Ahi serva Europa di dolori ostello, non donna di province ma bordello!

Mark Mardell, of Mark Mardell’s Euroblog, a BBC blog that seems to get better and better over time, has a rather typical post on Europe called A country called Europe. It is typical in that it centres around the issue of Europe becoming a superstate or not. Nothing new here. Some people dream of a United States of Europe, others cannot even stand the very thought of that idea, and then there are plenty of people who could not care less. Still, the comment thread to Mardell’s post makes for some very interesting reading and provides some wonderful quotes and ideas. Just reading this single thread brings you completely up-to-date with current popular viewpoints on Europe. All sides, pro or con or indifferent, are present and there is a good dose of history lessons and “outsider” views. In short, the very concept of blogging at its best.

What I especially like about this thread is how people talk about Europe and how their opinions reflect European culture(s). I would like to invite AFOE readers to go and read Mark Mardell’s post and the comment thread from this cultural perspective. Culture is not just about the Arts with a capital A, culture is first and foremost, for me at least, how everyday people live and perceive their lives. If only we could have had comment threads like this from, say, the times of the Roman Empire or the Middle Ages. What a wealth of information that would be for scientists, who now have to rely solely on ancient relics and the writings of contemporary elites, to explore and analyse. Very little is known about public discourse in those periods beyond what elitist literature left behind. And even then much must have been lost in translation. Nowadays, with the internet among other things, we are documenting our own era, from all levels of society, without really being aware of it. We are so rich. So here are a few quotes that I particularly like to wet your appetites. All emphasis is mine.

The first quote, wonderfully emphasising some European stereotypes, brought a big smile to my face, as it seems so familiar:

18) At 09:32 AM on 12 Jul 2007, Erik wrote:

I welcome all sentiments on the matter; federalism, confederalism, supranationalism etc. At least it keeps a debate going.

Unlike what has now happened in Holland. People don’t take sides anymore, they no longer care. They feel Europe is irrelevant. The British are waving their arms in panic as ever, the French probably have a secret agenda somewhere, the Germans never really know what they want and the Polish seem to have gone insane.

We have the euro now, and it allows Holland (a traditionally utterly capitalist nation) to do what it wants and needs: trade. The average Dutchman/woman shrugs his/her shoulders at anything else.

In a second quote, from an Italian reader, poor Europa is not just at risk of being kidnapped. No, it is much worse this time, and he does have a theoretical point, she could be turned into a prostitute:

4) At 05:37 AM on 12 Jul 2007, Giacomo Dorigo wrote:

The concept of Nation is a purely rhetorical and emotional one, built on the primitive base of feel of belonging to tribe and projected to a bigger community. Well, if someone starts from the point of view of objectively existing Nations, then you will see any federal project as the construction of a bigger Nation. (…) …this is precisely what happened during the construction of all the so called Nations! United Kingdom… United… what has been united? If it has always exist a nation called United Kingdom, why there was a need to unite it? The same with France, the north kingdom army made a kind of crusade in order to destroy the south culture and language! And what about the kingdom of Spain? It was the result of elite engineering as well as UK! And what about Germany and Italy built on military effort by Bismark or Garibaldi… (…) Now USA are the rulers of the world, tomorrow maybe Chinese will be, we don’t know. (…) Anyway they did, they merged their territorial diversities in giant so called National States. We, Europeans did it before, but our products were smaller, and now we are in this half-river-crossed situation. I don’t know. What we now call Italy has been in a similar situation for many centuries, many kingdoms, the Pope state, some city-republics, in the meanwhile Spain, Britain, France were built… but Italy not. Dante in the 13th century was already complaining at that, saying that Italy was more or less like a bitch (“Ahi serva Italia di dolori ostello, non donna di province ma bordello”). And now we are here the process seems very like that one…

Or: If Europe does not “really unite” pretty soon, it will be owned and abused in a who’s-your-daddy kind of way by greater world powers. And what to think of the next quote, comparing expanding EU powers to colonialism:

12) At 08:15 AM on 12 Jul 2007, John wrote:

President Barosso this week described the EU as an empire. In my opinion this word captures what the EU would become if the federalist dream was fulfilled because multi-national federalism is empire. It always involves centralised authority over its constituent nations who must live under this authority’s decisions whether they like them or not. Empires need not be tyrannical but they are always despotic. The enlightened despotism of the British Empire imagined (or deceived itself) that it was doing more good than harm in bringing civilisation to remote parts of the world. But to the people of Boston or Bombay it was still a despotism to be despised because so long as it lasted the governed could not replace their masters or even significantly influence their decisions.

