European Union Resurrected. Arafat Exhumed!

Too much to do in this season to blog seriously. Also my continuing international conversations with the Dane I call Frans command some of my time. (They take the form of “Comments” to my essay entitled: “Challenge From Social-Democrat Denmark.”)

The Norwegian Nobel Committee is continuing its pathetic descent into irrelevancy. It just awarded the Nobel Peace Prize to the European Union, N. S. ! The awarding of the prize to Barack Obama for what he was going to do was just one stop on the way to oblivion.

I guess the EU deserves the prize because not even two of the 27 members have begun eviscerating each other at all for years. Way to go Europe! The prize also acts as a sort of resurrection for a dying dream.

The fall began when the Nobel Peace Prize Committee awarded the prize to the arch-terrorist Yasser Arafat. Want the prize? Murder many people and then, just stop.

Speaking of Arafat, notice the big silence following the exhumation of his body? An international team of forensic specialists is looking for signs of his having been poisoned. Big, big silence.

I think I know what killed him. Here are some hints: Why would you send your revered national leader to die in a foreign country? Why France? What are the French good for? What can they be counted on for? (Obviously, I don’t mean food!) Why a military hospital for an obviously dying man? What does military discipline add to the advantage gained by sending him to die in France?

No poison will be found.

Greece: What’s Going On? (Revised slightly)

The Greeks are rioting in the extreme cold. They have been rioting now for weeks to protest austerity measures their coalition government is attempting to impose on them. It’s an emergency government trying like hell to borrow money from richer countries, especially Germany, so Greece, the state can pay its bills. The creditors and would-be creditor countries headed by Germany are saying such things as (I am paraphrasing):

You have many more public servants per 10,000 citizens than we (Germans etc, ) have. You will have to reduce the number by so many thousands by such and such a year as a condition of our lending.

Your government’s tax receipt as a percentage of GDP is much smaller than ours. There is also abundant evidence of massive tax cheating that is unheard of in our countries. You are going to have to improve the collection of taxes by such and such. (Note that this say nothing about tax increases.)

The creditor countries are all democracies whose tax-payers have the ability to express what they think about the bailouts of other countries. It’s their money. Their national politicians are lending to a nation-state that my local banker in his best days would not have given a second look to. The long and the short of it is that Greece, the country, is a bad credit risk. That’s why its government would have to pay something like fifteen percent interest if it could borrow money on the open market. For a comparison, I have US Government bonds purchased six years ago that pay 4,6 %. That was considered very good then. It’s even better now.

Note that there is no info about what private Greek concerns have to pay to borrow on the open market. I would not be surprised if they were able to borrow at normal rates. I wonder why this information is lacking. Massive privatization surely looks good with respect to a country where government finances are such a debacle. Big innovations work out best when it’s impossible to say: Situation normal; everything working just fine.

Ordinary Greeks are rioting against the prospect of cinching their belts a lot tighter. They are even thinking Communism again because this all comes as a surprise. For thirty years, they were allowed to believe that Greece was economically more or less a kind of southern version of Germany, not quite as prosperous and productive but pretty damn close and on its way there.

It was never true. Greece does not have much to rely on. Its workforce is less productive than that of any number of Third World countries. Its polity is definitely Third World, in the fundamental sense that citizens and businesses there cheat massively on their taxes. It’s like India in that respect, not like fellow European Union member Finland, for example. Greece is a tourist destination well favored by northern Europeans, including Brits and Germans. This means that in hard times, like now, this source of Greek income decreases drastically. Germans whose hours have been cut may cut their Greek vacation by one week, just this one time. No big deal for the Germans; significant unemployment and income loss for Greeks.

Intellectually, Greece is like other European countries but worse. One gets the impression that the reality of capitalism and of its immense capacity to lift ordinary people out of poverty never made it to the public discourse there.

