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Sunday, June 16, 2013

Europe's Road Towards Regrowth - Part 4

This post is obviously a continuation of some work in my 'Convergence' report as well as some other blog posts.
- one of the things which really seperated/distinguished Europe from other countries which I noticed when I was younger was that is somehow able to meld it's history/culture with technological progress. Over time though, it became clear that the technological gap was slowly disappearing, it's edge was somewhat lost and there was not enough progress in other areas. Basic things like healthcare, aged care, social welfare, malfunctioning legal system (across many countries), running a business, even living were needlessly and hopelessly difficult when compared to other countries (including Australia). The overlay of European policy on top of state policy made things even more nonsensical. I think it's about time we push the concept of "power sharing" even further within Europe. This means that we will abolish local (or else European) policies when possible/applicable. We regulate to ensure a safe and fair environment but not enough to inhibit the lives of ordinary citizens and businesses.
- the same policy should apply to internal state operation as well. If we can gain benefits from mergers, breakups, privatisation, nationalisation, or even complete abolition of departments then we should consider them
- projects like Concorde, Eurotunnel, Airbus A380/A350, ESA's Arianne rocket, CERN's LHC, all prove that Europe can compete with every single other nation on planet with regards to innovation, science, engineering. What's clear though is that that doesn't necessarily translate to real world profitability in a lot of cases. Think about stealth technology, the Internet, even the concepts behind Google and you immediately think about the United States. However, it was clear that Europeans (and other nations) were right in the thick of it from the very beginning...
Several things need to occur if Europe is to profit from it's intellectual prowess; life has to be easier for those who want to start or run a business, got to be easier to find funding in Europe, they need to be willing to take a chance (there have been some serious problems with some major defense projects but it's clear that this occurs with all nations not just Europe. Europe just needs to learn and push on where/when the benefits possibly outweigh the risks in the medium to long term), etc...
- when I meant closer co-operation of European states I meant on many levels. Part of this involved logistics, transporation, education, control of supply/demand, as well as energy. Basically, if/when possible we should subsidise businesess to move within states so that they can be located closer to the sources of their components (manufacturing in particular). This would reduce the cost of transporation, etc... and hopefully drive down the costs of the product resulting in a more competitive option for consumers. It also means that states will need to figure out their place within the union and play their part as part of a co-ordinated European economic trade union. One in which, certain states would specialise in particular areas while others would supplement them via supply chain, raw materials, or else act as a consumer for them. If they can not compete then obviously their status could be challenged by other states who believe that they could do a better job
- as indicated previously, one of the things I've found interesting is how much more dependent on emerging markets (and fringe, smaller, newer European states as well) European states have become for growth. Another thing that I've found curious is the apparent differentcebetween the GDP on many of the poorer states as opposed to those in the stronger states. What I'm wondering is whether or not we should fund investment in these weaker countries instaed of simply outsourcing to Asia/Africa as seems to be the current thinking (is the wage gap large enough to be profitable? are the benefits of the union and reduced transporation/logistical difficulty enough? Should we have a policy of preferecning local, Europe, then rest of globe whenever/ever possible and competitive?). In the longer term, if the weaker states become stronger there would obviously be a larger consumer market within the union as well...
The other obvious issue here is if if reducing trade barriers to possible growth markets (or even expansion of the union itself) is one way to achieving growth then the obvious option is to simply expand the union (to increase the size of the possible markets that they can access), else pursue "win-win" trade agreements as they have been doing with the United States, Canada, and so on...
- I think that one thing we all need to face is that Europe has sort of meandered for a while now. Is it that the EU has become less relevant? Are the products/services that they produce simply less competitive?
