Tuesday, June 29, 2010

Homer Economicus

Behavioural economics appears to be at a tipping point in terms of its adoption by businesses and non-economists. Take the latest briefing from Deutsche Bank Research: an excellent primer on why homo economicus has gone the way of the neanderthal. They even suggest that the financial crisis was the result of too much faith in the now extinct 'economic man'. Moreover, if we get the new behavioural economics right we might even avoid another crisis. We shall see.

The IPA in London now has a dedicated website aimed at educating advertisers and marketers to the virtues of behavioural economics. And we learned last week that Obama's administration have taken to using the insights from behavioural economics to sell their policy initiatives to the American voter.

Will it work? Of course it will, up to a point. The challenge - as it is/was with the classical economic treatment of the consumer - will be to avoid treating people as 'dumb' Homer-type folk who don't know when they're being manipulated. That world, and that consumer, is long gone. We are all choice architects now.

Monday, June 28, 2010

Death is Personal

Really personal: from a recent post by Dan Ariely I learned that just 10% of premature deaths were caused by personal decisions back in 1900. Today it's reckoned to be nearer 45%. So these days, if you die young, then it's almost fifty/fifty that it's your own fault. Flip a coin even. Sobering stuff (though you shouldn't have been over the limit in the first place).

I guess we're going to spend a lot more time arguing about no-fault death in the future. I was reminded of this by an excellent broadcast by ABC's FutureTense on the theme of Meatless Monday. It's an idea that originated in the United States (now there's a surprise) and that is getting school kids to only eat vegetarian food for their lunches and dinners every Monday. For the sake of their health and the environment, of course. No ulterior motives there. Though I must say I'm beginning to feel sorry for both teachers and their students: they are the first call of every social engineering fantasy to make the world a better place. It's a wonder they have any time for teaching and learning...

But I'm not against people choosing whether or not to eat meat: some of the time or all of the time for that matter. I'm rather partial myself to the occasional insalata caprese washed down with a cool glass of Pinot Grigio. In moderation, of course: I don't want to be on the wrong side of that coin flip. And if rising costs of meat products mean that I and others eat less then so be it: just so long as I (and others) have the choice. Even if meat prices in Ireland are 21% higher than the EU average.

I find it hard to call the future for vegetarianism: the growth of a 'blame culture' in relation to premature deaths (or maybe any deaths) may well see a growing proportion of middle-aged and older adults opting for less meat diets. On the other hand, rising affluence in the BRIC and other fast growth economies will increase the demand for meat. And will undoubtedly force prices to rise substantially as food security issues worsen.

Better hope we don't end up with the Sunday roast marking the only day of the week we do eat meat.

Saturday, June 26, 2010

Ireland and the Ten Commandments

I'm referring, of course, to the Ten Commandments for Fiscal Adjustment in Advanced Economies recently revealed by the International Monetary Fund. Like the original ten commandments, the IMF's are open to interpretation. Here's my interpretation of what they mean for Ireland:

Commandment I: You shall have a credible medium-term fiscal plan with a visible anchor (in terms of either an average pace of adjustment, or of a fiscal target to be achieved within four–five years).

We're not there yet, and I don't see any Irish government voluntarily adopting one, but it could be one of the key benefits of a Fiscal Council for Ireland.

Commandment II: You shall not front-load your fiscal adjustment, unless financing needs require it.

Unfortunately we have to do just that thanks to rising spreads on Irish bonds (5.6% yesterday or almost 3 percentage points above German bond rates) - which threatens to wipe out the deficit corrections achieved via spending cuts.

Commandment III: You shall target a long-term decline in the public debt-to-GDP ratio, not just its stabilization at post-crisis levels.

Our debt-to-GDP ratio is getting alarmingly close to the 90% level (depending on how you measure it), which puts us in the 'no-way-back' danger zone where we can no longer 'grow our debts smaller'. I think we should target a return to the ratio of just three years ago: closer to 30%. We're still a young'ish country with capacity for above average growth so we can do it (and should, before structural pressures such as an ageing population are upon us). Frankly, if we don't set ourselves a tough target we risk our debts exploding in the other direction.

Commandment IV: You shall focus on fiscal consolidation tools that are conducive to strong potential growth.

