Posts Tagged ‘europe’

Book Review: And The Weak Suffer What They Must? by Yanis Varoufakis

Source: http://yanisvaroufakis.eu/

Ten years ago, I read and reviewed Making Globalization Work by Joseph Stiglitz – my first Big Econ tome iirc – and my attention was immediately engaged by the eminently readable style of writing. Reading Stiglitz not only raised the bar for my expectations from nonfiction writing but lowered the barriers to my resistance to the subject of economics. I went on to devour everyone from the immortal words of The Argumentative Indians to the White Man’s Burden and it’s early hints of design thinking in development.

Today however I have a smile on my lips as I sit down to write this review of Yanis Varoufakis’ And The Weak Suffer What They Must? Europe, Austerity and the Threat to Global Stability – a search for his bio turned up a piece of trivia, we’re both born on the 24th of March in the 1960s. It seemed to validate my enjoyment of his narrative style, and my daily hour of reading pleasure over the past couple of weeks.

Varoufakis’ words breathe life into what could have been a dull and dry narrative, full of mindnumbing statistics and incomprehensible GDP growth rates. He humanizes the political economy of Europe, imbuing the German Bundesbank with nefarious motives and a schoolmaster’s strict discipline, and engagingly explains the social and political motives that shape the decisions that influence and impact the whole world.

No other economist that I’ve read has managed to dramatize the stage and the actors in such a way, crafting a gripping narrative of the sweeping changes that took place in the post war era.

The FT’s Martin Sandbu merely calls it an opinionated history, but isn’t that what ultimately history is? A well-balanced review worth reading:

His intellectual rebellion (in many ways justified) against the eurozone’s consensus view of what needed to be done with his country often seemed an end in itself rather than a policy in the service of changing the world for the better.
[…]
The book is nonetheless highly readable. It is also important, outlining a perspective on global economics that influences policy thinking in broader circles than the radical left.

What I personally found amusing when digging up the book reviews that I like to use interspersed with my own opinions in my reviews, was the The Guardian’s blatantly biased put-down of the man and his writing:

Yet while this book reflects a giant ego, and will not win prizes for its ponderous style, it is not entirely without merit for those with strength to plough through the pages.

But reading the review all the way through, one sees hints of a resemblance to the outline of points made by Sandbu in the FT. My own opinion is that if you’re looking to understand the politics of economics then there isn’t a better book yet that I’ve come across.

Highly recommend; eminently readable.

Innovations in transport business models across Europe

Spotted outside the Zuid Park Business Center in Amsterdam, this is a taxi stand cum charging station for electric vehicles. And its not the only one, as I saw the same taxis waiting at Schiphol airport. They were asking half the price of a regular taxi for the trip to the center of town.

In the same parking lot, I also noticed these Smart cars from the Car2Go service, a pay for use rental car service. A similar service is also becoming popular in Tallinn, Estonia where you can access the vehicle directly via your mobile phone. Rent instead of purchase business models are popping up all over. Below is the line of bicycles waiting for customers in Barcelona – the only downside here is that registration for this service is limited only to ID holding residents of the city.

Mind you, the urban pay as you use bicycle concept is not new, though ubiquitious but the cafe/bar below is certainly different even though it won’t get you anywhere ;p

Reflecting on my work here in rural Holland

Wageningen is not your average small town of pop. 30,000 in rural Holland. It has a very well known research university in the Biological Sciences, particularly the needs of agriculture and food.

This changes the character of the town’s thinking, being far more aware of the world and what chaos’ butterfly wing in another part of the globe means in the local and personal level.

The overemphasis in the English language internet on the Eurocrisis in Europe overlooks the reality that Europe is also a continent, not a country. Just like there are rotten parts to India’s growing economy, there are similar challenges in parts of the Eurozone, but is it really the end of the world as the media makes it sound?

Not really. Nowhere even close.

Like any other social network, the countries that choose to use the eurodollar as their primary currency of choice, now have a higher barrier to switching away from the euro or reverting back to dimly recalled national currencies.

Transacting in the euro is so easy across cultural and regional barriers that it makes the effort worth while. I myself am already banking on it.

Europe could stop fighting it and see if informal economy has lessons to teach

Wastepickers in Athens, Greece 2012

Scanning recent writing on the informal economic activity in the wake of the Great Global Recession brings to light the ongoing struggle to deal with it.  Is it good or is it bad? Will it help or is it hindering? Don’t forget the taxes being left unpaid by the economically challenged citizens trying to feed their children. The contradictory articles seem to imply that its perfectly alright for the unemployed in the third world to seek ways and means to earn a dollar but its evil and unthinkable for the same response to occur in the first.

