IMF Requests That Pensions be Lowered Because of “The Risk That People Will Live Longer Than Expected”

International Monetary Fund Director Christine Lagarde. Photo courtesy of EFE.

IMF Requests That Pensions be Lowered Because of “The Risk That People Will Live Longer Than Expected”
The organization wants the retirement age to be adjusted in tandem with life expectancy
Its economists propose decreasing benefits and increasing contributions
The Fund proposes that private insurers cover the risk of longevity
El País: El FMI pide bajar pensiones por “el riesgo de que la gente viva más de lo esperado”
Sandro Pozzi reporting from New York April 11, 2012

The aging of the population is a known challenge. The International Monetary Fund has now dedicated an extensive analysis to it which is part of a set of documents it has released in advance of its biannual summit. What is especially worthy of attention is the aggressiveness and severity with which it treats the problem. The Fund calls, among other things, for the decrease of benefits and the delay of retirement age because of “the risk that people will live longer than expected”. It also proposes market solutions to mitigate this “risk”.

This is what economists in the camp of the Spaniard José Viñals call “the risk of longevity”. They give data to put it in this context: “if average life expectancy increases three years more than it is expected to by 2050, the cost of old age – which is already enormous for governments, businesses, insurers, and individuals – would increase 50%” in advanced economies, using the reference of 2010 GDP.

For emerging countries, the additional cost would be 25%. In absolute terms, the cost on a global scale would be in the tens of billions of dollars. This poses a risk for the sustainability of public finances given the levels of public debt which would have to be issued. There is a parallel risk for the solvency of private enterprises.

According to Viñals’s explanation at the press conference in which the report was presented, “longer life is good, but it brings significant financial risk.” “We are going to cost more as individuals to corporations and governments. So we should worry now about the risk of longevity, so that these costs do not catch up with us in the future,” commented Viñals, who leads the IMF’s Capital Markets Department.

In 1750, life expectancy for those born in Western European countries was not even 40. Since 1900, there has been a linear increase to age 80 in 2010. On a global scale, life expectancy has increased from 48 in 1950 to 70 in the last year of data available. But what changes calculations, according to the IMF, is increasing life expectancy for those living until age 60.

The United Nations projects that by 2050, the life expectancy from age 60 onward will reach 26 years in advanced economies and 22 years in developing countries. This signifies that life expectancy will increase one month for every year until then. The Europeans who lived to age 60 in 1910 had an average of 15 more years ahead of them after that. A century later, they have 24.

As the population lives longer, more pensions and benefits will be paid out of social security. One example is American private pension plans. “Businesses would have to multiply their contributions many times to be able to confront those passive additions [to payments],” he points out. “Recognizing and mitigating this risk is a process that should begin now,” he reiterates.

The public sector as well as the private one has been preparing to amortize the financial impact of aging for years. But the IMF believes that the demographic evolution of the population was underestimated and it will weigh “more than expected” on a balance which is already unstable in both sectors. This also threatens to exacerbate nations’ vulnerability to other crises.

Christine Lagarde, director general of the IMF, wants the spring meeting in Washington to serve as a way to look ahead. That is, she is demanding that governments recognize that aging could create a serious problem in the future and that it is a risk. To neutralize its effects, she recommends combining the increase of the retirement age with other measures.

To delay retirement age, she proposes linking it to life expectancy such that the number of years during which the elderly receive pensions will not increase. In a recent Spanish reform, the beginning of the pension system was delayed until 67 years in a progressive way which already prefigured a mechanism of this type, called the “factor of sustainability”. And the law foresees that the key variables in the pension system (like the age of retirement) will be revised every 5 years starting in 2027 as a function of life expectancy.

But this delay is not enough. The Fund believes that more measures must be taken, including cutting pensions, increasing payments, and the possibility that states contract private insurers to cover “the risk that the people live longer than expected.”

As such, the report on financial stability argues that resorting to capital markets would transfer pension plans’ risk of longevity onto the institutions that have the greatest capacity to handle that.

The organization’s economists also argue that individuals increase their own savings through pension plans and recommends the facilitation or even obligation to contract lifetime sources of income. It also approves the use of inverse mortgages, in which a property is given up at the time of death instead of being paid for with income until death.

The Fund also asks for more transparency from countries in reporting on their aging trends and how they are preparing to finance retirements.

The IMF concludes by reminding readers that all these reforms “would take years to bear fruit” but that any delay in the process will make it more difficult to face up to the problem as needed. “Paying attention to the aging of the population and the risk of additional longevity is part of the set of reforms necessary to restore confidence in the viability of balance sheets in the public and private sector,” it argues.

