• Thursday, April 25, 2024
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BusinessDay

Cyprus: The limits of financial engineering

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The spirit of Chinualumogu Achebe is upon me and so I am prefacing this essay with a plethora of proverbs. The wind has blown and we have seen the fowl’s anus, and we have further seen that reverend fathers actually wear trousers beneath their soutane. Whenever we behold a stranger’s corpse, it looks like a log of wood! Those who usually retort ‘if it were me’, when it happens to them, what would they do? The dibia [native doctor] who cures diarrhoea should bear in mind that he is not immune to it! (Sadly, I structured this introduction on 21/3/12 only to learn later that Achebe died that same day!)

The financial/economic crises which started in 2007/8 and globalised by the US and the UK have been an eye opener of sorts. Economic philosophies that had been held as irrevocable truths have failed [like the Invisible Hand principle]; institutions that have been in existence through the ages and which were projected to be there till the end of the world collapsed; banks that had the best of corporate governance codes and reported with the best reporting standards [global best practices] collapsed; professions and professionals that were hitherto held in awe had their reputations rubbished; the rating agencies could no longer defend their ratings and their relevance; while politicians and governments that preached small government turned 180 degrees, practiced very big government and bailed out rogue bankers to the tune of trillions, replacing private debts with public debts. Everybody became a Keynesian and state involvement in private business was no longer that sinful!

When those strange happenings and even stranger responses are compared with the experiences of the numerous debt-ridden, corruption-infested and badly-governed or misgoverned less developed countries [some are now in the 4th world!], the relevance of the opening proverbs can be appreciated. The crises have exposed the underbelly of the so-called developed world, their mastery of everything and their failure-free policies, practices and strategies [that is the proverb about wind and the fowl’s anus]. When countries from the other parts of the world were in crises, they looked on with cold indifference, without compassion, and with ‘it-serves-you-right’ and ‘it-can’t-happen-here’ attitude [that is the proverb about the stranger’s corpse.] They usually acted as if all their systems and processes were failure-proof and that they had the magic wands to predict and prevent problems at embryonic stages. The crises developed, matured, exploded in their very faces, made nonsense of their famed economic and financial wizardry, and the fire is still blazing, six years later [that is taken care of by the proverb on ‘if it were me’]. And now, the fact that all that used to be the exclusive preserve of the LDCs have happened in the so-called developed countries has proved the truism that the native doctor proscribing cure for diarrhoea should remember that he is not immune to it. Furthermore, they have tried all the unpalatable medicaments they have been forcing on us [and are currently enforcing in Malawi] and found that they have awful odour/taste and that they don’t work just like that!

In this year of our Lord 2013, while the US has slightly recovered or at least stabilised, Europe is in dire straits and their crises complicated by the Eurozone structure; countries with different laws, economic orientation, banking culture and socio-cultural dispositions acting and pretending as if they were one. They ignore, at their own peril, the advice of Barry Eichengreen that monetary union without banking union won’t work and banking union requires at least some elements of fiscal and political union [“The euroless union”, BusinessDay, 18/12/12, p.14]. In all these cases, the IMF and the ECB have always been involved and the people have always protested. Their rescue package has always been the same: more tax, less pension, later retirement, reduced government expenses, higher cost of utilities. But when it came to Cyprus, the invincible white man has run out of ideas!

And some people think it is a Cyprus affair. As the indefatigable Richard Quest remarked on 29/3/13 [the day the Cypriot parliamentarians voted out the first bail-out package], those who think that the Cyprus ship is sinking [in Germany, France, etc] are making a grievous mistake because they are all passengers in that ship, or as St. Paul puts it, he who thinks he is safe must be careful lest he falls [1 Cor. 10:12]. Incidentally, that ship also contains the whole interconnected world. [To be concluded]

Meanwhile, I have just won N900,000 in the ongoing Dangote Promo with the ref No. BS42.U care of, 08174917578; 750,000.00 Pounds Sterling from NOKIA 2013 NEW YEAR DRAW held on 28/1/13, draw number “244”, care of David Fox, [email protected]; $2.5m from United Nations/World Bank 419 Compensation Fund care of Aaron Smith [email protected], +447031928715; 1,532,720 GBP from BBC One National Lottery, care of Kelvin Moore, ozkant.udulag.edu.tr; and UBA credit alert for unspecified sum, care of [email protected]. This is my season to shine and all these happened within one week. In the spirit of Easter, I am donating these fabulous prizes to my readers on the basis of first come, first served. Note, however, that I did not participate in any of these promos/draws and have no account with UBA. So, CAVEAT EMPTOR!

 

IK MUO

Muo is a lecturer and management consultant in the department of business administration, Olabisi Onabanjo 

University, Ago-Iwoye

muoigbo@yahoo.

 

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