The IMF says target current spending, which makes sense up to a point. But they don't mention capital spending (which I would define to include R&D and education) which is a fiscal tool that is more conducive to strong potential growth than tampering with social welfare entitlements. It seems both the Left and the Right in Ireland are in agreement on the capital spending priority.

Commandment V: You shall pass early pension and health care reforms as current trends are unsustainable.

It goes without saying, but it still remains unsaid by most of our elected representatives. The obvious place to start is with public sector pensions, but to quickly extend this to our increasingly dysfunctional private sector pension operations. We have a demographic 'buffer' here in Ireland that others don't have - we should take advantage of it: for our grandchildren's sake.

Commandment VI: You shall be fair. To be sustainable over time, the fiscal adjustment should be equitable.

Sure, I'll pay more tax if it doesn't end up going to looters of the public coffers like Callely.

Commandment VII: You shall implement wide reforms to boost potential growth.

This is critical for Ireland. As the IMF points out:
Strong growth has a staggering effect on public debt: a one percentage point increase in potential growth—assuming a tax ratio of 40 percent—lowers the debt ratio by 10 percentage points within 5 years and by 30 percentage points within 10 years, if the resulting higher revenues are saved. An acceleration of labor, product and financial market reforms will thus be critical.
We were doing just that during the 1990s and early 2000s - we can/must do it again.

Commandment VIII: You shall strengthen your fiscal institutions.

Which in our case means letting the European Commission and the ECB have more say in our budget setting practices. In an ideal world I'd prefer they didn't, but then in an ideal world we wouldn't have had Brian Cowen as Minister for Finance when the wheels were coming off the economy...

Commandment IX: You shall properly coordinate monetary and fiscal policy.

This is one Commandment that doesn't apply to us since we joined the eurozone. But of course we can always rely on the ECB to do the right thing by us in terms of monetary policy. Won't they?

Commandment X: You shall coordinate your policies with other countries.

Again we don't have much say in this one. Though perhaps instead of coordination we can simply be an inspiration to others?

So there you have it. But as with the original ten commandments, it's much easier to learn them than it is to live by them. Who will be our Moses?

Friday, June 25, 2010

The Right Wrong Idea

Most of us most the time get things wrong. Fact is, you have to get things wrong in order to get things right. Sometimes you have to get things wrong a lot before you get things right. It seems that is how the Onion's gets things right. This from a Slate interview with Ira Glass:
I had this experience a couple of years ago where I got to sit in on the editorial meeting at the Onion. Every Monday they have to come up with like 17 or 18 headlines, and to do that, they generate 600 headlines per week. I feel like that's why it's good: because they are willing to be wrong 583 times to be right 17.
The results, for those of you with a certain sense of humour, are usually pure genius. Like the latest one:

Thursday, June 24, 2010

The Retro Future

People's views about the future are really a 'Rorschach-like' revelation of their views about the present. That's what struck me reading the latest Pew research on how Americans imagine American life in 2050. Even looking ahead 40 years, they anticipate a gloomy outlook for jobs, retirement and standards of living. Though the outlook isn't entirely negative: the innate optimism of the American people leads to a consensus that life, thanks especially to technology, will nevertheless be better.

I suspect a poll of Irish attitudes about the future would reveal a similar mix of economic pessimism and technological optimism. But as I've said before, we don't do futures thinking well in Ireland, despite the best efforts of writers like Stephen Kinsella. Inevitably we can't help but view the future through the prism of the present.

Still, you can have fun with our 'present-centrism' by re-imagining the past through the prism of the present. The image is from an ingenious journey into the past - 1977 to be precise - by designer/artist Alex Varanese (ht: PSFK). For those of us who lived through the 'decade that style forgot', his 1970s take on 21st century technologies is truly delightful. My teenage years would have been a lot more fun if this stuff had been around back then.

Mind you, our technological advances since shouldn't make us feel too superior towards the past. There are some people who think that the 1970s marked the peak of human capability and that civilisation has been sliding backwards ever since. Which is one (albeit small) consolation for those of us old enough to have been around to see it when it happened...

Maybe it's our retro present we should be worrying about?

Wednesday, June 23, 2010

Catch Yourself On

...as they say in up North. Always a good idea to put the things we're afraid of (or are made to be afraid of) into perspective:

Via the very sensible Simoleon Sense.