Video Starring Children Sets Off Debate During Mexican Election Campaign

Video Starring Children Sets Off Debate During Mexican Election Campaign
The short film has been diffused on social networks by the movement Nuestro México del Futuro
El País: Un vídeo protagonizado por niños desata la polémica en plena campaña mexicana
Paula Chouza reporting from Mexico City April 13, 2012

(Knowledge of the Spanish language is not necessary for understanding this video.)

It is a world of children, but children with the vices of adults that live in a society rife with corruption, violence, drug trafficking, and environmental problems. This is the concept of a video spread across the Internet that has incited the fury of a good part of the Mexican political class just ten days after the official beginning of campaigning for the presidential election on July 1.

The advocacy group Nuestro México del Futuro (Our Future Mexico), which defines itself on its website as a “social movement that calls on all Mexicans to express their visions of the country in which they would like to life,” produced the film, four minutes in length and exceptionally harsh, which has already been seen on the web by over 10 million people. The assault of a citizen with a razor blade in broad daylight by a seven-year old boy, the image of a corrupt politician who is not yet twelve, gives these incidents a macabre realism that has frightened politicians, who asked this week for the video to be taken down.

Miguel Ángel García Granados, a representative of the Institutional Revolutionary Party (PRI), called the film “detestable” on Thursday because it used minors. “This is not the way to solve the problems of this country,” he said to the media. In the same sentiment, Mario Di Constanzo of the Workers’ Party said that “the use of children to portray prisoners, drug traffickers, and police constitutes a violation of childrens’ rights. PAN politician Rosi Orozco said it was “lamentable that children were manipulated and used, and that they will be stigmatized as future delinquents, prisoners, and drug addicts.” With these words, the legislators called for the Secretariat of Governance to prohibit the diffusion of the film, which would seem to be difficult because it has already been published on social networks, where the institution does not have the power to intervene because Mexico has not regulated them.

Our Future Mexico released a statement in response to the polemics saying that it was trying “to represent the opinion, not of any institutions or individuals in particular, but rather of millions of Mexicans.” The movement is sponsored by many companies, among them the insurer Grupo Nacional Provincial (National Provincial Group). Its objective is to gather the visions of citizens and compile them in a book titled El Decreto de Nuestro México del Futuro (The Decree of Our Future Mexico). The group has announced that said publication will be given to the presential candidates when it is ready.

At the end of the film, a girl looks at the camera and says, not in vain, “If this is the future that’s ahead of me, I don’t want it. Ms. Josefina, Mr. Andrés Manuel, Mr. Enrique, Mr. Gabriel (the candidates): time is up. Mexico has already touched bottom. Are you only going for the position, or are you going to change the future of our country?”

Spain to Argentina: There Will Be Consequences for Hostility Toward Repsol

Spain to Argentina: There Will Be Consequences for Hostility Toward Repsol
The conflict between the Argentinian government and the Spanish business is far from being resolved
The Argentinian government will decide the future of Repsol’s affiliate today
El País: Soria advierte a Argentina: “La hostilidad [con Repsol] traerá consecuencias”
Carlos E. Cué reporting from Warsaw April 12, 2012

The conflict between the Argentinian government and Repsol-YPF is threatening to become an authentic diplomatic row of the first order. The Spanish government has been discrete until now, although it tried to mediate when the Minister of Industry, José Manuel Soria, traveled to Buenos Aires. Even the King of Spain has tried to stop the conflict. The president of Repsol, Antoni Brufau, has been in Buenos Aires for days looking for a solution. But it all seems useless.

Six Argentinian provinces have now revoked a dozen licenses from Repsol-YPF, sinking the company’s value in the Buenos Aires market. Today, the Spanish government decided to go on the attack. In a recording made by the executive department’s press agency at the doors of the Spanish embassy in Poland, where Spanish journalists could not be present and could not ask questions, Soria said, “The Government of Spain defends the interests of all Spanish businesses, within and without. If there are acts of hostility toward these interests anywhere in the world, the government will interpret them as acts of hostility toward Spain and the Spanish government. What this government is saying is that if there will be consequences for any acts of hostility.”

A diplomatic conflict seems inevitable. Repsol controls 53.47% of YPF, while the Argentinian group Petersen holds 25.46%. The President of Argentina, Cristina Fernández de Kirchner, has encouraged the escalation against Repsol, which she accuses of not making sufficient investments in YPF, causing that company to decrease production and thus forcing Argentina to import petroleum. Repsol has promised to increase its investment, but the row, far from settling down, has worsened, and there is a risk that at the end of this process, Argentina will buy the company for a low price, which would be very damaging for the Spanish oil company.

