By Frank-Jürgen Richter
We all understand we don’t walk down dark alleys unless we must; those who wear stiletto heels don’t walk on paving joints; and long ago the Trojans were happy to accept the wooden horse gifted from the Greeks. Oh yes, it’s all a learning experience!
The International Monetary Fund has warned Europe in a brief note that it must create what is essentially a fiscal union and forgive the Greek debt if the euro is to be saved.
This means taking one of three routes, but all amount to the same thing – all the rich European countries of the euro zone must contribute to support Greece who would have its debt written off.
The Greek government seems to be playing its part having just passed a series of reforms and last week debated and again passed further structural reforms. It is not going to be an easy ride.
This is a sad state of affairs for both sides. Germany, France and so on do not wish to ask their people to support Greece that ought to have managed its money – as the late former UK prime minister Margaret Thatcher once said: “…any woman who understands the problems of running a home will be nearer to understanding the problems of running a country”. And it is humiliating for the Greeks to be indebted through no fault of themselves as individuals, but collectively as a nation.
Yet there is a deep issue facing the euro zone – of how to accept their cultural differences? Through the power of television we are used to seeing images from everywhere in the world. We see people who are obviously different to us, often with different skin colours and speaking their own languages requiring translation for the TV audience.
These are outward aspects of cultural differences, but the important differences are the mental processes that collectively define us as being from a national group, Germans for instance. Generally observers think that I will behave in certain ways and espouse certain views, like my national compatriots. Yet I am an individual and at least in Europe allowed to act and speak out as an individual; and individually I might engage in a personal work ethic that is too severe for some.
Cultural differences have long interested academics, and so have studies of management style and of leadership. In studies of “culture as…the software of the mind” we find across Europe a strong north/south difference and only a slight east/west difference, with France occupying an interesting middle ground and the UK being different, having a greater pragmatism or individuality. It is not surprising that the IMF’s suggestion that the eurozone peoples must“ pull together” angers European northerners while the Greeks cause angst.
We staunch believers in the concept of “Europe” have long known that there are great differences in European personal styles.
In part it is why we northerners go to Spain, Portugal or Greece for holidays. Not just for the sun and sea but also to experience their laidback lifestyle. So why should we complain when weare asked to be logical, hard-nosed and fiscally responsible and donate money to our southern friends? Well, perhaps one explanation lies with our superstitions “… don’t trust a Greek bearing gifts!” which are embedded in our subjectivity that Daniel Kahneman explained in his Nobel Prize-winning studies.
His empirical findings challenged the assumption of human rationality prevailing in modern economic theory. He proposed three heuristics – availability, representativeness, and anchoring and adjustment – that govern our intuitive decision making. Steven Levitt and Stephen Dubner also understand these human biases that they use to illustrate the errors of our thinking in their blog Freakonomics, as well as in their book When to Rob a Bank (the answer is ‘in the morning’, though they don’t advocate such illegal behaviour).
RELEVANCE IN ASIA
Do these European antics have relevance in Asia? I think so. Presently Asian nations have a great need to borrow to develop their countries as the globe swings its economic emphasis to Asia as a future powerhouse of wealth creation. It is not that Europe or the US is bereft of ideas and commercialism but Asia is a region of the young, the entrepreneurial and thus the new global focus. Asia must increase its infrastructure capacity and undergo institutional reforms – which absorb a lot of money. For instance, it costs only a few pennies to add vitamin supplements to the diets of children to benefit their physical and cognitive development but in populous countries like China where 17 per cent are under 14 years old (200 million or so) it adds up to a large amount of cash … and there are many other well-deserving infrastructures to bedeveloped. To aid developments China has become central to the instigation of two banks: one is the Asia Infrastructure Investment Bank (AIIB) and the other, the New Development Bank (NDB), formerly known as the BRICS Bank.
The BRICS concept was launched with statistical fanfare by Goldman Sachs researchers in 2001 as four nations (then not including South Africa) that would dominate future economic growth. This has not yet occurred except for China who now helps bankroll the NDB set up in 2013.
The AIIB was launched in 2014 by China and any nation is free to join – it has now 49 or more nations from Oceania, Europe and Africa. It is to operate rather more freely than the Asia Development Bank which China says is too conservative (like the IMF or World Bank perhaps) and too slow to grant needed support.
I see these two new banks, especially the AIIB, occupying a central role in Asia akin to the European Central Bank. And I foresee the AIIB having as difficult a time as the ECB managing diverse clients with their different cultural expectations, historical memories and behavioural biases. The Chinese, Indonesians, Greeks, Germans or the Americans are all grouped by their cultural identities. If one poked one of these individuals in their ribs their response might be culturally predictable! And so might the problems that will face the AIIB and the NDB. Life is not a sinecure but it can be fun.
The writer is founder and chairman of Horasis, a global visions community.