I am well aware of the fact that French public elites make antiquated left-wing statement in public all the time. You can even hear frequently on French media the words “les ouvriers” (though more rarely “la classe ouvrière.”) Yet, it’s fairly clear that they know they are pretending. Not many French intellectuals fail to notice that the 85% or more of the adult French populations who are not “ouvriers,” “workers,” also work. They use the petty Marxist ideology poetically, so to speak. Also, when leftist French coalitions come to power they display a clear sense of their understanding that capitalism is the golden goose one must not kill. The French public discourse reflects this in a sort of disjunct ed way: The poor are poor because the rich take all the money but one cannot do anything to discourage the rich. In Greece, only the first part of the sentence emerges. In this respect, Greece is more like Argentina than like Germany.

With this single vision of economic reality, when the state begins to fail financially, there is only one solution that comes to the average Greek’s mind: Raise taxes on the cheating rich (though everyone is cheating, including the poor.) They are flabbergasted when told that it’s not possible, that the Greek state has been living off borrowed for many years and that it now finds itself incapable of borrowing without agreeing to severe “austerity” measures.

Sounds familiar? One big difference: In this country, somewhere around half the electorate understands well the connection between the government’s living within its means and public solvency. Imagine a country where no one but politicians reputed “extremists” dares say anything like this in public.

Not surprisingly, ordinary Greeks fall from on high and suspect a trick or better, a sinister foreign plot when they are told suddenly that they must accept any degree of austerity. (On the foreign plot: There is a sickening picture of  ChancellorAngela Merkel in a Nazi uniform somewhere in the Greek press.)

Gross misinformation is one sources of the current Greek trauma. They did not know they were poor. Life in Greece was pretty good after all. There is another source that’s more difficult to grasp. I will describe it with a story.

Around 2003, my wife and I landed in Athens where her baggage failed to follow. We found ourselves downtown, in a business district trying hard to buy her some emergency closing. We were not dawdling because the temperature was in the 90s. It was about 2:30 p.m. on a Saturday. (The day of the week matters.) Quickly, it became clear to me that the clothing stores and the department stores around us were trying to close for the rest of the week. I recognized this phenomenon because I was familiar with France, another European Union country. Anyway, my guess was correct. All the stores were closed by 3:30 at the latest. (Yes, my wife was able to buy some clothes. Thanks for asking.)

Now, think about it: In rather prosperous France, long Sundays are common in the retail industry. And perhaps even more so in Germany and in Sweden and in Denmark. On the other hand, long Sundays don’t exist in the US or in Canada. They are unknown in Mexico and in India. And any one full closing day is unknown in Turkey, right next door to Greece. There, business is thriving seven days a week and far into the evening. Whoever makes the law in Greece thought that Greece was like France and Germany rather than like either the US or Turkey.

That’s a fatal if common mistake: By belonging to the same economic ensemble, the European Union, the Greeks came to believe that they had earned the same self-indulgent privileges as the Germans or the French. Belonging to the Union freed them mentally from the worry of catching up. In fact, the GP per capita gap between Greece and Turkey is smaller than is the gap between Greece and Germany. Economically, the Greeks are closer to the Turks, who would not dream of making laws to close on Saturday at 3, than to the Germans who have been making laws rolling back precisely this sort of practice.

Joining the European Union had some blessings for Greece. It also gave the country practices and delusions that were exactly what the Greeks did not need. With the notable and unfortunately highly visible exception of countries to which Allah gave a sea of petroleum, becoming rich involves hard work and long working days and weeks. It helps if you are able to sell the product of your efforts to the many, as belonging to the EU allows. It does not replace work.

Update next day: As I was writing, the Greek parliament passed a series of measures that was pre-approved by those who will provide Greece with another bailout. The package does not include the sale of the complete tourist resort, the operational airport, or the several casinos the Greek state owns. Imagine a gambling establishment  controlled by Greek politicians, or by any politicians for that matter.

Italy and National Debt and Everyone Else

I have been inactive. Some catching up to do. I will go straight to the Italian situation because I don’t see it addressed in the media with anything resembling insight based on good information. I am it by default.