Tuesday, June 22, 2010

The Gender Science Gap

Yesterday's Eurobarometer report on European attitudes to science isn't very encouraging for those trying to build a Smart Economy here in Ireland. Especially as Irish interest in science is below the EU level (though by no means the lowest). Meanwhile pagans celebrating the summer solstice at the Hill of Tara claim the M3 motorway has created negative energy around the site. Oh dear.

It's an amusing juxtaposition of course. Less amusing is the irrational and unscientific nature of Irish media coverage of the Eurobarometer findings. For there is one, defining feature of attitudes towards science they have chosen to ignore, and that is that women are far less interested in science than men - right across Europe and not just in Ireland as the chart shows. But there isn't a single mention of this 'scientific fact' anywhere. Even the authors of the Eurobarometer report seem somewhat embarrassed by the findings as they launch into a slightly bizarre 'interpretation' of the gender science gap thus:
In general, men more often express interest than women in all the issues and particularly when it comes to sport, 41% of men compared to 10% of women are very interested. However, when it comes to culture and arts the opposite is the case: women are more interested than men (23% vs. 16%, respectively).
A rather bizarre comment since the survey they are reporting didn't cover 'sport' or 'cultural' issues. Perhaps they were afraid of suffering the same fate as Larry Summers - the unfortunate ex-President of Harvard who foolishly pointed out the scientific facts about gender and science. Silly Larry, did he not anticipate the negative energy such a statement might unleash? Still, as a man of reason and science he called it as he saw it: everyone is entitled to their own opinion, but not to their own facts. Reassuringly for believers in freedom and reason everywhere, some are still daring to discuss the gender science gap.

What is intriguing from the Eurobarometer findings is that even in the countries we are regularly told we should model ourselves on - Sweden for equality and Finland for education - the gender science gap is even bigger than it is in Ireland. Of course, the inevitable reaction to the comparative lack of interest in science among women - and their absence from much of scientific academia and enterprise - will be to blame it on men. Yep, it's a patriarchal conspiracy, denying us the next Einstein, whomever she is. And so there'll be lots of huffing and puffing and investigations and calls for quotas for female scientists and so on... and it won't make a blind bit of difference. It hasn't in Scandinavia.

So will our politicians, academics and policy makers be scientific about science policy: and focus on ensuring that all our young people who are keen to pursue careers in science - and they will predominantly be young men - will be able to do so? Or will they stand shoulder-to-shoulder with the latter day druids on the Hill of Tara and their magical thinking and irrational faith in their ability to change human nature by insisting on equalising the gender science gap? Sadly I suspect that magical thinking will always be with us.

Monday, June 21, 2010

As Others See Us

Quite literally: a map of Dublin comprised of photos taken by tourists and locals. Tourist photos are in red, locals in blue. More here. Via Information is Beautiful, of course:

Data sculpting again, albeit in 2-D this time.

Sunday, June 20, 2010

Blog Cuttings 06/02010

Ones that caught my attention recently:
  • Homophily: the Internet is an echo chamber - discuss. And they do, over at the excellent FutureTense show on ABC radio. I hadn't even heard of the concept beforehand (a classic sign of homophily perhaps?)
  • The Death Switch: or how to stay in touch with loved ones when you're, well, dead. And no, you don't need to hire a medium (but you do need internet access).
  • The World in 2040: a fascinating view from the UK's Ministry of Defence about the future, including 'strategic shocks' such as a cure for ageing: smart feedback form as well.
  • The Big Pullout: a remarkably insightful post-election analysis of the recent UK general election by the folk at Greenberg Research - could the election of a Tory-led government be the straw that breaks the back of the EU's future?
And finally - after the silliness of the Fine Gael bun fight - a genuine, straight talkin' politician; he'd get my vote, even though it seems very few in the actual election thought the same (ht: Ultonia):

