Europe’s Crisis Treadmill
Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His most recent book is Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System.
05/12/2014 04:33 PM
Why EU Sanctions are a Bluff
By Christoph Schult, Jörg Schindler and Ralf Neukirch
While the EU currently shows a united front on possible economic penalties against Russia for its interference in Ukraine, that could change once more serious sanctions are on the table. Germany is struggling to maintain the facade.
European Union politicians don't like to be outdone when it comes to showing resolve. Last week, French Foreign Minister Laurent Fabius said that if the Russians continue acting like they have, then tough new sanctions will need to be imposed. His British colleague William Hague said that economic sanctions were being planned. German Chancellor Angela Merkel threatened last Thursday that if there were problems surrounding the Ukrainian elections, "there would be further sanctions."
These strong words are the West's answer to Moscow's expansionist push. More than any other measure, it's the possible so-called third level of sanctions -- wide-ranging economic sanctions -- that are intended to make Putin back down. Because Europeans have ruled out the use of military means, these sanctions are the most powerful weapon that they have -- the diplomatic nuclear option in the battle over Ukraine's future.
But there's one problem with this weapon: It can only be used if all EU members agree. In the EU, sanctions need to be decided unanimously. This worked for levels one and two, because they were primarily symbolic acts that affected people close to Putin and imposed no real burden on the EU. But level three would be different, making it unlikely that the EU would agree on sanctions that would have a strong effect Russia. Europe's strongest weapon is actually a bluff.
Hawks vs. Doves
In her talk with Sigmar Gabriel, vice chancellor and head of the center-left Social Democrats, last Tuesday, Merkel reported that during consultations about sanctions many EU partners are most interested in talking about how to secure exceptions for their own economies. Others are trying to avoid the subject entirely.
But there's a lot to discuss. On one side, there are the states taking a hardline position -- this includes most Eastern European countries and Great Britain -- who would rather implement sharp sanctions now instead of later. On the other side there are the more cautious countries, like the Benelux states, which are betting on diplomacy, or, like all of Southern Europe, are afraid of the economic costs a trade boycott could bring.
The French and the Germans are taking a middle position: They don't want sanctions, but will support them if Putin continues to destabilize Ukraine. Germany, in particular, is betting on financial sanctions, which would mean using the European Investment Bank (EIB) and the European Bank for Reconstruction and Development to exert pressure on Moscow. At the EIB there's a list of projects that would be put on ice if sanctions were expanded.
Countries like Great Britain or Cyprus are strictly against this, because it would also have an effect on their own financial sectors, and are arguing, instead, for an energy boycott. However, this faces strong resistance from Eastern European countries, like Bulgaria or Slovakia, who depend almost entirely on Russia for gas.
Genuine economic sanctions would clearly be expensive for the Europeans. According to a confidential report by the European Commission, Germany would have to reckon with a loss of 0.9 percent in growth this year, and 0.3 percent next year. The situation looks even direr in other countries.
Sanctions May Not Work Anyways
Many governments are also skeptical that the sanctions could actually get Putin to back down. In German security policy circles, that outcome is considered almost impossible. The thumbscrews the West has thus far implemented "haven't instilled much fear" in Putin and his associates, one security official argued. Russia has little foreign debt and large currency reserves, giving it a transitional period of at least two years -- enough time to find new buyers and distribution routes for Russian gas. "We'll be sitting in the cold before the Russians run out of money," says one security official.
Putin's determination to secure his influence over eastern Ukraine is also related to the region's importance to the Russian armaments industry. The Russian army's airplane motors, gear boxes and rocket equipment are, according to Western knowledge, in large part built in eastern Ukraine. That's why the Kremlin has also, according to the security official, planned painful economic sanctions of its own. "If the Russian leadership sees itself as strong, even if we don't see it that way, then it will also act strong -- and at the moment it feels very strong."
Although the 28 EU member states try hard to project a sense of unity to the outside world, their differences in opinion make themselves felt in internal meetings. Merkel is afraid that, in the end, the Union's disunity could spill into the open and Putin would have accomplished one of his important goals, dividing the Europeans.
Looking for Ways to Avoid the Issue
That's another reason why the German government wants to avoid, at all cost, a situation in which sanctions are unavoidable. Foreign Minister Frank-Walter Steinmeier has pointed out that Moscow has recently stopped questioning the legitimacy of the Ukrainian presidential elections, which are planned for May 25. The German government is grasping for these kinds of signals, because they may serve as a reason not to implement the third level of sanctions.
Before concrete steps can be defined, the EU also needs to discuss when the third level should even be implemented -- a way to skirt the delicate situation. "Clearly there will be economic sanctions if Putin sabotages the vote," says a high-ranking government official. "But it's unclear what would constitute sabotage."
One way to at least defer the debate around sanctions would be to push the Ukrainians to delay the vote. But the German government does not want that at all, because it would seem like a capitulation to Putin. "A delay isn't in our script," Markus Ederer, a state secretary in Steinmeier's Foreign Ministry, stated last Wednesday during a session of the German parliament's foreign affairs committee.
May 12, 2014 3:42 pm
Brain science fires up the neurons of managers
By probing the neural roots of behaviour that psychologists have puzzled over, neuroscience may help to solve conundrums such as why many companies still struggle to create socially and ethnically diverse workplaces even though they profess equal opportunity.
