The Latest Fashion in Economics? Cut the Budget!

The Greeks started the ball rolling. They weren't actually the first to adopt an austerity programme in Europe, the Irish were. But the Irish austerity policy created no waves. Somehow the Irish people accepted the fact they had to tighten their belt - maybe it's the Catholic in them. They know there's a time for everything, after abundance comes famine. The Greeks, being loud Mediterraneans, were far more vocal about it. They went on a wild rampage and managed to attract world attention. They gleefully burned down shops and banks in Athens, killing in the process a few hapless employees. That unfortunate event seems to have calmed them somewhat, but the damage was done. It added (greek) pathos to the proceedings, and helped ensure that austerity programmes came to the fore everywhere in the world media. Balancing the budget became the mantra across Europe. The only way to save the Euro, the only way to defend sovereign debt.

In truth, a fashion had been started. A trend that spread like wildfire to the other countries that felt threatened by waves of speculators under the banner of grading agencies like Moody's or Fitch. As soon as Portugal and Spain faced a downgrade of their debt, they rushed to announce cuts to their budget. Italy has not been downgraded (yet) but it followed soon with its own 24 billion Euro austerity policy. Then the Brits. Within a week of taking over government, Cameron had announced cuts, and you can bet bigger cuts are coming soon. The Germans have just announced wallopping cuts: nothing less than an eye-boggling 80 billion austerity programme. They've outdone everybody: three-to-one to the Italians, ten-to-one to the Brits. But, as I said, the game isn't over. It's just starting. The Hungarians have also joined the melée, and I wonder who's coming next, the French? Perhaps not, they've got a very sober lady as finance minister, the kind of woman who's too intelligent to follow a fashion, but you never know. And Obama beware! The fashion could come to America, riding the wave of the Republican Tea Party.

Fashion? Yes,because budget cutting is the latest fashion.

I know what you're going to say. This is ridiculous, it's not just a matter of fashion. It's hard, cold numbers: the size of the deficit in relation to GNP is the key indicator. Fiscal discipline makes sense. One has to follow the rules or else the whole system will collapse. It hasn't collapsed yet but it might. So you prop it up.It's nothing but preventive medicine, stupid!

I beg to disagree. Austerity programmes in times of recession (such as now, for God's sakes!)are nonsense. Economic nonsense, and highly dangerous. You put on the brakes just as the economy has stalled and finds it hard to start up again.

Yes, I know, I'll confess my sin right away: I'm a hard core Keynesian. I'm not the only one, I'm in good company: so is Stiglitz, the Nobel Prize winner. You ought to read his analysis of our current Great Recession: Freefall (published by Norton, 2010). It's a must. Unfortunately he wrote it midstream through the crisis and focused on the (dramatic) effects of failure in the financial system, with Wall Street unwilling to lend to Main Street. He didn't mention sovereign debt. At the time he wrote, it hadn't become a problem yet. But now it is. At least in Europe: we are in the midst of a different kind of crisis, and it is certain to reach America soon.

Why? Because to control the financial crisis and put their economic house in order, all G20 governments have engaged in stimulus packages. Now, all of a sudden, the implications of a stimulus package are hitting home: it means deficit spending. Or worse, resorting to the money printing press. So the next thing that needs fixing is the deficit. Off with its head!

Not so. You cut the deficit, you close down 10,000 government jobs as the Germans plan to do, plus all the parenthood subsidies etc etc and you find that you've effectively cut down on national consumption. Less consumption means fewer products sold. Trade winds down, investments slow, people are laid off, incomes fall and so do taxes. Governments in adopint policies to balance their budget will only succeed in obtaining less funds in their coffers as people have less money and pay less taxes in the coming years.

It's a downward spiral. And the Great Recession is already a downward spiral caused by the private sector. Now if you add the public sector to the equation - going in the same downward direction - there's no end in sight. Some central bankers are aware of the danger. The Italian Mario Draghi, a man of great common sense and (in my view) a perfect candidate to run the European Central Bank after Claude Trichet retires, has warned the Italian government that its proposed austerity programme would cause a slowdown in growth - a small one, but then the Italian programme is relatively modest, with a good third focussed on better controlling tax evasion (a perennial problem in Italy) which has no direct incidence on consumption.