There is a lot more, go and have a read if only to see what contemporary vox populi culture is like. Regardless of their content several arguments are posited quite elegantly and eloquently and are interwoven with cultural references. And, lest we should forget, Europa is supposed to be quite an elegant, sophisticated lady. Now that I come to think of it, to what extent is this actually true? Here is an idea for a debate on AFOE:

How elegant do you think Europa is? Culturally speaking and compared to, say, the US or China or Russia or whatever important world power you can think of. Does she still have some of the refinement of, for instance, the Renaissance, or has she turned permanently into a cheap and vulgar fishwife – as evidenced by, for example, public “talk” in soccer stadiums? Not to mention the recent exploits of the Polish twins and the reactions to their, alas not so unique, kind of discourse…

Chris Walker is Ignorant

If you want to lecture the French on “economic reform”, it pays to have some knowledge of French economic history. If you insist on doing so despite knowing nothing, “Big Mouth Strikes Again” is not a good headline. Of course, it could be some downtrodden sub-editor’s revenge.

Anyway, Chris Walker writes in today’s Independent that Nicolas Sarkozy is “committed to privatisation, and many of the Mitterand legacy stakes are to be addressed, such as Renault, Safran, EDF, and Air France”. Renault was nationalised by Charles de Gaulle in 1945, as punishment for allegedly collaborating with the German occupier. This is not a legacy of François Mitterand, at least not one he’d admit to. EDF is also a creation of De Gaulle, or more importantly the technocrats who ran it and the Communist minister Marcel Paul. It is hard to find an argument that cheap power is a net loss for French industry. Air France has been semi-nationalised as long as it has existed.

Walker also repeats the content-free mantra that “a Thatcherite-style purge and return to free markets has not happened in France in the 25 years since” Mitterand – well, something. Mitterand came to power in 1981, 26 years ago, swung around to the franc fort in 1983, 24 years ago, went into cohabitation in 1986 with the Right, who forced him to privatise many of his nationalisations, won the Presidency again in 1988, won back the National Assembly…but on the way, French heavy industry went through a pretty grinding restructuring process, with tens of thousands of jobs lost. The whole coal industry was shut down. The French also invested heavily in the remaining big industries, which is why they can build trains and space rockets and mobile phone networks and we can’t.

Walker demonstrably knows nothing about France. However, he is an expert.

Vox populi versus “erudition”

Below you’ll find a reaction I posted to an excellent rant by Ape Man on what he believes are some shortcomings in the news coverage of The Economist. His rant ties into what Edward posted below in his post Bad Journalism at The Economist and raises some, in my opinion, hugely important issues. Please go and read what he and Edward have written. I reproduce my own comment here, slightly altered, because… well, I am simply excited about this and, like Nokia, blogs are also about connecting people and ideas.

My own comment is only rudimentary, think stream of consciousness, since the covered subject is immensely complex and vast, but I would like to throw the basic idea out there for all to think about. Please focus on the two quotes from Ape Man’s rant and think about the implications of it.

Ape Man: “Outside of those who read this blog and know me personally, I don’t think anyone really has much contact with the type of people that I work with.”

There are more than Ape Man thinks. I come from a blue collar background myself. But he raises a very, very important issue in this excellent rant:

Ape Man: “The Economist comes by its opinions the same way any hillbilly does. They go by their emotions and what they want to be true. Any fact that contradicts what they want to be true, they ignore.”

I am afraid this is going to be one of my hobby horses in the coming time: the role of psychology in society. It ties in neatly with demography and with something that has frustrated me personally in news coverage/analysis: too little focus on what real people actually think and feel and how this can influence, or not, events.

