Negotiating the Future

There were two headlines almost side-by-side, for a few minutes at least, on CNN Money page recently. One was about a failed meeting of EU finance ministers attempting to resolve the Greece crisis. The IMF Director was quoted as saying scornfully that “What we need are adults in the room.” One columnist commenting on the crisis remarked that Greece’s problem was that they lacked the competence to manage their finances properly. The scorn at Greece’s “childlike” attitude was obvious. Since then, other negotiations have failed and Greece faces potential default and departure from the EU after Tuesday. We shall see. But one interesting comment posted on CNN about the crisis was, “Wouldn’t Greece be better off owing more?”

The other CNN headline was about the anger and derision leveled at school administrators for disciplining a cafeteria worker who fed a hungry child who had no money to pay for his meal. Hmm. A malnourished child not in debt versus a healthy child in debt – how does that come out? Think of the budgetary impact if that were wide spread.  That was not a real issue of course, for everyone’s ire at school administrators reflected a shared view that the future of a child weighed far more than the cost of a school lunch.

Perhaps there should be more children in the room when Greece and Germany are negotiating, to represent the many Greek families struggling with a real unemployment rate now estimated at over 30 percent and a 25 percent drop in Greek GDP brought on by withdrawal of liquidity and demands for enforced austerity from the Germans. It might remind participants of the human costs of what is at once a deep cultural conflict between nations and an even deeper threat both to the EU and to the future of the nation state.

As a cultural conflict it is a whopper. Germany possesses both a “Protestant Ethic” regard for frugality as a virtue and an export-based economy which requires low wages and overheads as a key to success. Their culture imposes a stern preference for austerity as the solution to all problems (except at Oktoberfest.) But doing it the German Way is just not in the cards for countries like Greece. Over millennia, Greece’s major exports have been Democracy, Philosophy, the Olympic Games, architecture and small amounts of olive oil, feta and wine. Imagine telling Greek leaders not to listen to the voices of their people! Greece does not make heavy-duty export items. People come to Greece to experience the good life, if only briefly. That is their major product. The Greek crisis arose not because of Greece doing anything different from what they have always done, but because the global financial panic in 2007 caused an abrupt withdrawal of funds by international financial corporations and consequent loss of liquidity. And the German remedy destroys all the things Greece has always been attractive for. Tourists do not come to view factories and starving children.

There’s been a lot of furor about Greece leaving the EU, an organization they probably should never have joined in the first place. Their departure certainly would highlight the built-in fragility of a group that is too tightly bound to function with separate policies and too loosely bound to function as a unified group. And it could threaten the future of that alliance. But the real conflict is not state versus state, but corporations versus states. Greece is functioning as a traditional state, while Germany is serving as the voice of international financial corporations. If Greece becomes a “failed state” as some fear, they will be the first nation to fall under the onslaught of corporations, a signal that international corporations are not only capable of destroying nations in the name of profits, but are prepared to do so.. And it is the state that serves as both the voice and the protector of their people. Corporate profit calculations do not include the cost of mal-nourished children and ruined lives.  That is why remembering children is important in those negotiations rooms. If remedies, such as debt forgiveness, are not found that preserve traditional Greece the future of the small traditional nation state looks bleak indeed.

Harnessing the Devil

Back in East Texas, when you had just found a good solution to a bad problem, you “had the Devil on a down-hill pull.” That seems to be what’s happening with regard to China’s new law censoring Non-Governmental Organizations and tightening the ”Great Firewall” of censorship on China’s portion of the Internet. A large group of international corporations that do business with and in China have banded together to say that China’s new laws are “bad for business” and must be changed or risk China’s loss of their business.  The Devil in this case is both censorship and economic determinism, so it’s actually more of a tug of war. But however it works out, it’s a welcome pressure against oppression and represents economics at its best as a force for good. The Devil of economic determinism is being put to worthy purposes. 

It reminds me of a prior post of mine about the differences between physicists and economists, (Economics and Cosmology). Physicists and Engineers discover that gravity is the most powerful force in the universe, capable of creating black holes and moving galaxies, say “fascinating”, and go out to build ladders, stairs, cranes, skyscrapers, airplanes and rockets to the outer planets. A friend of mine who pilots the Messenger and New Horizons rockets, and piloted the rocket that safely landed on an asteroid, actually started the asteroid mission by looping the rocket around the sun in order to gain the gravitational momentum to get it to the asteroid belt. Gravity was both a friend and an enemy. Economists on the other hand determine that economic considerations are the most powerful motivators in human life -  “economic determinism”, say “well, that’s it”, and sit like the proverbial bump on a log muttering “TAANSTAFL” (There Aint No Such Thing As A Free Lunch). If you propose something like an embargo or economic blockade such as with South Africa during Apartheid, which are enactments of TAANSTAFL, they just look gloomy and mutter “won’t work, hurts profits and it’s not strong enough.” Well then, figure out how to build a stronger ladder or an elevator – that’s what the engineers did.

The problem is that economists have lost sight of the truths that economics is not an end in itself but a tool to further human happiness and that there are more facets to happiness than economic gain. If they had only taken or stayed awake in a social science class that covered the Maslow Hierarchy of Needs, they would have learned that satisfaction of economic needs by itself is one of the lower rungs of that hierarchy, necessary to cross but simply a route to satisfaction of higher needs, not a destination in itself. The engineers understand that gravity is indeed the most powerful force but sometimes you need to go higher.

What we need is a new paradigm of economics as a tool for satisfaction of higher human needs. Economics originally had that. Aristotle coined the word to describe management of a household, and it takes a lot more than money to make a happy household. Adam Smith invented modern economics but as a Moral Philosopher deplored the indifference of the rich to the needs of the poor. Keynes invented the economics conservatives so despise during the Great Depression years to improve the overall happiness of society. The version of economics we practice today focuses on total GDP and along the way at possibly reducing unemployment, akin to the antiquated view that the only Vitamin C you needed was the amount to eliminate symptoms of scurvy. The prior wiser vision of economics has been lost and needs to be regained.

Perhaps the necessary shifts could be begun by adopting not the current simple-minded goal of just increasing total GDP, but instead, of increasing median per capita net wealth. If, in the process, we increase total GDP – good - but not at the expense of lowering the median level. That, after all, is supposed to be what democracy is all about. Then, after working as a society to get past those lower rungs of the hierarchy of needs, we could move on up the ladder. Yes, economic determinism is devilishly strong, but we as a nation have the wits to climb past it. It’s time to harness the Devil.