Perhaps the adoption of austerity programmes won't cause a double dip recession as so many have feared, but it sure is going to ensure that the recession will be a very long, slow downward slide. It could last years, if not decades.

Surely there's a better way to defend the sovereign debt? It seems that governments have been bending backward so hard to please their electorate that they have forgotten something very simple and essential: they're sovereign. To defend the Euro - or any currency for that matter - what is needed is not silly consumption-cutting policies that make a politician feel morally good. What is needed is an intelligent economic policy that correctly handles the main elements that make an economy function: consumption, savings and investment.

Yes I know, I'm back to Keynes, but nothing else works. You're going to say we didn't get out of the Great Depression thanks to Keynesian policies but because of World War II expenditures. And I'll tell you that (1) Roosevelt never had the political courage to consistently apply Keynesian policies, and (2) World War II expenditures were the precise equivalent of what Keynes was talking about: he suggested digging holes and covering them up - any work was better than none - and that's exactly what the war did. Unfortunately putting corpses in the holes.

Let's hope we don't need another war to get us out of this Great Recession!


The Saga of the "Peace Flotilla" that set out to force the Gaza blockade...

Once again, we are treated to another round of calamities in the Middle East. Whenever the Palestinians do something ghastly, like blow up an Israeli schoolbus or throw a bomb in a market full of innocent civilians, your sympathies inevitably and rightly go to Israel. But you can be sure that the Israeli will do something equally reprehensible the next time around. Like build more settlements in occupied territory or launch an attack on Gaza killing women and children, and your sympathies swing again and go to the Palestinians.

This time (we've all read about it) a bunch of ships loaded with humanitarian aid - reportedly some ten thousand tons of medicines, toys and building material - and with six or seven hundred pacifists aboard, sailed towards Gaza in an attempt to force the Israeli blockade. As expected it was stopped dead in its tracks by the Israeli military.

This episode might have passed unnoticed - several such ships have tried to force the blockade before - if the Israeli military hadn't totally bungled their operation. First, they attacked in international waters ships that were clearly civilian. Second, the attack was, as President Sarkozy immediately noted, "disproportionate": on board the ships there were only knives and clubs (no firearms), and while some Israeli soldiers got unfortunately wounded, the dead (9 of them according to the latest reports) are all on the side of the civilians aboard the ships.

This particular Israel vs. Palestine round has clearly come out in favour of Palestine. As a result of the attack, Israel has lost two of its most important supporting neighbours in the region: Turkey and Egypt.Turkey is clamouring for an international investigation, and so is the EU top diplomat, Lady Ashton. Egypt has reopened its Rafah border post which had been closed in deference to Israeli pressure.

Can America repair the damage done as two of its more trustworthy allies, Turkey and Egypt, clash with Israel? If nothing is done, there is little doubt that this episode signals the end (for the moment) to American efforts to revive the Israel-Palestine peace talks. But America so far hasn't done anything: Obama's silence has been deafening. He keeps talking (rightly so, no one will disagree this is a major issue) about the BP spill in the Gulf of Mexico, but why nothing about Gaza? Worse, American diplomats at the UN Security Council are reportedly busy shooting down any proposal for an independent international investigation, demanding that it should be entrusted to Israel.Are they serious? How independent can they expect Israel to be in this matter?

America is giving the world the impression that it has not yet taken the real measure of the situation. Seeing it from where I live (in Italy),the differences in reporting the episode in the American press compared to the European were very striking. American newspapermen talked of the passengers aboard the ships as "pro-Palestinian activists", reflecting the terminology used by the Israeli Government and echoed the concept that it was an action of self-defense on the part of Israeli forces. In contrast,Europeans talked of "peace activists" or pacifists and underlined that Israel attacked in international waters and that Gaza has become over the last three years, because of the blockade, an "open-air prison" for the 1.4 million Palestinians living there.

Who's right? Nobody, of course. Hamas is wrong in continuing to deny Israel's right to exist and in supporting despicable and horrific terroristic methods. Israel is wrong in over-reacting, establishing blockades and building Berlin walls around Gaza, in continuing with its settlements policy and, more importantly, in denying Palestine's right to become a free, independent state.

