Thursday 5 November 2009

Good night Dnepropetrovsk!

My last night in Dnepropetrovsk. Our business dinner ended unexpectedly early, and I find myself in the hotel restaurant, reflecting on how things change-and how things remain the same.

The first time I visited Dnepropetrovsk was almost exactly ten years ago, at the end of November 1999, for a company named Ista Battery. Dnepropetrovsk was a different city then: freezing, grim, caught in the throes of the economic collapse following the Russian ruble devaluation. On Karl Marx Avenue, few stores had anything to sell. At the vast, crumbling Hotel Dnepropetrovsk, a 19-storey Stalinist hulk on the Dnieper river, there was no hot water on the upper floors, and the floor monitors cast a jaundiced eye on all our comings and goings. There were perhaps three restaurants worthy of the name in the entire city of over 1 million, and very few people had money to eat in them.

The snow came early that year, and the temperatures quickly reached freezing. A few Ladas and Zhigulis sputtered and coughed their way down the streets; the world was a perpetual state of grey. Crumbling factories, crumbling apartments, crumbling hopes.

Fast forward to November 2009, and it’s a different place. Karl Marx Avenue is lined with expensive stores: Escada, Ermenegildo Zegna, Levis. Good restaurants are on every block: Nobu, Pastoral, Paris, Charly, Kadri. Wifi connections are everywhere. New shopping centres and office blocks have been built, their marble and granite brightening the crumbling Soviet-era apartments. People are better-dressed, better-fed, optimistic.

Despite the current crisis, there is a feeling of potential in the air. Things are tough, but they will get better, and eventually things will normalise to the point where Ukraine is indistinguishable from other European countries, at least for the young. Indeed, for most of them, this point has already been reached.

My client this time around is another manufacturer. In just 8 years, they have built a plant which is among the largest and most modern of its kind in the world. All-new Western machinery. A sparkling factory floor. Top quality products. A capacity for 7 million units per year. To most Ukrainians, manufacturing comes naturally, instinctively. Their thinking is Cartesian and linear. Their ability to plan and improve a manufacturing process is unlimited by tradition or custom.

Nearly every Ukrainian oligarch I meet begins our meeting with the line: “In the next five years, we will be one of the top 10 companies in Europe.” Many of them have actually achieved this. Some of them grow complacent: they drive around in black Porsche Cayennes and spend their money on extravagance. But most of them buckle down. Seven million batteries is just a start: the next step will be another plant for industrial batteries. Then a lead recycling facility. Then renewable energy solutions. There is no limit to the progression. The only limits are of time, capital and human resources.

Sitting in this hotel restaurant, I feel rather humble. In Greece, my country, we are still arguing about the basics. Should university education be public or private? Should the government re-nationalise ports and telecoms? Should an investor dare to build a soccer stadium and mall in the wasteland of Votanikos? Should a 5,000-room hotel complex be licensed on a barren peninsula in Crete?

Looking at it from the perspective of this city, we are frivolous and spoiled. We complain about forest fires, yet every day drivers toss their cigarette butts from their cars. We expect other countries to admire our history, but seem to have forgotten that our historical achievements required sacrifice and self-discipline to achieve them. The notion of arĂȘte, of the search for excellence, has largely been forgotten. Instead, we spiral into mediocrity, into the drone of morning TV and failed expectations, empty words in a hollow echo chamber.

This city started only a short time ago from nothing. Generations of Soviet planning had turned Dnepropetrovsk into a vast zone of grey, crumbling concrete. People were disciplined to follow orders. The concept of market cost or market price had not meaning. Just 20 years after the fall of the Berlin Wall, this city has made tremendous progress. Immeasurable, if compared with our western standard of living.

And a small group of business entrepreneurs built one of the most modern factories in the world from scratch, in 8 years, from nothing, and show no signs of slowing down. I have two more meetings tomorrow morning, then sprint for the airport and the long flight home. I return to Greece inspired, with different expectations, and a higher standard of achievement than I had when I left just a week ago. Of all the places to find inspiration, I found it in this industrial city on the banks of the Dnieper River, 10 years after I first arrived.

