Sunday, 27 November 2011

And end to the Entitlement way of thinking

There must be some kind of way out here
Said the joker to the thief
The first lines of Bob Dylan's All Along The Watchtower* spring to mind as I watch the world teeter on the brink on economic meltdown. There must indeed be some kind of way out of here, but it's not going to be pleasant. A face-off between young protesters and their banker foes will not, however, produce any roadmap as to the exit route from the crisis.

I can sympathise with the voice of a generation whose prospects are getting bleaker by the day, the Occupiers of Wall Street or London or Spain's Indignados and other groups of protesters. My problem with them, however, is that they have no solution to the problems besetting the global economy; all they can offer is a generalised list of woes that anyone can pick up from reading the papers.

Problems. Take the eurozone crisis. We all have a good idea of what would happen if, for example, Greece were to replace the euro with a new drachma. A run on the banks, capital flight - wealthier Greeks taking suitcases of euros out of the country to havens safe, printing new banknotes and minting new coins, making adjustments to bankomats** and vending machines, re-pricing all products in all shops. And the economic fall-out - suddenly, Greece would be the cheapest place in Europe to holiday, but, as the Greeks don't actually make anything, everything they need to fit out hotels and restaurants has to be imported from a prohibitively expensive eurozone.

We don't know what course of action to take. Keep the Greeks in, or push them out? Pain one way, pain the other. Greeks? Who's next? The Italians? A problem one order of magnitude greater. Then who? France? Germany? Britain? The USA? China? Contagion! Panic! The Great Depression, all over again. Just 80 years on.

Let's look at the root causes. I go back to Student SGH's brilliant essay from early last year, in which the anonymous author looks at the two main drivers of the market, Fear and Greed. He postulates that it was not so much Greed that sank the markets, but Lack of Fear. Now, I'd also like to add another root cause, namely Entitlement.

When anybody thinks "it's my right (to get money from the state for doing nothing/for leading a bank into failure)" then you know that Absurdity has got the upper hand. Entitlement-thinking leads to sub-optimal performance in the market place. Mnie się należy.
  • Because I'm the child of wealthy parents, I deserve an iPhone 4S for Christmas.
  • Because I'm a single mum, the State has a duty to provide me with free accommodation.
  • Because my company is French (or whatever) it should be protected from global competition.
  • Because my company is state-owned, and I'm in PSL, I must become Prezes.
  • Because I graduated with a Third in Media Studies at John Lennon University, I deserve a well-paid job in TV.
  • Because my bank's Too Big To Fail, I deserve a huge bonus from the tax payer.
  • Because my parents will leave me a big house, I don't have to work too hard right now.
  • Because the value of my house will keep rising, I'm entitled to exotic holidays and flash car.
  • Because it's done so up to now, my company's market share will keep growing indefinitely.
  • Because my parents are wealthier than my grandparents, I'm going to be wealthier still.
As you can see from the above list, entitlement thinking affects people across the entire spectrum of society. The blame cannot fall on the bankers alone. People should take on more responsibility upon their own shoulders - should your bank fail - take the blame, sell your mansions and helicopters and put the money into the accounts of the small savers who've taken the blow. Take the blame for your own fecklessness rather than expecting the taxpayer to bail you out. Less entitlement - more individual responsibility.
Getting used to economic well-being gets you soft. Poles, who in the space of a generation have been through economic hardships undreamt of in the West are, I think (and here, of course, I'm forced to generalise) are much better situated to ride out the coming storm than the 'softies' of the pampered West. Since 1981, Poland has endured the fifth-deepest economic depression of the 20th Century; empty shelves on shops, inflation of 1,300% year, and shock-therapy transformation from which many provincial towns and rural areas have not yet recovered from.

Young Poles certainly feel less entitled than their British peers. They know that life's hard, work's a grind, but there's no one around to spoon-feed you. If they can't find a job in Radom or Gorzów, they'll fly to the UK to look for work. Hence the Polish barmen with Master's degrees in engineering and Polish chambermaids with Master's degrees in law.

Sustainable Growth, the chimeric Grail that corporates strives for, cannot be achieved by armies of pushy salesmen foisting unsuitable financial or insurance products or endlessly updated consumer electronic technologies upon unwary consumers. (Incidentally, I have yet to meet one person to rave about the wonders of BlueRay discs.) As consumers, we must save more and spend less. When we do spend, we should part with our money for things that we shall treasure, not junk destined for the bin. (How much of the money the Britain currently owes China is buried in landfill sites around the UK?) Business should accept that only true innovation is the way forward; consumers should pull things out of factories rather than sales forces push them into the consumers' living rooms.

The economic crisis will not go away quickly. It will be here, tainting the lives and prospects of a young generation just ready to enter the world of work. It will hit those societies that have had it too soft for too long. The injustice of it all is that the politicians, bankers and corporate leaders that have misshaped the world economy up to 2007, with all its absurdities and imbalances, will among the last to feel the pain upon their own skins. And that is what the Occupy movement is all about - a frustrated yet impotent cry of anguish. But no solutions.

AFTERTHOUGHT. I look at the title again. What rubbish! There will never be an end to the Entitlement way of thinking! It will return once this current crisis is gone and forgotten, it will return once another generation of political and business leaders says "an end to boom and bust", starts thinking that we're on a upward sloping trajectory that will continue upwards for ever. Once that thinking sets in, all manner of people will start believing that "it's owed to me".

* Jimi Hendrix recorded the definitive version.

