Global financial experts must play music or understand French/Spanish

Former Dutch minister and jazz musician Hans Dijkstal

I put the previous post in Spanish translation on my blog "Tutto
è possibile" and received interesting comments.

One commentator, a professional translator from Spanish to English (he read my post in English and wrote to me in Spanish as that is the language of "Tutto è possbile") said:

"A friend of mine, a doctor specialised in food disasters, worked for 14 years with Doctors without Borders (Medecins sans Frontieres/Artsen zonder Grenzen). She said that in addition to English and one other European language, they required knowledge of one language from the Third World. She knew Swahili.

What I found at the time a silly requirement I understand today: knowledge of a language of the countries where she was going to work, even if it was only one of dozens, was a window into another perspective to see the world."

Another commentator, a pianist, said:

"I speak a universal language: music, directed, it seems, at the spirit, the soul. It's not sufficient for traveling around the world and, at age 57, I think I should learn English. I understand Catalan, but do not speak it, until now."

These two comments are a perfect starting point for what I'd like to explain. 

In my view, global finance experts are better equipped and more thoughtful experts if they understand French or Spanish as this gives them the possibility to open their mind to other perspectives. It may also contribute to enhancing their empathy, and looking at the world in a more modest, more curious, less arrogant manner.

Before I founded the Forum on Debt and Development, FONDAD, I worked with the Transnational Institute. The main language there was English, but a few of us spoke Spanish and French too. I remember how happy I was when I could speak Spanish or French with my colleagues as this was giving me and, I think, them a different view on things. It also stimulated me and them to talk about different topics. Finally, the speaking of Spanish or French opened our mind and spirit to other sentiments.

To finish this post, I will give you one other example of why the capacity of understanding French or Spanish is a useful (but not sufficient) condition for becoming a good expert in global finance. 

In the early 1980s I set up an informal discussion group consisting of global finance experts working with the commercial banks (Rabobank, ABN Amro, ING), the central bank, the major ministries dealing with the topic (Finance and Foreign Affairs - Development Cooperation), the parliament, and some media. 

In this discussion group I heard Treasury officials saying what I had heard before: policy makers south from Paris are not serious people, voicing rhetorical and radical ideas rather than the well-thought, balanced, down-to-earth, clear ideas of the northern Europeans (whose ideas, by the way, are not at all that well thought, balanced and clear -- but that's a topic for a next post). 

What I have noticed since I got involved with global finance as a journalist, researcher, conference organiser, international networker and global citizen, is that there is a difference between global finance experts who only speak English and those who speak at least one other "rhetorical" language.

Why do I include in the title of this post the playing of music as an alternative requirement for a global financial expert? Because I think the playing of an instrument may give the financial expert who only speaks English the sensitivity to better understand the world. The real world goes beyond global finance and needs inspiration from music. Isn't language also, in part, a form of music?

Global financial experts must understand French and/or Spanish

My greatgrandfather Bernardo de Ferrante was doctor in Amalfi.
 Painting by Aafke Steenhuis.

My wife paints, I play guitar. What has this to do with global finance, which is the main topic of this blog?

My bisnonno Bernardo de Ferrante was a doctor (medico condotto) in Amalfi, Praiano, Capri and Napoli. Any relationship with global finance?

Yesterday I attended a meeting of the association Robert Triffin International, RTI, in Brussels. Is there a relationship with global finance?

Yes, because Robert Triffin was a man who spent most of his life thinking and acting in the realm of global finance. The people I met yesterday in Brussels at the meeting of RTI are also spending much of their life to global finance.

Robert Triffin was the son of a small French-speaking farmer and got his PhD in the United States. He hoped he would get a job at Leuven University but as the university wanted Flemish speaking economists, he did not get it. He decided to return to the US. On the ship to the US he met a nice American woman, married her and became a famous professor at Yale University. Many years later he returned to Belgium and that is where I met him, at the University of Louvain-la-Neuve.

Yesterday I proposed to the other members of the Board of Robert Triffin International that new members should be able to speak French.

My proposal met with strong disagreement. Among others, it came from an Italian board member, who said that this would be completely against the spirit of Robert Triffin, who had always been willing to adapt his language to the person he was talking to. Triffin spoke fluently French, English, Spanish...

I explained that I also adapt myself to the language the other person speaks, but that my proposal to require that new board members would speak or understand French and/or Spanish had to do with a key problem: Anglosaxons who speak only English have a limited view of the world and, consequently, a limited view of global finance.

I had the feeling that some of the board members did not fully understand what I was talking about...

I will explain in a next post.

Tsipras hopes for May debt deal with Troika

The debate about Greece is more than a struggle between a debtor country and its creditors -- the Troika. It is a debate about democracy. Most financial policy makers and parliamentarians do not seem to be aware of that, or not sufficiently.

Why should the Troika take the democracy issue in the Greek debt debate more seriously?

Because otherwise European democracy will be undermined further, dangerously threatening the future of Europe.