Spain to Prohibit Cash Payments for Professional Services of Over €2500

President Mariano Rajoy at the Congress of Deputies this morning

Spain to Prohibit Cash Payments for Professional Services of Over €2500
Violators will be fined 25% of the quantity paid illegally; Rajoy announces in Congress that this anti-fraud program will be approved Friday
El País: El Gobierno prohibirá a los profesionales el pago en efectivo de más de 2.500 euros
Cristina Galindo reporting from Madrid April 11, 2012

The anti-fraud plan the government has finalized in order to alleviate the public deficit by raising tax revenues, and which will be accompanied by the first fiscal amnesty in two decades, will include the prohibition of cash transactions of values greater than €2500 for between professional businessmen. Henceforth, such payments will have to be made by card or bank transfer. According to President Mariano Rajoy’s statement in Congress today, violators will face a fine of 25% of the amount paid illegally.

Housing is using this measure to impede the traffic of black money (most of all in the form of €500 bills) inside commercial operations, and in the case of businesses, to obstruct them from resorting to false invoices, a typical kind of fraud that occurs when a business that pays IRPF (income tax) by a system of modules sends a bill for a service that it did not render so that another company can claim a tax exemption from a VAT (Value Added Tax) which it did not actually pay. This anti-fraud measure, which the Council of Ministers will approve Friday, aims to collect €8.171 billion in tax that otherwise would not have been paid in 2012; this would help the country meet its deficit targets set by Brussels (5.3% of GDP this year and 3% in 2013).

The measure announced today is inspired by limitations on cash payments ratified in Italy (€1000) and France (€3000 for professional services and €1500 for salary payments) in 2011 and 2010, respectively. Though fiscal inspectors don’t know the fine print yet, they consider any initiative that complicates the transfer of cash an improvement. “While it is not a panacea in itself, it is a positive measure,” said sources in the National Housing Inspection Organization, which represents 95% of the 1500 inspectors. “We will have to see whether the €2500 cap is too high or not; it’s still early,” the association added.

According to the experts at the Ministry of Housing (Gestha), this maximum should be lowered again to €1000, the maximum in Italy, whose underground economy is comparable in size with Spain’s. In addition, some experts stated in a communique that the measure will just be wet paper in the fight against fraud, because it would still make more economic sense to get caught and pay the fine than it would to follow the law: “Fraud saves one from paying the corporate tax (which is up to 30% of an import) and the VAT (from 4-18%), which means savings that are greater than the 25% which would be the maximum penalty for those caught by Housing.” Sources in the inspectors’ organization stated, however, that once the fraud is discovered, and the fine paid, the corresponding taxes would also be charged while the money is regularized.

“Restricting cash operations is always a good measure in the fight against fraud,” argues Valentín Pitch of the Register of Tax Advisors (REAF). This is the first time that limits on cash payment have been established in Spain. Until now, the fight against black money had concentrated on the controversial €500 bills, which make up 70% of the cash in circulation, and in reinforcing vigilance toward bank income.

The government announced the limitation of cash payments without making the quantities concrete on January 7 when it presented its battle plan against fraud.

Rajoy advanced this measure during parliamentary question time in response to a question by the spokesman of the United Left, Cayo Lara, about fiscal amnesty. Regarding amnesty, the president also qualified that he would not bring about a total amnesty but rather one in which parties which brought money to the surface would pay an 8% penalty – for businesses – or a 10% penalty – for individuals. He defended this measure by saying “it makes sense for our current situation.”

He also insisted that it is an “exceptional measure” which would only be valid in 2012 and which responds to a moment in which Spain needs to reduce the public deficit to 3% of the GDP in 2013, making it “very important” that Spain improve its revenues.

According to what Vice President Soraya Sáenz de Santamaría explained a few months ago, the plan will place special importance on the lists of tax evaders provided by countries that have left the list of fiscal paradises, like Andorra, Panama, and the Dutch Antilles. Nevetheless, the goal for collections stated today is below the current goal: €8.171 billion rather than €9.400, a decrease of 13%.

During another part of the control session, the Minister of Housing, Cristóbal Montoro, announced that the next trimesterly report of state revenues and expenditures would be published “very soon”, and it would show each Autonomous Community’s effect on the state ledger “to increase transparency”.

Guindos in Favor of Abolishing R&D Investment
The Minister of the Economy, Luis de Guindos, has signaled that investment in research and innovation has a “structural deficiency” because it is dependent on state subsidies which, in his opinion, should be eliminated to make way for private investment.

In his response to a question by Basque representative Arantza Tapia on the floor of Congress, Guindos pointed out that from 2009 to 2011, there have been “implicit cuts” in R&D&D, which means the drop in subsidies since 2009 is greater than the 26% it appears to be in the 2012 budget.

Bittersweet First Victory for Darvish: Bested By Ichiro

Darvish (left) gave up four runs in his first inning; Ichiro (right) went 3-for-4 against him and is coming in to score. Photo courtesy of the Associated Press.

Bittersweet First Victory for Darvish: Bested By Ichiro
Yomiuri Shimbun:
Kai Nishimura reporting April 10, 2012

Box Score

Did Yu Darvish “have it” during his first major league victory, like his former teammate Yuki Saito did for the Nippon Ham Fighters on his own opening day this season?