Good night Dnepropetrovsk!

Campaigning versus Governing: Understanding the Republican win of Virginia and New Jersey

The elections this week in NJ and VA illustrate the classic split between campaigning versus governing, and highlight the problems the Obama administration currently faces.

In both elections (as in the national elections last November), the campaign challenger held the upper hand over the incumbent (or the challenger associated with the incumbent party):

• Most regular voters were concerned with the rapidly declining economy and faced with personal insecurity. This remains the main driver of public perception in the present time.

• A challenger can easily challenge the incumbent’s record: public debt in both NJ and the US has reached historic levels. In this scenario, it does not matter, for instance, that Governor Corzine managed to reduce NJ’s debt by $ 2 billion: it’s still too high, and still restricts public initiatives to manage the economic downturn.

• The Democratic incumbents in NJ and VA had all been in power for at least 5 years. This gave the challengers abundant scope to raise the red flag of change, which, it should be remembers, is not a campaign trademark of Barack Obama.

We can take a quick look at the national stage and understand what this presages for the Democratic incumbents of the White House, Senate and House of Representatives:

• Far too much political energy is being focused on healthcare, climate change and a range of other initiatives which, though worthy, do not readily translate into a change in the daily life of most regular voters.

• Most regular voters continue to be affected by declining (or stable negative) economic conditions: unemployment; negative or nascent demand; employer cutbacks in compensation and working weeks; etc. There is precious little coming out of Washington dealing with these issues.

• Most politically-informed voters of the independent mindset (which includes as much as 40% of the voting public according to some polls), are upset by the fundamental inability or unwillingness of the Obama administration to address the mounting deficit. In addition to the deficit, the impact on the public debt of health care (where the final debt amount is still unknown, or challenged), as well as foreign wars, is deleterious.

• Finally, most voters are increasingly concerned about the wars in Afghanistan and Iraq. While we have accepted the “loss” and withdrawal of Iraq, it’s impact is mitigated by the fact that this commitment is over. On the other hand, there is mounting concern over the US direction in Afghanistan. Most voters see that we have been caught in Afghanistan for over 8 years with little to show in terms of results. The financial costs are rising; more casualties or fatalities are coming home, and the Afghans have just elected a corrupt president who apparently won the election on the strength of over 1 million tainted votes, while the US Secretary of State offered some inane platitudes.

All this adds up to one message: the Obama Administration has lost track. It is dealing with complex issues in domestic and foreign policy which have little to do with the everyday economic concerns of most American families.

The tremendous idealism generated by the campaign has not survived —and probably could never could—the tedious process of legislation and governance. This is why most younger voters have either stayed home or split their votes in the two races for governor.

If I have one message for the Obama administration, and politicians everywhere, it would be to prioritise on the economy and the economic issues which affect the majority of Americans. No one, not the hardest union worker, nor the most independent professional, nor the most well-paid CEO, is happy with either the state of the economy, or the state of public debt.

There have to be two types of measures:

a. Short-term measures to stimulate employment and raise real wages, and
b. Long-term measures to cut public debt.

Structural interventions, such as healthcare, education and renewable energy, should be addressed only once the economy has returned to a sustained growth track, and there is a clear understanding of how the debt will be reduced (and how policy in other domains will be funded).

Everything else should be prioritized against these two fundamental objectives. While our political classes may think we have the luxury of spending time and money as if there were no tomorrow, most taxpayers think otherwise.

Sunday 1 November 2009

Does Deputy Minister Panos Beglitis Actually Work?

It seems that whenever I turn on Greek TV these days, Deputy Minister of National Defence Panos Beglitis is there, waiting to enlighten me with his views on a vast range of subjects. Morning, afternoon or evening, I see him holding forth on the Stage programme, the national deficit, and the electoral system of Greece. In fact, I see him commenting on all subjects except the ministry for which he hold a portfolio: Defence.

