Self-Fulfilling Prophecy Or, How I Learned to Stop Worrying and Love the Global Economic Crisis

"Based on the findings of the report, my conclusion was that this idea [a Doomsday Machine] was not a practical deterrent for reasons which at this moment must be all too obvious."— Dr. Strangelove, in Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb (1964)

Being from Texas myself, naturally my
favorite character in Dr. Strangelove is
Maj. 'King' Kong.

Disclosure: I am trained in a field that studies expertise, or really the history of expertise… How it changes over time, or has different criteria for credibility in different cultures, or how it undergirds or undermines other kinds of authority (wealth and power, i.e. "might is right"; folk wisdom or "street smarts"; and so forth). So recently I've found myself thinking about all the expert opinions floating around in the punditsphere regarding the global economic crisis. It got me thinking about the movie Dr. Strangelove. Back in the 1950s, scientists and especially nuclear physicists were the experts of the hour, turned to for advice by policy-wonks politicians to inform their policies about our geopolitical futures, and in a more direct sense, potential nuclear threats and counterattacks. Now to cut an already long introduction short, Dr. Strangelove, through its brilliant satire of expertise, offered a very simple critique of the atomic age: None of these guys (politicians, experts) know what they're doing, and they're gambling with _our_ futures!

The beginning of a beautiful fable: "The haba and the tree." Dilemma... This year on Reyes,
 I was both the rey, for finding a tree figurine, and in debt (for next year's roscón), for finding the haba.
(This must be how how Rajoy feels.) It was because I _had_ to eat that second slice.

So what would be our Dr. Strangelove for this economic crisis? Because let's face it, none of these guys know what they're doing, and they're _literally_ gambling with our futures. I spent the first three months of this blog willfully ignoring the topic of economic crisis in Spain. (Stage 1 of the "Stages of Grief": Denial. The road ahead: Anger, Bargaining, Depression, Acceptance.) This was no small feat, since I'm a news junky, and all I was hearing on the news was Spain's economy looking grim. Record unemployment. PIGS this or PIIGS that. Macro-economic statistic this, and anecdotal grim story that.

I've long been fed up with all the global economic crisis talk and all the doom and gloom specifically about Spain. Doom in the media (_especially_ the British foreign press). In the politics. On the last working day of 2011, "recortes." On the first working day of the new year, "recortes." (How many "cumbres extraordinarias" can the EU hold, and at what point do they become "ordinarias"?) And perhaps most of all, the endless negativity among economists and financial analysts. 

I'm wondering if this former Barça coach, Louis van Gaal, ought to be our poster-child
for dealing with outside critics on the economy. He made a splash with this statement,
"Tú, siempre negativo, nunca positivo," back in 1999.

Upside to global economic crisis: I get to learn a whole lot of new economy-specific Spanish vocabulary… recortes ([budget] cuts), huelgas generales (general strikes), and so on. For example, how many times will they say "hoja de ruta" (roadmap) on the news _this_ year? (It's also good hunting ground for Spanish-specific jokes, too. Consider for your entertainment what has my vote for Phrase of the Year for 2011: "prima de riesgo"… Nope, it's not your cousin's risk. Look it up. Punchline: "¿Quién es esta prima, y dónde está "Riesgo"?) Downside: It's _bor-ing_. What happened to when news meant something new? It's all so predictably negative, self-defeating, and an all-around bummer.

It also has all the trimmings of the housing bubble, but in a negative inverse form. I still remember when, about five years ago, my friends were all telling me, "Buy a house now before they're all gone or too expensive!" Even then I was thinking, "This is just not socially sustainable. This must be some kind of lemming effect." For all of people's gushing about "crowdsourcing" and the "wisdom of the crowds", there has also long been a counter-wisdom, with labels such as "groupthink", "herd mentality" or more recently "information cascade," basically when everyone reads the same two or three faulty sources and thus recapitulate those source's biases and errors. (Another great line in Dr. Strangelove, when the Soviet minister explains to the U.S. President that his source for the erroneous "fact" that the U.S. was also making a doomsday device was the New York Times.) And just like five years ago when my instincts told me that the housing market was too inflated and surreal to be real, well, now my instincts tell me that all this doom and gloom is too gloomy and doomy to be real. 

Let us recall what started the economic crisis: It wasn't crop failures. It wasn't world war.
It was a bunch of overly cocky rich kids playing monopoly. The movie Margin Call (2011)
did a nice job of illustrating the problems of relying on a fixed, mechanical,
and opaque market device to determine our financial futures.

Are the "facts" overwhelming in this
crisis, or just all the numbers?