Table 5: Extra EU-27 trade by main trading partners, EU-27, 2001-2011 (1)
- for the immediate future the state of the EU will continue to remain the same. It's clear that a "European Superstate" is likely to only occur if countries are willing to take responsibility of their own affairs, others will only help to a limited extent, there continues to remain economic and other stability issues. Moreover with the diverging interests of many countries within the union, it's likely going to be a long time before we see a genuine political union. I suspect it will be a few decades before we may see this and the only way that it is likely to occur is if we go with a flexible, multi-tiered architecture. Already there are 30 odd countries in the union and we've seen in the United States that depending on the circumstances deadlock can result depending on the nature of the political union and the players involved. Yes, we can change the structure but it this will likely involve many compromises for members on a regular basis. The other choice is a change in the structure.
- structure allows for choice between level of "Europeaness". At this current moment in time so many countries with divergent perspectives. Moreover, it is clear that while many European citizens believe in the benefits of the trade union they aren't necessarily in favour of a "superstate". This will provide the structure for a modern union which provides for greater flexibility while also maintaining the benefits of the union itself (tiers can of course be added or removed at will if need be)
Tier 1 - EMU including political union, basically a superstate (economics, military, foreign affairs, etc...) which is similar to the way in which the "United States" is currently setup.
Tier 2 - EMU (basically similar to what we have in the current setup), high number of EU policies required to be implemented per year (percentage based?). Have the right to say yes, no to policies when desired.
Tier 3 - EU trade union but retain currency, medium number of EU policies required to be implemented per year (percentage based?). Have the right to say yes, no to policies when desired.
Tier 4 - EU trade union but retain currency, only small number of EU policies required to be implemented per year (percentage based?). Have the right to say yes, no to policies when desired.
- I think the debate regarding executive wages is a bit too simplistic. While a cap on bonuses makes sense there are many ways around this as is already been seen/discovered. In my version I would have a formula that is based on a combination of a multiple of the wage of the lowest full time employee plus a variation/combination of factors with regards to overall health of the company. If we can agree bounds on either end (includes everything such as basic wage, salary, bonus, package, incentives...) then we can ensure that they are paid a fair wage while still remaining globally competitive. Moreover, by adding in a time based factor for both performance during his time and a short period after he leaves it gives them greater incentive to work for the longer term benefit for the firm, proper handover procedures, developing a sucession plan and so on... Would like to see an end to so called "golden handshakes" (underperforming executives are sometimes paid enormous amounts for having their employment terminated early). It doesn't make sense to reward incompetence, sub-standard performance, etc...
Would only allow abnormally high renumeration where performance warrants. To deal with issue of massive bias of "institutional voters" would weight votes in such a way that voting rights of both retail and wholesale investors have an equal say. In abscence of vote, abstain.
- as I've stated here and elsewhere I think we hold ourselves back a lot of the time. I'd like to Europe (and the rest of the world) truly chase after
- European leadership need to be clear on what they are presenting to their people and why the changes that they are making are for the "greater good" (if they can't explain why this is the case though I question whether or not they are pursuing the right policy)? At the same time, they need to be representative of their interests. If they are having trouble with passing difficult changes then possibly consider extending term lengths? Think about pursuing a mix of more short term/easy win policies with more difficult medium to longer term structural changes? Other things they need to consider is that their reign is unlikely to last forever. It's possible that some of the changes that they make will not take effect until after they leave office. They might as well as well try to do the "right thing" while they have the chance.
Moreover, it's not just what they say but how they say it as well. Try to explain to them that there basically is not alternative apart from reform. The type/level of reform can of course be negotiated but the other choice is to basically let the state go bankrupt and have chaos ensue. Moreover, what Europeans need to understand is that without reform their countries and Europe will cease to become relevant. Trade is trending down between many EU nations as is...
It would also help if respsonsibility for the dealing with the problem was better targted (though this has changed of late)...
- the European leadership have probably done a poor job in commmunicating why some of the measures were required, why they were necessary in order to achieve stability within the Eurozone, why existing the Eurozone would have been so dangerous, etc... An example of this is explaining the purpose of taxes within society (especially int the context of Greece). If you've never paid tax then it is unlikely that you will wan to pay it. After all, if you don't make use of social services why would you have any reason to use them? The most amusing explanation of this that I've come across would be the notion of a "TV Collector Man". If for generations someone regularly took your TV from your home you would gradually come to accept it but if this were suddenly imposed upon you you would consider it a form of theivery.
