Between markets and the state
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Transcript of Between markets and the state
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Between Markets and the State
Stavros A. Zenios
President of UNICA University of Cyprus
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§ The State of the World § Markets –and the seeds of their destruction § States –and the seeds of their destruction § The value of COOPetition § COOP –and the seeds of their destruction
Outline
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“Anyone can count the seeds in an apple, but only God can count the apples in a seed”
Robert H. Schuller, 1926. ���
Conclusion
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§ Constructed uncertainty § Technological innovation § Complex interconnectedness
§ Social reflexivity § Post-traditional societies
(Anthony Giddens, Beyond Right and Left)
State of the World: social
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§ Global ecological footprint: 1.5 planets earth
“At the current pace of population growth and consumption, by the year 2030 we will need 2 planets earth to sustain us. And of course we have only one.”
§ Ecological footprint of regions: § Mediterranean nations need 3 Mediterranean seas § Cyprus ???
(Global Footprint Network)
State of the World: environment
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Το Χρυσοπράσινο Φύλλο
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§ World Bank Adjusted Net Savings
State of the World: environmental
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8 -‐30,00
-‐20,00
-‐10,00
0,00
10,00
20,00
30,00
POLAND Adjusted Net Savings
-‐5,00
0,00
5,00
10,00
15,00
20,00
25,00
30,00 1989
1990
1991
1992
1993
1994
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1996
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2008
Axis Title
CYPRUS Adjusted Net Savings
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§ Club of Rome--MIT § Limits to Growth, § 1970’s
State of the World: sustainability
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10
Corrections = increasingly more costly No correction = Collapse
Since 1980’s
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� Hysteresis
� Societal aOenPon deficit
� Social choices
� Lack of know-‐how
Collapse Trap
11
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“World economy is undergoing seismic shi2s. This is partly because of the success in increasing produc:vity in manufacturing, so that a small frac:on of the popula:on can produce all the toys, cars and TVs that even the most materialis:c and profligate society might buy” (Joseph SCglitz, Freefall, 2009)
§ Huge trade imbalance EAST-WEST. § Manufactured goods automated-no job creation. § Manufacturing related SERVICES exacerbate the problem.
State of the World: economy
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Markets: the seeds of their destrucPon
1. Ignore negaPve externaliPes
2. InequaliPes in distribuPon of wealth
3. Can not offer public goods
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1. ExternaliPes do not remain external
Environmental problems Banks care about shareholders not about depositors Management bonuses erode shareholder value
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1. ExternaliPes do not remain external
Total Income of Manager (1000 $) Shareholder Value (million $)
Base salary 125 40 35 20 125 40 35 20
ParPcipaPon 1 % 8 % 10 % 20% 1 % 8 % 10 % 20%
RaPng
AAA 817.1 605.4 661.3 986.4 103.7 103.9 103.8 103.5
AA 821.7 631.7 690.6 1,007.6 104.0 104.1 104.2 103.7
A 825.6 648.0 705.3 964.2 104.1 104.2 103.9 103.3
BBB 804.8 682.7 722.4 799.0 104.0 104.0 103.9 103.3
BB 892.7 794.1 796.6 636.5 103.3 102.9 102.7 101.6
B 979.9 994.4 977.0 719.0 102.3 101.3 100.9 98.9
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2. InequaliPes in distribuPon of wealth
“All animals are created equal. But some animals are more equal than others.”
Animal Farm
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Increased inequaliPes:
à Household debt à Reduce savings à Destabilize
à Social problems
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3. Can not offer public goods
FIRST GENERATION: Healthcare, educaCon, security, transport
SECOND GENERATION: Healthcare standards Quality assessments Food quality Waste management Policing
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States: the seeds of their destrucPon
1. Non-‐innovaPve bureaucracy 2. Dependencies 3. Complacency
4. Inefficiency
5. Fiscal irresponsibility 6. CorrupPon
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The State of Cyprus
� 300% GDP private debt
� +70% GDP public debt
� CompeCCveness on a ride 34….40….50….
� Oversized banking sector
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The value of COOPePPon
Love economy:
16 trillion USD vis-‐à-‐vis 24 tr. global GDP
Shadow economies:
34.5% of GDP = 8 trillion USD
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Genuine Progress Indicator
Human
Sustainable Development
Index
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Social Capital
TRUST
" Honesty " Keeping promises " Reliability in performing duties " Professionalism " Reciprocity
" Values have economic value added
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COOPs: the seeds of their destrucPon
1. Markets destroy social capital
2. Government intervenPons destroy social capital
3. Can COOPs destroy social capital?
Diamond’s Collapse Trap?
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COOPs: the seeds of their destrucPon
Causal link behind evidence that banks’ lending to owners and directors can result in “looCng”.
LooCng occurs when controlling parCes are at risk of losing control.
Related lending is used to transfer profits only in localiCes where the incumbent poliCcians face significant compeCCon for reelecCon.
Where the incumbent party has a high probability of reelecCon there is no such evidence.
Halling, Pichler, Stomper
The Poli1cs of Related Lending
InsPtute of Advanced Studies, Vienna
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“Anyone can count the seeds in an apple, but only God can count the apples in a seed”
� Karl Marx “Society poses itself only such problems
as it can solve”
� John F. Kennedy “Our problems are man-‐made, therefore they can be solved by men”
� Stavros A. Zenios amendment “Our problems are man-‐made, therefore they can be solved by women”