Prime Minister George Papandreou, in his first, televised Cabinet Meeting, warned his Ministers to keep a low profile and work hard in the interests of the Greek people. How does the behaviour of a vast number of Greek officials since then measure up to this?

Instead of being “hard at work” in their respective ministries, they seem to spend a good deal of their day going from studio to studio. And don’t think they have anything specific to announce: rather than outlining any specific plans for resolving a vast range of problems Greece confronts, they bicker, kafeneio style, about who’s fault it is.

For instance, a major issue confronting the government is that of the Stage “crisis”. Under the EU-conceived Stage programme, young people were offered the chance to work on a temporary basis in government, semi-governmental and private sector organisations. This was conceived as temporary work, for a period of 12-18 months, at reduced salaries, in exchange for job experience.

Greece being Greece, this programme has apparently metastasized into a huge patronage programme for political supporters of the previous government. These tragic, though rather hapless individuals, have been screaming on television for the past 2 weeks about how they have been doing “real work” for a very long time (some have been working for over 40 months in their “temporary” positions), and are now threatened with the termination of their contracts, with no opportunity for favourable terms of recruitment as permanent public civil servants.

What is equally surprising is that no one in the Greek government can give a precise figure for how many people are actually employed, and under what terms. The Minister of Labour has held repeated consultations with OAED and other authorities to try to sort things out. For his trouble, he is under fire not only from the Stagiares, but even from the main trade unions, who refuse to countenance public sector recruitment under favourable terms for anyone except, of course, their own members.

Yet despite the absence of core data, politicians, reports and other commentators of every stripe have an opinion to offer, each one more strident than the last. But the public doesn’t need more confusing hot air: it wants solutions. PASOK was elected on the strength of its promises: now it’s time to implement them, in the face of a high public debt and a continually-declining economy. Political point-scoring on talk shows is not a recipe for this.

Mr. Beglitis, with all due respect, the next time I see you on TV, I hope you will be speaking authoritatively about Greece defence priorities and strategies, and not a subject outside your remit. I realise you are a Member of Parliament, and of course fully entitled to your opinion. But under your watch (and that of Minister Venizelos), Greece has to deal with strategic issues such as:

• Achieving air parity, or at least deterrence capability, in the face of overwhelming superiority from Turkey. This involves strategic decisions on future purchases of the F-16; resolving the issue of Greece’s possible commitment to purchase the Rafale; and decisions on the next-generation fighter, particularly given that Turkey is a consortium member of the F-35.

• Resolving the issue of the four submarines currently on order from the Skaramangas shipyard, and the eventual fate of the first of this series, which has serious problems. This issue needs to be solved among the wider issue of the competitiveness of the Greek shipbuilding sector, and Greece’s political relationship with Germany.

• Strengthening the ability of the Hellenic military and political forces to deal with a military crisis. The recent anniversary of the Imia crisis, and the publication of a major book on this subject, reveals a wide gulf between PASOK’s civilian elected leadership, its military generals and its forces on the ground. Has anything been learned from this?

• Resolving the general modernisation and professionalisation of the Greek army, including the future role of the conscript force in an age of electronic warfare and the integration of C3I into battlefield operations. What are the Ministry’s plans for real-time satellite or drone intelligence on the battlefield? Do we still have the capacity to hold Greek islands in a conflict given Turkish air superiority?

• Optimising the force structure of the Hellenic Armed Forces, including long-term strategic roles and offensive/defensive capabilities. A key issue here will be sustaining military investments in an age of growing deficits and total public debt. A further key issue is providing adequate salaries and living allowances for military officers and professional soldiers.

I look forward to hearing your—and PASOK’s—policies and ideas for these subjects. I’d prefer to hear comments about the Stage programme or the national debt from the relevant Minister. The election ended on October 4th: please use this window of opportunity to work on the crucial issues confronting Greece.