Saturday, June 19, 2010

Married to Welfare

The Dutch have finally figured that encouraging the institution of marriage makes a lot of economic sense. Or at least two villages in the Netherlands have anyway:
...two villages are hoping to reduce their welfare rolls through strategic marriages: “The local social service departments are paying for the women to have a make-over in the hope they can hook up with a rich husband to support them.” Participants in the scheme will receive tips on hair, wardrobe and social and presentation skills.
Funny that, because so much in the way of welfare practice here in Ireland (and social legislation generally) has been about weakening the value of marriage rather than strengthening it. Marriage has become a lifestyle choice rather than an important component of Irish culture and society, as I've noted once or twice before. We are not unique in this regard, of course. Still, the Dutch development is interesting. Economic reality has an unfortunate habit of derailing most utopian ambitions and the idea of the state as 'nanny' (or 'sugar daddy', more like) - meeting all the needs of its citizens for protection from the consequences of bad choices and bad luck - is rapidly approaching the missing bridge. Accelerated by obscene levels of corporate welfare for financial institutions I might add.

But it isn't just about economics. We are in the closing stages of a clash between the culture of monogamy and the culture of polyamory, one that has its origins in several key developments in the last century - from the pill to labour market trends to hypergamy. A very expensive clash at that: much of the expansion of Europe's welfare states has been in response to the fallout from a shift from cheap monogamy to expensive polyamory. But we shouldn't blame it all on the Sixties. I agree with Frank Ferudi (in an interesting article on the 'permissive society') that perhaps the real problem is our collective inability to pass judgement on other people's behaviour:
Sadly, the ideal of being ‘non-judgmental’ allows far too many people to evade their responsibilities for making judgment calls about different aspects of their lives. Hiding behind morally illiterate ideals of being ‘non-judgmental’, ‘inclusive’ or ‘diverse’ has fostered a climate where far too many people can dodge the burden of authority for their own choices. Why? Because if we’re discouraged from being ‘judgemental’, and lectured that there are no ‘right answers’ or ‘right relationship’, then the exercise of choice becomes pointless. And yet if choices are deprived of moral meaning in this way, because no choice is any better than another, then we become disenchanted from exercising our freedom.
What has been lost is the awareness that the freedom we have cherished in the West can only be sustained if we reinforce the connection between freedom of choice with responsibility for the consequences of choice. A connection made famous by another Dutchman - Spinoza - back in the 17th century. It seems some 21st century Dutchmen are re-learning the lesson he once taught.

Friday, June 18, 2010

Refusing Refugees

Ireland is no long a 'soft touch' when it comes to asylum seekers. Data from Eurostat released today shows that only 7.8% of applications by asylum seekers were approved - compared to an EU average of 19.2% (and 30% next door in the UK).

In Ireland, approval of asylum applications on the first instance of application are down from 30% in 2008 to 4% last year: the latter rises to 7.8% on appeal. We're not the lowest, mind you: Belgium, Spain and Norway are significantly lower. And Estonia seems to have a 'zero tolerance' thing going with refugees right now...

The numbers seeking asylum in Ireland are also down (from 7,250 in 2008 to 6,560 last year). So a lower rate of approval applied to a falling number means that asylum seekers account for a trivially small share of foreign nationals taking up residence in Ireland. Despite more negative attitudes towards immigration in Ireland in recent times, it seems unlikely that asylum seekers will be a source of concern for the foreseeable future.

Wednesday, June 16, 2010

Horseman Pass By

I was very sorry to learn about the death of Horseman, the blogger behind Ulster's Doomed! - one of my favourite in recent years, and an occasional commentator here on Turbulence Ahead. I never got to meet him, and sadly now I never will. There's a nice tribute to him over at Slugger O'Toole, by the way.

I suspect his nom de plume had something to do with a well known headstone.

My condolences to his partner, children and his wider family.

Sunday, June 13, 2010

The Limits of Politics

The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. Mises
Will the next Taoiseach please stand up? The media are having one of their occasional frenzies over the all important question of who will lead our two main political parties. Except it's not all that important. Sure the current incumbents have their strengths and weaknesses, and new incumbents would bring to bear other strengths - and weaknesses. But that's not the point. As detailed in the bank inquiries, there is nothing to indicate in the past and present behaviour of all the political parties, the social partners and the various other boosters for the boom that simply changing the man in charge will really make all that much difference.