Frankly, it looked like the number one pitcher in Japanese baseball was overcome by nerves.

In the first inning, he walked the leadoff hitter, Figgins, on a fastball that was way outside. After getting an out, he faced Ichiro, the #3 hitter. On a two-and-two count, Ichiro hit a ball safely past the third baseman, getting Darvish deeper in trouble. But Darvish’s control didn’t return to him then, either; instead, he threw more bad pitches that got crushed. He even walked Kawasaki with the bases loaded to allow a fourth run in his very first inning.

Ichiro hit a double to right his next time up in the second inning, [grounded out in the fourth, and] singled in the sixth, which forced Darvish out of the game. All the hits the Mariners got on Darvish were off his two-seam fastball, the pitch that had been his lifeline in America so far. After his third exhibition game on March 19, he had said the pitch was really responding well – “it really moves, and I feel like even my teammates hate it” – and he used it most of the times he needed an out pitch. He couldn’t get a handle on it this time, though. In fact, all his pitches were a little wild.

His other great pitches, like his curve, weren’t going where he wanted them to, either, so it’s safe to say he hasn’t completely adjusted to major league ball yet. Darvish came here after relentlessly polishing his stuff in Japan. Given today’s painful experience, one is left wondering how close he is to attaining his goal of becoming the Greatest Pitcher in the World.

Sony Lost ¥520 Billion Yen in First Quarter, Making it Worst Quarter in Company History

Sony Lost ¥520 Billion Yen in First Quarter, Making it Worst Quarter in Company History
Yomiuri Shimbun: ソニーの赤字、創業以来最大５２００億円
April 10, 2012

Today Sony revised its consolidated earnings estimate for the first quarter of 2012 downward; it estimated a ¥220 billion loss on February 2 but now foresees a ¥520 billion loss ($2.7 billion) for the period.

This makes it the worst quarter in the history of the company.

Yesterday, the corporation announced that it would lay off ten thousand people, about 6% of its work force.

Female High School Falconer Contributing to Saga Raven Removal

Female High School Falconer Contributing to Saga Raven Removal
Yomiuri Shimbun: 女子高生鷹匠、カラス駆除に乗り出す
April 9, 2012

Saga Prefecture Takeo High School Senior Misato Ishibashi (17) and her father Hidetoshi (45), who are both falconers, are leading their falcons and horned owls in an effort to scare off the crows living in the prefecture’s forests.

According to the prefecture’s Agricultural Support Division, crows caused an estimated ¥66 million ($809,000) in damages to its oranges, pears, beans, wheat, and other crops in 2010. Crows can fly 10-20 kilometers at a time, and they are plundering crops more than city garbage. The prefecture is making an effort to introduce falcons and horned owls, which frighten crows, inside its cities in order to scare the crows into the mountains, where they can eat the fruit that grows naturally in the trees there.

In recent years, the father-daughter team has also received calls from the prefecture to chase crows from the Saga Castle Park, where the crows’ droppings and cries were disturbing residents.

In order to frighten the crows today, Misato set loose a Harris Hawk named Momotarō (Peach Boy), and Hidetoshi walked around with a Eurasian Eagle-Owl on his arm. Hidetoshi also suggested, “Wouldn’t it be even more effective if we set Momotarō loose from the top floor of the new prefectural administration building (which is 11 stories high) so he could have a downward angle on the crows?”

His Students Drugged His Lunch…He Was Forced to Work Over 150 Hours of Overtime a Month…He Committed Suicide in the Middle of Class…Government Still Rules Working Conditions Did Not Cause Teacher’s Death

His Students Drugged His Lunch…He Was Forced to Work Over 150 Hours of Overtime a Month…He Committed Suicide in the Middle of Class…Government Still Rules Working Conditions Did Not Cause Teacher’s Death
Yomiuri Shimbun: 生徒が給食に薬、残業１５０時間…自殺は公務外
April 9, 2012

The Miyagi Prefecture Public Employees’ Compensation Fund has ruled that the suicide of Mr. Hiroshi Ōizumi, who was a 43-year old teacher at Nakata Junior High School in Tome City when he leapt out of the school building to his death in 2008, was not a consequence of his working conditions. Mr. Ōizumi’s wife, Junko (age 47), who had filed the claim in 2009, has filed a protest of the decision with the fund’s oversight committee.

According to the prefectural teachers’ union, Mr. Ōizumi became a teacher at the school in 2006. His workplace harassment included being forced to work over 150 hours of overtime a month and students sneaking sleeping pills into his lunch. On February 7, 2008, in the middle of a rowdy class, he jumped out of the classroom’s third-story window to his death.

In 2009, Junko filed a claim with the compensation fund. This February (2012), the fund ruled that his suicide was not caused by his work.