In Belgium a recent survey revealed that bloggers, of all people, had been more correct in predicting the outcome of the recent June elections in Belgium than established pollsters. The survey measured “talk”, the number of times certain politicians were talked about on weblogs. For me weblogs in general represent more or less the vox populi, the voice of the people even though bloggers tend to be more educated or curious than the average population. It would be great if more blue collar people got into the business of blogging and/or commenting on blogs. That way we would get a more accurate picture of what voters think and how they think. After all, they represent the largest potential voting block in any given country.

Secondly, the importance of emotions. I too, like Ape Man, come across people who vote or pontificate rather on the basis of their emotions than on actual facts. And I myself fall into the same trap sometimes, I am a human being after all, but at least I am aware of it. And I too was shocked, years ago, to find out that people who should know better do exactly the same thing. Sometimes even for a living. Media trends seem to reflect this. What is all this crap, for instance, about “breaking” news followed immediately by analysis? How can you judge the importance of an event at the very moment it takes place? Very often it is hindsight, and only hindsight, that makes the picture clear because single events are more often than not the consequences of very subtle and very complex trends (like demography).

But breaking news attracts readers/viewers and is commercially interesting. The media cater to consumers and are in a way defined by them. Who are these consumers for mass media, those with the most impact? Right, common people. Do many pundits or even politicians know what really goes on among the common people? Rarely. Or their knowledge is fragmented or based on distant memories or geared towards populism/manipulation and whatever.

Has anyone questioned, since Ape Man mentioned the name, the psychology behind a guy like Mark Steyn? It would go a long way in understanding his motives and way of thinking. And it might explain his appeal to many. In short, we should have a multi-disciplinary approach to the coverage and analysis of events. And we should always remain humble considering the complexity of it all. Human beings and their interactions are complex, it is almost impossible to create stable models for them that predict everything, or even anything. And I am not even mentioning the element of “chance”.

People and societies move, and change, all the time to the rhythm of their daily experiences, perceived or real, and their emotions/needs/desires. I could go on and on about this, even when I realize that the complexity of it all is almost overwhelming, but we should definitely put humans back into the equation, be it through demographics and/or psychology and/or sociology. No matter how tricky interpretations in that area are.

Bad Journalism At The Economist

In a recent Afoe post on European Fertility (which was really an extended review of an article in the Economist) I took some considerable stick in comments for being too soft on the journalists over at the Economist who were behind the article (mainly because a large chunk of the “good news” they claimed to have found was, when all is said and done, spin, as Ape Man ably explains in this most moderate of rants from a lifelong Economist subscriber).

This post should produce no such complaints.

My issues today relate to an article The Economist currently have on site entitled “Eastern Europe’s economies, Worrying about a crash”. In fact, the article is, in the main, about Latvia, a small country which is currently suffering from a very acute form of labour-shortage-induced wage-price spiral, with wages having risen in the first quarter of this year by around 33%, while property prices in Riga – the capital – had gone up last May by something over 60% when compared with a year earlier. (Regular readers will already know that Latvia had already been attracting my own attention somewhat, and those who want a day by day commentary on the unwinding of Latvia’s property boom may find it interesting to follow events from the vantage point provided by Latvian Abroad.

Now,as I say, Latvia is, at the end of the day, rather a small country (with only a little over two million inhabitants) so why all the fuss? Well in the first place the problems being experienced in Latvia seem to be rather more general than might appear at first sight. The Financial Times only last Thursday had an article drawing attention to how the same sort of issues, to greater or lesser extent, were affecting all three Baltic states, and the credit ratings agency Standard and Poor’s only last week downgraded Estonia’s rating from stable to negative citing the growing risk of a hard landing even there. I say “even” since, at least on the surface, Estonia would seem to be the best placed of the three of them. It is also important to note that what is happening in the Baltics takes on even greater significance when situated in the context of a general labour supply problem which, in the shorter or longer term, is about to face all Central and East European “transition” societies, whether they be inside or outside the EU. Hence the importance of comparisons, which, as we shall see, the Economist itself is only too ready to engage in.

Since, however, my theme today is the quality of economics journalism, and the responsibility that those of us who write about economics have for trying to get things right, I will only frontally address this topic here, leaving treatment in depth of the underlying problems being posed in the Baltics for a subsequent post. My issues with the Economist are threefold.