Indeed, the real problem is the 'man-in-charge' fallacy. As Bill Easterly put it previously:
This a fallacy simply because: there is no Man in Charge of the global economy. There never has been, and there never will be. There is no Man in Charge of any national economy either. This is not about the debate about the role of government vs. markets, this is simply a statement of fact. There are government leaders, to be sure, but they are only one among many different power centers in the political system, society, and in the economy, all with sharply conflicting interests and tools to effect change, and so any individual leader has very limited power to change things. This is true of both authoritarian and democratic systems. You may want one of those leaders to act on a particular problem, which is fine, but you should not think that leader is the Man in Charge.
If anything, the recent crisis in the eurozone and the resultant expansion of ECB and European Commission powers (including the 'supervision' of domestic economic policies) suggests that whomever will be the next Taoiseach will have even less say in the economic direction of this country than any of his or her predecessors. Oddly enough, a large proportion of Irish citizens not only want this to happen, they even expect it to happen. Take a look at the chart showing the expected shift in influence of various institutions in the daily lives of Irish people by 2020:

Most of the influences expected to make more of a difference in our lives will be from outside of Ireland. This won't be an entirely positive outcome: the worst legacy of the financial disaster we are still reeling from will be the loss of real sovereignty and with it the freedom of manoeuvre that would otherwise have been ours as a nation. So enjoy all the politicking and the breathless coverage from the pol-corrs for the entertainment that it provides. For its entertainment value may be all that's of any consequence thanks to the mismanagement by the present incumbents and their predecessors.

Friday, June 11, 2010

Long Way Up

I was listening to Bobby Kerr talking about his pricing strategy at Insomnia the other day. Bobby was speaking at the An Post Driving Success roadshow (along with yours truly and a great line up of other speakers). He explained that their special offers had had the desired effect: footfall and volume were holding steady, despite the recession. His only problem was turnover: cutting prices meant cutting revenue, even with volumes holding up.

I've heard the same story from a number of other clients who have recently seen volumes grow (for the first time in a long time in some instances), but turnover is either flat or still falling because of price pressures. Deflation to you and me. And sure enough, today's retail sales data confirms that Bobby's is not an isolated experience: retail volumes are up year-on-year (for the first time in over two years), but the value of retail sales is still falling (if you exclude the motor trade).

Instead of 'stag-flation' - rising prices but falling volumes - we appear to be experiencing 'de-spansion' - falling prices alongside expanding volumes. This is unprecedented (outside of the IT sector) and it is forcing many businesses to reconsider their growth/survival strategies. Service businesses like Bobby's have had to work hard to reduce their costs of doing business - whether renegotiating (downwards) their rents, or simply working harder with fewer resources (including people). This is undoubtedly good news for consumers in so far as the prices of things they want to buy are continuing to fall. But is isn't such good news for employees since their prospects for pay rises (or for jobs in the case of the unemployed) are constrained by the downward pressure of deflation on revenues.

Nor is 'de-spansion' good news for the economy's growth prospects so long as interest rates remain so high. And they are extremely high when measured in terms of price trends (since interest rates are always positive but prices are still falling) or in terms of the loan margins banks are charging in light of their own borrowing costs. An Irish business borrowing money today would need to be extremely confident of growing sales by 10% and more with the money they borrow for machinery etc in order to justify the cost (and risk) of borrowing. That's bad news for consumers because the things they will want to buy in the future won't be available due to a lack of new business investment.

Indeed, with the (very recent) exception of motor sales, there isn't a single retail sector experiencing growth in sales values anywhere close to 10% according to today's CSO report. In fact sale values are still falling in 10 out of the 13 sectors surveyed. But volumes are rising in 7 out of 13 sectors. So something is driving growth. Some of it is straightforward 'bargain hunting' by consumers who now see their money going a lot further. Our population is also continuing to expand: and the normal replacement cycle for certain categories such as cars is kicking in again after the shock of last year's unprecedented collapse in demand. These things can support some volume recovery in the near term. However, in the medium to longer term, it may turn out that 'de-spansion' is the exception and that an oil-price fuelled return to stag-flation may be the more likely outcome in the months ahead.

Nevertheless, it would be a brave business owner who decided to put his prices up in the face of continuing deflationary pressures. The special offers will be with us for some time to come.

