Passing Comments

The financial leaders of the European Union are almost ready with a rescue package for the being-pushed-downhill-fast Greece, according to an article last week in Spiegel Online International (“PIIGS to the Slaughter/Can the Euro Zone Cope with a National Bankruptcy?” Feb 22, 2010). Officials have been ordered to keep everything hush-hush for now, according to the article, but it offers a glimpse at some of the details.

The bones of the rescue package were put together by the combined efforts of German and French officials, the article states, who then brought the rest of the 16-country Euro zone financial members into the loop.  Excerpt:

The German Finance Ministry expects support for Greece to amount to between €20 billion and €25 billion. All the members of the euro group are expected to participate, including those, like Spain and Portugal, who also might find themselves needing help soon.

In coming together and drafting the rescue package for Greece, the Eurozone countries had no choice but to do so, according to the article. The speculators attacks on the euro and on Greece reportedly are showing no letup. Europe is under threat of member-country bankruptcies, the writers say in the article’s opening lines:

The consequences would be dramatic for the whole of the continent, especially German banks, which are highly exposed to risky debt. EU politicians are willing to pay almost any price to help the beleaguered countries.

I would say this article is a must read for those of us standing on the sidelines trying for a glimmer of understanding of what’s happening in Europe now. The Spiegel article lays out a detailed and comprehensible chronology of how this potential crisis has been created, and what may or may not happen in the future.

It’s also stomach-churning reading, if you don’t share the to-hell-with-everybody-but-me profiteering views of speculators and bankers gone bonkers.

A little further reading: (Why?)

“This Crisis Won’t Stop Moving” by Gretchen Morgenson, New York Times, Feb 6, 2010

“Just a few lessons” (editorial by Jean-Dominique Giuliani, Feb 10, 2010)

“Rescuing Greece. Economic union. Two different things” by Charlemagne, The Economist, Feb 12, 2010

“Greece turns on EU critics” Financial Times, Feb 12, 2010

“Eurozone overhaul” by Mark Schieritz, presseurop, Feb 12, 2010

“Greece Derails: Is Europe Far Behind?” by Simon Johnson, Huffington Post, Feb 12, 2010

“Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis” New York Times, Feb 13, 2010

“The Greek Tragedy That Changed Europe” Wall Street Journal, Feb 13, 2010

“Goldman Goes Rogue – Special European Audit To Follow” by Simon Johnson, The Baseline Scenario, Feb 14, 2010

Portugal – “Slow progress to avoid decline” by Guido Rampoldi, presseurop, Feb 15, 2010

“Senior Goldman Adviser Criticizes Greece – Without Disclosing His Goldman Affiliation” by Simon Johnson, The Baseline Scenario, Feb 15, 2010

“The evolution of Greece’s financial woes” by Stamatis Assimenios, Deutsche Welle, Feb 16, 2010

“Euro flounders amid Greek woes” by Siva Sithraputhran, FRANCE 24, Feb 16, 2010

“The Dutch Join the Germans in Rejecting Bailout of Greece” by Edward Harrison, Roubini Global Economics, Feb 16, 2010

“A reminder for the EU: America did not create federalism to back the dollar” by Charlemagne, The Economist, Feb 17, 2010

“Feldstein’s Euro Holiday” Paul Krugman blog, New York Times, Feb 17, 2010

“Wall Street’s Bailout Hustle” by Matt Taibbi, Rolling Stone Magazine, Feb 17, 2010

“Fear of Mediterranean Contagion Grows” by Julio Godoy, IPS, Feb 18, 2010

“Crash of the titans” Commentary, Kathimerini English edition, Feb 19, 2010

“Greece Asks for Details on EU Aid Plan” Spiegel Online International, Feb 19, 2010

“Greece not looking for EU handouts with debt crisis, says Papandreou” by Zoe Wood, Guardian, Feb 21, 2010

“Prospects For Financial Reform” by Simon Johnson, The Baseline Scenario, Feb 23, 2010

In 2009, Elinor Ostrom became the first woman ever to win a Nobel Prize in Economics. Ostrom received the great honor because she took a master scientist’s interest in situations such as this one:

…consider the management of grasslands in the interior of Asia. Scientists have studied satellite images of Mongolia and neighboring areas in China and Russia, where livestock has been feeding on large grassland areas for centuries. Historically, the region was dominated by nomads, who moved their herds on a seasonal basis.

In Mongolia, these traditions were largely intact in the mid-1990s, while neighboring areas in China and Russia – with closely similar initial conditions – had been exposed to radically different governance regimes. There, central government imposed state-owned agricultural collectives, where most users settled permanently. As a result, the land was heavily degraded in both China and Russia.

And this one:

. ..user-management of local resources has been more successful than management by outsiders. A striking case is that of irrigation systems in Nepal, where locally managed irrigation systems have successfully allocated water between users for a long time. However, the dams – built from stone, mud and trees – have often been primitive and small.

