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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
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
2008
-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
CYPRUS Adjusted Net Savings
Axis Title
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 attention deficit
Social choices
Lack of know-how
Collapse Trap
11
“World economy is undergoing seismic shifts. This is partly because of the success in increasing productivity in manufacturing, so that a small fraction of the population can produce all the toys, cars and TVs that even the most materialistic and profligate society might buy” (Joseph Stiglitz, 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 destruction
1. Ignore negative externalities
2. Inequalities in distribution of wealth
3. Can not offer public goods
1. Externalities do not remain external
Environmental problems
Banks care about shareholders not about depositors
Management bonuses erode shareholder value
1. Externalities do not remain external
Total Income of Manager (1000 $) Shareholder Value (million $)
Base salary 125 40 35 20 125 40 35 20
Participation 1 % 8 % 10 % 20% 1 % 8 % 10 % 20%
Rating
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. Inequalities in distribution of wealth
“All animals are created equal.
But some animals are more equal than others.”
Animal Farm
Increased inequalities:
Household debtReduce savings Destabilize
Social problems
3. Can not offer public goods
FIRST GENERATION: Healthcare, education, security, transport
SECOND GENERATION: Healthcare standardsQuality assessmentsFood quality Waste management Policing
States: the seeds of their destruction
1. Non-innovative bureaucracy
2. Dependencies
3. Complacency
4. Inefficiency
5. Fiscal irresponsibility
6. Corruption
The State of Cyprus
300% GDP private debt
+70% GDP public debt
Competitiveness on a ride 34….40….50….
Oversized banking sector
The value of COOPetition
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
HonestyKeeping promisesReliability in performing dutiesProfessionalismReciprocity
Values have economic value added
COOPs: the seeds of their destruction
1. Markets destroy social capital
2. Government interventions destroy social capital
3. Can COOPs destroy social capital?
Diamond’s Collapse Trap?
COOPs: the seeds of their destruction
Causal link behind evidence that banks’ lending to owners and directors can result in “looting”.
Looting occurs when controlling parties are at risk of losing control.
Related lending is used to transfer profits only in localities where the incumbent politicians face significant competition for reelection.
Where the incumbent party has a high probability of reelection there is no such evidence.
Halling, Pichler, Stomper
The Politics of Related Lending
Institute 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”