Nathan’s Musings

It is amazing how all those free market types in the worlds of high finance suddenly want government to help their businesses survive. But they want to have their cake and eat it too. So, it is fine for the governments to provide hundreds of billions in liquidity, and even to directly take ownership of financial institutions, as has happened in the US, the UK, Benelux and elsewhere. But God forbid that the new owners should actually exercise some ownership rights, such as limiting salaries and bonuses for the executives who created the mess in the first place. My favourite magazine, The Economist, writes in a recent (October 18th) leader that this would be counterproductive as it would drive some of the best people out of the industry. To which I say: that would be no bad thing! It is a tremendous waste of society’s resources to have some of the smartest, best educated people on Earth devoting their talents to finding new ways of slicing up pools of dubious assets so that someone may make a bit more money from higher leverage. No, let all those PhDs and brilliant executives go back to the real world where they can work on useful thing. A result of this crisis will be a smaller finance sector, hopefully with simpler products that the bank managers (and maybe even the customers) can actually understand.

Here in Spain the crisis has exposed a couple of things: the low quality of public debate and the underlying weakness of the Spanish economy. The public debate first. During the first many months of the crisis there was quite a bit of Schadenfreude in Spanish media; Spanish banks have been much tighter regulated by Banco de España than their British or American counterparts and so had largely escaped the trap of US mortgage-based securities and other toxic assets. As a result, no big Spanish bank has gone bust. This was taken as proof that the Spanish model with its bureaucracy and tight regulation was right and that Anglo-Saxon freewheeling capitalism was on its way out. Now there is a lot of childish anxiety about the fact that Spain has not been invited to the summit in Washington in mid-November where the leading countries are supposed to “re-found global capitalism”. Of course, no such thing will happen. It will just be another useless photo opportunity, especially with a lame-duck US president hosting the event. But commentator after commentator on Spanish radio (I do not watch Spanish TV except when there is football on) moans that Spain is an important country, and why is not at the table at such an important occasion?

I think the reason why Spain has not been invited has partly to do with the generally poor relations between the Bush administration and the Socialist government here, but mainly it reflects the fact that while the Spanish economy is largish and has grown strongly in the decade until 2007, it just is not an important player on the world economic stage. This may be a painful fact for the Spanish to swallow, but it is nevertheless a fact. Spain has fewer multinational companies than the Netherlands, a country 1/3 its size. There is no Spanish equivalent of a Royal Dutch Shell, Unilever or Akzo-Nobel; even more troubling for the future, there is no Spanish Tom-Tom. The stark truth is that, besides its nice beaches and good weather and some agricultural products, Spain makes very few things that the outside world wants to buy.

Spain’s growth since entering the EU in the 1980s has basically been fuelled by EU subsidies to infrastructure (the motorways here are very nice) and by an uncontrolled construction boom which has resulted in hundreds of thousands of unsold beachfront properties now that the Brits no longer can afford to buy second homes here or to retire in the sun. In 2006 fully 1/3 of all residential construction in the EU was taking place in Spain, even though the country only has about 8% of the EU’s population. In 2007 that party came to an abrupt end, and now Spain’s unemployment rate is the highest of any major country in the OECD at 11.3%. Because successive Spanish governments have done little to reform the economy and to promote development of the kind of advanced industries that could have taken up the slack, it is now at the mercy of global trends that for the next couple of years are not going to be favourable. I love living here: the weather is good, the people are nice, the food and drink are excellent, the language is beautiful etc. But the quality of the government and the public institutions is far below what one sees in Northern Europe.

And now the construction companies that have built all those unwanted apartments are coming to the government too, with hat in hand, begging for bailouts. If you are helping the banks, why not us, they ask. I hope that at least here, the government will be able to resist this outrageous demand. The last thing Spain needs is to pump more money into those construction companies so that they can build even more houses that nobody wants to buy. No, let them go bankrupt. Help the unemployed workers, yes, but let the companies fail. That is how capitalism is supposed to work.

Every respectable newspaper, whether in the US or elsewhere, will endorse Obama or Mc Cain some time during the coming few weeks. So I see no reason why this little blog should not also endorse a candidate. After all, I did live in the US for a total of 13 years, both my children were born there, and so I have a more than passing interest in the election. And anyway, even without a personal connection to the country, almost everyone on the planet is affected in some way by the actions of the world’s most powerful country and so should have an interest in the election.

So, to whom should I give my backing? Unfortunately, I cannot support either of the two main candidates. Obama is simply an empty suit. He is undoubtedly intelligent and has had an interesting upbringing, but he is not qualified to be president. During his six years in the Senate he has not sponsored or co-sponsored any significant legislation. This man has no record. In a political campaign this might be convenient since it makes the opponent’s job more difficult (there is nothing concrete to attack). But when choosing a president, surely one should know something about what the candidate really stands for. With Obama, all you get is some eloquent speeches with the word CHANGE as the mantra but precious little in the way of believable policies.

Then there is Mc Cain. Normally I would never support a Republican. The Republican Party is a party of inequality, conservatism, reaction and corruption. Yes, corruption. Just look at the revolving door between big business and the Bush White House and the billions that have been squandered by contractors in Iraq. Despite my general dislike of Republicans, I did initially see a lot to like about Mc Cain. Clearly, here was a man of substance, with many years experience in the Senate, personal integrity, and a set of policy ideas on which he used to stand firm, whether free trade, immigration reform, or indeed his relative indifference to the social conservatism that poisons US politics.

Lamentably, during the past few months Mc Cain has taken on the characteristics of the typical mealy-mouthed Republican politician. He no longer stands firm on anything; like Obama, he says different things to different audiences. Worse still, his pandering to the religious right puts him beyond the pale. Supposedly every Republican candidate has to do that in order to “shore up the base”. But what are the Jesus freaks going to do? Vote Democrat? The fact that Mc Cain feels the need to pander to creationists and all the other assorted loonies on the right fringe of his party says something very unsettling about US politics. And then of course there is choice of running mate, a woman whose government experience consists of some years as mayor of a small town in Alaska and a couple of years as governor of a state with less than 700,000 inhabitants. A right-wing fanatic and the embodiment of the worst kind of US ethnocentrism, Palin did not even have a passport until 2007. Given that Mc Cain is 72, his choice of vice president was particularly important. If he really believes that Palin would be qualified to run the country in the event of his death or incapacitation, then he must already be becoming senile.

There is thus nobody who is running that deserves your vote. My advice to everyone who votes in November is therefore: write yourself in! Think about it: you would be voting for a candidate who is intelligent, good-looking, honest, and with whom you agree 100% on every single issue. It is a bit like Woody Allen’s memorable line from one of his films: “do not knock masturbation, it’s sex with someone you love.”

I have no idea how the political system would deal with such a result, but it sure would be interesting to watch. It would be a truly anarchistic act, in the best sense of the word.