Between  Markets  and  the  State

Stavros  A.  Zenios      

   President  of  UNICA        University  of  Cyprus  

§ 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

“Anyone can count the seeds in an apple, but only God can count the apples in a seed”

Robert H. Schuller, 1926. ���

Conclusion

§ Constructed uncertainty § Technological innovation § Complex interconnectedness

§ Social reflexivity § Post-traditional societies

(Anthony Giddens, Beyond Right and Left)

State of the World: social

§ 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

Το  Χρυσοπράσινο  Φύλλο  

§ World Bank Adjusted Net Savings

State of the World: environmental

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  

1995  

1996  

1997  

1998  

1999  

2000  

2001  

2002  

2003  

2004  

2005  

2006  

2007  

2008  

Axis  Title  

CYPRUS  Adjusted  Net  Savings  

§ Club of Rome--MIT § Limits to Growth, § 1970’s

State of the World: sustainability

10

Corrections = increasingly more costly No correction = Collapse

Since  1980’s  

�  Hysteresis      

�  Societal  aOenPon  deficit    

�  Social  choices      

�  Lack  of  know-­‐how  

 

 Collapse  Trap  

11

“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

Markets:  the  seeds  of  their  destrucPon  

1.   Ignore  negaPve  externaliPes    

2.   InequaliPes  in  distribuPon  of  wealth      

3.   Can  not  offer  public  goods        

 

1.  ExternaliPes  do  not  remain  external  

Environmental  problems    Banks  care  about  shareholders  not  about  depositors    Management  bonuses  erode  shareholder  value  

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

2.  InequaliPes  in  distribuPon  of  wealth      

“All  animals  are  created  equal.    But  some  animals  are  more  equal  than  others.”    

Animal  Farm  

Increased  inequaliPes:  

à  Household  debt  à Reduce  savings  à   Destabilize      

à Social  problems    

3.  Can  not  offer  public  goods  

FIRST  GENERATION:  Healthcare,  educaCon,  security,  transport    

SECOND  GENERATION:  Healthcare  standards          Quality  assessments          Food  quality            Waste  management            Policing  

States:  the  seeds  of  their  destrucPon  

1.   Non-­‐innovaPve  bureaucracy  2.   Dependencies  3.   Complacency    

4.   Inefficiency    

5.   Fiscal  irresponsibility    6.   CorrupPon        

 

The  State  of  Cyprus  

�  300%  GDP  private  debt  

�  +70%  GDP  public  debt    

�  CompeCCveness  on  a  ride  34….40….50….  

�  Oversized  banking  sector  

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      

 

Genuine  Progress  Indicator  

 Human  

Sustainable  Development  

Index  

Social  Capital  

TRUST

"   Honesty "   Keeping promises "   Reliability in performing duties "   Professionalism "   Reciprocity

"   Values have economic value added

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?

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    

 

 

 “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”