How to Finnish With The Crisis
The G20 came and went and we remain none the wiser. Apparently the IMF will
gets loads of money, bla bla bla. The poor BRIC (Brazil, Russia, India and
China) countries were placated with platitudes about more say on how the
fund is run, but that won’t be till 2011. It was business as usual.
Lots of pussy-footing was done, with more emphasis on face saving than real
action. The US, in typical superpower style, tried to bully the Europeans
into greater tax cuts and public spending. The Americans eventually stopped
when the Europeans threatened not to take Guantanamo inmates and the French
and the Brits hinted that they might just recognise Mexico’s claims to
Arizona, Nevada, California and Texas. So they agreed to agree to disagree
about what to do, in private, and agreed to agree on an agreeable
compromise, in public. You know, what’s the hurry, after all?
The analogy that comes to my mind is a guy whose house is burning, after
having been looted and he’s worrying about what to wear to meet the
insurance company rep, and, worst of all, how to explain to Blockbusters
that he won’t be bringing back that DVD, after all.
The communiqué was along the lines that they would ensure that “all
systematically important financial institutions, markets and instruments are
subject to an appropriate degree of regulation of oversight.” Very
wishy-washy in my opinion, so much for the urgency of important action. But
then when you realise that these finance ministers were actually politicians
with mostly little or no financial training, then surprise somehow
evaporates. Politicians don’t make decisions in a hurry, not in democracies
at any rate. Alastair Darling, the UK Chancellor, was Secretary for
Scotland, Secretary for Transport, Secretary of State for Work and Pensions
before ending up as Master of the Universe. One can hardly can him
qualified. At least France’s Christine Lagarde was the first female Chairman
of an international law firm and knows how to take decisions. But her boss
Sarkozy is such a primadonna that he would never allow her to take a
decision unless he was there. And Geithner, well, he can’t pay his taxes, so
technically, he is more part of the problem than he is part of the solution.
So we have to wait till April 2nd when all the head honchos meet.
Surely it cannot be that difficult. But the leading economies of the world
(except for China), are making a very good impersonation of a chronically
indecisive person with a dilemma. All solutions so far have been open-ended
and piecemeal. Take the idea of a Bad Bank… Nobody can agree in the major
economies (except the Swiss who set one up for UBS’s toxic assets) how to
make one work. Or the stimulus plan in the US, After congress had a go at
rewriting it, it has been emasculated… Tough love is the answer. We need
decisive action and for that we go Finland….(see title)
Yes, compared to the Swedes, the Finns may come across as very staid and
rather boring. Who’s heard of Finnish porn? Exactly my point. Who’s heard
of anything Finnish other than Nokia? But when it comes to dealing with a
credit-crunch, they know how to take tough decisions. In 1991 a Scandinavian
credit explosion was followed by a housing bubble which eventually burst.
The result was a banking crisis that humbled the mighty Finns…In 3 years,
GDP fell by 11% and unemployment went up from 3 to 18%. Technically, Finland should have been Finnished…but no. Not the Finns.
They went into decisive action. But then what do you expect from a country
whose top telephone maker once used to make boots and other rubber products.
Yes, Nokia made boots, analogue ones, I presume. So what did the Finns do to
save their economy?
1. They recapitalized all the banks
2. Their government gave a solemn guarantee for all deposits and banks
in peril
3. The government took full control of any bank that went under (unlike
our 30% to 75% nationalised banks, RBS, Lloyds HBOS, Citibank -
Nationalisation is like pregnancy, you either are fully or you’re not at
all)
4. They injected massive capital in the form of public loans to
promising businesses going through a bad patch
5. They froze dividend payments (unlike Gordon Brown, who’s still
insisting on not giving up on this vestige of old capitalism) despite having
sold capitalism down the river in every other way
6. They set up a bad bank to throw in all the toxic assets
7. And on the 7th day, they rested and had a Sauna
The amazing thing about us today is:
* We are still procrastinating about setting up a Bad Bank (hoping
that somehow this is all a bad nightmare that will go away), the Finns did
not waste time
* We refuse to take the worst case scenario as the most probable
scenario as the most likely scenario for fear of scaring voters. “Most of Mr
Obama’s targeted deficit-reduction comes not from his own actions, but from
the expiry of the stimulus, a halt to bail-outs, and the natural restoration
of tax revenue as the economy pulls out of recession, growing by a robust 4%
on average from 2010 through to 2013. And therein lies the biggest threat to
the president’s plans.” Economist, 26th Feb 2009
http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=131854
15
The Finns just plunged in and didn’t skimp on the courage. They waged total
war on their recession. It makes sense. Here’s why:
* First, they have to make themselves a reputation. All their
Scandinavian neighbours had already forged themselves reputations as mighty
warriors and Vikings. Somehow the Finns never caught on and became the
boring cousins. Declaring war on recession may not be as sexy as raping or
pillaging, but it meant that come 2009, we would be talking about them
* If you look at the their language, you get a hint that if anybody
was going to do something 1000%, full on, and not skimp on the details, if
would be the Finns. Here for example is passage in Finnish:
Yhdistyneiden kansakuntien peruskirja allekirjoitetaan San
Franciscossa 26. kesäkuuta 1945. Jäsenmaiden tulee kansainvälisissä
toimissaan mukautua peruskirjan periaatteisiin, jotka kieltävät mm.
sekaantumisen vieraiden maiden sisäisiin asioihin. YK on pääasiallisesti
vastuussa kansainvälisten kiistojen rauhanomaisesta sopimisesta
These are people who never miss an opportunity to put dots
everywhere irrespective of the consequences. Throwing caution to the wind,
their courage borders on foolhardiness. Also, if you see the word
pääasiallisesti , you will see that they are not even scared of using not
only double but also triple vowels! They don’t do things by half…hence
their 1991 rescue package. Their language, one of only four
non-Indo-European in the EU, is part of the URALIC family of languages and
share something with Hungarian, equally unintelligible. Sadly for the
Hungarians, that’s all they share with them. Hungary’s economy is screwed
and lacks Finland’s resolve. These characteristics and the opaque nature of
their language meant that the Finns could take rather tough action and
neither worry about being understood by others nor justifying themselves to
others. Only Finns needed to understand what was being done to them and they
were doing to themselves. Obama is the leader of the free world, is
ubiquitous, and speaks a language most understand. The slow nature of his
decisions tell us that he seems to care more about being understood than
actually about being effective…May be Americans should learn Finnish so
they can sort out their mess.
Ironically, Nokia’s first GSM phone was launched on 1991. The Finns wanted
desperately to communicate their wisdom with the world (trying to call New
York using a pair of Nokia rubber boots had failed miserably). Sadly they
spoke Finnish and we did not. Their many dots and triple vowels are our
loss….