What is the way out of this impasse that has lasted now nearly half-a-century? It is undoubtedly in the hands of America. Everyone in the Arab world is convinced that (a) Israel is more than a preferred ally of the United States but a de facto extension of America (even its Prime Minister is a born American), and (b) it has nuclear weapons, which explains why it has recently refused to join the international anti-nuclear pact. Maybe it does, and that is certainly a reason why Israel is so concerned about Iran getting its own nuclear bomb.

What are we supposed to do? Watch the Middle East burst into a nuclear mushroom or recognize Palestine?

With such a simple solution at hand (i.e. mutual recognition of Palestine's and Israel's right to exist as independent states), one wonders about Man and how stupid he can get...But then, we should remember that it took 110 years to solve the "Irish question". So I suppose we've still got time on our hands...

In the meantime, the ships' passengers who had ended in Israeli jails have all been expulsed and deported home (citizens from some 40 countries were involved - many Europeans, even some Americans but most of them were Turks). But what about the humanitarian aid the ships had brought? Not a word about it in the press. I assume that now everything has been confiscated by the Isreali...

And once again, it is the poor and the destitute in Gaza who are the real victims...


When a bottle of water becomes a bottle of wine...

That can only happen in France! Yesterday, I ordered a bottle of Badoit mineral water in a nifty Parisian brasserie - btw, I highly recommend it, "Les Ministères" rue du Bac, where they serve excellent traditional French fare (I had superb kidneys with an old-style mustard sauce). And it is frequented by a seriously eating French clientele, always a good sign in a touristy place like Paris.

But the bottle of water? Yes, I couldn't believe it. My attention was first attracted by a neat tag around its collar, annoucing that it is produced since 1778 - a respectable date of birth, by any means - and that it is "recognized for its digestive and exhilarating virtues" (sic). Exhilarating? Yes, "exhilarantes" in French, and that (aside from being good for your liver) also means, as it does in English, something that makes you laugh hard.

OK, that was my first laugh (a small one), but there was more (and better)to come.

I turned the bottle over and read the description on the back. Here it is in bullet points, just the way it's printed:
"Bulles fines et légères" = fine and light bubbles: that would fit a Champagne...
"Nez discret et frais" = discreet and fresh "nose" meaning scent, which applies to wine of course...
"Attaque ronde et veloutée" = round and velvety "attack", meaning touch which again applies to wine...
"Bonne longueur en bouche" = good staying power in the mouth, i.e. the taste lasts the way good wine does...
"Effervescence délicate" = delicate froth, again a term well adapted to Champagne...
"Finesse aromatique" = aromatic delicacy: hey, are we still talking about water?
"Finale rafraichissante" = refreshing finale: all right, this is definitely wine. Every wine connoisseur worries about the finale.

Naturally there's an explanation on the left-hand side of the tag: the author of this superlative description of mineral water is none other than Dominique Laporte, the best sommelier of France. He also explains that this is how he is initating us to EAUnologie with Badoit. Yes, eaunology not enology.

So when are we going to have mineral water tasting competitions? With Perrier, Vichy, San Pellegrino, Fiji water, Ferrarelle and all the other mineral waters that exist around the globe? I can't wait! There's bound to be a lot of experts out there considering that every year an estimated 200 billion bottles of water are consumed and that this is one of the fastest rising markets in the food industry (it has grown some 50 percent over the past 5 years). In upscale restaurants in Paris and London, it has become elegant among the ultra rich to have Perrier as an apéritif and wash down refined nouvelle cuisine dishes with Evian or Fiji water.

I can just hear the comments of mineral water experts. Fruit and flower-inspired: "mulberry scented...clean as violets...with acerbic echoes of lime and lemon... ". Geological: "crystal-clear...pristine as chalk cliffs...". Meteorological: "a Tsunami of bubbles...effervescent as a spring rain...explosive as a volcano..." Spatial: "cool as outer space...shimmering like the full moon on a midsummer night..."

Yes, this is all about water - a rapidly diminishing resource. It is expected that fifty years from now, half the humans on this planet will suffer from drought. No wonder water is beginning to look like wine!


Stieg Larsson's Trilogy: Another Black Swan in Literature!

