trans-Pacific Partnership (TPP) aka Trans-Pacific Strategic Economic Partnership Agreement.  Not to forget NAFTA and CAFTA. And the pan-American free trade area that Bush tried to promote but fell flat on its (his) face in Mar Del Plata at the 4th Summit of the Americas in November 2005. Which was by the way followed a month later, by another major fail of the WTO Doha Round of talks in the 6th WTO Ministerial Conference in Hong Kong, 13–18 December 2005.

Political science and politics have developed in recent centuries different models for the re-distribution of wealth inside national confines. Now they have to deal wit it at global level-framework, not national. No wonder many are fighting against a world government (with a world parliament) tooth and nail! Even at the European level, the Euro crisis is partly a crisis of redistribution of wealth at European level or even the mere development of "EU interest" or "Eurozone interest" instead of national interest!

No wonder that an oxymoronic anti-globalist (and even anti-EU) libertarian anti-tax, anti-state, austerity-hawkish political philosophy has evolved. How does one blend libertarianism with nationalism, well that is a political "bartender's" secret that still eludes me.

So, are the social democrats or the left of center more generally ready to govern in Europe? Yes, as long as it finds a political model for EU or Eurozone "interest". The same applies to the centrists in Europe (who are they? that is another post). The conservatives are torn between the German ordoliberal and the classic or neo liberal thinking dogmas (eg the UK Tories). Against a backdrop of the Belgian issue between Vlaanderen and Wallonie or the after-math of the German re-unification pains of the 1990s that still linger to some extent.

Are the German Pirates a view of things to come in European politics? Too early to tell.

What will happen in the Eurzone and the EU if Hollande breaks up the Merkozy affair on May 6? Well, on verra, but can it be worse than the existing situation (of Merkozian politics and economics)? Nein, non. ochi.

Never mind Social Media and Finance. The value of Strategy and Philosophy in 2012.

Philosophy talks about enlightenment and wisdom.

Strategy talks, in effect, on awareness of the external (environment) and the internal (to the company).

Know thyself and understand the word. Then you are in sync with the universe and at peace.

In the era of social media (monetization, SEO, likes, friending, etc) and finance (CDSs, etc), it is the real economy that still the real economy. Of course the real economy pf 2012 cannot rely on construction (see problems with real estate bubbles in the US, Ireland, Spain) or traditional manufacturing.

But, my point, in this note is, that Strategy and Philosophy, albeit not buzz words of the times, are crucial tools in surviving and prospering in these times, or at least, being "happy" or content (for persons and for organisations, including corporations).

PS. The above does not mean that Finance and Social Media are or should be unimportant. Simply puts them in the right perspective and speaks out on the value of Strategy and of Philosophy in biz, politics and life in general,

May 6: Europe's Super Sunday?

Sunday, May 6, 2012 is shaping up as something like an electoral type of Super Tuesday!

To the 2nd round of Presidential elections in France, which is crucial not only for France but also for Merkozy,
European social democrats, the Eurozone and the EU., elections in the German state Schleswig-Holstein that can prove crucial for the whole of Germany and for the Eurozone and EU, Presidential and parliamentary elections in Serbia with state, provincial and local-level elections to be held at the same time, the addition of
Parliamentary elections in Greece: does make May 6 a political Super Sunday for Europe!

EU's Fringe?

Given Germany's stance in EU and Eurozone matters in recent years, how many EUropeans would rather their states were members of the United States of America instead of a Germany dominated EU - Eurozone?

Maybe in a parallel universe they are?

The Protestant Ethic and the Spirit of Merkelism

1) Some claim that Ordoliberalism is the key to understanding not only Merkel's but also Germany's POV on the Euro crisis issue, fiscal union, the fiscal compact, austerity, etc. I am not convinced (not yet at least).

2) I am sure most of you are familiar with Max Weber's 1905 book "The Protestant Work Ethic and the Spirit of Capitalism" (for a summary, see Wikipedia). Following on his theory:

Of the 17 Eurozone members, 3 have a dominant or somewhat dominant Protestant tradition (but not necessarily Calvinist, see eg Finland (Lutheran)), 2 Eastern Orthodox,1 atheist, 11 Roman Catholic.

Does that profile of traditions across the Eurozone affect the appeal of Merkel/CDU socio-economic thinking?

Eurozone: Cheap money, what cheap money?

I noticed a crossfire that took place about a month ago between the President of Brazil and the PM of Germany (see a press report by China Daily).

"Rousseff (note: President of Brazil) complained rich nations are responding to the global financial crisis with easy credit and low interest rates — and that cheap money makes its way to Brazil, which has high interest rates and a strong currency" 

Since then, the BRICS initiative has taken place, including an plan to make the Yuan a global currency.