Firstly, when they come to examine the fragility of the current economic growth cycle in Eastern Europe the Economist writers argue that Hungary, despite being a “wobbly” candidate for contagion if things go badly wrong in the Baltics, is in fact likely to escape the worst case scenario of a hard landing as its current economic imbalances unwind, since Hungary has, in general, been “disgustingly lucky”, and the best example they have to hand of this “disgusting luck” would seem to be the fact that “exports and industrial production have risen”. Now, in fact, while it is the case that Hungarian exports have been rising more quickly than imports in recent months (although please note that this is due in part to a slowdown in domestic demand), industrial output has in fact fallen in 3 of the last 4 months. I sincerely hope that Hungary will avoid a dramatic crash, but if you want to argue that they will, and back this with analysis, then first and foremost you need to get your facts right.

Secondly, in their search for a recipe and a way out, the authors single out Slovakia as a positive role model worthy of recommendation to the rest of the EU8 (and so logically to the Baltic states) since:

“For countries that can do it, keeping their interest rates above the euro’s and letting their currencies appreciate helps” and “bringing in foreign workers from places such as Ukraine” may help “reduce upward wage pressures. Slovakia is a prime example of how to pull off both tricks”.

Now the problems that are likely to arise in any up-and-coming correction which may occur in Eastern Europe due to the fact that some of the currencies there are systematically pegged to the euro may well constitute an important headache in the days to come, and it is nice to see the Economist waking up to this fact, but since currency hard pegs are not my main topic here, I will simply note the issue and pass by. No, what attracts my attention most about this incredible statement from the Economist is the fact that Slovakia is now itself beginning to suffer from acute labour shortages, as the International Herald Tribune highlighted in an article that went up at more or less exactly the same time as the Economist went live with their view (My thanks to Michal Lehuta for drawing our attention to this little detail on his Central-European Economics Watch blog, and for pointing out that the Slovak government “recently made the requirements for obtaining citizenship tougher”). As the IHT says:

“Slovakia could soon become the world’s biggest car producer per capita – if it can find enough skilled workers to assemble the vehicles “…. but …. “Now, having carved out a niche in car manufacturing in recent years, Slovakia is suffering from the same regional labor shortage that is exacerbating concerns that foreign investment could be deterred“.

The source for the IHT article was a report published last week by the Vienna Institute for International Economic Studies, which you can find here, and in fairness to our Economist authors the report does say that in Slovakia, as opposed to the Baltics or Romania or Bulgaria, the overheating problem may be containable in the short term and even that “very high growth does seem to be sustainable, at least over the next two years”. But then two years at the end of the day do not exactly constitute what you would call a long term outlook for sustainability, so what is it we are saying here, “go down the Slovakian road and you can enjoy life for two more years before you then finally get to crash”?

Yet another time we have here a case of get your facts straight before preaching, I think.

Thirdly, and this is really my biggest beef, the Economist keeps making indirect references to the way in which attracting inward flows of labour may help the EU8 economies out of the trap they are falling into, but it never actually spells out what the underlying problem is, or how – in much more explicit terms – inward migration might really help. Maybe this is because, as they argue in the European Fertility article:

changes in population are not – in and of themselves – either a good or a bad thing in economic terms, since “there is no short-term correlation between population change and wealth”

In fact, what is happening now in Eastern and Central Europe may finally provide the Economist with just the sort of evidence they feel has so long been lacking.

Basically the situation is this: years of systematic out-migration and a collapse in fertility around 1990 have left all these countries with a significant and ongoing labour supply problem. Claus Vistesen has just done some very interesting background research for Lithuania which really help put things in perspective (and especially the easy-to-read graphs, which are an absolute must). Using back-of-the-envelope-type calculations, if we consider that Lithuania currently has around 50,000 unemployed, and economic growth is reducing this pool by about 5,000 a month, then you don’t need to be a mathematical genius to work out that they have about ten moths left before they run out completely, and this is clearly impossible. So push does come to shove, one way or another, within a time horizon of about ten months.

