Captain Future's Log

Investing in Ourselves

Since the Reagan years, the reigning orthodoxy is that economies succeed when the wealthy and corporations are free from taxes, government is virtually nonexistent except to subsidize favored corporations, and businesses cut costs by shedding jobs to countries where living standards are poor and labor is therefore cheap, and by forcing employees in western nations to work harder and longer for less pay and smaller pensions and health care support that can be disappeared at any time, while businesses spend freely on lobbyists, legal and illicit graft, and executive pay and perks, all in response not to the longterm health of a company, an industry or a polity, but to keep stock prices going higher by means of favorable quarterly reports.

This philosophy, considered radical everywhere but in the U.S., is increasingly been forced on other nations by the U.S. and its puppet international institutions. But necessary to that philosophy's success is that economies that pursue other courses of action be less successful, and even fail, so that this particular approach doesn't look like a convenient mask on the greed and avarice of a few already wealthy and powerful cabals.

So the U.S. economy must constantly be inflated as the most successful in the world, and other economies, particularly those of European nations that have evolved a philosophy mixing market capitalism with social supports, be seen as failures.

Unfortunately the only way that strategy can succeed is if Americans are ignorant of what's going on in Europe, and why. So far, we are.

But European economies are successful. Despite having the most extensive and expensive social supports for workers in the world, Germany has the strongest industrial export economy in the world. And it's getting better.

German economy at Forbes :

The Ifo Institute announced this morning that its business climate index rose to 98.7 in October from 96.0 in September, the highest reading since October 2000 and well above forecasts for a very slim rise to just 96.1. The news suggests that Europe's largest economy is holding up much better than many had hoped.

'The outcome came as a surprise and reflects improving prospects for the German economy, with both the current and expectations components registering solid gains,' he added.

Bloomberg on Italy:

Business confidence in Italy, Europe's fourth-largest economy, rose to the highest in 11 months in October ...``It's still not a given that there's a sustainable recovery under way in Italy, but there are comforting signs,'' said Paolo Pizzoli, a senior economist at ING Bank NV in Milan. ``These signs are being reflected in France and Germany too, which is always good for Italy, considering they are our biggest trading partners.''

Today's report is at least the sixth in a week to suggest faster growth in the dozen nations sharing the euro. French and German executives, as well as Italian consumers also became more optimistic this month.

But perhaps the most impressive news comes from Finland.

Reuters on Finland :

Fifty years ago, Finland was known for little more than the wood pulp from its endless forests. A poverty-stricken land of poorly educated loggers and farmers on the edge of the Arctic Circle, few paid it any attention.

Today, this small Nordic nation boasts a thriving hi-tech economy ranked the most competitive in the world, the best educated citizenry of all the industrialized countries, and a welfare state that has created one of the globe's most egalitarian societies.

The article points out that Finland's success is due in part to it being a small, homogeneous country, which once were its major drawbacks. But any nation can decide to invest in itself by investing, for example, in education and related social services.

Mr. Nygard and his partner, Minna Sirelius, have certainly enjoyed the fruits of Finland's exceptionalism. Neither of them paid a cent for their university education, though they took seven years to complete their respective degrees in history and psychology. Ms. Sirelius enjoyed free healthcare throughout her pregnancy and the birth of their daughter, Emilia, and she plans to stay on leave from her job in IBM's human resources department for 11 months.

She can afford to: The government is paying her 60 percent of her salary to look after her baby. Next year Nygard and Sirelius will choose among the Finnish-, Swedish-, English-, or Spanish-language day-care centers in their neighborhood, and the state will pick up four-fifths of the cost.

If either of them loses their job, they will be able to count on unemployment benefits that range up to 70 percent of their salaries for 18 months. And when they retire they can look forward to generous pensions that amount, for the average Finn, to 60 percent of their last salary.
These benefits come at a cost, of course: Finland levies some of the highest taxes in the world, and if Ms. Sirelius does well in her career, she will pay more than 45 percent of her personal income toward taxes. But she does not object. "I feel that is what keeps our society and country running," she explains. "We can't keep the welfare state running unless everyone pitches in and helps with the costs."

But what Mikko Kautto, a researcher at the government's Welfare Research Center, calls "universalist thinking," goes further. Finns do not regard social spending as a drag on economic growth and job creation, he says, but as a positive force.

"The merit of thinking socially," he argues, "is that having everybody involved, with all our human capital working for the benefit of society, is part of the reason for our [economic] competitiveness."

The World Economic Forum'which runs annual business summits in Davos, Switzerland, has ranked Finland the most competitive economy in the world, ahead of the United States, for four of the past five years.

Nowhere is this approach clearer than in Finland's schools, which at the end of World War II turned out some of the worst educated young people in the industrialized world, and now graduate the best, according to comparative studies by the Organization for Economic Cooperation and Development (OECD).

Making sure that every Finnish child, wherever he lived and whatever his background, could get a decent education had a very deliberate goal, says Riita Lampola, head of international relations for the Finnish Board of Education, which oversees schooling.

High level education is the key to what Pekka Himanen, a brilliant young philosopher who advises the Finnish government, calls his country's "virtuous circle."

"When people can fulfill their potential they become innovators," Dr. Himanen argues. "The innovative economy is competitive and makes it possible to finance the welfare state, which is not just a cost, but a sustainable basis for the economy, producing new innovators with social protection."

Other European countries could copy Finland's efforts to improve its education system, Himanen insists, just as they could emulate Finland's heavy investment in research and development.

Finland is still recovering from years of economic crisis, so its services are not yet on par with neighboring Scandinavian countries. But this model is widely supported in Finland, especially in a changing world economy.

Indeed, says Mr. Rouvinen, the challenges of globalization mean that "we specifically need our social model. As a small country on the edge of the world we will have steep ups and downs. We have to have mechanisms so that individuals won't suffer from that."

In the end, says Jorma Sipila, the Chancellor of Tampere University, Finland's inclusive social model is its best guarantee for the future. "The conditions for a flourishing economy are so demanding that the state has to make social investments to raise competent people and take care of dropouts so that they carry their share of the burden," he argues. "Marrying prosperity and social protection is the only sustainable future."

As Jerome a Paris puts it, "wealth capture is not wealth creation. " Yet businesses are captive of their own mythologies of cost-cutting and short-term profits.

Even on their own terms, business people talk about investment but so few seem to believe in it or understand it on a larger scale. Consider the publishing business in the U.S., which has gotten increasingly enslaved to short-term, high-profit margin thinking. Then you go into a huge Barnes & Noble and see portraits ringing the wall of famous writers who now are the brand names that give these stores their identity, and few if any of them made anybody any money for a long time. And today they just wouldn't be published by commercial trade publishers.

Quality is future-oriented. Decently paid workers with health care and cared-for families return investment in many, many ways, for generations. Europe is years ahead, perhaps light years ahead, in the sometimes difficult enterprise of dealing with all realities: those of world economics, the common good, the greater good, the ecological and energy and design practices for long-term prosperity.

Economics is health. The soul of a nation is as important as its wealth. It is the better part of its wealth.