I am reminded that one of the reasons for the failure of the Doha WTO Round has been the insistence of leading developing countries to open their markets to US and EU industrial goods, retaining the tariffs that exist (yes. WTO "free trade" is not free, it uses things such as math formulas to calculate how much each economy is allowed to retain barriers to imports).

But my main point in this post is:

What cheap money? The Eurozone's (ECB) rate is 1.00% (used to be 1%, the previous Presidency raised it to 1.5% and the new one back to 1%) but compared to the Bank of England rate (0.5%) and the US Fed's (0 to 0.25%), the Eurozone's interest rate is high!

By the way, ever wonder why the Eurozone has had to maintain a such a differential vis-a-vis the UK and the US?

Wave goodbye to the Western Way of Life? But which Western way of Life?

The initial impetus for this analysis was today's (Friday) release of the US Department of Labor's data for March re employment (see a press report by BBC News) as well as a phrase from a statement by the US Secretary of Labor Hilda L. Solis on March employment numbers: " we need to invest in community colleges and job training programs that prepare our workers for 21st century jobs".

21st century jobs? Studies have showed that the biggest bulk of jobs creation in the US has been in low-skill - low pay jobs such as carer and related.

Plus the US medical sector (mostly private as opposed eg to Europe) has been a job creator even in the midst of the US economic crisis. Please note the continuing resistance by lobbies and others to Obamacare, even without the original public option.

Please also note my view that the No 1 target of the so called "Euro crisis" is not the Euro but the so called European Social Model which is inter alia based on public health insurance and healthcare services.

Take also 8 minutes to listen to my theory on the fundamental causes of the US subprime crisis.

You may also want to read my February 3 post "If GDP per capita in USA, EU, China, India was to converge then ..."

Ms Solis argued inter alia: "We've added nearly half a million manufacturing jobs since February 2010. This week, major U.S. carmakers announced that their U.S. sales rose last month to the highest level in at least four years.... the industry has seen a complete turnaround, adding more than 230,000 jobs since the summer of 2009".

Yet for decades now, manufacturing jobs have been moving East. before China entered the WTO on December 2001, Japan was the main target of complaints by US lawmakers. Since China, a 1.3 billion entity still in communist political mode but with a capitalist model of economy in operation in recent years, has entered the "WTO trade game", the impact on the US and the EU (especially the Eurozone with its inflation phobia that has led inevitably to a hard Euro in most of the 10 years since the intro of the Euro notes and coins on January 1, 2002) is even more remarkable!

Are environmental policies and tools, prompted by global warming, the "wooden walls" (see Ancient Greek history) that will save Western world manufacturing and related jobs?

How about the so called "Western Way of Life"? First of all, what is it? Is it the European Social Model (watch it being destroyed in Greece and other PIIGS as well as in the UK) or the US "success or bust" model (aka venturing without a safety net)?

So what if US unemployment remains above 8% (with more low skill - low pay jobs) and EU unemployment is soaring? As long as the financial - health insurance - healthcare sector is doing well in profits and in jobs ......

Note also the recent initiative of the 5 BRICS countries/economies to stand up to the current "world order". as well as India's refusal to allow its airlines to fall under the EU's  transport CO2 emissions trading scheme.

Plus, as long as listed companies are reaching financial results expected by analysts ..... Times are too financial and too jobless. Or is it because US and EU GDP per capita is starting to converge with China's via "free trade" etc? Growth without jobs (or with low pay jobs)? It's called productivity by some,isn't it? Look at what's happening with Greece's internal devaluation experiment!

And look at how the prices of things are rising in EU member Bulgaria as well as non-EU Albania (prices of food in Tirana are reported to be as high a in pre-crisis Athens) in spite of the fact that salaries in Bulgaria and in Albania have risen only a small fraction compared to the rise in the cost of living! Within the EU, people from the new member states have/are trying to partake in the western way of Life by moving. Romania's 2011 census reported a 12% drop in population compared to the previous one, leaving the country with just over 19 million inhabitants compared to 22 million only a few years ago. Trade or migration?

At the global scene, people are trying to partake in the Wsstern Way of Life either via economic migration (in spite of it being discouraged or outlawed by most destination countries) or via trade.

So as billions of people, in China, in India in other BRICS and other countries around the world (and in "New Europe") are making a rightful claim to the Western way of life, that way of life disappears. Means it was not viable to begin with, ie it was only meant to work for a % of the world, an elite?

