Eurozone crisis- Short term long term balance?

13 Dec 2011    

News: Eurozone needs to balance short-term rescue with long-term reform (People's Daily)

The People's Daily is affiliated to the Chinese Communist Party. Western newspapers remind me of a sheep herd, of a cacophony of partisan opinions which reflects how the journalists feel about life. Have you ever tried to discuss politics or financial markets in a pub? What you find is that people seem to have an opinion about everything, but it's impossible to have a meaningful discussion with them about anything because it's like trying to take hold of smoke, it moves whenever you try to grab hold of it.

Socrates said knowledge begins when we stop feeling the answer to everything intuitively and start concentrating on something expertly. People who wave their hands and opine about everything are called Dionysians, the mental faculty they use is a sort of emotive visualization. People who move beyond hand waving and start making calculations and subjecting their assumptions to tests are called experts, or Orphics. An artist painting pictures or writing poetry about wrestling has nothing constraining him, but an expert practicing wrestling knows when he is wrong because he gets beaten in the ring. The smarter the expert the more focused he becomes, so the smaller his sphere of expertise gets. The ultimate step in human self-development is the study of philosophy, philosophy shrinks the sphere of expertise to nothing, instead of talking about what we believe philosophers talk about why we believe, about human nature, so all real world opinions vanish and the subject becomes totally transcendental.

Socrates contrasted the chattering opinionated Athenians with the disciplined self aware Spartans who spoke in sharp laconic riddles. In conversation an Athenian typically made the Spartan look uneducated at first, he could list a thousand reasons why such and such is a good idea by the time the Spartan opened his mouth, but then the Spartan would nail him with a few words - such as "Real men aren't afraid of arrows" - which got right to the heart of why the Athenian felt the way he did, and which left wise Athenians speechless and ashamed.

The Chinese are famous not just for their enormous discipline, but also for their philosophical skills. They speak in riddles, words have multiple meanings, it seems as if their entire language is designed to make you think beyond the surface layer. Chinese newspapers are generally refreshing, but the People's Daily is especially impressive because the journalists make a conscious effort to assimilate and communicate the views of the experts who run the country, it reminds me of a hive of bees each with their special expertise and united under one brilliant communal vision, not a chaotic sheep herd running all over the field following shadows. So I think if you are in search of wisdom about geopolitics and the evolving zeitgeist of human society the People's Daily is required reading.

On this web site I often tear into the Western press, not to demonstrate my brilliance, indeed catching and killing headless sheep is hardly a great feat, but because I hope that by teaching you to see the motives behind their opinions you can learn self knowledge. To date I have never questioned a People's Daily article, but I think that time has finally come. So today I want to take on the bees now taking over the world, I want to make some comments about the quality of their wondrous honey.

The article I want to talk about, Eurozone needs to balance short-term rescue with long-term reform, talks about the short term and long term aspects of the eurozone crisis, and says, in a typically Chinese way, leaders must find the harmious balance between these two parts and not focus lopsidedly on one nor the other. For example, short term measures might include bailouts or bonds purchases, and long term measures might include budget discipline and structural reform. At the moment the Europeans are not doing what they suggest, they are thinking more long term, and this is a pretty important issue because if China felt confident about Europe they might shift around some of their reserves and make a big short term difference.

If you engage a Chinese person in a discussion about philosophy they usually begin by looking for two philosophical opposites and then trying to find the harmony between them. We philosophers talk about how most problems can be divided into a short term and long term perspective, with the short term perspective giving pleasure to the body, and the long term perspective making us stronger. In the case of the Eurozone, short term bailouts prevent recession and pain, long term reforms make Europe more competitive and wise.

In the West we find it harder to grasp the idea of two self contradictory perspectives, instead we naturally look for one solution. So the Anglo-Saxons are focused on the short term solution, and the Germans are focused on the long term solution. The Chinese call us naive, they say their search for harmony is the pragmatic way forward.

Yet the Chinese are not always right. When I try to teach Chinese people philosophy, the first question I usually ask is do you think idealism blends ignorance and wisdom, or just seeks wisdom alone? I hope it's pretty obvious to the reader that the correct answer is to seek wisdom, not to search for a harmony between ignorance and wisdom.

It's not just body builders who say "no short term pain, no long term gain", it applies to mind builders as well. Of course what makes us stronger makes us fitter as well as more creative and therefore more fulfilled. Long term gain, strength in wrestling, or knowledge in mathematics, is both the key to living a more effective life and what makes the soul happy. So you can see why Socrates used to say many short term pleasures in the body do damage to the soul, and many long term pleasures in the soul cause pain in the body.

Which makes one think, when the People's Daily say the short and long term should be balanced in the Eurozone, are they are saying anything more than German's need to be less like tiger mothers and more like pussy cats? As a general rule people who talk a lot about short term pain are what we call "wets", when Dynosians loose their idealism they head straight toward bodily pleasure, their rejection of the relationship between short term pain in the body and long term pleasure in the soul creates what we call today post-modern liberalism, and it ends up in existential failure. The swing away from liberalism is accompanied by intense suffering and violence, because pain is the agent of reform, because pain comes back in fashion, because people become fighters for justice, and because human personality has become totally corrupt so people turn into monsters under stress.