Wednesday, June 9, 2010

Data Sculpting

In the world of immersion, authorship is no longer the transmission of experience, but rather the construction of utterly personal experiences.
Brenda Laurel
The quotation is from a series of forecasts and conjectures culled by Kevin Kelly from the first five years of Wired magazine. Internet years of course. Brenda is right (or was right - the quote's from 1993): the trajectory of the Internet is away from content dissemination to content creation - and the technologies available to us (blogger, Facebook, twitter etc) fuel that trajectory. But the most exciting thing to me right now is the revolution under way in the manipulation and communication of data. Information is Beautiful (whence the image) is one of my favourites.

But we are only in the foothills of what is to come. Today we mine data: tomorrow we will sculpt it. As the poet Frederick Turner put it in Art Recentered: A Manifesto: the experience of truth is beautiful. And if you don't believe me, check this out (fast forward to 4 minutes if you're in a hurry):

(ht Techneos). It's a, gulp, Microsoft product by the way. We heart Microsoft. Honest!

Tuesday, June 8, 2010

Shorting the Future

Two observations that got my attention recently. The first is from The Economist:
Banks have also reduced the maturity profile of their own borrowing, rather than paying higher rates for safer longer-term funds. When all banks make the same decision this is a form of collective madness because it makes the system vulnerable to market disruptions. Moody’s, a ratings agency, notes that the average lifespan of new bank debt has fallen to its lowest level in at least 30 years.
The second is from Jeffrey Sachs:
The relevant fact was that the US, UK, Ireland, Spain, Greece and others had over-borrowed for a decade, so a decline in consumption after 2007 was not an anomaly to be fought but an adjustment to be accepted.
With the banks not willing or able to support long term lending (vital for businesses seeking to invest in capital equipment if they are to exploit any recovery in demand), it looks like we're going to have to get used to the downward adjustment in our standard of living for some time to come. Feels like the year 2000 all over again...

Monday, June 7, 2010

The Battle of the Narrative

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong - these are the features which constitute the endless repetition of history. Winston Churchill

Most of the really interesting thinking about the future is found in military analyses. I think it's because the military are charged with having a clear-eyed view of potential threats over time horizons beyond the electoral cycle. Military futurists are also very fond of quotes from Winston Churchill - such as the one above. This despite Churchill's own disastrous military career as First Lord of the Admiralty at the time of the Gallipoli campaign. But it was Churchill's penchant for warning fellow politicians of threats they otherwise preferred to ignore that has perhaps endeared him most to military strategists.

Interestingly, none of the military analyses of long terms threats that I've read recently are concerned with financial crises and sovereign debt problems. Except perhaps to the extent that such economic developments might accelerate or exacerbate other, more significant forces shaping the long term future. One such force that I've mentioned before is Peak Oil. The chart is from a fascinating report on NATO's Multiple Futures Project. Their conclusions are that resource constraints will be the predominant source of geo-political and military conflict in the future. NATO specifically analyses the multiple impact of peak oil because of its perceived significance. Intriguingly, just as President Obama threatens a ban on further deep sea oil drilling post the Deepwater Horizon disaster, the U.S. Department of Energy has revised its global forecasts for oil production downwards - even recording a recent global peak that others speculate may be more permanent than the Department projects.

Here in Ireland, Feasta has recently provided an excellent analysis of the implications of peak oil. The good news: we don't have to worry about climate change since CO2 emissions will collapse with oil consumption. The bad news: so will everything else. Though I'd give human ingenuity a little more credit than the authors do - but I don't doubt the difficulty of the energy transition facing us.

Separately, the U.S. Joint Forces Command (USJFCOM) has recently published the Joint Operating Environment (JOE) 2010 report, and it too warns about the medium term threat posed by peak oil (along with quite a few other threats). It is less than optimistic about the task of finding from new sources the equivalent of Saudi Arabia's current output of crude oil every seven years between now and 2030. But do read the entire report (though maybe not before bedtime). It's one of the smartest and most insightful reports I've read in a long time, and contains jaw-dropping facts such as the China's People's Liberation Army now has more students in America's graduate schools than the U.S. military...