[Warning: I'm gonna get a bit nerdy here.] There are so many tools in the toolkit in my profession which one could use to explain this recent roller-coaster ride of faith it's hard to know where to start. The key one is the "self-fulfilling prophecy", a prediction that directly or indirectly causes itself to become true. Robert Merton based this on the Thomas theorem: "If men define situations as real, they are real in their consequences." More recent sociological models talk about "reflexivity" in risk decisions – the fact that risk-taking people, take for example stock market investors, know that they are being watched, and thus predictions or anticipations of their actions can have consequences on how they act. Risk studies gave us the clunky but oh-so-true notion of "offsetting behavior". (For the über nerd, check out how sociologist David Stark builds on the concept of performative utterance to explain how finance people follow each other to a fault, rather than following markets or the real world, thereby creating bubbles and crashes.) My personal favorite is the Mathew's effect, often shorthanded as "the rich get richer and the poor get poorer," which basically explains the positive snowballing effect that awards can have, such that one person can end up accumulating them all… Not necessarily because that award winner (or market leader) is _that_ _great_, but because it is easier and safer for a committee (or lenders) to give the award (or investment) to an already recognized great than take a risk on an unknown. These are all examples of how our self-awareness and future-mindedness shape the present often in spite of the actual present. Each could also be the thesis statement for an entire dissertation on how Spain is getting screwed by the current crisis of confidence and finger-pointing.

Hans Christian Andersen's fable ought to be
required reading on Wall Street 

But you don't need to be a sociologists to know all this doom and gloom talk about Spain is bunk. Heck, this is kid's stuff. Hasn't everyone read The Emperor's New Clothes. Isn't it abundantly obvious that the smartest guys in the room in these rating agencies didn't know jack about the real economic health of banks back in 2008, and clearly don't know jack about how to predict the economic health of a given country's citizenry today? Here's a New Year's resolution: I will not pay heed to the self-serving zany and after-the-fact unreliable prognostics of Standard & Poor's, Fitch Ratings, or Moody's. (Big tip off: Why _are_ we trusting agencies called "moody" or "standard and poor", anyway?)

So I offer you all a manifesto. How about all of you my faithful readers? join me in an experiment. Ignore it. That's right, stop listening to the doom-and-gloomers, and start focusing on all those things that are still going _right_ in Spain. This was my realization sometime last November. I was unemployed and feeling quite discouraged by all this negativity. How does one get up the energy to apply for a job, and want it, when everyone is telling him its a horrible market with poor prospects? When it hit me. It wasn't helping me to believe all this negativity. It was disempowering me while making gloomy economists and pundits rich. I also suspect that it is this negative talk from other countries that is directly pushing Spain into the mud, and undercutting Spaniards' abilities to adapt, innovate, and keep positive.

The New York Times's country page for Spain opens, and I quote:
"In Spain, after two decades of dizzying growth, the party is over." 
The party's over? Yikes! But I just got here!

Let's all start telling a different story. I've decided I'm going to listen for more success stories of Spanish entrepreneurs and businesses, and then share them on the blog. (Uh, that is, _after_ Fallas. Even global economic crises take a backseat to Valencia's magnificent street festival.) That's right. There are stories of Spaniards who had a business or non-profit initiative, took a risk and made it. It happens all the time in this country, yet somehow economic pundits in the acronymopolis —the US, EU, and UK— only ever talk about the problem of the PIGS, debt and unemployment, when Spain comes up. (Forget that Spain has demonstrated a unique democratic strength in being the only economically challenged country to let voters determine its fate. Such trivial democratic track-record or virtues apparently don't have a measure at Moody's.)

Look at all those Logos! This economic powerhouse,
Inditex, is Spanish. It can be done!

I already have some candidates: at the top of the list, Zara and its parent company Inditex Group, a Spanish clothes retailing company that has grown at incredible rates despite the crisis. Or, the other day on the national radio (thank you RTVE!) I heard an interview with the CEO of Imaginarium. It's a pretty cool sounding Spanish toy company that is expanding globally. Last fall EmTech Spain gave out its first round of Technology Review 35 (TR35) awards to ten talented scientists and engineers under the age of 35. That's right. Talented, forward-looking Spanish innovators. The New York Times was recently talking about the rise of caviar fish farming in Spain, what a concept! How innovative! Heck, and we shouldn't forget all the local businesses and freelancers sprouting up all over the country with smaller or more modest ventures, such as the Serie Limitada collaboration here in Valencia among others. I'd say that "after two decades of dizzying growth" it's time we let go of Hemingway paradigm stereotypes about lazy or backward Spaniards or stifling bureaucrats holding the country back. This is a new Spain for a new century.

Imaginarium S.A. Building economic success on a sense of enchantment.

So, yeah, it's the economy, stupid. But let's not forget that _we_ are the economy. And we are also much, much more. So don't consider this rant post a prediction, consider it a call to arms!

Are you one to say the cake is half eaten, or half remaining? 
I say, have your cake and eat it too. It's good to be king!  

Local Vocab: "Los Funcionarios"

A simple answer to what is a "funcionario" would to be say that he or she is a state public employee. I think Americans often mistakenly interpret this to mean a functionary or bureaucrat, since these are usually the funcionarios that tourists and exchange students interact with. However teachers in public schools, doctors in the public healthcare system, not to mention nurses, policemen, firefighters, and garbagemen, are all also funcionarios. Indeed, as of 2010 one in six working Spaniards was a funcionario in the sense that their salary was paid by a local, regional, or national government administration. Much more of Spain's economy is run by public institutions, so many more people in Spain are state employees.