** Bankomat - a word that needs to be adopted into English.

This time last year:
West Ealing - drab and sad suburb

This time two years ago:
To Poznań by train

This time four years ago:
Late autumn drive-time

11 comments:

DC said...

I'm glad to see some balance in the discussion of what entitlement actually mean - it's not just for poor folk anymore. Yet many of us still carry around this obsolete thinking: you're either pro-business, survival of the fittest, and all government is bad. Or you're just an opportunistic socialist trying to figure out how to get money without working.

I see something in between. There is an excellent opportunity for well-planned government regulation to head in some of the directions you suggest. (And by well-planned, I also mean simple, easy to understand, and easy to implement. This takes some effort.)

Example: Mobile phone providers. There should be an option for customers to opt-out of the business of subsidizing other customers to get a new phone every 2 years. Government could demand that along with the current plans they provide (some people will never give up the idea of a "free" phone) that a customer be allowed to pay the full cost of the phone up front, and then pay a lower monthly fee for service. It's lower because the subsidy for free phones is not part of the monthly price.

Right now those of us who choose to use our phones for 4 or 5 years or more are forced to subsidize the wasteful practice of those who get a new phone every 2 years. It's a small bite, but in the right direction I think. And it's a simple enough example to hopefully make my point.

Right now the mobile phone providers have no incentive to curb this anti-green practice. I can think of no market mechanism to make this happen, so it has to come from government.

I could provide other examples, but they start to get more complex and would require a much longer comment.

One thing I'm curious about: is it really a good idea to have credit default swaps remain legal? Doesn't this pervert the original market forces - who ever though intentionally wrecking a business could be profitable? Perhaps I don't understand enough about economics to see the downside to making these illegal.

student SGH said...

Oh, may it really come to an end. But way of thinking has to be changed not only on the level of state institutions, but also down, in companies and in families, with emphasis on upbringing - children after all should not be used to getting everything they want. Here's where the problem begin. We have the generation spoilt by the communism, now we have generation spolit by their parents and some other institutions (media...).

I don't sympathise with those young people you mention. Occupiers don;t come up with any constructive idea how to turn around the capitalism or how to bring in a new system. They protest, I work ten hours a day and stay happy to have a job, keep my mouth shut and don't complain. I'm suspiciously meek...

Thanks for the link. Hope I wrote some worthwhile posts thereafter as well ;-)

I would compare greed and fear with entitlement. We're talking about two different realms...

DC said...

@ SGH

Protesters 1, Saying "I've got mine so screw it" 0.

They may not have a clue what to do about it, but at least the protesters are saying publicly that things must change. Who knows? Something could come of it, if that enthusiasm were properly channeled.

Of course you've worked hard to be where you are, and that's to be admired. Yet doesn't that make you more qualified than most to be part of the solution?

adthelad said...

MAybe there are a few tips here http://www.youtube.com/watch?v=czcUmnsprQI

Michael Dembinski said...

@ AdTheLad - I'd hate to have a simpleton such as Thomas E. Woods getting us out of the mess we're in. Listen to 4:07 to 4:23. He's suggesting that tinkering with levers such as monetary or fiscal policies has no effect, and markets should find their own levels. This rather implies a complete lack of monetary or fiscal policies at the outset of the recession - not the case.

Andrzej K said...

I agree wholeheartedly about the Chinese crap, destined for the dustbin almost immediately upon purchase, being the cause of China holding most of the debt.

The only consolation is the the Chinese have very little chance at present to offload any of the sovereign bonds.

adthelad said...

@MD
I realise that Mr Woods (or I for that matter) is not an economist, and that the increase in the interconnectivity of markets and economies since the 20's means that losses at the top can spread through to many more people. The question however is not whether fiscal policies have an effect, it's which type of 'fiscal' policy do you follow. Do you let the banks go to the wall or not? Do you vastly increase the debt on the populus and keep the bubble inflated or not? Are the political and civil repercussions manageable? The evidence seems to speak, at least in the 1920's example, that less is more. Looking around and reading in my admittedly unspecialised way I'm reminded of two quotes: 'The chief cause of problems is solutions.' and 'Specialisation is a dangerous. It gives us experts and not wise men'.

pvnam_2 said...
This comment has been removed by a blog administrator.
Anonymous said...

If the end of the entitlement talk is really to come, good part of this blog will be no more !

Because i live in the suburbs, everyone else must pay for my train connection !
Because i've built my house in the swamps, the city must build me drains !
Because i want a smooth ride, all streets in my distant suburb must be asphalted !

(Mat. 7:3-5)

Anonymous said...

How about the entitlement of "I need a car"? Very few people need one. But they buy them, and crowd the roads nonetheless.

Then, as a public transport user, my bus is stuck in the traffic jams caused by these car drivers who can't or won't use public transport.

adthelad said...

Saw this and thought 'How apt'.

"The thinness of the new atheism is evident in its approach to our civilization, which until recently was religious to its core. To regret religion is, in fact, to regret our civilization and its monuments, its achievements, and its legacy. And in my own view, the absence of religious faith, provided that such faith is not murderously intolerant, can have a deleterious effect upon human character and personality. If you empty the world of purpose, make it one of brute fact alone, you empty it (for many people, at any rate) of reasons for gratitude, and a sense of gratitude is necessary for both happiness and decency. For what can soon, and all too easily, replace gratitude is a sense of entitlement. Without gratitude, it is hard to appreciate, or be satisfied with, what you have: and life will become an existential shopping spree that no product satisfies." Theodore Dalrymple