It’s human nature I suppose to want simple solutions to complex problems and easy solutions to hard problems. Italy is out of the swamp and therefore, the Euro is saved and therefore, the sterco is not going to hit the fan on this side of the Atlantic. Reason: Old bad boy Silvio Berlusconi resigned. Not much analysis, not much going below the surface by the American press. I have to do their elementary work for them.

First, I suspect there is a monstrous confusion in the minds of many in the media between the accounts of Italy, the state, the Italian republic on the one hand, and the figures pertaining to the Italian economy, on the other hand. The Italian economy comprises a few highly visible major corporations such as Fiat and myriads of small businesses.

The Italian Republic is in debt. The Italian economy is doing well. It’s on the healthy side of economies of developed countries. It’s a lot better than Japan’s for instance. It’s also true that, as elsewhere in Europe, the budget of the state is large relative to the national economy. My bet is that it is smaller than say, in France, or in Sweden, or even in Germany, because the black economy in Italy is so large. The Italian government is just not able to get its grubby little hands on much of what’s generated within Italy. Nevertheless, it’s true that the government budget and the private sector economy influence each other in Italy, as they do elsewhere. That’s not excuse to confuse the one with the other. My wife and I influence each other. It does no mean that we are one and the same. (For one thing, she is both attractive and intelligent.)

Berlusconi did not accumulate the large sovereign debt of the Italian Republic. The debt goes back a long way, some say to the aftermath of WWII. Successive governments just left it alone or they contributed to it.

Technical note: There have been about sixty of those governments. Italy is a parliamentary republic where the head of the largest party that can gather a majority in parliament is automatically head of government. Under that system, there may be many different “governments” with much the same people, the same members of government but in different groupings. Thus the large number of Italian “governments” does not imply that same degree of instability it would in other countries. Moreover, transitions from one government to another are always impeccably peaceful in Italy. It’s a democratic country, period!

Berlusconi had become unpopular with many Italians, of course. That is in large part because of his theatrically amorous peccadilloes, some of them technically illegal. Yet, Berlusconi gave Italy about ten years of political stability, more than any other political figure before him. He was far from being overwhelmingly rejected by the Italian people. He kept his mandate for the better part of ten years. In Italy, as in all developed democracies, that isn’t possible without the assent of the female part of the electorate, by the way. It’s no absurd to speculate that he hit a chord as a showman, in that part of politics that is show business. “He acts like a buffoon but he is our buffoon. He reminds me of my uncle, of my father, of my brother, of me, if only I were braver.”

In the meantime, in tens of thousands of small plants, of small businesses, Italians were doing what Italians have always done. They worked long hours and hard, – unlike the French, for example -and creatively. And again, Berlusconi did not accumulate the public debt of his country and neither, did his generation of Italians, by and large. And unlike the case in France and in this country, for example, he national debt is mostly held domestically. Those creditors who will use it without delicateness know that they will sink their neighbors, their brothers, their children.

Those who dislike Berlusconi, those who think he gave Italy a bad name, are largely those who failed for most of ten years in taking away his majority in parliament. The fact is that when Berlusconi resigned yesterday, he was still the leader of a democratic majority of Italians. If he had achieved that majority and if he had kept it through illegal maneuvers, the problem should have been fixed in the courts. Italy has an independent judicial system. No ambitious prosecutor found the material to indict him on proper government grounds. They had to be content with “rape” charges about a 17 and1/ year-old prostitute who never misses a chance to say publicly how much she likes him.

As elsewhere, we find in Italy a class of distinguished, refined people who have read maybe ten or twenty books in their lives and who deplore in the end the workings of democratic political institutions and the results they produce, all in the name of higher values. Does this sound familiar or what?

The Italian debt crisis is not over, nor is that of the Euro. The chicken is coming to roost. The richer European countries lived for thirty years or more higher on the hog than their economies allowed. Many kind of knew it but forbade themselves a straight look at what they were doing and at what they were doing to their children. (That would include my own French brother.)

