Economics of Good and Evil

This is for me the book of the year. Tomáš Sedláček is a Czech economy professor and advisor of former Czech Republic president Václav Havel. 

Tomas Sedlacek unveils the underlying myths in our economy, like the necessity of growth and the unavoidable accumulation of debt in western democracies. The author first discovers 'economy' in the great myths of mankind, like the Epos of Gilgamesh and the Old Testament. It becomes clear that economy is not about the optimisation of mathematical formulas maximising economic 'utility', economy is about man and his human condition, about the eternal choice between good and evil.

This book is instructive because of the myths themselves and because of the critical view on economy as an 'exact' science. For me the most interesting parts were: the Epos of Gilgamesh itself, the lack of arbitration in the scientific community (creators and arbiters of truth are basically the same), the axis of good and evil (ranking philosophical views according to their moral view on 'utility'), and the "sabbath economics". 

The author points out that Hebrew society considered the observation of the Sabbath as an obligation, not as a permission. Moreover, every seven years, the soil had to be left to rest and debt slaves were freed. Every 49 years, debts were forgiven and the land ownership changed. There was a kind of systemic reset in the economy, to release the internal pressure and to reduce the ever growing injustice in society. Is it a coincidence that we have a huge economic crisis now that we have had almost 70 years of peace in Europe, without one single organised "system reset"? It is time to organise a jubilee year for our economy !

See also my blog about generosity.

Lifestyle

Everybody would agree the work - life balance got lost somewhere. The new occupational diseases are called burnout and depression. Reported solutions range from mindfulness to low calorie diets. What is going on? We talked ourselves into a value system that is oppressing and depressing. And although we know it is wrong, we persist in evil.

1) This evil value system makes us recognise our fellow human being because of his merits and his performance only, and not because of the human being he really is. In biblical language, we could say we are obedient to the Mammon; we adore something that is not worth adoration. We think we are respectful, but we only show respect to the winner of the rat race. Our children need to be perfect and we need to be perfect, but our perfectionism only aims at our outer performance not at our entire human being. Meritocracy, the Frankenstein monster that we created ourselves, holds us in its claws.

2) The speed of traffic and media disturbs our sense of reality. Our expectations prove to be unrealistic all the time. We deny our limitations rigorously. It is a sin of hubris.

3) Efficiency is everything. Beauty needs to step aside for function and performance. Never in history has fashion been so contrary to beauty.

4) We don't recognise the small things in life. We don't make time neither for each other, nor for anything unimportant. It is always good to make a little walk and talk to the neighbour. Let us please reintroduce Sunday silence. I refer to my previous blogs time and energy in households and meritocracy is merito-crazy.

Luxembourg

What is so typical and recognisable for Flemish (Belgian) people in Luxembourg? Here is an attempt: like Flanders (and Belgium), Luxembourg lies on the border of German and Roman territory and needs to balance between superpowers at each side. The populations stem from farmers and have got used to influence from the outside, with or sometimes without joy.

Both populations have a high work ethos and plead for multilinguism. However, unlike Flanders, Luxembourg is rather modest in promoting its 'native' language among newcomers, perhaps because of the low number of speakers. Luxembourg didn't apply for the recognition of Luxembourgish as a European language, whereas Irish and Maltese are now recognised European languages. The real language of Luxembourg is not Luxembourgish but trilinguism (Luxembourgish, French and German). The 'foreign' languages German and French are not foreign; they are part of daily life.

Luxembourg is very open to immigration. The reason is that Luxembourg believes immigration brings welfare. This is actually true for Luxembourg. Luxembourg knows very few integration problems compared to the neighbour countries, but the immigrants usually only move in after they found a job in Luxembourg, so that the employment rate of the newcomers must be close to 100%. On the real estate market, there is no balance between offer and demand, families usually buy their property at a price that reaches their pain threshold.

Due to the size of the country, the political and economic decision makers know each other well. This leads to very fruitful cooperation and fast decision making, not impeded by too much internal friction. As a result, Luxembourg has always been able to start industry reconversion in time and this is now happening again.