Everyone's heard of that phenomenal blockbuster that's come out of Sweden: the Millenium Trilogy. The author is a Swedish newspaperman, Stieg Larsson, who by the way, is unfortunately dead - he died in 2004 at age 50 from a massive heart attack. We, in Europe, for once have been luckier than Americans in getting to know his work. The three volumes - crime thrillers featuring an improbable couple of mystery-solvers, a middle-aged investigative journalist Mikael Blomkvist and his young bisexual hacker friend, Lisbeth Salander who's a mathematical genius and covered with tattoos - have been translated in all major European languages,since they were first published in 2005 (I read it in Italian). They became a hit in Europe well before arriving in America, a very rare event. Usually, it's the other way round, as notoriously exemplified by Dan Brown's Da Vinci Code.

Now the third volume - The Girl who Kicked the Hornest's Nest - is coming out this week in the US and I thought you might be interested in hearing my...mmmm... opinion! And what a book this is! Once again and like its two predecessors, it's well over 800 pages long and weighs a ton. Anyone who's got an ebook reader would be well advised to load up the electronic version on his/her machine and thus avoid getting muscle cramps.

First, I'd like to point to the amazing odds that faced such a literary product. You'd think that anything longer than 2500 pages (even if divided in three volumes) would be next to impossible to sell. You'd have to be Dostoievsky in person to manage it! Yet Stieg Larsson's masterpiece has been an instant success and has sold millions of volumes all around the globe. His work is the next Harry Potter wonder - with adults this time. Which goes to show that publishers never know from where the next literary juggernaut might come from. In fact, when Larsson proposed his manuscript to publishers in Sweden, convinced that it would make him a millionaire and ensure him a happy retirement, he was the only one who thought so. By the way, that is a very common malady among would-be writers: they're all convinced they're the Next Big Writer... Larsson was turned down by everyone and eventually the only publisher willing to take the risk was a small one. That, of course, is a repeat of what happened with the Harry Potter series, and in the past, it's happened to a great many other big sellers, including Gone with the Wind (it was rejected 20 times!)

In short, books such as these are perfect "black swans", to use Nissim Taleb's famous image: they are totally improbable events - yet they do happen! It does make one wonder what the ingredients for (literary) success are. In any case, they are apparently not what literary agents, editors and publishers are looking for! Left to their own devices, publishers appear to prefer publishing "sure bets", i.e. authors that have already published successfully, like Stephen King, Dan Brown, Danielle Steele, Agatha Christie etc. In this "business model" new writers haven't got a ghost of a chance.

Thank God there are black swans around that remind everybody that it is wise to look beyond the "true and tried". Actually, what publishers forget is that people love anything that breaks the monotony - anything new, and that means, by definition, anything "untried".

The Millenium Trilogy is definitely a break with the accepted genre (mystery, spy stories etc). It's not another Le Carré or anything else you've ever read. Why? First, Stieg Larsson doesn't look down on his reader or takes him for an idiot. He expects him to plod through all kinds of background material, just as any good investigative journalist would. The famous principle of the new American writing school "Show, Don't Tell" is largely ignored - and that in itself is refreshing. Oh,to be sure, there are many suspenseful passages of "show", with plenty of violence, murder, sexual abuse and the like. And they're welcome and fun to read. But in between, you get a lot of thoughtful "tell" and complex disquisitions into highly interesting issues, such as how money is a source of corruption (in the first volume), how violence is linked to sexual abuse (the second volume) and how spies, while necessary for national security, are nevertheless a threat to democracy (the third volume). And a thread running through all three volumes is a definite and refreshing feminist stance. It is nice to read stuff that is unabashedly open-minded and liberal!

So, in spite of the excessive length of these volumes, you never get the impression you're indulging in cheap suspense and wasting your time. His books invite readers to think. Even when the story slows down to snail pace, one keeps reading to find out how the whole thing will get resolved. Because the protagonists - always highly likeable - get themselves entangled in seemingly hopeless situations. The fun is guaranteed.

These elements - dealing with interesting issues, proposing likeable characters in addition to ghastly villains, making the plot so complex that one wonders how it will all end, - are the key to the success of the Millenium Trilogy.