Of course the Chinese aren't cowardly people, it's absurd to suggest to they are infected with the same sort of "wetness" we see in Western journalism and politics, it would be absurdly controversial to think of our Chinese friends now leading the world as wrongly blending short term pain avoidance and long term idealism creating a corrupted mix only one step up from what we do in the West when we take the painful bits out of socialism and capitalism and imagine what is left is sweet, when in fact it's junk food not honey. So I think they must mean something else, something more sophisticated than pleasure and pain, yet I can't see what it is in their article.

Let me give another analogy for the crisis. Suppose you want to cross a river, there are two parts to the process. You must choose where to cross the river, that's the long term vision, and then you must walk that path overcoming local obstacles, that's the short term vision. The long term vision must come before the short term vision, because if you choose the wrong path, where the river is too deep or too fast, no amount of fancy footwork can save you. The long term vision requires courage and judgement, the short term vision requires strength and self control.

If we look at the development of China up until now under the technocratic scientific development concept, it has emphasised short term rather than long term vision. China today has a many problems in its environment, housing market, and liberal cultural forces which developed because it didn't think carefully enough about long term vision, it just assumed the Western capitalist consensus was the correct way to cross the river.

Now let's switch back to the European Crisis. The question I want to ask is what is the long term vision for Greece? The country has a debt to GDP approaching 170% of GDP, how is it going to repay that debt? If you embark on bailouts before thinking about that long term vision you risk creating greater problems for yourself in the future. You are like the person who practices his fancy footwork, but doesn't pay attention to the path ahead, and ends up drowning.

I think the long term vision is so critical it's a waste of time even talking about the short term. I think the wise old philosopher only looks into the distant future, into the sunny uplands that are so bright no-one else can look at them without burning their eyes, and he leaves all that short term stuff to technocrats.

Europe has two choices as far as I can see, to force the Greeks to repay it's debts or to kick them out of Europe. If it's going to make the Greeks repay it needs to implement a lot of policies against their will, such as profound reforms and confiscation of private assets, and giving them more money to carry on as they are will just mean they have to take more away and reign in their leash even tighter in the long term. If, on the other hand, it's going to kick them out it needs to do that in such a way that it costs the rest of Europe as little money as possible and sets a precedent that will terrify other miscreants, so giving them short term money now which makes everyone's fears vanish is again self defeating.

Both of these visions are very painful in the short term, but making a blend which is neither one nor the other doesn't build a more harmonious word, it builds an unjust unwise world in which the Greeks are both unreformed and unpunished. You can not blend justice and injustice, nor wisdom and ignorance, you have to head toward the light.

The world outlook is very grim, the Chinese are more aware of this than anyone else, surly this is the time to think first and foremost about the long term path, and once you have found it plot the short term path in harmony with it, rather than just wondering along in the dark looking for the short term path that is in harmony with bodily pleasure and the status quo. Perhaps I failed to understand the People's Daily article, indeed I struggle to understand a lot of people's writing, but I fear it is encouraging Europe to make the same kind of mistake of shying away from courageous long term vision that China made in the run up to 2008 and which has left it so unbalanced today.

The Chinese search for harmony reminds me of Plato's Lysis dialogue. Hippothales is an older boy who wants the younger Lysis as his student, but Lysis dislikes him and hangs around playing knucklebones with kids of own age instead. Hippothales asks Socrates for advice, and Socrates said don't flatter your prey, flattery makes people arrogant and ill disciplined and they walk away, instead keep them constantly under pressure, keep tearing them apart for the sake of their soul. Then Socrates demonstrates this process by debating with Lysis. Whilst searching for a definition of "friendship" Socrates discusses the relationship between the loved and lover, then like and unlike, then good and bad, then belonging and un-belonging. The dialogue does talk about the neophyte fighting for friendship and the master being standoffish, but it doesn't answer the main problem raised in the friendship debate and it mostly leaves the reader thinking, which is the way Socrates typically seduces us of course. But perhaps there is a clue in the theme - Hermes is the god of guides and Socrates is walking from the Academy to the Lyceum when he comes across their wrestling school. Instead of thinking what the couple get from friendship, think what their friendship does for the world. So Hippothales teaches Lysis and he in turn teaches the slaves, thus resolving the dilemma of what use like is to like.

In the same way perhaps we can we think of a harmony between the short term and the long term not in terms of bodily pleasure and pain, but in terms of a sort of similarity of approach each operating in its respective sphere. The short term moves should hit the same notes as the long term vision. For example, Steve Jobs used to obsess about little things like logos, because he wanted to see that vision everywhere. In the same way, you can translate the long term functional goals into short term psychological goals. In the West we are naturally individualistic so we focus on honour seeking, in the East people naturally cohesive so they focus on shame avoiding. The former is far away and external, the latter close at hand and internal. In the West we are far sighted, if we are healthy we tend to focus on long term physical ideas such as "no bailout rules". In the East people are short sighted, if they are healthy they tend to focus on human psychology. So what I am saying is that I think it's possible that when the Chinese criticise the Germans for thinking too much about the long term it's a bit like a biologist criticising a physicist for not caring enough about human nature- his reply should be we each have our own path to heaven. In fact, I think the Chinese are guilty of thinking too much about long term physics and not enough about short term biology themselves. 

Describe to me what is wrong with the Greek people my Chinese friends, and how their personality can be reformed, and then we who focus on long term functional goals can walk in synch with you. But if your vision is still filled with smoke, don't criticise our German friends, they are at least making an effort, and they are doing a much better job than the Americans. Considering how much you value harmony, it makes no sense to me why you keep so much of your sweet honey in a country so out of tune with yourself. For all it's faults, I think Europe is a much better match.