Luxembourg is quiet, rural and relatively sparsely populated. It is safe and secure and has low tax rates. The risk of being so quiet is for the politicians: the smallest detail in politics can grow to awful dimensions. Like (most) Belgians, Luxembourgers are European minded and plead for further European integration.

Travelling is a privilege

Travelling is a privilege and it should remain one. I don't mean to say not everybody has the right to travel. But looking back at the time the happy few started travelling for pleasure, the time of the Great Continental Railway Journeys, we have come a too long way.

Now, too many people travel too far without solid reason or motivation. It is not funny anymore. On the highways, you end up in traffic jams, worse than any traffic jam in the working months. In the airports, you stand queues for ages, and hope nothing goes wrong with the ticket computer. At the monuments, you may also have to queue to obtain a ticket or a terrible lunch for your kids. Why do we all need to see Australia? We hardly know the good places in our own towns, let alone the history. Travelling in the summer months is becoming a nightmare. Let us please stay at home.

Who should travel then? Of course, the ones who really need it for their work. Secondly, those who really deserve travelling. They have worked hard and are prepared to pay their expensive trip. These can't be spoiled youngsters without any working record. Neither can it be people who have already had a good life in wintertime, without contributing to society (to the extent possible). Let us make travelling a little more for the happy few, like it was in the old days. This is good for the environment; it is good for the travelers and it is good for the ones who should learn to live with a little bit less. Don't consider this blog as a total rupture with my earlier demonstrated social concern.

I would rather refer to earlier green blogs heat, Durban and love miles.

Confucius' inequality

The main message in education should be the following: competence is more important than success and integrity is more important than competence. The consequence is that integrity is more important than success. The mathematical formula is written below:

Integrity > Competence > Success

I attribute this formula to Confucius, because it can be derived from his philosophy. So let us call it Confucius' inequality from now on.

Virtues and virtutes

Virtues come from Latin "virtutes", the "man-like properties" that were useful and recognised by society. In the past, many attempts have been made to list the different virtues exhaustively or to classify them into categories. Usually Character, Courage, Humility and Generosity played some role. In ancient and Middle Age history, the virtues were often related to martial arts and knighthood.

Benjamin Franklin promoted 13 virtues to his fellow countrymen and today Tom Peters teaches us how to apply virtues in modern business life. The fact that I mention two North-American reference philosophers is not a coincidence.

Today, we have become anxious, even of mentioning virtues. We ignore them. We don't look at them and don't talk about them. We tend to surrender even before any ideal is put forward. Yet the virtues are there, even if you ignore them. Should I apologise for dedicating a blog to virtues? They could prove to be the only way out of the recession. I also refer to Anständig Wirtschaften, Generosity and Rip van Winkle.

Interdisciplinary research and development

At our University of Leuven, the Lectures of the 21st century are taught since the nineties (of the 20th century..). They offer students, professors and local inhabitants to look over the walls of their subject and share knowledge across faculties and disciplines.

Today, twenty years after the start, one can see that 'disruptive' innovation indeed requires more interdisciplinary R&D cooperation. Knowledge sharing and networking between disciplines proves to make business sense.

That doesn't mean the lectures should only continue because of economic use. Higher education could use a little bit of style and beauty. Moreover, the terrible challenges society faces today can only be solved in a climate of cooperation across disciplines, professions and social classes. And this will not only require knowledge but also drive and enthusiasm...

Mainstream versus democracy

Every time has its obsessions. Every people and every society share a number of common viewpoints and a sense of urgency about a reduced number of topics. This is the so-called mainstream thinking, the way of thinking shared by a majority of people. To give an example, before World War 2, the desire for order belonged to mainstream thinking. After World War 2, other priorities took over: equal rights for women, for other races, other beliefs, other types of family life.

