Which way from Davos?

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“Government is like a baby. An alimentary canal with a big appetite at one end and no responsibility at the other.”  Ronald Reagan

News

The World Economic Forum’s annual meeting at Davos brings together global leaders, including 800 CEOs whose companies represent 25% of the world’s GDP.   So it is perhaps surprising that one of the major topics of conversation this week is pay differentials – a crucial indicator of how fair the economic system is.  Despite the economic downturn, CEO salaries of top companies are 145 times the average salary of their employees.  

The BBC’s Robert Peston says that rising inequality used to be accepted as a necessary price for growing prosperity during the boom years.  But something is badly wrong when salaries of top earners, whose high risk strategies led to the financial crash of 2007-8, continue to spiral upwards when most people face years of stagnant wages (executive pay of the FTSE100 companies rose by 49% last year, compared to just 1.5% for average UK workers).

Compounding the problem of inequality is large scale unemployment; across the EU, over 16 million people are officially unemployed, 10% of the working population (these figures exclude those who want to work but are not registered).  Governments are responsible for running the largest economic entity in their country (called the public sector), but the actions they take (such as raising levels of taxation) to try and keep that “business” solvent are often at odds with what’s needed to encourage job creation in the private sector.  

At heart is the question, what is the purpose of the economic system?  Is it about maximising rates of growth (which assumes that the whole population will thereby be better off) or should it be about ensuring that every person of working age has the opportunity to earn a decent living for themselves and their dependents?  Crudely speaking, do people serve the economic system or does the economic system serve the people?  The current form of global capitalism is geared towards maximising profits, but is failing society as a whole.  Is there a road from Davos towards a more relational economic system?

Read on…

150 kms to the west of Davos lies Ibach, home to a company famous for Swiss army knives, which puts jobs first.  This relational business has managed to avoid making anyone redundant for economic reasons for the last 80 years, and yet has survived several recessions to become a global brand.  Read the Victorinox story here.

Walk the talk

Our spending decisions usually reflect a trade-off between financial and relational wealth.  For example, buying something in the local store instead of an out of town supermarket will cost you more financially, but you become relationally more connected with people in your neighbourhood, and help keep someone employed locally.  Next time you go shopping, why not practice taking the relational costs or benefits into consideration, not only the financial ones?

The last word

From the Bible, Proverbs 28, verse 20: “The trustworthy person will get a rich reward, but a person who wants quick riches will get into trouble.”

Germany’s dilemma

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“There is, in fact, no law or government at all in Italy; and it is wonderful how well things go on without them.”  Lord Byron 

News

Italian prime minister Mario Monti pleaded with Germany and other creditor countries this week to do more to lower Italy’s unsustainable borrowing costs, not only to help prevent Italy defaulting on its debt but also to give some encouragement to Italians who are facing the brunt of austerity measures.  As Europe's largest and healthiest economy, Germany is confronted with a web of dilemmas.  Like Hercules slaying the Hydra, for every potential solution to the debt crisis, two more problems are poised to spring up.   

The crisis has been argued from legal, economic, political and moral angles.  For example, legally, the terms of the Maastricht Treaty prevent Germany from bailing Italy out; economically, Germany might be able to increase the firepower of the European Financial Stability Facility to the point of covering Italy’s debts, but not those of the other Eurozone nations whose debt crises are also threatening the euro.  Politically, many in Germany resist throwing good money after bad and encouraging governments that are less disciplined than their own.  From a moral perspective, it could be argued that as Germany encouraged the peripheral European countries to join the euro a decade ago, and has since trebled its exports to the Eurozone, it has a moral duty to stand by its southern partners. 

Ultimately, each of these perspectives is relational, for they describe and influence how people, institutions and nations interact with each other. The EU began as the EEC – the European Economic Community – but has moved towards an ever closer political and social union.  This shifts the nature of relationship between member states from contractual towards covenantal – a much deeper binding of two parties together for better, for worse.

Perhaps the heart of Germany's dilemma is not about the euro, debts or interest rates.  Twenty years ago the West Germans pursued a relational goal – the reunification of their country – at any price financially.  The dilemma now hinges on understanding the nature of their relationship with fellow members of the Eurozone.  Is it a covenant, which will promote the long term peace and stability of the relationship at any cost, or something much more conditional?  The future of the Eurozone may well hinge on the answer to that question.

Read on…

For those of you who have not studied economics, and feel a bit lost in the arguments, a good place to learn about some of the main principles and laws as they apply to current affairs can be found in the ‘Economics Help’ blog, which you can read here.

Walk the talk

Sometimes we're tempted to use a financial argument as an excuse to end a difficult or strained relationship.  "We couldn't afford to keep her on," or "You're just not paying your way."  Money should always be made to serve relationships, not the other way round.  Is there any situation where you need to correct your priorities?

The last word

From the Bible, Luke 12, verse 34: "For where your treasure is, there your heart will be also."

The Big Issue and two-dimensional poverty

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“We think sometimes that poverty is only being hungry, naked and homeless. The poverty of being unwanted, unloved and uncared for is the greatest poverty.”  Mother Teresa

News

Just before Christmas researchers at Sheffield University reported that homeless men in Britain have an average life expectancy of 47, and women just 43.  Although drug and alcohol abuse is a major factor contributing to homelessness and premature death, there are many other reasons for people experiencing short- or long-term homelessness.