In several places, the Nepalese government, with assistance from foreign donors, has therefore built modern dams of concrete and steel. Despite flawless engineering, many of these projects have ended in failure.

These two examples are from the Nobel Foundation’s press release describing the unique value of Ostrom’s life work. Over several decades, the economist gathered information that illuminated the complexities and successes of problem solving related to shared resources, according to the release.

In particular, Ostrom challenged the conventional wisdom that the only solution to public problems is either to turn them over to the state to manage or hand them off to privatization. There’s a third way that often can trump both of these, according to Ostrom — let the users themselves create and run their own systems at a local level.

What’s more, the Nobel release noted, Ostrom’s work also has shown that there is a much greater willingness of individuals to participate in their own shared systems — for little or minor reward — than is commonly believed.

This month in the online edition of The Solutions Journal, Ostrom brings this same perspective to the problem of global warming. In the aftermath of the disappointment of Copenhagen 2009, the economist says it is important to recognize that climate change problems can be solved in other ways:

Acknowledging the complexity of global warming, as well as the relatively recent agreement among scientists about the human causes of climate change, leads to the recognition that waiting for effective policies to be established at the global level is unreasonable.

Instead, it would be better to self-consciously adopt a multi-scale approach to the problem of climate change, starting at the local level. This approach serves to maximize the benefits at varying levels and encourages experimentation and learning from diverse policies…

Read the full article here.

This morning, I read in the New York Times that the banks who helped Greece hide its massive debt  may actually now be pushing the nation closer to the brink of financial ruin (“Banks Bet Greece Defaults on Debt They Helped Hide” Feb 24, 2010):

…credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.

Crazy, right? Legal, oh yes. Perfectly. These days. (see here)

As I wrote about in an earlier post, I’m reading Jacques Barzun’s history of our past five hundred years (“FROM DAWN TO DECADENCE 1500 to the Present/500 Years of Western Cultural Life”).  Today, reading the Times story, I recalled something I just read in the Barzun book.

He is describing the 16th century Protestant Reformation,  a revolution against the widespread (Perfectly. Legal.) institutional decadence of the time:

The system was rotten. This had been said over and over; yet the old hulk was immovable. When people accept futility and the absurd as normal, the culture is decadent. The term is not a slur; it is a technical label.

When I took this photo in Rome a couple of weeks ago, I felt a bit of a louse. The horse doesn’t exactly look happy, and here I was flashing a camera a few feet from its face.

Today when I saw the article at ANSA.IT about the city of Rome issuing new regulations to ease the lives of the buggy horses there, I felt some sense of vindication, even though irrational, probably (“Rome gives buggy horses a break” Feb 22, 2010).

“The new regulations were adopted after a series of accidents over the past few years, which have seen horses maimed in the line of duty.

In addition to limiting the horse’s work-day to a maximum of eight hours with mandatory breaks during the hottest hours of the day, the city ordinance mandates regular check-ups by city-approved veterinarians.”

Animal rights activists aren’t satisfied with these regulations, according to the article, which quotes Animalisti Italiani head, Walter Coporale:

“We’re not going to stop lobbying until we get them off the streets for good,” said Walter Coporale.

“It simply isn’t conceivable for horses to be carting people around in 2010,” he said.

Coporale suggested that the city should have gone further in its regulations and allowed the buggy horses only along the shady trails of parks.

All this brings back to mind the compelling story of Nietzsche’s last sane act, which leading scholars insist is mythical. From the website Nietzsche Circle:

On January 3, 1889, Nietzsche collapsed in a piazza in Turin. It is oft repeated that he saw a coach-driver beating his horse, threw his arms around the horse in tears, and collapsed; however, this is but another apocryphal legend that cannot be corroborated with absolute verity. Italian Nietzsche scholar Verrecchia investigated and disputed this tale, which was originally published in an Italian newspaper somewhat akin to the Daily News called Nuova Antologia.

Whatever the doubts of the scholars, they can no more prove this didn’t happen, than its proponents can prove it did. So, going with my heart — I’ve read Nietzsche, I admire Nietzsche, and I say it did.

Today, in the first video of a series, TOL showcases a cross-section of citizens of the country of Georgia. Each one talks about his or her idea of what civil society actually is. May seem dull fare but, as usual, when people speak from their hearts in ordinary language about something important, it isn’t (“The View from Tbilisi: Change from the ‘Bottom Up’” by Tako Paradashvili and Nia Kurtishvili, Feb 22, 2010).

TOL is a non-profit organization focusing on the post-communist countries of Europe and the former Soviet Union. Intro to video:

As democracy in Georgia continues to develop 19 years after independence, how do Georgian citizens view their personal and collective responsibilities? Is civil society capable of fighting for people’s rights, and how well has it succeeded? To what extent do Georgians recognize and capitalize on the power they have to monitor their government and take part in building the country’s future?