Mainstream thinking has its positive sides. It usually makes a society evolve in a certain direction: closer to paradise and very often away from some past evil. But it also has its drawbacks. First the priorities are always limited, because public opinion doesn't seem to be able to cope with too many issues at the same time. Secondly, the priorities are determined by a limited group of opinion makers and amplified by a large majority of blind followers. Look at the success of Twitter. Mainstream is often not as democratic as it seems. And last but not least, mainstream can be un-nuanced and violent. The minorities who don't comply with mainstream thinking, can be heavily persecuted. The freedom of speech is only valid if this speech amplifies mainstream thinking, not if it contradicts mainstream thinking. Philosophers and prophets need to take risks to make the required corrections to mainstream thinking.

I sometimes worry about the tone of some 'politically correct' internauts. In their enthusiasm to amplify mainstream thought, they create mainstream victims, people who don't fit the picture. They condemn people and come up with with the arguments of 'respect' and 'freedom of speech' according to the needs of the day. To give an example: today you can easily support good causes like gay rights, immigrant rights, etc (I consider these positive outcomes of recent mainstream thinking) but don't count on sympathy for people who express their christian or Muslim beliefs, wearing visible signs of their religion and attending weekly rituals. Today, mainstream is evolving towards a growing contempt for religious practise in general. Where did the freedom of religion stay? The freedom of religion includes the freedom of expression of religion. If you need to hide your religion, this legal freedom is totally pointless.

Wearing a headscarf for instance, can't be compared to wearing a T-shirt with insulting slogans. (Some politicians make this false comparison, though.) You may argue that wearing a scarf is still a legal right today. True, but read what people are writing on the Internet. All persecutions started with some kind of ridiculisation. I notice that Christians and Muslims are becoming unexpected allies in their defence against a growing contempt for any type of visible expression of their faith. Mainstream without values leads to oppression of minorities. It is a threat to real democracy.

Our knowledge economy is not a knowledge economy ... yet

Our knowledge economy is not a knowledge economy ... yet. And yet another adagio could have been: our economy has always been a knowledge economy.

Both are true. When we talk about knowledge economy, we usually mean an economy based on recent, extensive research, development and innovation. Most of the added value and the competitive advantage is in the ideas, the intellectual property behind the product or service. Companies that offer such products or services need to rely on a number of knowledge workers, people who spend all their time on research and development.

It may be true that such economy exists, but I tend to think that our economy has not made an essential transformation yet to come to a true knowledge economy, and perhaps this is one of the impeding factors in the restoration of our economy. This essential transformation needs to happen in the way we think about knowledge sharing, knowledge working and the treatment of knowledge workers.

We need to find new ways to share knowledge efficiently and to raise and train new knowledge workers. We need to think differently in rewarding knowledge sharing and knowledge working. Look around in society: are those who go (extremely) well in the economic sense, go well because of their knowledge work? I don't think so. Are decisions in company or society taken by knowledge workers? Usually not. In the best case, knowledge workers can express their opinion. Can knowledge workers really freely do their job? Or are they continuously charged with endless paper work to get their R&D funded by public authorities?

European politics has much focused on stimulating competition, taking aways trade barriers. There may indeed be a positive effect on prices at the side of the consumer. At the side of employer and employee, however, the price to be paid is high. Tax on work revenues should urgently be replaced by tax on undeserved revenues. Knowledge workers are considered a major cost. Dissatisfaction and social unrest are the consequence. Perhaps we need more knowledge workers in politics. If we feel this is a waste or a contradiction, it means we have too much disrespect, both for the knowledge workers and for the politicians.

Something needs to change in all these areas. I don't have the final answer as to how such transformation should take place, but we are not there yet.

Local versus global

Globalisation clearly has its advantages. For some products, global markets make sense. This may be the case for electronic components and equipment, for specialised hi-tech and even for specialised services like complicated construction work like dredging. For any product or service requiring world class R&D investments.

For some markets however, I don't see the advantage, on the contrary. To give an example, I don't understand why we need to import (cheap low quality) products from abroad, when we have decent quality products at home. I think of most agricultural products, except those you can't grow in these countries. You may say these products from abroad lower the prices, but that is exactly my point: the price is already too low! We buy from other countries, then subsidise our own agriculture or industry.