I think a better way to explain it to them is that without taxes the whole public sector would basically collapse.
- for every person who criticises the European leadership/Troika over some of the policies that they have pursued they need to ask themselves just exactly what would they have done in the same circumstances. Very few people are trained/qualified to run a large company, fewer still countries, and possibly no one who has a career/history in dealing with bankrupt states.
- labour mobility has been an option outlined here an elsewhere as a means of dealing with the employment crisis. One thing I've been wondering is whether or not there should be "core languages" that should be taught across the union? Based on what I know many countries already teach secondary languages to students as part of their education systems so implementation shouldn't be too foreign to member states...
- I think that while the protesters from the "Occupy/Blockupy" movements have clear grievances they'll never gain traction unless they clarify their message, attempt to come up with a solutions to the problems that they are describing, or possibly even attempt to change the system from within?
- budget for European administration is huge. Should look at savings within union structure itself and devolve savings back into countries that are in trouble. Are we sure we need so many MEPs? Should we consider a freeze on wage increases/hiring? Consolidate to a single base in Brussels or else reduce the importance of other locations (savings of several hundred million per year possible apparently)? Increased savings through better use of technology to flesh out details of major European policy before meetings occur? Currently, discussions are getting strung out for too long...
- are they banks being realistic in attemping to get some bad assets off of their balance sheets? Even in better economic conditions it's clear that it will take some time before they can get rid of these assets. Should they just accept that they will take the a hit to their earnings in the short term? Should we give banks in the weaker countries more/less time to deal with their problems (basically giving them a temporary competitive ad/disadvantage/setting up a regulatory arbitrage situation)?
- I don't see the EU as just a trade block. I see it as much more than that. In the future I see a multi-polar world prevailing and it is likely that Europe become be a part of it (as long as it is able to deal with it's present problems). These trade blocks will form the basis for sharing of burdens and responsibilities for global issues and these blocks will act in the interests of all nations within that block as well as the interests of that particular block within the world. Basically, the notion of notion of nationally based superpowers will have far less of an impact if these blocks are able to maintain solidarity.
- it's clear that the Eurozone has sort of stablised (there's still clearly a lot of other clean up work occurring especially with regards to the banking sector).
This means that instead of having to focus our resources on stabilising we can focus more on the process of using it to stimulate growth. From now on (whereever possible), I propose that every single dollar that can be saved at the European or nation level will be counter-blanced by funds for the direct funding growth initiatives such as developpment of businesses, better infrastructure (problem is that most infrastructure in Europe is reasonably modern and well integrated. Not too many projects that would be major game changers (energy sector and perhaps better integration of transportation/logistics with states that are newly entering the union to facilitate trade), etc... in troubled states? Would like to see greater input/discussion from various stakeholders on what they believe to be imperative to future of Europe...), etc...
- unrealistic that we abolish tax havens, etc... in the near term but we can at least reduce the spread (especially with regards to exceptionally low corporate tax rates). This will allow these countries to maintain their deposits/competitive advantage but we could use these funds/savings to help deal with some of the more troubled states where possible...
- Europe really needs to look hard at itself. Figure out what it's citizens want with regards to welfare, what it can pay for, and how much they are willing to pay in order to get these particular services. I recall high income professionals in parts of Europe who were paying atrociously high tax rates to the point where I often wondered whether there was a point of diminishing returns...
That's the basis from which I think we should be thinking about cuts, not necessarily just cutting without necessarily understanding the real world implications... which brings me to the next point. I think there may be a slight disconnect between what they are feeling and what is actually happening on the ground. Recently, a few local politicians tried living on welfare benefits for a short period of time to see what is was like. I challenge some members of the European leadership to do the same. Figure out just how far you can push without taking people "over the edge" and don't be afraid of rolling back changes if they don't have the desired effect.