But why am I niggling like this with the Economist? Because behind all this lies a much bigger debate, one about the sources of economic growth, and about the relative size of the demographic and the institutional components in growth. The journalists at the Economist clearly have an in-house view that the demographic component is not important, and this has lead them in one country after another across the globe to either simply ignore the issue, or to say that the importance of demographics is greatly overstated. In Japan, for example, they continue to believe in a sustainable, internal-demand-driven, recovery (despite the fact that as Claus Vistesen explains here), the recent data we have from Japan do not support this assumption at all). In India (which has as we all know, lots and lots of young people just about to enter the labour market) they continue to argue the absurd view that the Indian economy is in grave danger of overheating (a view which Nanubhai Desai systematically refutes in this excellent post here). Meantime, and as is only to be expected in any economy which is running short of natural coolant, overheating is visibly starting to show its face all over Eastern and Central Europe.

So what was up to now a reasonably academic debate is about to become a live macro issue, and my strong chiding against The Economist is simply due to the fact that in turning a blind eye to one possible account of the growth process they will have done nothing of any great substance to inform and forewarn their readers of what may now be about to come. As he wearily raises his telescope over the dust-ridden patch he declares “people, I see no people”. Yes, that is just the point.

Update

Well just in case any of you have the impression that the points raised here simply constitute some kind of oversight on the part of the Economist, the Economist Intelligence Unit have dispelled any remaining doubts we may have entertained. They have just published a new study entitled Eastern Europe: booming economies, dangerous politics, which astoundingly – at least going by the blurb – doesn’t seem to treat the labour supply constraint question as having any importance at all. At this point I haven’t read the whole report, I admit, but then, is it really credible for people to ask would-be clients to shell out £335 for something which seems to miss the central point about what is going on? The quality of our current intelligence is indeed, it appears, severely strained.

Also doing some background digging on Slovakia, I found this data in the Slovak Spectator. Slovakia has a pool of about 200,000 unemployed, and is eating into it at a rate of about 50,000 a year, which gives an outer limit of about 4 years, at current growth rates. But then of course there are skill bottlenecks, and demands on the Slovak labour pool from other countries to think about. So in reality the situation is much tighter than it seems, especially in Bratislava. Slovakia’s currency – the Slovak Koruna – does however continue to appreciate, since industrial output has just risen year on year by 17.9%, but the steady increase in the value of the currency may in today’s climate, have the rather perverse effect of boosting domestic demand even more by attracting an inward flow of funds in the anticipation of even more currency appreciation, in the process fuelling the Bratislava housing boom mentioned in the above link (which of course means an increased need for construction workers, and on and on we go, of course, until the day we don’t).

Update 2

According to the Economist Certain Ideas of Europe Blog Edward Hugh “is very cross” about their reporting. In fact I am not cross at all, but I am anxious to get some important issues aired. Many thanks to the bloggers there for helping me to do this, and to the Central European correspondent for taking the trouble to reply to me. An ongoing conversation I think.

Incidentally, just to demonstrate how “uncross” I am, and how seriously I take all of this, I have now established a Latvia Economy Watch blog, to accompany my Hungary Economy Watch one.

Gay creationists in government

Hessia’s education minister Karin Wolff has recently drawn attention for proposing that school biology lessons include the biblical creation story. Now she has drawn attention by outing herself as gay. All too many politicians pander to creationists; and some out themselves. But it’s pretty rare, I’d think, that the same politician does both.

Wolff will have needed a bit of courage to come out; but probably not too much. There are some homophobes in Germany, and I suppose Wolff’s conservative Christian Democratic Union is where they’d feel most at home. But even CDU people, for the most part, won’t be much bothered. (It’s public knowledge, for example, that the CDU mayor of Hamburg, Ole von Beust, is gay; the Union wouldn’t dream of sidelining him. His title is misleading, by the way. Because Hamburg is both a city and a federal state, von Beust is no mere mayor but head of a state government.)

By coming out, perhaps Wolff hoped to draw attention away from the creationism flap. The Frankfurter Rundschau, by contrast, suggests she outed herself as a tactic against intra-party opponents — by announcing she is a lesbian, she makes it harder for enemies within the CDU to criticise her without appearing bigots. Well, ‘maybe’ on both counts. But perhaps Wolff simply thought, ‘This is who I am, I’m not ashamed of it and I’m not going to hide any more.’ If that’s the case, good for her.