Hoist by their own petard is the cliche that comes to mind, yet it seems as though the conflict is more due to the long established demonization of this natural behaviour, one that has documented benefits such as resilience and cooperation, thus few attempts are being made to bridge the chasm between the formal and informal or pause to understand if there may be some value for the future.

John Sullivan asks What Does the Informal Sector Mean for Global Economic Growth? where he offers insights from the situation in North Africa:

Most of the countries involved in the Arab Spring do not yet have the resources available to create the jobs that they promised. They lack the money to simply build new factories, and government sector employment is no longer the solution it was during the strongman days. Governments must mobilize the informal sector and give them a voice. […] The street vendors of Cairo have already spoken out by partnering with the Federation of Economic Development Associations to develop a draft law and begin working toward its implementation.

But from Europe comes writing whose word choices imply that the neighbourhood kid out to make some pocket money is as much of a tax dodging criminal as more shadowy members of society:

This informal economy is spreading almost to everywhere in the world. It does not only affect developing countries but it is also part of the everyday life of high-income countries, such as the EU member states. Entrepreneurs operate in the unofficial economy because they want to get free from the taxes and regulations that make official transactions unprofitable or unfeasible. Thus, the farmer who sets up a roadside stall selling produce is a participant, so is a construction company that does not report its income to the government in order to avoid meeting legal standards such as minimum wage. Parts of this informal economy also include the children who sell homemade lemonade outside their houses in summer, or their private French classes paid for by adults under the table.

Its a terrible virus, apparently, and its infecting our kids. In Greece – hardest hit of the eurozone nations – Prof Friedrich Schneider, who has researched the Shadow Economy, as he calls it, shares his point of view:

Schneider said that the greater the difference between gross and net income of citizens the more likely it is for the informal economy to deepen.  High social security deductions and taxes predispose individuals to seek ways of avoiding these costs. “No one is hiding taxes in order to save money. All who evade taxes want to gain something in the short term.”

A major prerequisite for the development of informal economy is the complex and complicated legal system. European countries are hyper-regulated by default and the more severe cases are on the periphery of the euro area and in the countries of the Eastern bloc. Corruption there is particularly strong. Schneider explained that the system should be simplified and facilitated.

The quality of services in the public sector can also affect the deepening or reduction of the informal economy. The more severe the procedures in the public sector, the greater the risk of avoiding the implementation of established procedures.

The European version is all about the formal structures, laws and regulations, taxes and services – sounds like a bureaucracy, while the very nature of the informal is the flexible and adaptable. Is it any wonder that its sprouting up in response to the perceived collapse of the global formal economy, as we saw in Spain last week?

I wrote the following 3 years ago, after reviewing the writing on the informal economy, then focusing primarily on the lower income demographic in the developing world:

Because as long as you lump together the activities of the people like selling hotdogs door to door (although buying it from a wholesaler informally), distilling wine for the village, keeping small shops within walking distance when towns are far away or even urban services ranging from garbage disposal to dishwashing to repairing shoes – with the “firms that are hiding from formal regulations and don’t want to pay taxes etc” any formal programs or activities, whether from the social and economic development angle or the corporate profitability angle are going to act at cross purposes.

Martha Alter Chen writes in “Rethinking the Informal Economy” that India stands out as an example where the informal economy has been accepted, acknowledged and now slowly being addressed by government policy. Not in order to dissolve it or remove it but to work with it simply because the incomes of far too many people are dependent on it and no formal systems can be put into place to take care of each and every corner of the country nor her billion citizens.

One can then take what seems to be working, called “creative, resilient and efficient” by Hart, quoted by Chen, and enable systems that support it further, fostering development and increasing success rates at the touchpoints where the informal and formal meet.

Perhaps there is a lesson here about flexibility and adaptability for formal, structured Europe and her economy, hurting as it is right now? After all, as the Jamaica Gleaner puts it, people have to spend all that money somewhere:

Everton McFarlane, deputy director general, said informal activity is being reflected in the formal economy via consumption and investment.

“If there was this informal sector that somehow was not being captured, then where are these people spending their money?” asked McFarlane.

“Are they not spending their money on agricultural goods? Would you not see that in the GCT sales? Are they not spending on electricity consumption? Are they not spending on housing?

In other words, the intersection of the formal and informal economy is not an island by itself that is divorced from the formal sector.  Whatever is taking place, people must consume.