And here is a political proposition no one else in the whole world dares say aloud: Different European countries’ capacity for self correction is not evenly distributed. The popular impression is right; the stereotypes are largely correct: The closer to the Mediterranean, the greater the capacity for self-delusion in this respect, as in others. The Finns and the Estonians are not Greeks. They will do what needs to be done, count on it. And here is the Delacroix Rule of Olive Oil and Self-Delusion. You can use it in constructing your international investment policies, as short-hand for deeper political analysis:

“The cheaper the olive oil in the salad, the greater the probability that the population is in denial about national economics.”

Good Husband Abuse

Once, more, I am getting tired of commenting on the bad policies of our government. They are not all very bad, only the vast preponderance of them. So, here is a story while I catch my breath. It’s about Greece, sort of!

My wife says that women are stingy; nothing you can do about it, and nothing they can do. Anyone who has ever worked for tips, anywhere in the world, will recognize the boulder of truth in that blanket assertion. Oh, the precious minutes wasted while six women co-workers search for the exact penny change at the bottom of their purses! Oh, their collective awkwardness in computing 15%; their total inability to compute 20%! And smart, taste-maker millionaire Martha Steward went to the Big House for the equivalent of fifty of my dollars!

One summer, we took a trip to Turkey. In the weeks before our departure, my wife spent many happy hours buying elegant summer clothing, appropriate for a hot climate, on sale and at a discount outlet. Her declared intention was to “kick ass” with her appearance, among the thousands of probably haughty and possibly malevolent European women we were sure to bump into on the way and within Turkey itself. When we reached Athens, at four in the morning, a catastrophe awaited us: Her suitcase could not be found. As an experienced male, I immediately knew I was in trouble. I seriously asked myself what the perfect husband would do under these threatening circumstances and I made sure I did not let myself off easily. I devised a prudent plan.

As soon as we were in the hotel room, I laid out on the bed all my still-impeccable laundered shirts and offered her any and however many she wanted. She practically spat at me with contempt, a strange reaction, given that my wife routinely confiscates any shirt I buy for myself that she likes.

After a few hours of sleep, and knowing it was Saturday in the European Union, where ordinary business is treated as a criminal activity, I got up, ordered coffee and woke up my wife. I convinced her that it was better to go out and shop than to wait for her suitcase (because any action is better than inaction in times of grave crisis). I informed myself about likely shopping locations with a lady hotel receptionist I judged elegant. (I am pretty proud of my discernment in that respect.)

We took a cab, my wife beginning to steam redolent in the hundred-degree humid heat. Within minutes, we were in the middle of what was evidently a shopping district, but one that was in the process of closing for the weekend. Once more, I had underestimated, Old Europe’s resistance to the idea of earning a living: In a major city and a capital then preparing for the next Olympics, shops close at three or before, on Saturday.

Although I knew better, I humored my wife in her desire to shop around to compare prices. After four of five futile attempts in shops whose names she could not even read (in Greek characters), she was rebutted by the poor quality and high prices of everything she saw. In my mind, this was all to be expected, in the European Union. Yet, I had the wisdom to keep my mouth shut. My wife’s annoyance became like a thick fog enveloping both of us. I am proud to say that in that moment of peril, I acted like a real man and decided to do the obvious and to throw money at the problem.

I grabbed my wife by the wrist and dragged her to a branch of Marks and Spencer’s, the hoity-toity London clothier I had spotted two blocks away. I pushed and forced her to the second floor, Ladies Garments. There, quickly, with my own eyes, I spotted a superb Irish linen blouse for less than one hundred Euros, a little more than a hundred dollars then. I knew there was nothing she could say about the elegance of the item. It was chic itself made fabric! But she was bitter about the price, arguing that it would cost no more than twenty dollars at Ross-Dress-for-Less, at least on a good day. I prevailed, nevertheless. Then, I used nearly ungentlemanly arguments to force her to the third floor to buy underwear.