It is not only a question of taking the last Greek elections, which brought the current Greek government to "power" (its power is limited), more seriously, it is also taking the issue of 'sound' economic policymaking more seriously.

'Sound' or serious (thoughtful, rational) economic policies are not the ones advocated by the Troika, but more the ones advocated by the new Greek government -- see eg Varoufakis: "A new deal for Greece".

Am I biased and do I overlook or neglect the good arguments of the Troika? I don't think so.

The arguments given by my friend of the FONDAD network in the previous post do not deal with the democracy and sound economic policy aspects in the Greek debt debate. They deal with diplomacy and sensitivity issues.

By the way, my friend mentioned in the previous post an important issue: "There is no provision for an orderly process of "bankruptcy" which quite clearly was and is needed to deal with the problem of Greek debt. So, this takes me to the subject that we have discussed many times at FONDAD - global governance, global governance, global governance."

European policy makers are engaged in a debt and democracy debate about Greece -- and their own countries -- of which they do not seem to realize the importance.

In the meantime, Tsipras hopes that by his change in the Greek debt negotiating team and by playing the game smarter, he will be able to reach a debt deal by May -- see eg, "Tsipras presses for May debt deal, threatens referendum".

Will Tsipras succeed within 27 days and stick to the promises he and Syriza made to the Greeks who voted for them?

Did Varoufakis say "fuck you" to Schaeuble and Dijsselbloem? (2)

In the dialogue I'm having with a friend from the FONDAD Network about the struggle between Greece (Little Thumb) and the Troika (The Giant), my friend has written the following:

"I should not have used that F-word but in a way you seem to end up saying the same thing. Varoufakis comes to these meetings without a touch of humility which I think bothered me. You may ask why he should be like that - only because the country has signed agreements which should be honored. The country (not Varoufakis) made huge mistakes in the past which should be recognized (massive tax evasion, serious corruption, bizarre tax code, massaging data and lying about them, wasted public expenditures - Olympics! etc.)  as a starting position to negotiate concessions from the creditors. If the creditors were not listening, it is most likely because they felt that Varoufakis was simply "demanding" and not negotiating. And as we see, he still has not "delivered".

I do not have much sympathy for the creditors but the problem is with the system which allows them to be so demanding and irresponsible. The assessments of credit worthiness by credit agencies has been poor and so was the assessment by the EC. Neither EC nor ECB had enough powers to do an effective bank supervision. When the hell broke loose, neither the EC or ECB had the mechanism and skills to deal with the debt crisis without the help of the IMF. The IMF program was fairly "classic" - relatively short term with the weight of responsibility put on the debtor. There is no provision for an orderly process of "bankruptcy" which quite clearly was and is needed to deal with the problem of Greek debt. So, this takes me to the subject that we have discussed many times at FONDAD - global governance, global governance, global governance.

In addition, there is a problem of timing. Any special deal for Greece will be poorly seen by countries like Spain, Ireland and Portugal which have gone through their drastic adjustments (and recessions). Not surprisingly, the biggest opponents of a special deal for Greece are precisely those countries as well as other "poor" members such as Slovakia."

Did Varoufakis say "fuck you" to Schaeuble and Dijsselbloem? (1)

Two images of the same reality, painted by my wife Aafke Steenhuis.

The reality you see on the two paintings is the river that separates the part of Amsterdam where I live, Nieuwendam, from the part where most people live in Amsterdam.

This morning I wrote a letter to a friend who said that Varoufakis had been saying "fuck you" to Greece's creditors over the past few months when he met them discussing Greece's foreign debt problem. In the letter to my friend I tried to make clear why I disagreed with him. I wrote the following:

"I don't think Varoufakis has been saying "fuck you" to them. At least that's not my impression. I rather have the impression that some of the others (Schaeuble?) have been saying "fuck you" to him... even though they may say or think Varoufakis has been saying "fuck you" to them.

I interpret what has been happening between the new Greek government (Varoufakis) and its creditors in a different way. I feel Varoufakis wanted to make clear that the new Greek government has another view on how the Greek debt problem should be solved than the way previous governments and the Troika have treated it, and he did not get an ear for that. And becasue of the lack of understanding and interest in the new Greek view that he received -- because of the lack of empathy, understanding and political agreement of Schaeuble, Dijsselbloem and others -- , Varoufakis insisted on repeating his view.

Diplomatically and tactically this may have been stupid -- to insist all the time on your own view because the others are not really listening to you -- but I fully understand why Varoufakis has done this or may have done this. Therefore I wrote that criticial post on the Fondad blog,  'Clumsy' Varoufakis replaced as key negotiator - Is he about to resign?  (I revised the post after I had sent it to you.)"

After I had written this letter to my friend I had to think about the two paintings by Aafke -- they are two pictures of the same reality. Aren't Varoufakis and Greece's creditors looking at the same reality from two different views? And can both parties have had the feeling that the other was saying "fuck you"?

