How much humiliation can Spain cope with?

The FT’s Gillian Tett reports today on a conference presentation given by historical sociologist Dennis Smith, who’s been working on the question of how humiliation operates at the cultural / collective psychological level – and what this means for the Eurozone.

The whole article‘s worth reading, but here are a couple of highlights. First, on how humiliation works:

Psychologists believe the process of “humiliation” has specific attributes, when it arises in people. Unlike shame, humiliation is not a phenomenon which is internally driven, that is, something that a person feels when they transgress a moral norm. Instead, the hallmark of humiliation is that it is done by somebody to someone else.

Typically, it occurs in three steps: first there is a loss of autonomy, or control; then there is a demotion of status; and last, a partial or complete exclusion from the group. This three-step process usually triggers short-term coping mechanisms, such as flight, rebellion or disassociation. There are longer-term responses also, most notably “acceptance” – via “escape” or “conciliation”, to use the jargon – or “challenge” – via “revenge” and “resistance”. Or, more usually, individuals react with a blend of those responses.

So what does that mean for European politics? Well, Tett continues, the Eurozone’s periphery countries have indeed experienced “a loss of control, a demotion in relative status and exclusion from decision making processes (if not the actual euro, or not yet)” – and it’s interesting to observe how different European countries have used different coping strategies:

National stereotypes are, of course controversial and dangerous. But Prof Smith believes, for example, that Ireland already has extensive cultural coping mechanisms to deal with humiliation, having lived with British dominance in decades past. This underdog habit was briefly interrupted by the credit boom, but too briefly to let the Irish forget those habits. Thus they have responded to the latest humiliation with escape (ie emigration), pragmatic conciliation (reform) and defiant compliance (laced with humour).“This tactic parades the supposedly demeaning identity as a kind of banner, with amusement or contempt, showing that carrying this label is quite bearable,” says Prof Smith. For example, he says, Irish fans about to fly off to the European football championship in June 2012 displayed an Irish flag with the words: “Angela Merkel Thinks We’re At Work”.

However, Greece has historically been marked by a high level of national pride. “During 25 years of prosperity, many Greek citizens had been rescued by the expansion of the public sector . . . they had buried the painful past in forgetfulness and become used to the more comfortable present (now the recent past),” Prof Smith argues. Thus, the current humiliation, and squeeze on the public sector, has been a profound shock. Instead of pragmatic conciliation, “a desire for revenge is a much more prominent response than in Ireland”, he says, noting that “politicians are physically attacked in the streets. Major public buildings are set on fire. German politicians are caricatured as Nazis in the press . . . the radical right and the radical left are both resurgent.”

Prof Smith’s research has not attempted to place Spain on the coach. But I suspect the nation is nearer to Greece in its instincts than Ireland; humiliation is not something Spain has had much experience of “coping” with in the past. Whether the Spanish agree with this assessment or not, the key issue is this: if Angela Merkel or the other strong eurozone leaders want to forge a workable solution to the crisis, they need to start thinking harder about that “H” word. Otherwise, the national psychologies could yet turn more pathogical.

Intelligent Agents or How to Stop Consumers Getting Screwed

Seemingly inadvertently yesterday, David Cameron made a commitment to legislation that would force utilities to ensure their customers were always on the cheapest tariff for their energy supplies.

The proposal has been met with some derision and now seems to be unravelling, but it’s problematic principally because it does not go nearly far enough.

In this, as in many markets, the odds are stacked against the consumer. Tariffs have proliferated, becoming increasingly difficult to compare, making informed decisions almost impossible. Few people really understand what they’re buying.

This is not simply a problem for the ill-educated. As I pointed out in a paper for the Long Finance initiative, MBA students prove incapable of determining which mortgage offers them a better deal, even when dealing with fewer parameters than are offered to British borrowers.

A massive information asymmetry is at work. Companies understand their customers’ cognitive biases. They crunch the likely impact of millions of buying decisions. And they frame choices in ways that turn what should be plain-vanilla commodities into much more profitable branded products.

There is only one answer to this: redesign markets from the consumers’ point of view. There are two main tasks.

First: enable the creation of technologies that level the playing field for consumers.

If you venture into a complex market without representation, you are asking to be fleeced. Traditional agents (people), however, are expensive, and their role as honest brokers has often been eroded when they are paid by the seller, not the buyer.

Technology can solve this problem. It is now a very simple task to design an intelligent agent that scours the market  on behalf of a consumer, inviting bids and accepting them, based on criteria that its master has specified.

Here’s how it might work in the utility market.

Continue reading

Freudian tweet of the day

An intriguing tweet from EU development commissioner Andris Piebalgs:

What could he possibly have said?

Interesting factoids on employment and development

…courtesy of the World Bank’s 2013 World Development Report (which is on jobs, and definitely worth a read):

  • 1.6 billion people work for a wage or salary, compared to 1.5 billion in farming or self-employment
  • The average Mexican firm will grow to employ twice as many people over 35 years; in the US, it’s 10 times as many over the same period
  • 21 million people are victims of forced labour
  • Women’s labour force participation is 77% in Vietnam, but only 28% in Pakistan
  • 600 million new jobs are needed over the next 15 years just to keep current global unemployment rates [6%, according to the ILO] at its current level
  • The global total of NEETs (young people not in education, employment or training) is 621 million
  • The number of international migrants as a share of world population is 3% – but in Kuwait, Qatar and the UAE, the foreign-born population is 60%

The times they are a-changing at the IMF

“Some dismiss inequality and focus instead on overall growth – arguing, in effect, that a rising tide lifts all boats. When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”

Um, that’s a group of IMF economists speaking (quoted in an NYT piece today).

Even more interesting is this little nugget:

“Growth becomes more fragile” in countries with high levels of inequality like the United States, said Jonathan D. Ostry of the International Monetary Fund, whose research suggests that the widening disparity since the 1980s might shorten the nation’s economic expansions by as much as a third.

Reducing inequality and bolstering growth, in the long run, might be “two sides of the same coin,” research published last year by the I.M.F. concluded.

Pretty arresting, when you stop to think about how long the IMF argued that inequality was in effect the price you had to pay for policies that would foster high growth rates.

Coca Cola – active healthy living

Here in Addis Ababa, last weekend saw the Coca-Cola Road Race, an annual 7km race. The strapline for the event was “active healthy living”. Um, really? Seriously?

If you talk to food experts like my friend Professor Tim Lang at City University in London, they’ll tell you that highly sugared soft drinks are right up there as prime villains of the current obesity epidemic. Here’s a quote from a commentary piece that Tim co-authored with his colleague Geoff Rayner (emphasis mine):

Dietary patterns have always been changing. But now, part of the public health crisis is due to the pace and scale of that change. Two examples are the vast increase in production and thus consumption of sugared soft drinks and of sugary energy-dense ultra-processed products, and the distortion of customer and consumer demand that is driven by commercial marketing power.

Right now, Ethiopia has the lowest rate of obesity in the world. As a result, you never see Diet Coke for sale here – there just isn’t the demand.

But hey – give it a few years.

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