The Present-Day Consequences of the Peloponnesian War

Peloponnesian WarNaval battle in the port of Syracuse (Sicily), where the Spartans defeated the Athenians during the Second Peloponnesian War.

The Present-Day Consequences of the Peloponnesian War
For centuries, Spain has been a pessimistic society resistant to change
Support for innovation is essential to its transformation

El País: Consecuencias actuales de la guerra del Peloponeso
By César Molinas, March 9, 2012

The physicist David Deutsch argues that human beings are not immortal yet because Athens lost the Peloponnesian War. This is a complicated statement, and I’m going to dedicate the first part of this article to analyzing it with some detail in order to introduce the notion of progress. In the second part, I will discuss the role of progress, especially that of R&D&D and its financing, and a project for the future of Spain.

I changed my computer recently. My old one had become obsolete, and it already couldn’t handle the latest generation of antivirus and office programs. I made a copy of all the archives and programs on my hard drive and moved them to the new computer, where everything started functioning rapidly again. In other words, in 15 minutes I successfully transmigrated the soul of my old computer to a brilliant new Quad Core. My computer has a potentially immortal soul: all I have to do is change the hardware sometimes to keep it eternally young, fresh, and capable of doing an unlimited amount of new things.

The immortality of the soul doesn’t have to be an exclusive prerogative of computers. It’s conceivable that a process similar to the one described in the last paragraph could be realized in humans some generations from now. A copy of cerebral software – its several million neuron connections – could be moved to a new brain which would control a new body housing a now-immortal soul. The reason we haven’t done it yet is that we don’t have sufficient knowledge; that is, the problem is technical. If progress continues, the solution to any technical problem is merely a question of work and time. Achieving immortality, in the sense used in this paragraph, depends on the continuity of progress.

Progress is an exponential accumulation of knowledge that results in a rapid succession of innovations. About one and a half million years ago, humans discovered how to file a flint rock to make a knife. It was another million years before it occurred to someone that the flint could be filed on both sides to make a lance point. In 1903, the Wright Brothers went down in history for a flight of a hundred meters. Only 13 years later, the Red Baron battled in the skies of France. In 1969, just 66 years after the Wright Brothers, Neil Armstrong walked on the moon. Only half a century ago, we learned about the double helix of DNA, and the base of genetic medicine is already very developed. It has been less than a quarter century since the first message on the Internet, but the web has already changed the world. Innovations, the fruit of creativity, a biological adaptation of the human species, are accelerating more and more: it’s estimated that in 2022, 90% of human knowledge will have been produced in the last decade, and it will all be things we don’t know now. Is this acceleration unstoppable? If progress continues, then yes.

Progress as we know it today began with the Enlightenment in the 18th century. It’s characterized by being inseparably multidimensional – scientific, technological, social, and moral – potentially unlimited, belonging to Western Civilization, and…fragile. Progress is fragile because to develop, it needs a society that is open (in Popper’s sense) and optimistic (in Deutsch’s sense). There cannot be progress in a closed society ruled by the principle of authority and in which there are strict limits on topics for debate and the interchange of ideas. There cannot be progress in a pessimistic society in which innovations are not perceived as opportunities but as threats. Progress requires an open society, with provisional truths, in which you can debate whether God plays dice or whether homosexual marriage should be legal. What’s important is not the topic but rather that there can be debate. With three exceptions, all societies in history have been closed and pessimistic. The exceptions are current Western Civilization, the Florence of the Medicis, which was very ephemeral, and the Athens of the Golden Age, whose optimism was squashed by Sparta when the former was defeated in the Peloponnesian Wars. What would have happened if Athens had won the war? What would have happened if Athenian optimism had been maintained for much more time? It’s possible to dream that the beginning of progress would have continued for centuries and that we would have already become immortal and visited the stars.