- I think sometimes European states think about the problem of dealing with their deficits too simplistically. Sometimes it seems as though they just think about cuts and revenue raising through increased taxes (aware that this is not always the case). Europe shouldn't be afraid fund businesses directly or help companies grow larger... if they are successful that means that the size of their tax base instantly increases (of course starting a business is never easy)
- one of the things I've found interesting when looking at various statistics regarding Europe is how disperse the spread is with regards to the size of businesses and also the size of government spending/taxation in relation to overall GDP. What's noticeable is how healthier econonomies tend to spread the load more evenly across the private/public sector as well as across businesses of varying sizes...
- capitalism and other social models in my mind are simply a highly evolved version of Darwinism within the framework of human behaviour which is then overlaid upon a series of theoretical manifestations which allow us to live in a relatively harmonious fashion. However, over time it's become clear that huge abberations/distortions have occurred which have led to a skew in the overall ecosystem which have meant that system needs to be altered. We've hit the point at which MNC/TNC powers have almost superceded that of countries and perhaps even continents. Clearly, this can skew government decision making since we've become so dependent on them for employment and income from them. The biggest problem is this. If our governments are basically being run by people who are looking after the interests of business rather that of their citizens then everybody loses. If governments are inefficient or even bankrupt we have political/social unrest, if businesses hold too much sway then eventually they may one day end up running many government services. Something which is often unprofitable and probably wouldn't be the workeable in the long term. This is what everyone should keep in mind if we continue down the pure corporate path that some nations seems to be taking (I highly doubt an executive at a software company is going to be interested/skilled in running government and vice-versa). Everyone has a role to play...
This is about getting what's best for everyone while still being able to maintain our belief and values that we work within a meritocracy. as long as they control our world what do we have to look forward to?
- If you can't change their behaviour change the system. The thing that needs to be explained here is that we don't really care how much a company makes as long as they pay a fair share of tax. They are dependent on us to make their income just as we are reliant on them for employment
- the problem is that "protected" industries don't learn to adapt and change to suit the circumstances. For instance, for a long while now local car companies have insisted on making large cars even though the trend is clearly moving towards smaller, more fuel efficient vehicles. The concern is that the more "protection" you have the more likely it is that you become complacent, don't adapt to modernisation, global best practices, or become overly dependent on government subsidies
- focus on 'real value' in products. Not just incremental changes but substantial improvements over current science technology. Incremental improvements provide easy sales when there is a relatively solid, known market. To make real gains you need to be bold and innovative
- states don't need to take advice from the European administration but they need to heed the warnings and realise that in many cases there is a lot of expertise and help available from within the union should they require. Moreover, it's clear much of Europe looking at similar problems with regards to dealing with excessive debt... States could learn from one another's experiences... To deal with the credibility issue, have three levels national review, European review, and private review (similar to the methodolgy envisaged for bank supervision by Mario Draghi)
Too strict/loose with regards to healthcare contributions?
If you look hard enough you'll notice that the solutions are already provided by those who are already in the industry already. Need to factor in the zoom in/zoom out issue. All you have to do is ask the people in question what is wrong with the system and it's more than likely that they'll already have the answer for you
- it seems as though there is endless complaints about how slow the change takes to complete within the union. This is true but they also need to realise that it still isn't a "superstate" as yet and is unlikely to be so in the near future unless structural of philosophical changes occur
- someday I'd love to have a future in which money is no longer relevant and we can basically do whatever we want with our lives but as it stands we have to make do with what we have. Altering the system to suit our needs rather than working with a system that serves only a small minority must surely be in the best interests of everyone?


Quick Beef Stew Recipe, Random Stuff, and More

This is the latest in my series on quick, easy, and tasty meals:   http://dtbnguyen.blogspot.com/2017/11/chinese-style-congee-jook-recipe...