(Perhaps it will occur to you, as it immediately did to me, that these same questions apply as well to the older democracies — to the United States at more than 200 years old, and to those of Western Europe — especially as some are facing a critical and defining turning point in their development –see here and here.)

What Is Civil Society? from Elene Asatiani on Vimeo.

The traditional, pre-dominantly Catholic society of Poland is being revolutionized by some of the country’s strong women, according to an article by Jan Puhl last week in Spiegel Online International (“‘Turbo-Emancipation’/
Polish Women Enjoy Post-Communist Success” Feb 18, 2010).

The article profiles a few of these leaders. One is Ewa Wieczorek, the editor-in-chief of the leading women’s magazine in Poland, Wysokie Obcasy (High Heels). Puhl describes the publication as “a cross between a high-brow cultural magazine and Cosmopolitan.”

“Articles describe people cheating on their spouses and women taking on traditionally male professions. They are about abortion, pornography and sex during pregnancy. They write headlines like “A Woman is Not a Lamp,” an opinion piece in which the writer argues that women should not have to respond to demands of sex, like a light being switched on.

They are the kinds of subjects that still shock many in a deeply Catholic country like Poland.”

Puhl writes that the magazine’s success signifies the huge, post-communist change in Poland:

In the last 20 years, Polish women have achieved as much as women in the West took many decades to achieve. For women in Poland, the end of communism translated into a sort of turbo-emancipation.

The article also includes interviews with a leader of the women’s rights movement in Poland, Agnieszka Graff, and with one of the country’s business icons, Irena Eris.

Keeping an eye on Iceland, which was hard hit early on in the 2008 financial crisis, I saw this article today at The National (“Iceland looks to green, innovative income sources” by Ben Quinn, Feb 19, 2010).

The small country is now plotting a comeback with some new and different ways, according to Quinn. Excerpt:

Over the past 12 months, scores of businesses have gone bust, unemployment has gone from being virtually non-existent to over eight per cent and the misery from a wave of home repossessions has been allayed only by a government moratorium.

According to entrepreneurs like Guðjón Már Guðjónsson, however, the very fact that Iceland’s economy is starting almost from scratch makes it the perfect laboratory for green ideas.

“We are rebooting the complete financial and political system of an entire western European country, so we have some unique opportunities,” said Mr Guðjónsson, the founder of Ministry of Ideas, a think tank dedicated to finding innovative ways to lift the country out of its predicament.

For the week of February 6 -13, Jovanotti’s exquisite “Baciami Ancora” (Kiss me again) is number one on Italy’s Hit Parade Top 100 (Il blog di Chartitalia). The song is from the newly-released film of the same name.

Lyrics here (in Italian).

John Lanchester’s newly-released book “Whoops!: Why Everyone Owes Everyone and No One Can Pay” is getting raves from critics. One reviewer described it as “Acidic, frightening, and sharply funny.”

The subject of the nonfiction book is the craziness of the world of contemporary finance, and how the lunacy came to be.

Earlier this month, Lanchester offered a peek into the material of his book when he spoke at an event sponsored by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) in London. I’m especially taken by Lanchester’s ideas because his thesis — my own favorite one — is that we as citizens can and must become informed.

The video is below and I hope you will watch it. As an inducement, I’ve excerpted a few comments.

In his opening remarks, Lanchester alludes to the longstanding idea of the two cultures of arts and science and the gap between them. He suggests that this gap no longer exists, but another one does:

It seems that there’s a much bigger gap between the world of finance and the general public, and that there’s a need to narrow that gap if the financial industry aren’t to become a kind of priesthood administering to its own mysteries and feared and resented by the rest of us. Lots of bright, literate, functioning well-educated people… have no idea about all sorts of economic basics of a type that financial insiders take as elementary knowledge about how the world works…

To people who don’t, as it were, speak finance the language can seem impenetrable and the interlocking ideas too complex to grasp or unpack. I’ve become very preoccupied by this gap which seems to me a real problem not least because the idea of a democracy implies an informed electorate. If you don’t have an informed electorate, which I would argue that we don’t really in this area, then the democracy is thinner, and I tried to do my bit in addressing that gap by writing about it.

Lanchester goes on to describe the faulty mathematical models used by those in today’s finance world. He details their persistent refusal to acknowledge the undeniable proof during recent decades that these models were broken. And, after describing the magnitude of the errors that occurred in 2008, he adds:

That is so wrong you just can’t put it into words. It shouldn’t be humanly possible to be that wrong. We’re talking about a drop in house prices causing people with bad credit to have trouble paying back their mortgages. And they managed to turn that into literally the most unlikely thing in the history of the universe.

And the really outrageous thing is that the banks are still talking about it as if they were unlucky.  As if it were some sort of freak, perfect storm or 100 year event, which is what the bank chairman in the U.S., has just been telling Congress. That’s absolute rubbish — it’s like closing your eyes and trying to run down the strand without opening them and then complaining that you’re unlucky when you get hit by a bus.