Debt and more debt: student loans and family formation

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“Education is the best provision for old age.”  Aristotle

News

Results of a survey of teenagers in Britain this week show that half of them are less likely to apply to university due to steeply rising tuition fees.  The British government will allow universities to raise maximum fees from £3300 to £9000 a year starting in 2012; two thirds of institutions say they plan to charge the full amount.

Proponents of raising tuition fees and making students pay for them through loans make an economic argument.  Graduates earn more with a degree, so can repay the debt from their higher salaries (under the new rules 9% of everything earned over £21,000 will repay loans, and any balance will be written off after 25 years). 

However, this ignores the relational implications of loading students with high levels of debt.  In previous generations, graduates in their twenties would have saved up for two major events: buying a house, and getting married/starting a family.  These two milestones are now reached later, due largely to the rising ratio of house prices to salaries, and the tendency to cohabit or marry later.

With rising student debt, those who still go to university will take even longer to buy their own home or start a family.  The delay in family formation puts greater pressure on women than men, as their remaining fertile years become fewer, and the health risks (to both mother and child) of having children in their late 30s or 40s increase. 

The cumulative impact of these factors will be to reduce birth rates; one long term consequence will be fewer people of working age to support retired people – adding fuel to the fire of the looming pensions crisis.

Raising tuition fees and leaving students with high levels of debt may save government expenditure in the short run, but even in purely financial terms, the collateral damage to relationships may end up costing the nation far more than it saves now.  The relational loss in terms of postponed marriage and fewer children is impossible to measure.

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The changing trends surrounding patterns of cohabitation and marriage in the UK is a research concern of the Jubilee Centre; their latest report, ‘Cohabitation: an alternative to marriage?’ has just been published and can be read here.

Walk the talk

Although irresponsible use of debt is behind the global financial crisis, it is still seen as a solution of choice to a range of economic problems.  How might you help your family or colleagues to recognise the long term consequences of debt and to explore other solutions instead?

The last word
From the Bible, 2 Corinthians 12 verse 14 “…after all, children should not have to save up for their parents, but parents for their children.”

Allies and rivals: lessons from the Blair-Brown relationship

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“It is the privilege of posterity to set matters right between those antagonists who, by their rivalry for greatness, divided a whole age.”  Joseph Addison (1672-1719)

News

Documents leaked to a pro-Conservative British newspaper last week provide evidence that several of the current leaders of the Labour party were involved in a campaign to oust Tony Blair and replace him with Gordon Brown as leader of the party – and therefore Prime Minister – back in 2005. 

The present Labour leadership have dismissed it as “ancient history”, but the documents have once again cast light on the chronic tension between the two most senior government leaders from 1997-2007: Prime Minister Tony Blair and his Chancellor Gordon Brown.  Despite the oft-repeated statement that all was well, the actual relationship between the two men – whose combined leadership was crucial to governing the country – was ‘volatile and sometimes ferocious’, to quote a BBC journalist.

Backstabbing has been a feature of politics at least since the Ides of March in 44 BC, but there is always a high cost when those who are charged with leading a government (or any organisation) are fighting for control of the levers of power. 

In democracy, the relational art of compromise is a political necessity; no one person has all the insight, wisdom and experience to take the best decisions for wider society.  Dictators prove that daily. 

The ability to listen carefully, to forgive, to emphasise a common purpose, to practice humility, and to recognise what is best in others are some of the relational qualities needed for effective leadership.  By the same token, envy and selfish ambition in a senior colleague are a toxic growth that should be weeded out, or it may bring down the organisation.  The same principles apply from the home to the board room and all the way to Downing Street.

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Rivalry has continued to characterise the top of the Labour party; Ed Milliband narrowly defeated his brother David to win the leadership election last year.  A review of the recent book by Dorothy Rowe on sibling rivalry, ‘My Dearest Enemy, My Dangerous Friend’, can be read here.

Walk the talk

Ambition is good, but it needs periodic refining to rid it of the subtle but corrosive influence of envy and jealousy.  Do you need to examine your own heart for this?

The last word
From the Bible, Matthew chapter 12, verse 25: "Every kingdom divided against itself will be ruined, and every city or household divided against itself will not stand.”