After filing a protest, Junko held a press conference. She said, “I want them to take the value of human life seriously.”

Is There a “Catalonian Problem”?

The Carlist Wars

Is There a “Catalonian Problem”?
Spain needs to have a more audacious, motivating, and urgent plan for the future than other European countries in order to escape this crisis.
El País: ¿Existe el ‘problema catalán’?
March 18, 2012

Last year was the 90th anniversary of the publication of La España invertebrada (Spineless Spain), one of the books most hated by Ultramontane Spaniards. It’s worth rereading because it’s a fresh and topical nonagenarian (as Virgil said, iam senior, sed cruda deo viridisque senectus (“old now, but a god’s old age is fresh and green”).

In this article, I am going to argue that in order to leave the present crisis behind, Spain needs a more audacious, more motivating, and more urgent project for the future than other European countries. The reason is that its national cohesion is, comparatively, very low, and so to overcome the obstacles of the present, it needs a strong pull into the future. First of all, I will discuss the national experience of Spain with respect to Ortega’s idea of a nation. After that, I will analyze the important differences between Spain as a nation-state and its neighboring countries like France and Portugal. Finally, I will stress the anachronistic character of our national construct in this 21st century and defend my future project, which has to put emphasis on the construction of a society that maximizes the opportunities it offers to individuals.

Ortega defines a nation as a project for the future with a capacity for integration, directed by a people with the authority to rule. It is a very broad concept that includes, for example, the Roman Empire (the Latin nation directed by Rome). Spain had this kind of project, at least until the 17th century; its backbone was a Castile that knew how to rule and ruled that way. The history of a nation is a story of the process of integration, if there is a vigorous project for the future, or disintegration, if the project fails. A nation also can be seen as the equilibrium between centripetal forces which are always moving and the centripetal force that emanates from the integration project. When this last weakens, because the project is exhausted, the centrifugal forces manifest their full potential. In the 17th century, the Spanish project came to a halt because the ruling classes became immobilist and reactionary (in the first article of this series, Spain: Capital, Madrid, I gave a Braudelian explanation of this process based on geography: there are, of course, other explanations, be they complementary or alternative). This is the history of Spain since then: first Flanders left, then Naples, then America, then the Philippines and Cuba, then the African provinces; now Catalonia and the Basque Country are thinking about it as well…It’s striking that there were no accurate diagnoses of what was happening until 1921, and it’s significant that, once Spineless Spain was published, a thick layer of silence fell over it. So now we are talking about the Catalonian problem without finding its common denominators with the Philippine problem, the American problem, and the Flemish problem. The problem is not in the centrifugal forces, which have always moved this way and always will, but rather in the centripetal force, whose integrative attraction was lost centuries ago.

In 1939 (the end of the Civil War), Spain became “a union of destiny in the universal” in which proto-Catalonians of two milennia ago, Indibilis and Mandonius, would incarnate the patriotic essence of an eternal and immutable Spain. That all this was risible from any serious historian’s perspective was no object for this fantastical millennialism that consolidated itself as the paradigm in which a sector of the Spanish population – whose intellectual organ was the Catholic Church – conceived of the past, present, and future. In the spirit of brevity, I will henceforth refer to this group of Spaniards as “Indibilis and Mandonius”. Their concomitance with the social base of Castilian capitalism is very strong. Their strategic alliance with the left through the labor movement – I will call them “the unions” – to make structural reform fail is one of the keys to understanding the politics at the heart of contemporary Spain. The reactionary pincer (henceforth “the pincer”) formed by Indibilis and Mandonius and the unions to defend the status quo is the greatest obstacle that any coherent reform program has to overcome. But I will leave this for later, for the fourth and final article of this series, to concentrate now on another kind of obstacle this program has to confront: the weak cohesion resulting from the peculiarities of the construction of Spain as a nation-state.

In an article published in this newspaper in 2009, Spain and History, I defended the thesis that Spain, as a nation-state, was left in half-boil. The reason is the role that war has on the construction of nations. War, as terrible as it is, has been a very important motivator for innovation, for technology, for fundamental research, and for social and moral change. Perhaps the most striking statement in support of this last notion is this one Sartre made after Hiroshima and Nagasaki: “in opening up for the first time the possibility of collective suicide, the bomb has made us definitively free.” If it weren’t for war – though war is terrible, I repeat – we would still be monkeys. The national idea applied to the military permitted Napoleon to put anchors on the European population, and it mobilized armies of a size that had never been seen before. There were more deaths in each Napoleonic battle than there were in all the battles of the 18th century put together. Other European powers, in order to defend themselves on equal terms, had to resort to the same idea – one which they detested, of course, because it was revolutionary and French. Hence the capacity to mobilize the population became the master key to military strategy in the 19th century. In order to ratchet up the state’s military power, the nation had to be fortified, and for that reason national cohesion had to be increased. Compulsory education, pensions for the elderly, and other measures which we have today were referred to as “social conquests” when they were introduced in Bismarckian Prussia, where they were a key element to long-term military strategy. Other European states had no recourse but to join this military escalation, and that is how the welfare state as we know it today was born.