But beyond identifying future threats, one of the key themes emerging from strategic military thinking is the Battle of the Narrative. This is the modern day version of 'hearts and minds', and is described by NATO strategists as "coherent messages and an engagement strategy that reflects strategic goals and supports core values, ideas, missions and operations". This is where military strategy blurs into political strategy. For Ireland or the European Union or Western Democracies generally to survive and thrive they must have a competing narrative about the future. One that is compelling not only to their own citizens but also to the citizens of the BRIC economies and Africa who must navigate the same resource constraints as we will in the decades ahead.

Yet another tragedy of the current (mainly Western) economic crisis is that such a narrative is no longer articulated let alone very credible. As the military thinkers keep pointing out, the inability to successfully engage in the Battle of the Narrative will severely weaken our capacity to successfully deal with all the other challenges that we face. But at least someone is thinking about it.

Meanwhile, over at Leinster House...

Sunday, June 6, 2010

Looting for Democracy

Ivor Callely ('working for you') is to the common good what Silvio Berlusconi is to traditional family values. Mind you, I'd prefer Silvio for Taoiseach than the current incumbent - at least it would be more entertaining. But just as the Italians have a soft spot for Silvio, we've always had a soft spot for the chancer or the cute hoor in Ireland - someone seemingly getting something for nothing: 'sure we'd all do it if we had the chance'.

It's a very Irish version of The People's Romance - if the crime doesn't have a victim then it's not a crime, right? But just as children have to learn that 'money doesn't grow on trees', so eventually must electorates learn that the people you elect to represent you may not have your best interests at heart. Meet the agency problem again.

As another politician - Al Gore - reminds us, even the longest standing romance can sometimes simply fade and end. And the Irish people's romance with the Val Falveys running about Leinster House is surely coming to an end as well. And not just with politicians - the chart below charts a decade of collapsing trust in major Irish institutions, private as well as public:

Of course the Irish people are not alone in their waning romance with politicians. The following table (Table 31a in the recent Eurobarometer survey) puts our 'relationship difficulties' in an international context (click on image for greater detail):

In no country does anything like a majority of its citizens actually have a favourable impression of its politicians. Sure, some of this may well be an inevitable reaction to the economic/financial/sovereign debt crisis that is still unfolding. But could it also be a dawning realisation that majoritarian democracy as currently exercised may actually be a root cause of the crisis? Might political romance turn to bitter acrimony?

For people like me who value the freedom that we retain and enjoy here in Ireland I find the unfolding crisis of representative democracy quite disturbing. Too often people pulling away from unhappy relationships end up in even unhappier ones 'on the rebound'. The key issue is trust. Without trust between citizens and our representatives then the capacity to solve our shared problems becomes severely weakened. The following chart (which is oriented towards the commercial world of trust between businesses and customers) nevertheless captures the vital importance of high trust:

When the degree of trust is low then the willingness of citizens/customers to support risky but vital changes will also be low to non-existent. Which is why the poison leaking into Irish democracy from one expenses scandal after another is so dangerous. We need a high degree of trust in order to tackle the enormous problems that we face. Though as Silvio shows, that can be a slow, difficult and sometimes futile task. Sometimes divorce - or removing the party whip - is the best alternative for everyone concerned.

Friday, June 4, 2010

Start Up Recovery

Just when we need more people to start up businesses in Ireland it appears that our appetite for entrepreneurship is waning. That's according to a fascinating Eurobarometer Report comparing attitudes towards and experiences of entrepreneurship across the EU27 countries, EFTA countries and the USA, China and South Korea. Whence the chart which shows Irish people's preferences for 'being an employee' versus 'being self-employed': the former has surpassed the latter for the first time.

Perhaps we shouldn't be surprised at a 'flight to safety' resulting from our economic depression and the resultant collapse in appetite for risk. Except that not all countries in recession are experiencing such an inversion (see Table 1a in the report), e.g.: a higher proportion of French people would prefer to be self-employed than Irish people (then again, they did give us the word 'entrepreneurship').

What's stopping those Irish people with a desire to be self-employed therefore becoming entrepreneurs? Sadly - and uniquely among all the countries surveyed - the number one barrier is 'the risk of losing your property': cited by 27% of Irish people (and higher even than 'the uncertainty of your income') - see Table 25a. Another factor is finance: Ireland tops the international league table when it comes to the percentage who think that 'having the necessary finance in place' is a vital pre-requisite to starting up a business.

