Britannia Radio

The Economy’s Crisis: The Tumor Is In Its Political Direction

From the desk of George Handlery on Thu, 2011-07-21

Even if he travels, a fool remains a fool.

Sovereign debt and the Euro.

This chaos of the global economy is not caused by its participants’ inability to offer goods in a quality and for a price for which there is a demand. That (private) part of the economy that produces and consumes is in good shape. The tumor is located in the political direction of the economy. The crisis is one of confidence. No wonder. The Western pillars of the world economy have governments that are in debt because their clientism forces them to misspend the community’s funds. These indebted governments are run by leaders who, being blinded by their “eurocratic” doctrine, extend loans to broken systems. These national economies have no chance to climb back up on the greased flagpole on which they have slid down.

The question. There is a basic issue lurking behind the sovereign debt crisis of Europe and the USA. When we peel away the euphemisms such as that when they say “sovereign debt crisis” they really mean “default”, a central issue emerges. It is whether our time’s practiced democracy and fiscal sanity are compatible with each other.

There is reason for optimism. Mired in the present, as we must be, we know more about our current problems than we can be expected to guess about their future solution.

Caveat. The distant future will arrive much sooner than the professional pundits predict and we like to anticipate. Oh, yes, this includes the need to pay back the borrowed money that keeps the deficit alive and the theory kicking that reality has disavowed.

Success and its perils. Regardless of the implied contradiction, such a situation can arise. A case in point is the misfortune of the thriving Swiss economy. Even in the best of times, that animal has an odd feature. It is “small country, big economy”. A symptom of that condition is that several major global enterprises (for example Swatch, Novartis, SGS, UBS, CS, Brown-Bowery/ABB) are Swiss. Currently, in Europe, all public figures declare their loyalty to the €, while everybody but the lame rush with their money into gold and the Swiss Franc. Since part of the writer’s income is generated in dollars, its decline from 4.3 CHF to 0.82 confirms the sad story.

Some may wonder “how come”? Three numbers tell part of the tale. Unemployment in the EU-zone is 9.9%. In America, it is 9.2%, while in Switzerland it is 2.8%. The latter figure hides an oddity. Regardless of the low figure, employment is expanding. An invasion of qualified persons from Germany is taking place. The magnet works because of significantly lower taxes and much higher salaries. Regardless of the local Left’s efforts to ruin a good system, these numbers are a reflection of sound policies and efficient governance. Add to that a school system that is not geared to issue diplomas that qualify for unemployment. Much rather, the system provides useful skills that meet demands and serves as the foundation of high productivity. The outcome compensates for the consequences of elevated salaries and an overvalued currency. (Here, to confirm some of the embedded macroeconomic hints, the reader might want to cast a glance at the economic performance of the Baltic States.)

So, where is the “destroy” the topic’s introduction mentions? The threat comes from shrinking profit margins. Most Swiss products are sold abroad. Payments are made in US $s or €s. The crash of these currencies implies that good products are paid for in funny money. The results are not quite as funny as are the bozos behind these currencies. Even improving efficiency cannot compensate for the shrinking revenue. The consequences threaten the ability of the economy to absorb the resulting exchange related losses. Therefore, because of the confidence it enjoys, the economy behind the currency that everybody wants is in peril.

Traveling in the Kim Family’s Kingdom. TV in German-speaking Europe has shown a long report on a small group’s trip to North Korea. Material filmed in the world’s most reclusive country has the attraction that “dirty pictures” had in the Fifties. That was before Hugh Heffner came to the rescue of the eternally adolescent. Shot under the control of an army of “minders”, the result became, as the regime wished, a copy of the usual. Wide streets, no cars and freely flowing traffic. There were also some attractive and unspoiled landscapes and high-rises that, from up close, were unfinished. The crew had no access to people –except officially selected “samples” of that species. Furthermore, the visitors were not allowed to film folks at ant-like work except the few that utilized machines. It all amounts to scenes shot in a concentration camp that make it look as a recreational facility. That the reporter also deposited the expected flowers at the “Eternal President’s” statue must have been the price of the right to shoot whatever fit the agenda of the regime.

Throughout the specific scenes of the reportage, your correspondent kept exclaiming “I remember having this done to me while I grew up”. Frankly, these interjections had a tone of self-pity. That was so, even if the context of the pictures made it clear that original Stalinism’s horrors have been surpassed by their Korean mutation that Kimism’s Communism is. More interesting than the censored pictures from the last cave of Communism’s surviving fossils was the reaction of some of the lay travelers that journeyed with the film’s crew.

Especially a lady that, to no surprise turned out to be a teacher deserves to be mentioned. That innocent joined the group without any “prejudice”. That meant that she lacked knowledge of the place and claimed to be without any interest in “politics”. True, she did not apply for political refugee status at the end of the fact-finding mission that was to uncover the planted evidence. Nevertheless, the lady who seemed never to have hurt a fly appeared satisfied in the name of the locals she has not been allowed to encounter. Her “greenish” evaluation pointed out that these people live simple, close-to-nature unspoiled lives. Little pollution and distraction by consumerism puts their existence in harmony with nature –a quality that folks that could pay for such trips have lost. Her perception suggested that North Koreans had “dignity” and enjoyed the security that discipline can guarantee. Especially the equality she discovered when everyone gets what he is deemed to need has confirmed the impression of general satisfaction.

Also in the past, political travelers have left behind an odd record. Apparently, nothing confuses more than a well-supervised close-up visit of your dreams and prejudices. Intelligent people have visited Stalin’s Soviet Union to find there “the future” that “works”. Crisscrossing the starvation zone of the “holodomor” failed in other cases to dispel the suggested impression of plenty to eat. Nazi camps have also had visitors that concluded that all is well. “Reeducation” in Viet Nam’s has made a stronger impression on some witnesses than the testimony of the “boat people” that refused to enjoy paradise. Does anyone care to remember the reception of the early evidence from the death zone run by the Khmer Rouge? What about the case of visitors to Cuba that report on the enjoyment of cheap cigars? Can you recall “documentaries” shot during Mao’s destructive campaigns that presented girls in spotlessly white robes picking cherries? Perhaps the conclusion is that a fool that travels still remains a fool.