Greed is not good after all

One of the fundamental things capitalism got right was marketing. It has spread the illusion that everybody or at least most of us can rise up and be rich. The reality is that a tiny proportion of people do.

Sadly it can't be true that all 6 billion of us can afford the good things in life, being rich is all about having more possessions than the average person. Somebody has to lose somewhere in the end, there is ofcourse some truth that overall increased economic activity raises all boats, however for the most part we have become more unequal societies, and while hard working people should be rewarded and those not working shouldn't this should not be taken to extremes.

In short in the last 40 years the things we sacrificed in order to afford more status symbols and cheap consumer goods are:
  1. Real friendship and family relationships and community because of an increasingly transactional and competitive nature in the way we relate to other people because of the way we "consume" others as products. This mentality harms our emotional health.

  2. Safety: No good quality pensions in our old age by removing the state from the pension system.

  3. Safety of good quality healthcare in our old age by removing the state from healthcare.
For some people this tradeoff may make sense, although i suspect this is only because most think that their "investments" will mean that they will not need the state for the above as they will be rich...

The market turmoil shows that certain things should be left to the state which is the only institution that can have the long term horizons, the necessary balance-sheet and the incentives necessary to support pensions and healthcare. It has proven impossible to align the interests of business/shareholders and their customers.

Bratislava holding up in a stormy world economy. Slovakia doing better than most in the Credit crisis, Does not need bank bailouts

I feel rather priviledged to live in a country which in its finances it resembles the country of my birth back in the 80es.

In Slovakia people still live within their means, it not only the extreme proximity in distance between Vienna and Bratislava, its also a healthy scepticism about getting in debt. Like our viennese neighbours, Slovakia as a whole has very conservative banks (many of them austrian) that lend frugally and expect big deposits before agreeing to finance a mortgage. Here the banker is somebody you meet in an office, rather than a trainee call centre person in Wales assessing your tele-loan because you saw an aspirational ad on TV (like it is the case in the UK).

It seems that there is going to be an impact worldwide from this mess (including China and India), but i still believe this little corner of the world is more stable than most. The factors that make it so are briefly:
  1. Slovaks did not get in the habit of spending more than they earn
  2. There isn't a big rental or buy to let sector, people live in their homes.
  3. People have a 1950es style frugality, and aversion to waste and excesses.
  4. consumer indebtendness is circa 16% of GDP as opposed to 90%+ in western europe.
  5. real wages are growing every year, when in the rest of the developed economies they have been stagant or near stagnant.
  6. All our banks are well capitalised, and have zero exposure to american debts/CDOs/CDS/derivatives/asset backed securities and toxic loans.
  7. The central banker Ivan Sramko is a seasoned austrian-trained banker with a steady hand.
  8. We are getting the euro unlike any other central european country.
  9. EU money will continue to flow from the structural funds and CAP to Slovakia giving the country another useful boost.
  10. Government debt in Slovakia is a tiny less than 30% of GDP.
Now I have to say that things are so bad in the rest of the world that our economy is going to be impacted, the latest projections predict something about 5% GDP growth, maybe 6.6% which is very comfortable.

Hope you re alright wherever you are.
remember that all this means that Thatcherism/Reaganism is now dead. Shareholder capitalism ditto.