At Prof Amodio’s NYU, volunteers wearing scalp sensors took part in experiments assessing their susceptibility to stereotyping others. Those who turned out to be fairly unprejudiced showed greater electrical activity in brain regions associated with self-control, suggesting they were working hard to stay focused on the task and respond impartially.
This suggests that the brain can apply a conscious override to knee-jerk bias. Other experiments measuring threat responses in the brain agree with the idea that while we may instinctively mistrust “difference”, the brain’s neocortex – which evolved as primate social networks became more complex – has mechanisms to keep prejudice at bay. “Though we may have unconscious prejudices, we can be adept at regulating our behaviour,” says Prof Amodio.
Such research could provide pointers for employers. For example, if prejudice is partly innate, encouraging managers to spot their prejudices and work around them may be more effective than repeating the mantra that prejudice is wrong.
Such an approach might have helped Zillah Byng-Maddick, chief financial officer at Future Publishing. At a past employer, she confronted a personal prejudice in the shape of a well-qualified but obese interviewee. Try as she might, she could not silence the thought that overweight people are lazy. “I kept saying to myself, listen to what they have to say . . . .but I couldn’t get past their weight.”
Her response was probably doomed to fail. “Trying to suppress a bias usually backfires, because it keeps you thinking about the bias all the more,” says Prof Amodio. However, her current approach − to talk first by phone, so that her first impressions are unaffected by looks − he says, is spot on.
At the University of California, Los Angeles, Matthew Lieberman has been exploring the part of the brain that deals with social relationships through “functional magnetic resonance imaging”. In his book, Social, Why Our Brains Are Wired to Connect, Prof Lieberman writes that brains feel a social form of hurt – such as exclusion and unfairness – much as they experience the physical pain of, say, breaking a leg.
Yet most organisations, he writes, miss this vulnerability. Employers appoint task-focused managers who lack human understanding, and trust that money will motivate employees, overlooking social rewards such as praise and opportunities to help others flourish which, he argues, the brain registers just as powerfully.
When it comes to holding an audience, neuroscientists have an advantage over many presenters – a picture of neurons firing is more compelling than talking theory and data points.
Tips for avoiding ‘neuro-bunk’
●Do not be overly impressed by pictures of brains lighting up – a popular sales device, according to Tara Swart, a neuroscientist and leadership coach. Dig into the detail and beware of generalisations.
● Be aware that neuro-imaging techniques are still broad-brush in spite of big advances, advises Molly Crockett, a neuroscientist at University College London.
● Ask if findings have been peer-reviewed and replicated and be cautious about small experiment samples.
● Consider Dr Crockett’s rule of thumb: “The more wonderful a thing sounds, and the more you’d like to believe it, the less likely it is to be true.”
Steven Rice, who leads human resources at IT company Juniper Networks, was won over by the explanatory power of neuroscience. He had already sensed that many Juniper employees regarded the ranking system used to evaluate them as unfair. But it was reading about how the brain reacts to threat and unfairness, in Your Brain at Work, by the consultant David Rock, co-founder of the NeuroLeadership Institute, he says, that motivated him to redesign Juniper’s performance management process from scratch. “It was one of those ‘Aha!’ moments, when two things came together.”
Faith that neuroimaging can supply management insights is not universal. First, say sceptics, most brain regions perform multiple functions, making the interpretation of brain activity difficult.
“I don’t think there’s any area we can say is [such and such] an area, and be really confident that’s a correct statement,” says Russ Poldrack, a psychology and neurobiology professor at the University of Texas.
There are also limits to what neuroimaging can observe, while preliminary findings from small-scale studies are often regurgitated as facts. Managers need to be aware that there is neuro-myth alongside the neuroscience.
“Anyone can call themselves a coach and many people quote neuroscience with no right,” says Michael Brooke, UK head of learning and development at BNP Paribas, the French bank. To talk about unconscious bias and the psychology of trading, he hired a coach with a neuroscience PhD who had also trained as a doctor. Her credentials, he says, reassured him.
Molly Crockett, a neuroscientist at University College London, has a rule of thumb for spotting “neuro-bunk”: “The more wonderful a thing sounds, and the more you’d like to believe it, the less likely it is to be true.”
Likewise, people are often readier to believe that commercial “brain-training” programmes will make them smarter, than act on evidence that exercise improves learning and cognition – possibly because exercise is hard work.
“While we have quite clear evidence of the effects of exercise, very few brain-training programmes on the market have been scientifically validated,” says Paul Howard-Jones, a reader in neuroscience and education at the University of Bristol.
Prof Lieberman conjectures that, in coming decades, neuroimaging will progress from stationary scanners to wearable headbands affordable to businesses and even schools.
This raises the possibility – or the spectre, depending on your perspective – of employers adding brain-response diagnostics to the panoply of psychometrics already deployed in leadership selection and development.
For now, however, the focus is on teaching executives brain awareness rather than probing into their brains. Ms Byng-Maddick has a personal story. Raised on the adage: “show me the boy at seven and I’ll show you the man”, she believed individuals either have what it takes or do not.
However, learning about neuroplasticity – the idea that the adult brain reorganises itself and forges new connections − persuaded her that people can develop.
Faced with the dilemma of how to handle an unhappy deputy whom she had beaten to a coveted post, she decided to mentor him. When she got promoted, he got her job. “Had I not learnt about the brain, I’d have handled the situation differently,” she says.
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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