Modern nation-states were cooked in the fires of the European wars of the 19th and 20th centuries. To put it quick and dirty, France became French by killing Germans, and vice versa. Wars against external enemies are very cohesive, and as a result of these wars, some very cohesive nation-states were born; that is to say, nations with a strong sense of the state and the general interest, capable of undertaking national enterprises with the support of the large majority of the population.

While all this was happening in Europe, in Spain we dedicated ourselves to killing each other in a bloody succession of civil wars: the Carlist Wars of the 19th century and the Civil War of the 20th, which left a million dead. The civil wars were not cohesive; they were divisive. That’s why it isn’t strange that the level of cohesion in Spain is much lower than it is in, say, France or Germany. In Spain, the notion of the general or national interest is weak, and there are hardly even state policies: the legality of abortion is dependent on who governs; foreign and educational policies change from one administration to another; it hasn’t yet been possible to get the consensus needed for the most important structural reforms (for pensions and the labor market); instead, these issues are electoral weapons for the opposition party…Spain has not become a modern nation-state because it lacks the internal cohesion necessary to be one. A comparison with Portugal, a country which has very strong cohesion, despite not having been involved in any of the European wars of the last two centuries, suggests that Spain’s problem comes not only from a lack of ardor for wars abroad but also from the excess of this ardor for wars wthin.

Things being as they are, Spain is confronting a very profound crisis, within which two components can be distinguished. One is cyclical; all the countries in the world are being affected in unequal ways. Spain is one of the European countries that has been most affected because in times of plenty, it didn’t carry out the reforms it already knew were necessary for the labor market and pensions…and for justice, public administration, education, the banking system, energy, and housing…The mirage of the real estate bubble, the pincer’s ferocious resistance, and the incomprehension, if not cowardice, of our governments have brought us to a situation that is not only very bad but also very susceptible to get worse. The leadership of the PSOE stepped down without giving an explicit diagnosis of what was happening. I believe that, in its bewilderment, it never had one. The PP arrived, and it doesn’t seem to know what’s happening to us, either. They do – they say – what Brussels demands. They are reforming the labor market – more for good than for bad – and they are increasing taxes and cutting spending – more for bad than for good – but they do it without giving a credible diagnosis of the crisis besides faulting everything Zapatero did.

Even more important than that, they do not have a plan for the future that clarifies where they are directing us or illuminates the path that we must follow. The confusion of the public, from #nimileurista (Twixters) to the entrepreneurs, is total, and given the forseeable long duration of the crisis, it would be unusual of this disconcertedness did not transform into resistance. Portugal is going into a very difficult adjustment program dictated by and controlled by the European troika and the IMF. Although it also doesn’t know where it’s going, its population has demonstrated an iron discipline because its national cohesion is so great. It’s probable that the program will bring macroeconomic stabilization, which is its purpose. I don’t see Spain accomplishing something like that.

The Transition (of Spain to democracy) was a success because there were explicit ambitions which the public rallied around: democracy, Europe, and the welfare state. Confronting current challenges would require new ambitions, articulated in a program which, for reasons I’ve explained until now, should be more audacious and motivating than what other countries in our region would need. I will dedicate the next, and last, article of this series to that program.

The second level of this crisis, which is deeper than the first, has to do with the very important changes the world has gone through in economics, society, the military, and politics since the fall of the Berlin Wall in 1989.

In economics, there has been rapid globalization which, united to a monetary discipline imposed by the euro, has made it very difficult for Spain to compete on cost in the global economy. We have no option but to bet on something else.

In society, the establishment of the Internet and the web has exponentially increased interactions between people and, as a consequence, has inspired greater acceleration of innovation and progress in all its dimensions: scientific, technological, cultural, and moral.

In opposition to the natural tendency of military affairs, countries have professionalized, reduced, and even privatized their armies, whose bellicose activity no longer depends on the capacity to mobilize the population. This means that social cohesion and the welfare state now have less strategic military importance than they did in the 19th and 20th centuries.

In politics, the Modern Era’s national construction projects have become anachronistic: nation-states will not disappear, but they will lose their abilities, not only due to decentralization but also due to centralization of multinational organizations. This is already occurring in Europe, and it is something that our peninsula’s nationalist movements should take note of.

In this more global context, and with less personal, political, and social certainties, the program Spain needs should put an emphasis on maximizing the opportunities offered to individuals, to fomenting their initiative and creativity, in giving up making decisions for citizens about their lives and giving this responsibility back to them, and in maintaining a social protection network that, without disincentivizing personal effort, guarantees the basic equalities of citizens with respect to education, illness, and aging.

