Idealism vs. Nationalism in Risk Management
Posted by Jim Wickenden on Mon, Nov 29, 2010 @ 03:35 AM
The Asian Wall Street Journal reported this weekend on South Korea's intention to tax foreigner's purchases of their government's bonds for fear of a potential mass exodus of capital should things go pear shaped in the future. Not an unreasonable thought bearing in mind recent events in Greece and Ireland. Money scuttles for safety in gold especially when the risk in more liquid markets is less attractive. Again, not an unreasonable act. Companies work under the caveat that they do what they do for the benefit of their shareholders and individuals say that their family comes first. But to hunker down, to panic in the face of financial uncertainty has traditionally been the worst option when things go pear shaped. But I slightly digress when I talk about strategy. I am talking about the human component for self -preservation above the greater and noble good.
Do you see where I am coming from here? There is a common desire to be unified, to forge a sense of togetherness based on the assumption that more is better. Togetherness fosters compassion and it is a noble concept. But when push really comes to shove, then it isn't lofty and noble idealism or even pragmatism that rules the day. It is nationalism.
The emerging capitalist powerhouse of China is all but a market economy under one party and is seemingly quite content to undo seventy years of painful revolution. Why, for money? Hardly. But it is willing to sell its idealistic soul for solidified Chinese influence in Asia and increasingly abroad and flying the flag proudly as it does so.The U.S. refuses to give up or even modify its sense of self despite the evidence that its laissez-faire economic model is dangerous and flawed, Allen Greenspan's words not mine. Once again the cycle of recession has hit the America hard, but if anything we are seeing a resurgence of hard edged capitalsim even as we are all still wincing at the last blow from Adam Smith's free hand. Iceland has tossed out it's European unity monetary principles out of a sense of national indignance not fiscal prudency. It is nationalism that is threatening to tear the Eurozone apart at the seams not lack of recognition that the Euro must survive for the greater good of those in it up to their accented necks. And South Korea is turning its back on the ideals that made it a tiger in Asia out of a sense of nationalistic self preservation, not cold hard fiscal logic.
Kudos to Britain some observers might say for not abandoning sterling, but why did they stay out of the Euro? It certainly wasn't a pragmatic decision but a highly charged, jingoistic one by the highly vocal, an let's be honest, largely ignorant British public. Do away with the head of the monarch on our coins and slide another emblematic rung down from our lofty heights of yesteryear? I should cocoa! And I confess I was one of those blustering nay-sayers.
Not everything that counts can be counted and just because something can be quantifiable doesn't mean it makes sense. These too late words of sagacity are coming home to bear fruit. I was doubtful that nationalism, the driving force of world economics, can be done away with under the auspices of risk management and prudent risk analysis.
The human component, the immesaurable x-factor, was completely omitted from the bean counters equation. Where were the mathematicians when Greece decided that fudging the figures was better than coming clean? Where were the prudent inspectors when they failed to recognise the evidence in Ireland, despite the Irish doing absolutely nothing wrong- in principle? And who does Angela Merkel answer to when the German people are primarily being asked, again, to bail out a third nation should Portugal sink under the weight of prudent finacial management? Not the policy makers that's for sure. She has to answer to the seething German electorate who will not be convinced that the common good is best for Germany.
Regulation has failed each and every nation on earth to some degree since 2008. North America and Europe moreso than South America and Australasia, for sure, but boom or bust, nobody is looking beyond their borders for a solution. Every nation is looking inward, pointing the finger at the leaders and just as angrily pointing outwards as everyone blames everyone else for the situation we all have to live with for the time being.
Who says a trouble shared is a trouble halved? Not the Irish, Greeks, Portuguese or Germans right now.
More to follow...