Sunday, October 19, 2008

We're all partners now

This is how Thomas Friedman, columnist of the NY Times finished his article 'The Great Iceland Meltdown'.
http://www.nytimes.com/2008/10/19/opinion/19friedman.html?hp
One of the questions he addresses in this piece is why there are less police patrols in Surrey/England after icelandic banks were rescued by a government which is factually broke.
Globalization is such a complex phenomenon that investigating it reveals a lot of connections between seemingly unrelated things. What do you think links the war in Bosnia 13 years ago with the London bombings in 2005? Well according to Ed Husain's book 'The Islamist' the massacre where 8000 Bosnian muslims died made it easy for the militant, islamistic groups to recruit new 'soldiers'. They told the folks on the streets something like 'see people who were previously the neighbours of our muslim brothers killed them from one day to the next. This could happen in Britain too. Today the Whites are nice and tomorrow they slit your throat and rape your daughters'. Fear, as the last eight years of Bush regime have also taught us Westerners, is a powerful motivator.
This is one of many impacts of globalization. You can certainly think about others, for example by mentally tracing back where the t-shirt you're wearing came from.

This is intimidating because thinking about all these things shows us that anything seemingly trivial has consequences, most of which can't be anticipated because we simply don't have the mental capacity to consider the multitude of results which our behaviour might generate. What complicates the matter further is that we're not taught to think in systems. We study maths, geography, languages and history in separate units as if they had no relation to each other. But everything affects everything. This is frightening. But it means that you are important. What you do is important. Where you invest your money, how you vote, how you raise your children and what books you read are not trivial matters. They have consequences. Maybe someone got the confidence they needed from you today to carry out a difficult job. Maybe you're making an important difference and don't even know about it.

Thursday, October 09, 2008

Ideas, Idiology and the Economy

I wasn't around in 1929 so I don't know if I shall believe the papers when they say it's the worst crisis since the Great Depression. But adjectives such as worse and worst are not going to help here. The economy is in trouble and after reading the papers for months the sentiments I gathered can be reduced to the following:
-'Banks get the profit and the tax payer bails them out.'
-'The main problem are the outrageous salaries and the greed of the managers'
and
-'This is the proof that capitalism and globalization have failed'

Undifferentiated and one-sided thinking like this caused the crisis in the first place. As a society we're trimmed to think that there's only a right and a wrong. The good and the bad guy. Conflicts and bad headlines sell papers, critical analysis does not. Just having an automated response (opinion or an idea about how to do something without working on a balanced assessment of the situation) is what is called a schema. Schemas make our day easier. These routines we've learnt happen, without having to think about them. Just imagine having to think hard how to exactly get out of bed, questioning whether there was a better way to use the shower or make your morning tea. You'd be exhausted before having started to work. So schemas are helpful. Schemas and habits (also thinking routines) are great but they have limits.

Schemas, habits and routines are not very helpful to solve complex problems. So let's look at some of the statements above:
Although there's undeniably a certain unfairness to the way some things are handled in a global company it's simply not true, that the common people don't profit from the banks or other corporations. Zurich is a good example. It's one of the richest cities in the world and it's going to have the first deficit for quite some time because the banks lost money and hence pay significantly less taxes. So without the banks our social security system, schools and other infrastructure would be in trouble. Pensions have been invested in bank shares so people have profited from the high return the banks generated without even knowing it.

Some salaries are indeed outrageous. But the companies concerned in this crisis are all financed by shareholders. Shareholders are people like you, your employer, your insurance, your parents etc. You have the right to not elect the board of directors, you can raise issues at the general assembly which have to be settled through a vote and you can sell your shares whenever you feel that the managers are not doing their job properly. But why would you become a shareholder in the first place? Maybe because of the return which the 'greedy bunch' generates? So if you don't approve of the company or its managers don't invest.

Is communism going to return? Capitalism has failed! Globalization has caused the crisis to spread! Those are the headlines now. Whoever wants a communist regime should do a bit of travelling. Go to Albania, go to Kuba, ask the Russians, Cechs or the Chinese who left their country why they did that. I'm not saying everything about it is bad. Apparantly a lot of Russian students are very well educated, same with Albanian fishermen. But did they have the freedom to study where they wanted to, read the books or have a shop without fraternising with the bureaucrats? And how about the brutality of all these regimes? How fair would it be to earn the same amount of money for sitting in a call center as you would while operating people and saving lives?
Without capitalism and globalization you would not be sitting in front of your computer right now. The countries with oil and other resources would be rich and all the others would be poor. How fair would that be?

This is not an ode to managers, capitalism and globalization. This is about taking responsibility for your investments, your voting record and about how important it is to study an issue in depth before making decisions. It's not about good or bad. It's about how to find solutions which work right now but are also sustainable.