César Molinas, mathematician and economist, is Barcelonese by birth and Madrileño by adoption. He has been an academic, public administrator, and investment banker. He is now devoting himself to “risk capital” in biomedicine and to consulting.

Don’t Speak of Cuts; Speak of Love

Euphemisms are especially frequent when the economy is bad. Photo by Samuel Sánchez.

Don’t Speak of Cuts; Speak of Love
Euphemisms have been part of public discourse ever since there has been public discourse, but times of crisis can bring their abuse to a comical extent or sometimes even a cynical one
El País: No digan recortes, llámenlo amor
By Amanda Mars, March 5, 2012

Never fear, my friends; no one is going to lower your salary. All that international organizations like the European Central Bank (ECB) are asking from Spain is a “competitive devaluation of salaries.” As you know, we are going through a time of crisis – or “severe deceleration” – and cuts – pardon me, we meant to say “reforms” or “adjustments” – are necessary in many places. But don’t put your head on your hands: Catalonia has absolutely not considered a co-pay for public sanitation; it is merely looking at the idea of introducing a “sanitary moderating ticket.” And the government has not increased income taxes – as they promised they wouldn’t during the election campaign – rather, the Vice President has made it clear that this modification of the IRPF consists of a “seasonal recharge of solidarity.”

They say that this period of “negative economic growth” (only alarmists hawk it as The Great Recession) has not given the same invoice to everyone; it has been pricier for the working class than for the wealthy and powerful. This is not only “the asymmetrical impact of the crisis.” Though workers continue to swell the ranks of the unemployed, it’s not because their companies laid them off, but rather because these companies are immersed in processes like “rationalizing the office network”: for example, when they fused their strongboxes.

Circumlocutions, periphrases, roundabouts, ambiguities, unintelligible jargon, unnecessary foreign words…they have a long relationship with power and seduction. The persuasive use of language has been part of the public discourse ever since there has been public discourse, and in this delicate frontier, and it dances on the thin line between makeup and masks. But the use of euphemisms intensifies in times of crisis. When all the news is bad, language abuse can verge on the comic or the grotesque.

The basic idea is that the important thing about a rose is its name, that things are what we say they are. This linguistic turn explains that language is not just a vehicle to express a previous thought but the formation of a thought in itself.

Or, to go all the way down the rabbit hole, calling something love convinces us that it is love, and not vice versa, and that’s why we say “I love you.”

“The War of the Words overpowers wars between policies and has an anesthetic effect, most of all during recession periods,” states Antón Costas, chair of Economics and Public Policy at the University of Barcelona (UB). “Euphemisms has that function, (we can’t call it a virtue,) of anaesthetizing, but from there we can abuse them in a cynical, crude, and even perverse way,” he adds.

The risk of this abuse, argues the chair, is that, as Newton’s Third Law says, every action creates an equal and opposite reaction. Or, to use a medical image, “we should take care with euphemistic language because these words can numb us for a time, but when the sick man wakes up and sees what happens, he could beat the hell out of us.”

For Darío Villanueva, secretary general of the Royal Spanish Academy (RAE), “the phrase “negative growth” is the height of all this, an anti-phrase that represents the absurd. It’s like saying “hot ice”. Poets can play those games and talk of the sound of silence, but as prose, negative growth is an anti-phrase.”

Luis de Guinos, when he took over as Minister of the Economy last December 26, gave the first demonstration of his language management style. De Guindos stated, without saying “recession” a single time, that Spain would enter 2012 with a “negative growth rate” that would “determine the profile into which we are going with greater depth” and that – why not? – it would be “relatively decelerated” (sic). But this should not be just an incentive – he said – to launch the “reform agenda”.

Soon after, he put one of his reforms in black and white. Guindos himself let slip that labor reform would be “extremely aggressive” in a conversation with EU Commissioner of Economic and Monetary Affairs Olli Rehn; his words were captured by cameras and microphones.

Fernando Esteve, Professor of Economic Theory at the Autonomous University of Madrid (UAM), reiterates that economics “is not scientific about usage; there are very clear elements of persuasion, and depending on how you express something, you can cause one impact or another.” For example, “you could call the same decision a savings method or a cut, and the sensation you generate is different: saving makes you think of something good and prudent, while a cut is a loss of rights.” Saving, when you put it that way, sounds more like love than reduction.

Every era has its fetish words. At the dawn of this crisis, it was no more than an economic “deceleration”, as ex-President José Luis Rodríguez Zapatero pawned it. The real estate bubble – which was only recognized as such when it burst, as happens with bubbles – was only going to bring about “a smooth landing of prices”, to use the words of some developers.