Is it well written? I don't know, unfortunately I can't read Swedish. Because I believe that to judge style, you have to read it in the original. In Sweden, people say it is well written. Indeed, many doubt that Stieg Larsson actually wrote it. They point to his companion,Eva Gabrielsson, an architect who is reputed to be a good writer while he, Larsson, was a graphic designer and reportedly couldn't write. Who knows...A sequel to the three volumes may yet come from his companion who has kept his personal computer which contains, it is said (see article in IHT of 22 May 2010), three quarters of the next volume, plus fragments of more volumes (Larsson had apparently planned on writing ten volumes). Whether we'll ever get to read anymore depends on the outcome of a legal battle between Ms. Gabrielsson and Larsson's father and brother who so far have inherited all rights to his work - a quirky effect of Swedish law that does not recognize any rights to an unmarried companion.

Is there something I don't like about the Millenium Trilogy? Yes, the length! I wish a good editor had taken a red pencil to it. Much of the "tell" parts could be cut back without affecting the book and leaving intact all the issues raised. I'm convinced that instead of nearly 900 pages a volume, it could easily be reduced to 300. And in the process gain in literary value. Because, let's face it, in this form, it's not exactly literature - too often it reads like straightforward investigative journalism.

This said, I highly recommend it. Because it is after all something new in crime thrillers: one could call it "romanticized investigative journalism". Quite a mouthful to describe, but well worth the effort to read...

Do let me know what you think - after you've read it, of course, three or six months from now!


A neat fish restaurant in Paris: La Marée

Yesterday I tried again what used to be one of the classic fish restaurants in Paris back in the 1960s: La Marée. It's on the angle of rue Daru with the Faubourg St Honoré in an "art nouveau" building, and it has replaced what used to be until 1963 a pharmacy owned by White Russians.

By classic restaurant, I mean a comfortable setting, with wood panelling, almost (wow, the ugly word!) bourgeois but soooo "gemutlich", and with food that was always remarkably "true" - and by that I mean the best ingredients and careful, precise preparation.In short, a whiff of the sea. The last time I went there was some 15 years ago, it was still very good, even though the 1960s had become something of a lost decade. Then it changed hands in 2006, and I was curious to see whether it had maintained its original class...

Well it has! It's now run by a couple of very talented young people: Yves Mutin, the chef, and Stéphanie Bennassar who looks after clients in the dining room (still with the 1960's panels on the walls - but why not, they've become now part of the "classic look of the restaurant). Next time you're in Paris, don't miss out on it!

First Let me tell you where it is: go all the way to the end of Faubourg St Honoré, where it becomes Avenue des Ternes (that's in the 17th Arrondissement). Ah, before I forget, another plus: if you like music, it's right next door to the Salle Pleyel, so you can combine an evening of music and follow up with supper at La Marée. These young people running the place are clever and keep the restaurant open for the very purpose of catering to late music fans - meaning people come in for dinner as late as 11 pm...

The food? I'd give it at least two stars if I were the Michelin Guide (indeed I've been to 2 stars restaurants that didn't deserve them - more on that another time). The classical cuisine was perfect: I had white asparagus with mousseline sauce, flavourful, cooked right (they could be eaten right to the end, yet they were not soggy) and the sauce was light and tasted just right, not too much lemon. My husband had a classic fish soup as entrée, equally good with the usual accompaniment of fried bread, rouille and grated swiss cheese to float on the soup. This was followed by a salmon perfectly done with new potatoes pan-fried in delicate poultry-flavoured butter and an unusual, very "nouvelle" preparation for fish fillets of St Pierre: served in a light purée of fresh peas (it's the season now), the fish was covered with paper-thin slices of raw tomatoes. A striking green-red dish! The wine was satisfying dry and fruity Pouilly Fumé Blondelet 2009 "Domaine Le Bouchot". We closed the meal with a crème brulée, which was ok (probably the only thing that could have been better) and a coffee with "mignardises" (small petits fours and chocolates) that were superlative.

Total cost? A little over €100 for two, which is very reasonable for a well-served meal based on fish fare - always an expensive kind of food - in a pleasant surrounding and well-served (the service is fast).

The address: Restaurant La Marée 258, rue du Faubourg St Honoré
tel: +33 (0)1 43802000
opened every day

PS It's a good idea to call to reserve a table. We went on a week-day and it was really full (we couldn't eat before 10 pm).