In the "old days", eg in Ancient Sparta, the Spartans exploited an 8-fold population of the neighbouring Messinians as helots (slaves). To protect against their uprising, they (the Spartans) became soldiers for life and their state a military one. Compare that to the Athenians. But the Athenians' wall, built by Themistocles, the same Athenian who masterminded the win in the battle of Salamis, turned against them during the siege by the Spartans during the Peloponnesian War when an outbreak of the plague (be it Typhoid Fever or other, see About.com) killed 33% of the population, including Pericles.

The world as we know it via History, be it Rome, Middle ages Europe, etc, Charles Dickens' England, etc was mostly a world were elites enjoyed things the masses could not (that 99%).

It can be argue that the industrial revolution and the ensuing mass production techniques provided for a certain way of life for a much wider % than just the elites. To get a rough idea: One can calculate the 99% based on the whole world for this period, ie the Western world as the area of the planet where the elites lived (the 1%, 1% of 7 billion is 70 million, the combined population of the US, Canada and the EU is around 800 million, thus the world's 1% elite is 9% of USA+Canada+EU! Rough calculations, but indicative of the West - rest of the world divide.

In any case. it was in the early 1990s in Brussels that one day my secretary noted that she was seeing beggars in the streets and that was a new thing, in her eyes. I replied that people in need were always present, but in distant parts of the world. Now the "segregation" was diminishing. It seems to me, 20 years later, that I was right. More and more rich people are not in the "West" and more and more poor people are in the "West" compared to the industrial age. A new phase has been on, for some time now.

But does one more poor person in the West make for one less poor person in eg Asia, via trade? Not necessarily, because that value foregone by an average Belgian may not be pricked up by an average Chinaman but by a Western company producing in China (some 50% of China's exports are still not made by Chinese firms in China but by "Western" companies).

Yet, instead of the West's states and welfare systems helping Americans and Europeans adjust to the earthshaking relocation of value (not people) from the West to other parts of the planet, a Euro crisis is used as an excuse for cutting down that European Social Model and passing many fillet parts of it to the private sector. Instead of America getting a public option, Europe is losing its own "public option". That was the main game changer of the last 2-3 years.

No wonder many Europeans, especially, and for now, South European ones, are experiencing a sense of vertigo. The economic poles are shifting. It is 2012.

Food for thought:

a) Can capitalism work to make everyone better off (ie with a minimum number of "losers")?
b) Is modern finance as we are experiencing it in recent years a core element of capitalism?
c) Is China capitalist, communist or both?
d) Is the real "problem" economic immigration or trade?
e) Can "Devaluation" take place successfully in the West to allow for the growth of the rest of the world? By "devaluation" I mean a wider equivalent of the "Greek experiment", ie a reduction in wages that is met by a reduction in the cost of living as well. In Greece. it does not seem to be working. Wages are falling but the prices of most goods and services is not.  Take another example. London real estate prices. Can the London economy sustain them? What will happen after mid-August?

In recent years I have talked to many persons who experienced the Soviet Union and the Iron Curtain first hand not only as children but as adults as well (eg until the age of 25 or 30+). Almost all miss the certainty that existed regarding the basics: a job, basic food on the table, a roof over their heads, access to free healthcare.

I will wrap up this post with a piece from Gary Hart's speech at the MIT auditorium in 1984 (I was there): The enemy in South America is not communism, it's poverty.

Draw your 2012 analogies!

From the center or from the fringe?

"We don't win by moving to the middle. We win by getting people in the middle to move to us and move this country forward," said Rick Santorum, the GOP candidate on Tuesday night. 


His strategy does not seem to be working, against MItt Romney in trying to get to the GOP nomination.


On the other hand, has the strategy he describes led to political successes in many European countries in recent months? At what cost? 

Euro-Oxymoronic?

The Euro has risen again, to 1.3342 USD, while Euro unemployment has reached record high. But Inflation is low, to please the inflation-hawks. The Eurozone, in spite of all its problems, remains the core of the world most lucrative export market for Chinese, US and other products, including German ones (40% of German exports in 2011).

Oxymoronic?

PS. Let's not forget that the introduction of the Euro (with 12 members) deprived many of 11 (12-1) tools of speculation (not to mention revenues lost from FX between those 12 currencies). It seems that they recovered those tools via the CDSs that applied to sovereign debt. The rest is History (still in the making).

BRICs, Brazil, UNASUR and the WTO

Food for thought:

Does Brazil want to help UNASUR evolve or to focus on the BRICs group?
Can it do both?

In addition, is the BRICs initiative another symptom of how irrelevant WTO how become?

The return to reality

The return to reality passes through the real economy.
That applies to the EU and to the US.