E. coli, cucumbers and counting costs

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“To feel keenly the poetry of a morning's roses, one has to have just escaped from the claws of this vulture which we call sickness.”  Henri Frederic Amiel

News

The death toll from the outbreak of a rare strain of e coli in Germany has now passed 30, and it continues to cause heavy economic losses right across Europe.  The combination of the deadly effects of this particular bacteria, the slow response from the German authorities and the difficulty in isolating its source has heightened the anxiety felt by consumers all across the continent. 

Today the Robert Koch Institute, responsible for disease control, announced their conclusion that the contamination has indeed come from a farm producing bean sprouts in Lower Saxony.  Over the last two weeks the suspected culprit has moved from Spanish cucumbers to salad vegetables in general, before focusing on the locally grown bean sprouts. 

Given the severity of the health scare, the consequence has been the near collapse of the market for tomatoes, lettuce, cucumbers and peppers in many European countries.  Spanish farmers estimate their losses at over €175 million so far, and say it could take months for sales to recover.

This crisis illustrates how, in a closely interconnected EU, the decisions made in one part of the continent can have a devastating impact on third parties 2,000 miles away.  The German health officials, anxious to contain the disease outbreak in Hamburg, indicated that Spanish cucumbers might be to blame, although the evidence was not conclusive.  This ended up wrecking the relationship between Spanish (and other) farmers and their customers right across the continent.

In any relationship, there is a risk of injustice whenever consequences of actions cannot be matched by accountability.  Relational leadership involves learning to factor in the wider consequences of decisions to third parties, particularly when those parties have no means of holding the leaders accountable. 

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Harvard risk consultant David Ropeik has written an insightful article on the difference between the low statistical risk of being affected by this E. coli outbreak and people’s higher perception of that risk, which has led to major economic losses to farmers.   Read the article here.

Walk the talk

We all make hasty judgments from time to time; is there someone who has ended up hurt as a result of one of your judgments, based perhaps on inaccurate information, to whom you need to apologise or make amends?

The last word
From the Bible, James chapter 1 verse 19: “Take note of this: Everyone should be quick to listen, slow to speak and slow to become angry...”

Fair play and foul: two extremes of international football

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“Academe, n.: An ancient school where morality and philosophy were taught.

Academy, n.: A modern school where football is taught.”  Ambrose Bierce

News

Last Saturday, Barcelona Football Club won the UEFA Champions league title for the third time in six years, defeating Manchester United 3-1.  Barcelona’s characteristic style involves keeping possession of the ball, quick passing, and waiting for gaps to open up in the opposing side.  How do they do it so well? 

In searching for the secret of Barcelona’s success, two things stand out.  One is the fact that the club is owned by 150,000 of its fans rather than foreign tycoons or big name shareholders. The other is La Masia, the club’s youth academy, which recruits boys from around the world and provides a unique blend of soccer training, academic study and character development. 

“We want to make them better players and better people by teaching them about respect, teamwork, humility, sacrifice, applying themselves and commitment,” explains academy director Carles Folguera.

Most of Barcelona’s squad is home grown, and the fruit of La Masia’s relational values is seen in the way trust and consistent teamwork are as much in evidence as the talent of the players.  Even the world’s number one player, Lionel Messi, who scored the crucial second goal for Barcelona, never hogged the ball or tried to outshine his colleagues. 

If only the same could be said for FIFA.  Wednesday’s re-election of 75-year-old Sepp Blatter after the withdrawal of his challenger amid various allegations of corruption has brought the sport’s governing body into disrepute.  This week’s Economist explains how FIFA uses the World Cup “to sustain a global network of patronage”, and details how much of its vast revenues it spends on itself.

One thing which makes football the ‘beautiful game’ is the way which everyone has to play by the same rules, which ensure that if you don’t play fair, you don’t play at all.  Human nature always tends towards bending or breaking the rules to gain some advantage; this is kept in check on the football pitch by an impartial referee.  In the marbled halls of FIFA, however, there is an urgent need for a different kind of whistleblower.

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An article on Pierre de Coubertin, the values which he sought to build the modern Olympic movement on and their final expression in “excellence, friendship and respect” can be read here: http://www.sportingpulse.com/assoc_page.cgi?c=1-3653-0-0-0&sID=138368

Walk the talk

How much do we rely on ‘star players’ for the success of our organisations?  Winning teams may not need them, if they encourage each member to play to the strengths of their colleagues, and cover for their weaknesses.  Is there a lesson you might learn from Barcelona’s example?

