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.
Here’s a piece I’ve done for Yale Global magazine on democracy under strain in Europe.
Politicians in power since the 2008 financial collapse, regardless of their political stripes, find themselves in peril. Analysis of the recent French and Greek elections followed three lines of thought: voters soundly rejecting strict austerity measures, blaming incumbents, and abandoning mainstream political parties for more extremist leadership, both right and left. The three interpretations are linked. Read more
On Greece, Martin Wolf is bleak…
Yet [despite the bailout] it is hard to believe that Greece can avoid debt restructuring. First, assume, for the moment, that all goes to plan. Assume, too, that Greece’s average interest on long-term debt turns out to be as low as 5 per cent. The country must then run a primary surplus of 4.5 per cent of GDP, with revenue equal to 7.5 per cent of GDP devoted to interest payments. Will the Greek public bear that burden year after weary year? Second, even the IMF’s new forecasts look optimistic to me. Given the huge fiscal retrenchment now planned and the absence of exchange rate or monetary policy offsets, Greece is likely to find itself in a prolonged slump.
Would structural reform do the trick? Not unless it delivers a huge fall in nominal unit labour costs, since Greece will need a prolonged surge in net exports to offset the fiscal tightening. The alternative would be a huge expansion in the financial deficit of the Greek private sector. That seems inconceivable. Moreover, if nominal wages did fall, the debt burden would become worse than forecast.
…Felix Salmon depressing…
Even if Greece were running a zero primary deficit (and I’d love to know if it’s ever managed that particular feat), a default without devaluation would still keep the country mired in its current uncompetitive state. If you’re going to go through the massive pain of a default, you might as well get the upside of devaluation at the same time, and exit the euro.
At that point, the only question is: do you default and devalue now, or do you wait a couple of years? Germany and France might well want to wait, in the hope that their banks will be better able to cope with such a thing in a couple of years’ time. But from a Greek perspective, if the pain is coming, best to go through it now and bring forward the growth rebound, rather than push off the devaluation stimulus to an indefinite point in the future.
…while most of Simon Johnson’s readers have now slit their wrists:
The Europeans will do nothing this week or for the foreseeable future. They have not planned for these events, they never gamed this scenario, and their decision-making structures are incapable of updating quickly enough. The incompetence at the level of top European institutions is profound and complete; do not let anyone fool you otherwise.
What we need is a new approach, at the G20 level; this can definitely include debt restructuring, but it has to be done in a systematic fashion (and even then there will be a considerable degree of total mess). Such a change in framework for dealing with these issues will not get broad support until after further chaos in Europe, but it now needs to be put into place.
The Europeans will not lift a constructive finger. The leading emerging markets are too busy battening down the hatches (and accumulating ever more massive chests of reserves). And the White House still seems determined to sleep through this crisis. Expect nothing.
What are the chances of the Euro emerging from this unscathed? Increasingly slim, it seems – surely one or more countries are going to find it almost impossible to stay inside the currency union. While the UK gazes at its navel, phase 2 of the global financial crisis has firmly taken hold.
We now have an inter-related banking and sovereign debt crisis; no procedures for an orderly bankruptcy of countries (having ignored the lessons of the East Asian financial crisis); and no legal way to allow the destitute to exit the Euro.
What a mess.
A few weeks ago, I questioned German wage restraint, pointing out that other Eurozone countries would prefer Germany to allow salaries to rise, thus stimulating domestic demand, and helping address Europe’s economic imbalances.
French finance minister, Christian Lagarde recently made the same point:
Clearly Germany has done an awfully good job in the last 10 years or so, improving competitiveness, putting very high pressure on its labour costs. When you look at unit labour costs to Germany, they have done a tremendous job in that respect.
[But] I’m not sure it is a sustainable model for the long term and for the whole of the group. Clearly we need better convergence.
In the FT, Otmar Issing – who did his best to ensure the European Central Bank was run on Bundesbank-approved lines – reacts to the suggestion with characteristic restraint and good humour:
This idea, presented as a panacea for Europe’s problems, is so economically erroneous and politically dangerous that it would hardly deserve being taken seriously – were it not for the risk that it might actually prevail…
At a time when the EU has launched a new initiative to make the continent’s economies more competitive, after the failure of the “Lisbon agenda”, an approach that deliberately tried to reduce the competitiveness of one of the most successful exporters in world markets would look like a bad joke.
I’ll take that as a ‘no’ then. Issing, who has been lobbying hard against a Greek bailout, reflects a worrying trend in German opinion. According to this line of thinking, other Eurozone countries should buckle down, cut wages and public spending, and do what their richer and more prudent masters in
Berlin Brussels tell them to.
And if this medicine is too bitter, then they should bugger off, re-adopt the drachma, lire or peseta, and spend the next hundred years or so paying back the Euro-denominated debt they have incurred while in the single currency.
It’s a depressing vision. And, for Europe, it looks like it’s stagnation ahead.
– With the UK election campaign under way in all but name, the FT’s Martin Wolf explains why he doesn’t fear a hung parliament – arguing that it might be just what’s needed to achieve fiscal restraint. “So poorly has single-party despotism governed the UK”, he suggests, “that I would welcome a coalition or, at worst, a minority government.” The Institute for Government, meanwhile answers all your hung parliament-related questions here, placing things in international and historical perspective.
– The Cable highlights the Obama administration’s key people on Iran. Richard Haass, meanwhile, suggests that the West’s strategy must do more to help the Iranian people – with the US and EU acting to “energise and lend rhetorical support to the opposition, helping it to communicate with the outside world”.
– Elsewhere, Der Spiegel profiles the five main risks to the Euro – namely Greece, Portugal, Spain, Ireland, and Italy – assessing their economic woes. Charlemagne, meanwhile, interviews Cathy Ashton. And The Economist also has news that Dominique Strauss-Khan, current IMF head, is considering running against Nicolas Sarkozy in France’s 2012 presidential elections.
– Finally, this week saw a group of British Academy experts writing to the Queen about the failure to foresee the credit crunch – a follow-up to a question from the monarch at the LSE last summer. Their suggestion: the need for a better-coordinated government horizon scanning capacity – something that could take the form of a monthly economics briefing to the Queen, which would serve – as Professor Peter Hennessy has commented – to “sharpen minds” of officials. Read the full letter here (pdf).