Spain’s relationship with progress has never been an easy one. For centuries, Spanish society has been pessimistic, resistant to innovation, and vigilant against the dangers represented by the new ideas spreading through Europe. Few countries have expended as much energy to keep from following into modernity, and even less have been so rewarded for their efforts. In a study about R&D performance published by the European Commission at the beginning of February, Spain placed 21st of 32 European countries, ahead of Greece and Poland but behind Italy and Portugal. The average Spanish grade on the 24 distinct factors analyzed in the study did not reach 5 out of 10, and the score for capacity for entrepreneurship within the society was less than 2.5/10. This does no more than confirm what is already known from others studies like the Pisa (on education) and the World Economic Forum (on competitiveness): Spain is backwards. It gives one vertigo to think that this diagnosis is the same one that Jovellanos made in the 18th century, but backwardness is a relative concept: the other countries in our area have advanced more. Reality is stubborn, and this is it. To overcome this backwardness and incorporate Spain into the flow of progress should be the prominent objective of a project for the future of Spain which would give perspective to the necessary efforts to overcome the difficulties of the present.

In a globalized economy like this, Spain doesn’t have a better option than betting decisively on R&D&D. The alternative is to compete on cost with Vietnam and Morocco. This bet is not a trivial one, though, because to bring about significant results would require very important cultural changes, as much in the public sector as the private one. We’ll look at it in parts.

All Spanish politicians, under one banner or the other and regardless of rank, fill their mouths with pompous expressions like “changing the productive model” or “accessing the knowledge economy.” The truth is that in times of abundance, budgetary allowances for R&D&D grow, but in times of scarcity, they are the first things cut. They are like flowers in an entrance hallway: they grow well and make a good impression, but they are dispensable. Here we have a grave problem in comprehension. Basic research and development needs a lot of time to mature and needs consistent financing. It would be better to provide less financing when things are going well – leaving some money unspent – so that financing could be maintained when things go badly. The rollercoaster R&D&D has to ride in Spanish public budgets provokes the emigration of scientists and the slowdown of research. Also, public incentives in the private sector are badly designed, as I will explain later on.

The principal factor strangling innovation in Spain comes not from the public sector but the private one. In the first article of this series, I distinguished between managers, businessmen, and entrepreneurs. The first execute a business plan; the second contribute a vision of the future of their business; and the third contribute a vision of the future of the world. A similar classification is made between financiers of economic activity: there are bankers, investment bankers, and financiers. Bankers need guarantees, and so they only finance managers and solvent entrepreneurs. Investment bankers work on commission: they finance entrepreneurs only when the financial markets carry the risk. And financiers finance entrepreneurs, especially in their first runs when they are typically insolvent. Financiers risk their possessions to share the entrepreneur’s vision, and they believe that the world can be changed in the direction proposed. Anyway, in Spain there are many bankers and sufficient investment bankers, but there are few financers. This truly strangles Spanish innovation: without financiers, Gates would have never been Gates, and Jobs would have never been Jobs. In Spain, there are entrepreneurs – not many – but they all have great difficulties with financing.

The scarcity of financiers in Spain has two reasons. The first is cultural, and to what I said about it in the first article of this series, I would have to add the exaggerated fear of failure that exists in Spanish society. A financier is accustomed to failure in a relevant percentage of his investments, but those that succeed bring a lot of money. For this reason, investment in venture capital – badly called “risk capital” in Spain – is done in a diversified manner. This is still not understood in our country.

The second reason is incentives. The tax system for Spanish financiers is punitive and dissuasive. In our country, fiscal incentives for R&D&D are channeled as deductions from corporate taxes. To benefit from them, corporations have profits. Large technology investors like Telefónica, Indra, and others do, but startups of innovative technology companies do not. This kind of business, essential for driving innovation, takes many years of turn a profit or be sold at a profit by financiers. These last are discriminated against in comparison to large companies, and they should be incentivized with a transparent regime that would bring the fiscal credit generated by investments to their tax bases. This regime could be extended, like in France and other countries in our area, to physical people. This would not be a privilege; it would only give them equal incentives to invest in R&D to what consolidated companies enjoy. The Minister of Housing should reflect very seriously on this proposal. As I hope I have explained in this article, no less than the immortality of the soul could depend on the decisions he adopts.

César Molinas, mathematician and economist, is Barcelonese by birth and Madrileño by adoption. He has been an academic, a governor, and an investment banker. He currently dedicated himself to “risk capital” in biomedicine and to consulting.

Explore posts in the same categories: Business, Politics, Spain

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: