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Saturday, January 26, 2013

Structural Reform and Sustenance in the E.U.

Speaking at the World Economic Forum in Davos, Switzerland on January 25, 2013, Mario Draghi, president of the European Central Bank, said the bank’s program to buy the bonds of heavily indebted E.U. states had been “very helpful” in reducing the perception that the euro was on the verge of collapse. He also pointed to the structural reforms enacted by European leaders as “now bearing fruit.” He urged the state governments of the heavily-indebted states to continue to implement structural reforms so those states could take advantage of the ECB’s low interest rates and easy credit to banks. That is to say, the strategy was to use monetary policy as leverage for long-term-oriented fiscal policy. Political risk analysts listening to the central bank official likely came away with a more optimistic stance on the European economy.
Even though the progress achieved already on the debt crisis provides “light at the end of the tunnel,” the matter of structural reforms at the state level could prove to be more uncertain, given the political element. Chancellor Angela Merkel of the state of Germany warned against the impulse to reduce the pace of structural reform in the face of economic stagnation in the heavily indebted states. She pointed to the record unemployment numbers announced in Spain just the day before as fodder for the anti-austerity crowd there. On the political side, she observed, “experience tells us that often pressure is required to enable structural reform.” The obstacles could come from entrenched political officials or bureaucrats at the state level, as well as from the poor whose very sustenance can be put at risk by the austerity in structural reforms. I contend that whereas the former source ought to be combatted, even the austerity advocates ought to see to it that the poorest of the poor do not slide through the cracks.
In other words, survival in the short run should not be sacrificed for long-term structural reform. In fact, making a qualitative (i.e., difference in kind) distinction between government programs that keep people alive on a daily basis and all the other budget items could actually permit more budget cutting because so much would be found to be subject to cuts without risking lives. To be sure, unemployment caused by a cancelled defense contract could put people in danger of losing their house or going without food. However, such individuals would be covered by the continuance of the programs providing sustenance. Therefore, having an indirect effect on sustenance does not render a particular budget item itself in the category of vital programs.  Buffering sustenance programs from the massive cuts everywhere else would significantly reduce the vehemence of the protests and soothe the path of structural reform by isolating the entrenched officials and bureaucrats as the only primary obstructionists.
In short, long-term fiscal reform need not be at the expense of people eating and having shelter as well as medical care. Based on the firm foundation of human rights, programs primarily geared to sustenance can be isolated and protected such that the structural reform can be implemented more smoothly. Put another way, the European leaders have been making their task much more difficult than necessary.


Davos: ECB’s Draghi Says ‘Real’ Economy Still Stagnant,” Deutsche Welle, January 25, 2013.


Friday, January 25, 2013

The 11-Inch Footlong at Subway

It is perhaps all too common for companies that franchise out stores to insist to complaining customers that the franchisee bears full responsibility for any dissatisfaction. That franchisees are bound to certain standards in a legal agreement with the company is apparently of no consequence. The refusal to take responsibility is perhaps all too common in the retail sector. It is more convenient to point to the other guy’s responsibility than to one’s own. In fact, this mentality may be said to characterize business culture today. The sordid condition can be seen in the knee-jerk avoidance company statements made on the heels of a customer-led controversy.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available at Amazon.com.