But it isn't all negative. Indeed, Irish attitudes towards entrepreneurship are still amongst the most positive in Europe. For example, I've charted the data showing the percentages of people in Ireland, the EU27 as a whole, and the United States who have a 'rather favourable' image of entrepreneurs, comparing the same 'rather favourable' image scores for other professions:

We're definitely more Boston than Berlin when it comes to our entrepreneurial 'ethos' it seems (and we're even more likely than Americans to say that those whose businesses have failed should 'be given a second chance'). Better still, we aren't afraid to take on the world when it comes to doing business. A final section (Section 8.1) of the Eurobarometer survey includes a fascinating comparison of attitudinal descriptors such as 'in general, I am willing to take risks'. Ireland does very well when it comes to such attitudes - including the chance to compete with others:

This is a hugely important report on an area I've blogged about often. Not everyone is cut out to be an entrepreneur, and not everyone who wants to be an entrepreneur should necessarily be encouraged to become one. But is important that those who shape the entrepreneurial landscape in Ireland (academics, policy makers, bankers and - yes - even expense-inventing politicians) are informed by the many insights contained in this report. We simply won't have a recovery until we regain some of our entrepreneurial (and 'intrapreneurial') zeal.

Wednesday, June 2, 2010

Migrating Attitudes

The latest economic outlook from Ernst & Young contains several interesting forecasts. The one that got my attention was for migration: they see a return to net inward migration in the Republic of Ireland by 2015, though no such return in Northern Ireland. This seems plausible given the rapidly falling population of twenty-somethings in Ireland and the likely demand for immigrant labour to make up of the shortfall.

Ireland's experience of immigration has been remarkably benign in comparison to several other countries: I don't expect that to change, despite some of the gloomier prognostications (or wild extrapolations) about Europe's future and the impact of (mainly Muslim) immigration. Nevertheless, we are seeing significant changes in Irish attitudes to immigration. I recently updated research first conducted in 2008. I have summarised the main results below.

The first chart shows Irish people's perceptions of the impact of immigration on Ireland. Back in 2008, a majority of adults felt that immigration - on balance - had been good for Ireland: against a much worse economic background opinion has turned more negative:

The chart also shows the 2010 attitudes of the population by gender and age. As before, Irish women are more negative about the impact of immigration than Irish men, and young people are more positive about the country's experience of immigration than older people.

A key question two years on from the first survey is the extent to which immigrants are perceived to have integrated into Irish society. Here the trend is more polarised - although more Irish people now feel that immigrants are completely integrated than two years ago, the proportions who feel that integration will proceed no further or hasn't even begun have risen sharply:

However, beyond the integration of existing immigrants, a key issue is that of policy towards future immigrants - especially in light of the Ernst & Young forecast. Back in 2008, the vast majority of Irish people wanted stricter immigration policies in light of the then economic situation. Not surprisingly, that continues to be the predominant view - though there has been a significant growth in the percentage who are satisfied with immigration policies as they currently operate (and a collapse in the percentage seeking fewer restrictions):

All of this suggests to me that the greater part of Irish attitudes are coloured by prevailing economic conditions (as they no doubt are elsewhere), and that a much more benign economic situation in a few years time will likewise see a more relaxed attitude towards inward migration. However, the issue of integration risks becoming a more problematic one: which is why not giving asylum seekers the right to work (without prejudice to any subsequent decision to approve or reject their asylum application) is unfortunate. It will serve only to reinforce perceptions of (some) immigrants as 'spongers', and lock the same asylum seekers into a cycle of welfare dependency in the even their applications are approved.

Let's hope our relatively benign experience of immigration remains benign when the recovery kicks in.

Tuesday, June 1, 2010

Leaking Anglo

Is Anglo Irish Bank Ireland's Deepwater Horizon - BP's ill-fated oil rig in the Gulf of Mexico? The thought struck me at the news that the government (i.e.: you and I) are going to try and stem the toxic flow from Anglo Irish Bank by adding another €2 billion to the national debt. As financial 'top kill' goes I'm not convinced it's the last we'll hear of the problem.

But of course there's a major difference between BP's and Anglo's problems:
...when BP screws up we make sure they pay every dime in damages, but if a bank screws up we bail them out with taxpayer money.
ht Anti-Dismal
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