She still needs her ears boxed over the creationism thing, mind you.

A (positive) German shock?

Eurozone Watch has two articles about Germany and Italy that offer support for an optimistic view of the European economy. For a start, Sebastian Dullein argues that a comparison of Germany today and the US after the early 90s recession shows that Germany might be on the brink of a productivity surge. Dullein argues that labour productivity growth at the moment is being depressed by the re-absorption of the long-term unemployed, which also happened in the US in the early 90s. He quotes a figure of 7.6 per cent for productivity change (per employee, rather than per hour worked) in the metalworking industries (in Germany, a term that covers most of the industrial sector), which is positively stellar – after all, the US didn’t pass 2 per cent per-hour until 1998, well into the boom.

He also criticises Wolfgang Munchau for arguing (in essence) that there had been no structural reforms that accounted for productivity growth, and therefore that there was no growth. At this, I think I heard J.K. Galbraith’s ghost chuckle into his martini – it is indeed a fine example of all that is wrong with economics as a discipline that one can argue that we must all reform because there is a crisis, the evidence of that crisis being that one’s reforms have not been adopted.

An alternative argument would be that there was not all that much wrong with German firms in the first place. It is suggested that R&D spending is too low, but Dullein argues that it’s picking up. And anyway, their products can’t be that bad, as the rest of the world wants to buy German exports more than anything else. He also notes that there has been a wave of capital investment since 2002.

This possible German shock is already reverberating interestingly. Italy, for example, is experiencing better economic times, with growth picking up and strong industrial order books – especially on orders from France and Germany for capital goods. The growth is despite an increase in the tax take, with the result that the government is likely to have a chunk of change on hand. The OECD and the EU Commission would rather like to see that used to cut the monster public debt, still running at over 100 per cent of GDP. But the political situation might make that unlikely.

That might be the good news, though. When wasn’t the Italian government up to its eyes in debt? And it’s almost traditional that political turmoil in Italy is accompanied by good economic news. The difficult bit, though, is that Italian inflation is running somewhat slower than German – this implies, of course, an improvement in the terms-of-trade. Probably, Italy has done some internal disinflation, being unable to devalue – but this implies that wages have suffered relatively. The question is how to redistribute the benefit of the German shock without killing the golden goose.

Web applications and geopolitics

I was recently fiddling with the German Federal Railways’ on-line European timetables, when I noticed something very strange. They have the best cross-European timetable, no doubt about it, but some odd things happen if you’re heading too far east. For example, when I asked it for a route from Paris to Tallinn, everything went a little bit weird..

To kick off, it suggested Nachtzug number 237 to Hamburg, which seemed fair enough. And, I was informed, I could take a limited number of bicycles with me on prior reservation. Things went wrong, though, at the next step. In Hamburg, there was a connection on EuroCity 31 to Copenhagen. You can see where this is going, can’t you – due north, essentially. There, I was to catch an X-2000 Swedish high-speed train to Stockholm and transfer to the docks by bus, before hopping a Silja Line ship to Turku in Finland. Presumably rested after the overnight crossing, I’d catch fast train no. R130 to Pasila/Böle, to meet a night train, D 31 (for some historical reason all the long-distance trains are numbered as German D-Züge) to St. Petersburg.

Arriving in the northern capital at 1.40 am, I’d cross it to the Vitebski station and spend three hours on the platform waiting for the express 649-KH to Tallinn. Riiight. In all, some 63 hours. The only alternative differed in that I’d have to change in Brussels as well.

Somehow, the great clockwork was set up to try and avoid leaving EU territory – it’s the only explanation I could come up with. If, after all, I forced it to route via Minsk it produced a far better result, down to 33 hours and four trains – and no ships! But left to its own devices, though, it did go to Russia. I am fascinated by this application pathology – it’s quite routine for timetable servers to produce absurdly complicated routes in order to save a few minutes somewhere, and in fact it’s an important problem in Internet engineering that the system’s basic rules can easily create inefficiently large numbers of hops unless something is done to enforce a less specific route.

Or is there some sort of assumption that nobody wants to go via Belarus baked into the code?