Various initiatives in higher income countries have sought to alleviate the plight of homeless people, one of the most prominent being street papers such as The Big Issue.   These news, arts and culture magazines are distributed through street vendors, who have to be homeless in order to sell them.  They purchase the magazine for half the cover price and go on to earn the other half from as many copies as they sell.  Launched in 1991, the Big Issue has helped inspire an international network of street papers with over 100 publications in 40 countries; over 200,000 homeless people have benefitted from the training, encouragement and support provided by the organisations behind these papers. 

It is the possibility of earning their own income and not being dependent on handouts (or worse, petty theft) which motivates most vendors to stand on street corners in all weathers.  The venture has the potential to alleviate poverty in two dimensions, both financial and relational.  The process of becoming homeless usually involves some form of relational breakdown, and people are more likely to suffer rejection and abuse once homeless – not least from others in the same situation.  Living on the street is relationally complex; homeless people lack the relative security of their own home, often rootless, and uncertain how far (if at all) to trust others. 

Becoming a street vendor can help such people regain a measure of dignity and respect, and passers-by have the power to accelerate or hinder that process.  If people who do have somewhere to call home ignore street paper vendors or treat them with disdain, then they contribute to the relational poverty experienced by the homeless.  Such people have often fallen through the safety net of the state welfare system, and so the responses of individuals – in buying street papers and showing kindness to vendors – can go a long way towards creating a more relational society. 

Read on…

An article in yesterday’s New York Times called for a rethink in how poverty is tackled in the US, citing the work of LIFT, an organisation recognising the relational dimension of poverty and responding accordingly.  Read the article here.

Walk the talk

Do you know of any people selling street papers in your town?  If so, why not go out of your way this week to buy a copy of The Big Issue or other title, and make a point of looking the person in the eye, calling them by their name (written on their ID badge), and sharing a word of encouragement or kindness.

The last word

From the Bible, James 2:2-4 ‘Suppose a man comes into your meeting wearing a gold ring and fine clothes, and a poor man in shabby clothes also comes in. If you show special attention to the man wearing fine clothes and say, “Here’s a good seat for you,” but say to the poor man, “You stand there” or “Sit on the floor by my feet,” have you not discriminated among yourselves and become judges with evil thoughts?’

European identity and the poet-president

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“Heaven in Europe is a place where the British are the policemen, the French are the cooks, the Germans are the mechanics, the Italians are the lovers and the Swiss run the place.  And hell is where the British are the cooks, the French are the mechanics, the Germans are the policemen, the Swiss are the lovers and the Italians run the place.”  Anonymous.

News

Europe has entered 2012 on a bleak note: Chancellor Merkel declared the road to recovery will be long and fraught with setbacks, and president Sarkozy said the crisis is the worst since the second world war.  The debt debacle across southern Europe rages unabated, and other countries round the world are resigning themselves to being dragged into recession by Europe’s demise.

The European project hinges on the strength of trust, solidarity and mutual commitment between the member countries, especially in the Eurozone. Knitting together these diverse nation states is one thing during a time of prosperity, or when faced with a common external or historical enemy.  But when adversity comes not from outside but stems from within, for example from very different attitudes to work, retirement, debt and public borrowing, are the relationships strong enough to weather the storm?

The poet-cum-president of the Czech Republic, Vaclav Havel, who died just before Christmas, understood that nations, like individuals, need to be confident of their identity, purpose and role in the wider world in order to deal maturely with others.  Referring to Russia’s attitude to NATO enlargement ten years ago, Havel said, “If I do not know who I am, who I want to be, what I want to achieve, where I begin and where I end, my relations with those around me, and with the rest of the world, will inevitably be tense, full of suspicion and burdened by an inferiority complex that may be hidden behind pompous bravado.”

Perhaps today Havel would be asking whether the Eurozone countries have sufficient shared culture and commitment to make a single currency work in the long run.  Unity in Europe cannot be brought about mechanically, by adopting a common set of fiscal rules and harmonising EU law.  Ultimately it can only work when the majority of people in each member state are more committed to a shared European identity – recognising the benefits of diversity within that – than to their separate national identities.  This is a far cry from the way countries such as the UK see things today.  Without this, the EU is only held together by mutual self-interest, which at a time like this is in very short supply.

Read on

The arguments for and against a common European currency, and how monetary union can only work in the long run with political union, were laid out in a Cambridge Paper by Paul Mills and Michael Schluter back in 1998.  You can read this timely perspective from two Christian economists here.

 

Walk the talk

Personally or corporately, how deep is our sense of identity, and how do any weaknesses play out?  Consider what you might do in order to celebrate your personal, family or community’s identity and thereby deepen your maturity.

The last word
From the Bible, John chapter 13 verse 3-4, “Jesus knew that the Father had put all things under his power, and that he had come from God and was returning to God; so he got up from the meal, took off his outer clothing, and wrapped a towel around his waist. After that, he poured water into a basin and began to wash his disciples' feet…”