Varoufakis: "A new deal for Greece"

Yanis Varoufakis wrote an interesting post on his blog, "A new deal for Greece", in which he stresses the need for "agreement on a new development model for Greece".

I think Varoufakis and the new Greek government are right in stressing the need for a wider agenda than the one usually discussed in debt negotiations.

"It requires overcoming two hurdles," says Varoufakis after a brief introduction in which he mentions the agreement reached so far between Greece and its creditors - "We and our partners already agree on much."

"First, we must concur on how to approach Greece’s fiscal consolidation. Second, we need a comprehensive, commonly agreed reform agenda that will underpin that consolidation path and inspire the confidence of Greek society.
Beginning with fiscal consolidation, the issue at hand concerns the method. The “troika” institutions (the European Commission, the European Central Bank, and the International Monetary Fund) have, over the years, relied on a process of backward induction: They set a date (say, the year 2020) and a target for the ratio of nominal debt to national income (say, 120%) that must be achieved before money markets are deemed ready to lend to Greece at reasonable rates. Then, under arbitrary assumptions regarding growth rates, inflation, privatization receipts, and so forth, they compute what primary surpluses are necessary in every year, working backward to the present.
The result of this method, in our government’s opinion, is an “austerity trap.” When fiscal consolidation turns on a predetermined debt ratio to be achieved at a predetermined point in the future, the primary surpluses needed to hit those targets are such that the effect on the private sector undermines the assumed growth rates and thus derails the planned fiscal path. Indeed, this is precisely why previous fiscal-consolidation plans for Greece missed their targets so spectacularly.
Our government’s position is that backward induction should be ditched. Instead, we should map out a forward-looking plan based on reasonable assumptions about the primary surpluses consistent with the rates of output growth, net investment, and export expansion that can stabilize Greece’s economy and debt ratio. If this means that the debt-to-GDP ratio will be higher than 120% in 2020, we devise smart ways to rationalize, re-profile, or restructure the debt – keeping in mind the aim of maximizing the effective present value that will be returned to Greece’s creditors.
Besides convincing the troika that our debt sustainability analysis should avoid the austerity trap, we must overcome the second hurdle: the “reform trap.” ...

I also copy the last two, interesting paragraphs:

"The current disagreements with our partners are not unbridgeable. Our government is eager to rationalize the pension system (for example, by limiting early retirement), proceed with partial privatization of public assets, address the non-performing loans that are clogging the economy’s credit circuits, create a fully independent tax commission, and boost entrepreneurship. The differences that remain concern how we understand the relationships between the various reforms and the macro environment.
None of this means that common ground cannot be achieved immediately. The Greek government wants a fiscal-consolidation path that makes sense, and we want reforms that all sides believe are important. Our task is to convince our partners that our undertakings are strategic, rather than tactical, and that our logic is sound. Their task is to let go of an approach that has failed."

- for the full Varoufakis blog post click  HERE

Johannes Witteveen: "If you want the free market to function properly, you need to intervene"

A couple of year ago, in 2007, at the beginning of the crisis, Witteveen and I had a conversation about the need for free, creative thinking about economic problems and how some of the world's economic problems could be solved. Here is what we said.

- The Fondad network is quite large, it includes people like the French economist Charles Wyplosz, the North-American economist Barry Eichengreen, the Latin American economist Jose Antonio Ocampo... Unfortunately, the climate in which we now live makes that academics and policymakers are less enthusiastic, less motivated than people like Triffin and Monnet to come up with challenging policy proposals inspired by a long term view. That's an important difference.

Yes, yes.

- They adapt their proposals and their thinking to the circumstances ...

And do not look at what is possible ...

- By which they miss an important aspect of thinking. Thoughts should be free ...

Yes, yes.

- And they are not free.

No, that is indeed a big problem. Therefore, I think it's so important to see the problems of today against the background of problems that we have not resolved properly in the past [such as the problem of a privatised international monetary system based on the US dollar].

- But if I say that to the president of the Dutch central bank or whatever policymaker, they may still say 'yes, you are right', but then go back to the order of the day. Fondad defends the public interest, it is not inspired by self-interest, neither the Dutch or European self-interest, nor the US self-interest, but by the international public cause ...

I find that very important, very valuable. The time may come that the policymakers will have to start thinking again. (Softly) That time is close.
 
- For years, people were trapped by the idea that everything should be left to the market, that the market would take care of everything and that the risk assessment systems of the banks were good...

The market is always good, they think, and any intervention is wrong. But that is absurd. If you want the free market to function properly, you need to intervene in the strategic points. That is a credo of Tinbergen I made my own. 
 
- That is a fundamental problem. There are fashions among economists, and whether they're reigning at universities or at policymakers' institutions, these fashions affect enormously the way of thinking.

Yes, they influence the economists, the media and policymakers. But fashion can change again.

- Indeed. But it is important that people who analyse at some depth the problems get the space to develop their ideas and promote them.

Yes, yes.

- And that they encourage each other.

Yes, and that they're going to warn in time. And that people think in time about what could be done.