The bill came to something under two hundred dollars, total. Not bad, given the nature of the European social-democratic state, its protected market, its high taxes, and the six weeks vacations it awards everyone. Amex Platinum had solved the problem, as it so often does. Having averted complete horror through my virile decisiveness, I allowed myself to be pleased with myself; I let down my guard.

I drew my wife to a bench, half expecting thanks. Instead, she was as somber as ever, with the closed, tight face of really bad days.

“You still don’t understand,” she blurted heinously, “Losing her wardrobe is the worst thing that can happen to a woman.”

“Worse than losing a child?” I asked.

“Yes,” she retorted without hesitation.

The next morning, her suitcase arrived, intact.

Then, we moved on to Turkey. Throughout our otherwise enjoyable vacation in Turkey, that linen blouse stood between us, as if it were a kind of silent but tangible evidence of adultery (mine, naturally). She wore it only once more, and reluctantly. When we returned home to California, she put it away it in her deepest closet.

One day, a month later, one of her female friends, a world traveler, remarked to her that she could probably get reimbursement from the airline. My wife dropped everything, listened like she had never listened in her life and took notes. The next day, she had contacted the airline. A week later, she received a check for full reimbursement. At last, she forgave me for giving her the elegant Irish linen blouse. Alleluia!

© Jacques Delacroix 2005, 2008, 2010

Chocolate for Thought

 

There is a pervasive feeling among thinking people that this country is not just facing a severe economic crisis but that we are losing something exceptional. That something is American exceptionalism precisely. Lech Walesa, the blue-collar hero of Polish freedom from communism put it well in a recent piece in the Wall Street Journal. There is only one of America and if it ceases being itself, the world is left in the dark, goes the thinking. It’s not reasonable to count on the debt-ridden government pension-sucking Europeans to hold up the flashlight. The fact is that several European countries are disappearing because they don’t make enough babies to replenish themselves. That’s the ultimate form of pessimism. (And no, this is not a racist statement, I am completely pleased with the fact that brown-skinned Mexicans and their children are keeping the American population growing. They make good immigrants. See my article on Mexican immigration, with Nikiforov, in the Summer 2009 issue of the Independent Review.)

Unfortunately, there is an innate humility among Americans which makes it difficult for them to think aloud about American exceptionalism. If there were not, twenty years of cultural relativism in the schools would make the very thought difficult to formulate: “Everybody is equal. We are not any better than those who suck their grandmothers’ brain – but only after they die, or than those who practice horrendous sexual mutilation on little girls, or than those who still practice slavery. Only American slavery was atrocious. Slavery in exotic locales is kind of nice, actually, if you look at it in its proper cultural context.”

One way to overcome this shyness and diffuse sense of equality in order better to grasp what we are losing is to consider Swiss exceptionalism about which no one gives a damn, not even the Swiss. It turns out that in the main respects, there is not one America, there are several. Switzerland is one.

Contrary to a widespread impression, Americans probably don’t have the highest standard of living in the world. I will use Gross Domestic Product per capita (GDP/cap) to discuss this matter further. It’s simply the total value of the goods of all kinds produced in one country in one year divided by the number of population. If you care to look, you will find out why GDP/cap is not a good measure of anything because, blah, blah, blah. Or, you can simply trust, for the time being, my assertion that it’s a fine measure for our limited purpose of illustrating the standard of living in similar countries with fairly large economies. (Check my credentials to discuss such matters if you wish. Go through my vita, linked to this blog, and then, through Google. Go ahead, every time someone Googles me, I get a shiver up my leg, like Chris Matthew of MSNBC when he thinks of Barack Obama.)

The GDP per capita I am using is computed “PPP,” Purchasing Power Parity; it take into account different costs in different countries. So, it can be used to compare what ordinary people can really buy, at home, with their share of GDP. It compares what’s comparable. In this essay, I am only referring specifically to advanced developed countries. A short walk in any street of any town of any country I mention by name would persuade you that I am comparing what’s comparable. Those countries are not identical but they are similar. Americans have larger cars than the French but the French enjoy longer vacations, as do the Germans. The Swiss have smaller cars than Americans and shorter vacations than the French or the Germans but, in their country, just about everything works, which is more than we, or the French, can say.