Yet this alone still doesn't help you to fully understand the reasons for the heated public debates in Spain over whether funcionarios are, according to some, the scourge of the Earth, people with overly cushy jobs and little incentive to innovate or care about providing good service, or according to others, respectable workers who provide normalcy and consistency in service, and who, given their large numbers, are likely to be someone you know personally.

Perhaps the biggest difference in government employees here in Spain and in the U.S. is that funcionarios can get a permanent position, a job for life, something like tenure in the U.S. academic system. So even while salaries are often lower than private jobs (though perhaps not so comparatively low as they would be in the States), this job security makes these positions a highly coveted and desirable career path. What's more, many of them have special perks, such as only working half days (many government offices are closed after lunch) or having longer holidays (i.e. teachers).

In all fairness, though, to get one of these positions involves jumping through hoops, complicated and highly competitive selection tests ("oposiciones") for very few openings. And many problems with the system are unintended consequences: it is hard for young people to move into positions filled by more experienced though aging staff, and rules intended to ensure fairness and objectivity in selection result in little flexibility to adapt to changing markets and social needs. In short, if you are not inside the funcionario system, if you run a family business, work for a corporation, or are an "autónomo" (self-employed), then you might be envious frustrated by the widespread presence of this power-wielding, overly protected class of employees.

It can result sometimes in a kind of culture wars, pro-funcionarios versus anti-funcionarios. I have seen friends strongly divided over the question of whether the public employee system needs to be heavily reformed, or thrown out entirely, or whether 'since it ain't broke, don't fix it.' One problem is that the image that Spaniards often first think of when they talk about funcionarios is also probably the local bureaucrat, maybe the town hall (ayuntamiento) administrative worker who pushes paper for a living and is in charge of said citizen's success processing their taxes or resolving some social security problem… such as your unemployment checks.

(For an excellent and humorous critique of life under this system, check out this Spanish short film, with English subtitles!)

In the heat of the economic crisis last year, when the government was exploring one route to balancing the national budget by cutting salaries and benefits for funcionarios, El País (one of the main newspapers here), did an excellent "radiography of public employees" in Spain. The article burst some common stereotypes about funcionarios. For one, most funcionarios, in terms of numbers, can be found in the public healthcare or education system. So cutting money or benefits for funcionarios means penalizing that doctor that treats you (think Spain's aging population) or that teacher who educates your kid, too. Moreover, only 40% of funcionarios had that mythical permanent position, so the majority of funcionarios were on part-time or temporary contracts and also experiencing some kind of job insecurity like everyone else.

A regional breakdown of population, public employees, and the ratio of inhabitants to public employees in 2010

But as an American, what is amazing about the El País radiograph are the sheer numbers, there is a funcionario for every 17-18 people inhabiting Spain. As of last year, 2.7 million of them in a country with a population of just 46.7 million. Another interesting thing is the wide variation across regions in reliance on and presence of the state. Almost 1 in 10 people are a funcionario in Extremadura, whereas only 4 of every 100 people in Catalonia are, Catalonia having a much stronger private economy than other regions in Spain. This means that any public initiative to reduce funcionario wages or benefits could be devastating for some regions, while barely affecting others. (Though despite all the loud ranting here about funcionarios, Spain is squarely in the middle range when its statistics are compared with other European countries.)

So keep an ear out for discussions about funcionarios. Whether this crisis erodes their social importance or reinforces it, funcionarios make up a central institution in the everyday lives of Spaniards, and chance are you'll hear people talking about it.

Note to Americans: PIGS is a four-letter word

Spain has been in the U.S. News _a lot_ this last year. And when it's not the usual buzz about tourism, it has been news about Spain's failing economy, the next domino in what could be the so-called collapse of the European economy. I don't think American newspapers bat around the acronym "PIGS" or "PIIGS" as much as British ones do, but I want to take this moment to say that this peculiar acronym says a whole lot more about those who use it than those it describes.

A "ninot" (papier-mâché figurine) from the 2002 Na Jordana Falla
in Valencia, depicting the International Monetary Fund as a fat pig

PIGS, which stands for Portugal, Italy, Greece, and Spain (sometimes also Ireland) is a term that is used when talking about these countries and their systemic problems with political corruption, chronic high levels of unemployment, and all around economic backwardness. But, please, enough with it! I ask you, what does it say about economists that they can lump together countries and cultures (not to mention economies) as different as Spain, Italy, Portugal, and Greece's (and Ireland!?!) under one simple moniker. Oh, and is it meant to be cute that they call them "pigs"?

Next time you see it, remember, there is an ugly undercurrent of north-south stereotypes in Europe. Hemingway fell for it, too, in his day, though he loved Spain for it… a society still not modernized, prone to lawlessness and spontaneous bouts of anarchism or self-destruction. I imagine economists thinking, "Oh those southern Europeans, they can be so intense and passionate" (read emotional and irrational). I don't buy it. PIGS, after all, is a four-letter word.