I also refer to my blog on food miles. Some multinationals are already exploiting the advantages of a local approach. There is an economic and an ecological advantage at buying local. We should be prepared to pay a slightly higher price for a local service. We don't pay the ecological price now.

But in my opinion, this is still too much of a utilitarian approach. Human beings are more connected the closer they live. This is not a plea for particularism or provincialism. This is a plea for a re-establishment of the value of the 'locals', whether it be people, products or services.

Time and Energy in Households

Picture: mural by artists Nora Theys & Gerard Alsteens at HIG

When you talk to modern parents about their concerns, the main complaint is lack of time and energy to get everything done in the household, from practical stuff, like cooking, washing and cleaning to helping kids with homework, bringing them to school activities and getting the house in good order.

In many or most households, both husband and wife have a job. The strain of work is already high. On top of that comes daily traffic in the rush hours. The concern to get the children safe at home. Kids often go to multiple side activities. They need to be the best.

Moreover, many houses are very expensive and yet poor quality. Whether they are old or new, there are usually many problems to be solved before everything is in good order. This is not new, but it is not easy to find affordable help or you need to do everything yourself.

Household costs also tend to rise faster than household income, so more and more households are facing a difficult time. Fortunately grandparents tend to live longer, so they can help if they are living in the vicinity. But this is not the case with everyone. Moreover, if you are struck in your household by a problem like chronic disease or loss of a family member, you can end up in deep trouble.

I'm still convinced society is putting too much strain on the households. The centrifugal forces have become too high and divorces have increased spectacularly. Yet the households are raising the children who will work for our retirement in the future. They deserve a little more attention.

I also refer to my earlier blogs 'raising kids in the 21st century' and 'meritocracy'.

Government spending in crisis times

Governments can spend money in the economy for different purposes. First, they are often in charge of the major infrastructure, airports, railroads and roads and need to maintain them at competitive level with neighbour countries. This is good for the internal economy. To give an example, governments may spend money on satellite navigation and traffic telematics services, in order to enhance traffic mobility, which is sound for the competitiveness of the region or country.

Moreover, the investments often generate spin-off in other areas of the economy (e.g. location based services), which is good for the economy in general. Governments also spend money on regional reconversion, as the required investments usually exceed the potential of private initiatives. Governments tend to insure all major risks that can't be carried sufficiently by private people or organisations (e.g. rebuilding areas struck by natural disasters like floods and earthquakes). The government spending described above is considered useful in both crisis and non-crisis times.

In crisis times, there is pressure for additional spending. On the one hand, governments are asked to save the public from major economic disasters, like bank bankruptancies (strange combination of words). Consistent with this, governments need to provide the masses with sufficient income to maintain the internal demand (Keynes) and prevent social disorder. There is the general feeling that all this is difficult to do without creating national debt. Very much generalised, the 'republican' thinking emphasises reducing or stopping government spending as a solution. The 'democrat' thinking emphasises the maintenance of social justice or the prevention of social disorder. (Sorry to use these terms in this context, but it seemed the best way to clarify.)

What governments actually do is usually a compromise, balancing every 8 years between left and right, and usually plagued by a nasty third party standing aside. The general public has the feeling government spending has not dropped, as budgets seem to be maintained from year to year. In reality, the spending has dropped, not because the budgets have dropped, but because the approval cycles have slowed down. The current crisis does not only affect the behaviour of the private industry. It affects the behaviour of everybody deciding on expenditures. Public officials have become more critical, decisions are taken at a slower pace, therefore approval cycles for public tenders or R&D programmes take a longer time. This also reduces the average spending rate, although it is more difficult to put your finger on it, and prove that the expenses are actually lower than they should have been.

Let us hope that reason will prevail at some point  in time over the current 'crampy' behaviour and that this reason will lubricate the economic engine again. But the 'reason' should come from all decision makers, not only from government members. I also refer to my past blogs on voting behaviour and on the role of greed and generosity in this crisis. (Picture: freefoto.com)