The last word
From the Bible, Ephesians 4, verses 2-3: “Be completely humble and gentle; be patient, bearing with one another in love.  Make every effort to keep the unity of the Spirit through the bond of peace.”

Obama, burgers and essential relationships

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“Our American values are not luxuries but necessities, not the salt in our bread, but the bread itself. Our common vision of a free and just society is our greatest source of cohesion at home and strength abroad, greater than the bounty of our material blessings.”  Jimmy Carter, former US President.

News

President Obama’s state visit to Britain this week has been hailed as a resounding success.  Winston Churchill coined the phrase ‘special relationship’ to describe the mutual regard between Britain and the United States following the second world war.  This week the rather jaded expression was recast as an ‘essential relationship’ – more practical, less sentimental, but still vitally important for both countries.

The heart of the relationship, according to President Obama, is the “values and beliefs that have united our people through the ages,” especially democratic freedom and human dignity.  Out of this flows the present joint commitment to cooperating on Afghanistan, the war on Al Qaeda and supporting the Arab spring uprisings.

It was fitting, then, that the president and the prime minister, together with their wives, personally served the grilled meat and salad to the British and American servicemen and women who were the guests at Wednesday’s barbeque in Downing Street.  In an age of spin and political insincerity, the gesture was genuinely well-received.

These two leaders sign the orders which commit their military personnel into combat around the world, sending them to injury perhaps, or death; yet the gesture of serving some of these ordinary servicemen and women a meal demonstrates the very values which President Obama was citing earlier. 

The head of state is not superior in worth to the soldier who defends its liberty, despite the power and privilege which comes with political leadership.  The human dignity of all is best ensured in a society by reducing the relational distance between prime ministers and privates from time to time.  Eating together, talking face to face and serving each other as happened on Wednesday celebrates another ‘essential relationship’ – our equality and brotherhood as men and women before God.

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Robert Greenleaf has promoted the concept of servant leadership widely in the business world for 40 years, although it is far older than that (see the Last Word).  For a 3 page article summarising seven practices of servant leaders, click here.

Walk the talk

How easily do we allow power and its associated trappings to increase the relational distance between us and the most junior members of an organisation or institution we are part of?  Do you need to do something to redress the balance, such as making an opportunity to serve authentically, or taking time for conversation outside your normal roles?

The last word
From the Bible, Mark chapter 10, verses 42-44: “Jesus called them together and said, ‘You know that those who are regarded as rulers of the Gentiles lord it over them, and their high officials exercise authority over them. Not so with you. Instead, whoever wants to become great among you must be your servant, and whoever wants to be first must be slave of all.’ ”

Money, sex and power: a lesson from Mr. Strauss-Kahn

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“The consequences arising from the continual accumulation of public debts in other countries ought to admonish us to be careful to prevent their growth in our own.”  John Adams, second US President, 1797.

News

A week ago, Dominique Strauss-Kahn (DSK) was the charismatic head of the IMF, taking a leading role in solving the Eurozone crisis and setting his sights on winning France’s Presidential election in 2012.  Today he is without a job, on bail for $1 million, and facing grave charges of sexual assault.  Yet according to the Financial Times, the alleged incident with a hotel chambermaid may not be DSK’s greatest error of judgment – instead it is his handling of the Eurozone debt crisis. 

As head of the IMF, he chose to treat the financial woes of Greece, Ireland and Portugal as problems of liquidity, not of solvency, bailing them out with huge loans on condition of draconian measures to reduce government borrowing.  He eschewed the options of debt restructuring or possible withdrawal from the euro, which would allow these countries to devalue their currency and increase exports, to offset weaker domestic demand resulting from spending cuts. As it is, the current measures are pushing Greece further into recession, tax revenues are falling and borrowing requirements remain stubbornly high.

What do these two decisions associated with Dominique Strauss-Kahn have in common?  Both are relationship problems, both illustrate how something valuable can turn into something destructive when removed from its relational boundaries.  Sex is good but only in the safe limits of a consensual, committed, socially-sanctioned relationship (which once was called marriage).  When a person’s appetite for sex is stronger than the commitment to express it within these limits, it can wreak havoc.