Villanueva casts his view farther back: “During Francoism, we could also seem any euphemisms. Democracy, for example, was a taboo word, but in time it came into use. They said the regime was an organic democracy. What was inorganic was bad. Strikes were labor conflicts, and political parties were associations,” he recalls.

The risk of euphemisms – besides the risk that a user’s scheme will be exposed by a traitorous microphone – is that they lose their influence as time goes on. This is a theory of many linguists. “When people become so accustomed to a word that they immediately associate it with the concept it’s supposed to sweeten, it’s no longer a euphemism, and another word must be found to fill in for it,” explains journalist and writer Álex Grijelmo, president of the press agency Efe, who has studied the field of euphemistic language and gives some examples: “‘concentration camp’ was, in principle, a euphemism. It portrayed a remote place. Puta (“bitch” in modern Spanish) was used to avoid saying mujer (“woman”) in public.”

The media rides the euphemistic wave. “They are totally contaminated. They are now referring to information services when they are really talking about espionage,” he argues. In the economic camp, Grijelmo agrees that “I’m sure you could establish correlation between the GDP of a country and the use of euphemisms.” The author of books like La seducción de las palabras (The Seduction of Words) gives another example: a headline from the newspaper Diario de Burgos last November: “financial entities redefine their presence in small towns”. Or high-end fashion companies, which never announce “discounts” in newspaper pages, but instead “special sales”.

News reports refer to “encounters” with prostitutes and sometimes substitute the word “sex worker” for prostitute.

Political correctness in language has also lead to euphemisms like “developing country” rather than “undeveloped country”. Darío Villanueva mentions this and specifies that the key: “One way to confirm something is negative is to negate something positive.”

Economic language has been used for determined ends since days of yore, Fernando Esteve explains. “Think of all the wealth that a business creates, the entrepreneurial profits; they are called entrepreneurial surpluses, which would signify something good. But the profits for the workers are considered labor costs,” he points out. “Nobody wants to raise costs. That’s a common feeling. And we all end up in agreement that the more surpluses a business has, the better…We’ve already incorporated this into our language [and our subconscious as well],” Esteve explained. When we speak of education or public health, for example, we can forget that they are paid for with taxes.

The professor also finds a very persuasive bias or purpose in the use of certain metaphors. “When a politician or economist speaks like a dietitian, you should tremble in fear,” he says. “What he says is, ‘You have a lot of fat; you need to go on a diet, and then you’ll start to get better.’ If you give this image to citizens who don’t understand the economy, they’ll blindly believe that, in effect, they have eaten too much, and now they have to slim down, and that this diet, although it hurts, is the best thing they can do.”

The same thing happens with hangovers. Using this image for the crisis, in some way, puts the blame on someone who suffers, for being drunk. “For me, one of the most cretinous things about this crisis is the talk of hangovers. It implies that things are going badly now because of your excess, and we cannot fall for the tricks inside these metaphors,” he argues. Journalists, he critiques, “should stop carrying these facile metaphors.”

Technical terms can also make great allies for sweet talk. Referring to collective layoffs as “expedients for the regulation of employment” is a good example. Another is the “creditors’ competition”, which was a term a 2003 law chose for what was previously known as suspension of payment by a business, a much cruder and more explicit term.

Financial jargon, which is sometimes very complex, can also make communication hazy. Debt exposure and asset allocation often refer to real estate has been seized because the proprietors could not pay for credit. A little while ago, the airline company Spanair announced that it had seized operations because of “a lack of financial visibility”; that is to say, it didn’t have money, and no one would give it any more.

In this chapter of the interminable crisis, we never stop hearing the word “sacrifice” used for cuts to programs (seeking a “fiscal consolidation”). The European project is staggering because of budget disequilibria and sovereign debt crises.

It’s interesting to listen now to the Javier Pradera’s analysis published in this same newspaper August 1, 1993. The negotiations between government and social agents on an employment plan went beyond euphemisms. “The Byzantine wording the executive branch is using to convince Spaniards that convergence with Europe will demand effort but not sacrifice has nearly exhausted its reserves of verbal gunpowder,” Pradera wrote. “The useless semantic struggle to determine whether the rigor of the new government’s budgetary politics will lead to a cut in social spending sometimes distracts from the summertime blues, but it won’t do much to help negotiations progress,” he continued.

Miguel Boyer presented the budget like so May 17, 1983: “The fight against inflation will be facilitated by an attitude of salary moderation.”

This type of language is expressed not only by the lips of public powers, Antón Costas points out. “Corporations also use them when they have to defend certain pacts, such as those for salary moderation.” Moderation moderates: it tempers, tightens, and cleans up to avert excess.

Some debates and their linguistic resources are timeless. There will be more bad years, some melancholy poet said. Businessmen, on the other hand, evade “problems” in their interviews and instead speak of “challenges”. There will be cuts for some and adjustments, reforms, or fiscal consolidation measures for others, but a third group will call it love.