For 2009 Luxembourg’s GDP/cap was above $77,000 and Norway’s above $59,000 while the US ranked 10^th at $46,600. Switzerland ranked 18^th at $41,600 By way of comparison the mean for the whole European Union was $32,700 . France stood at about that level. (All of the above figures are from the CIA World Factbook, available on-line, consulted 2/16/10.) For 2009, in raw terms, the French were thus collectively about 20% poorer than the Swiss. If you had made the comparison ten years ago, the French would have fared worse in comparison with the Swiss and the Swiss much better in comparison with Americans.

Luxembourg is really rich in every sense of the term plus it’s a fiscal paradise which makes comparisons difficult. Norway possesses important petroleum resources that are well administered and whose proceeds are well distributed. The other seven countries that rank above the US are oil sheikdoms or very small, which also makes comparisons difficult. The US has over 303 million people, France has 56 million, and Switzerland only about 7,5 million people. The point I want to make is that the Swiss are richer than about 95% of all people in the world or more and, more importantly, that they are richer on average than the French, right next door.

Switzerland is also smaller than France on every dimension. It has a small internal, domestic market. It’s not part of the huge European Union market, unlike France. (It does have a limited free trade agreement with the EU) Its climate is similar to that of France. Unlike France, Switzerland has almost no natural resources aside from expensive hydroelectric power. The Swiss are not even obviously better educated than the French. They spend the same % of their GDP on education as the French. That’s more in absolute terms since the Swiss GDP is higher. But France has obviously more top-notch schools at the university level than its neighbor. Contrary to a widespread impression, Switzerland is not primarily a financial country either. Its service sector, which would include finance, is proportionately smaller than that of France. It’s also smaller than the German and the American service sectors. If anything, Switzerland is a more industrial country – in the conventional sense – than France, and Germany, and the US. The usual common-sense explanations for the Swiss superiority in general don’t match well the Swiss reality.

For reasons I can’t go into here, many people like “cultural” explanations of socio-economic phenomena. Most of the people with such preferences don’t really know what they mean by culture. Yet, by any definition, language should be included under “culture.” With three and a half official languages, it’s difficult to argue that Switzerland has a distinctive culture. (It’s not impossible but it’s far-fetched.- Do you know what the fourth language, the one I call “half” is called?)

So, what does Switzerland have that France, and its neighbors, and most poor countries don’t have?

The answer is not about what it has but about what it does not have. Switzerland has little government. It applies with great rigor the principle of subsidiarity – which is also implicit i the US Constitution. Whatever concerns the village or town is decided at that level. What cannot be is decided at the canton level. Very few decisions ever reach the central, federal government. The Swiss central government is so small, you hardly every hear about it. The country’s President, unlike the French President (or the German Chancellor) is hardly ever on television because she has little to say that would matter to her citizens.

Correspondingly the weight of taxation is less in Switzerland than it is in France, not a little less but much less: It’s at 30% of GDP (like in pre-Obama America) against 46% in France. Now, let’s run this into real numbers, Suppose there were a political earthquake and the French taxation rate were reduced to Swiss levels. This means that in the first year, each French man, woman and baby, on average, would have about $5,000 to invest, to pay toward a car, or to buy more health insurance. What do you think this would do for the French economic growth rate?

To summarize: The Swiss federal government does not suck the substance out of its citizens and it’s too small to prevent them from doing whatever they want to do. The Swiss strive more than their neighbors who are in every way in similar circumstances and they thrive more. Does anyone think this is a coincidence?

Here the story ends. Until now, the US has been in most respects (including taxes) like tiny Switzerland. The Obama administration and its mad mentors in Congress want us to become like France.

As you ruminate these simple facts  also think of this: The giant food multinational firm, Nestlé, is a Swiss firm. Anyone who has no cocoa, no sugar and no milk to speak of, and who can sell chocolate to the world knows something worth knowing.