Similarly with debt.  While the ideal is to avoid debt, it can be useful if kept within secure boundaries governing the relationship between borrower and lender, summed up as follows.  The person who makes the loan should share the risk involved in its recovery; the lender should only burden the borrower with an amount that can be reasonably repaid; the borrower must view the loan as a binding commitment to repay the lender; and finally, the lender must be prepared to cancel debt should the borrower become genuinely unable to repay.  The problem is that financial institutions have moved away from lending within relational boundaries, and treat debt more like a commodity; this is a major root of the financial crisis.

Power can deceive people into thinking that the normal rules of relationship (usually enshrined in law) somehow don’t apply to them.  DSK’s alleged incident with the chambermaid may well have cost him his career and reputation, even before his trial.  It remains to be seen what price will finally have to be paid (and by whom) for the way in which banks and global financial institutions have torn up the relational rule book regarding debt.

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The economist Paul Mills has written about the current financial crisis from the perspective of the relational principles on debt found in the Bible.  You can read his Cambridge Paper here.

Walk the talk

How seriously do we consider the impact of debt on relationships?  Would it be helpful to review your own lending or borrowing in the light of the relational principles above?

The last word
From the Bible, Psalm 37, verse 21: “The wicked borrow and do not repay, but the righteous give generously;” and Proverbs 22, verse 7: “The rich rule over the poor and the borrower is slave to the lender.”

Osama bin Laden and the question of justice

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“Extremism in the defense of liberty is no vice; moderation in the pursuit of justice is no virtue.”  Cicero.

 

News

The killing of Osama bin Laden has led to a heated debate about the necessity and legality of the action by the US military last week.  There are two underlying questions: first, what was the extent of bin Laden’s responsibility for the indiscriminate killing of thousands of unarmed civilians?  Was he effectively the commander of a military force still at war with America?  If that was indeed the case, then killing him (whether he was armed or not) was justified according to the rules of war – a view widely held in America and supported by the Attorney General.

If there is any uncertainty about the first question, then a second one is this: was it justified to shoot bin Laden in his own home, when he had been indicted for trial?  Could this amount to an extrajudicial killing under civil law, which would undermine the rule of law and right to a fair trial, two of the democratic values which America is promoting in countries like Afghanistan and Pakistan?  

From a relational perspective, which was the lesser evil: killing bin Laden unarmed and in front of family members, or capturing him and bringing him to public trial?  Initially one might think the latter – but this would have promoted the terrorist’s cause, inflamed extremist opposition to the West and probably led to Al Qaeda networks taking Americans hostage somewhere round the world and demanding their leader’s release.  Although there is high risk of reprisals by Al Qaeda now, the time for them will pass.  But a lengthy trial would have brought a more insidious risk for a much longer period to a greater number of unarmed people.     

Thinking relationally helps to shed light on the wider dilemma.  Human rights – including the right to a fair trial – should be understood in their relational context.  Rights can only be granted and upheld by means of relationships with other people, acting individually or as representatives of an institution. 

Consequently, a narrow, individualistic concept of human rights, uprooted from its wider relational context, can produce nonsensical outcomes such as society being obliged to uphold the right of an individual to destroy the very society which granted him that right.

Killing as opposed to capturing Osama bin Laden on May 2nd may end up saving thousands of civilian lives and averting relational tragedy for countless networks of families and friends.  On other hand, when an American president authorizes the killing of a man without trial and outside the rule of law, this may legitimize autocratic regimes in disposing of dissidents without recourse to judicial process. 

Such choices are hard, and we would do well to weigh the rights and wrongs of this incident carefully – and relationally.

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Li-ann Thio, Professor of Law at the National University of Singapore, has reflected on the tension between the rights of an individual and the interests of society in a paper “Constitutionalism in Singapore: through a Relational Lens”.  You can read an extract from the paper here. 

Walk the talk

It can be easy to pass judgment on others whom we scarcely know, on the basis of hearsay and rumour.  

Is there anyone in that category over whom you might suspend your judgment for a while, with a view to getting to know them better first so that your judgment is a more considered one?  

The last word
From the Bible, Proverbs 18:17 “The first to present his case seems right, till another comes forward and questions him.”