Page 30 - Flathead Beacon // 7.8.15

LIKE I WAS SAYIN’
TWO FOR THOUGHT SAME TOPIC, DIFFERENT VIEWS AMERICAN INDEPENDENCE
KELLYN BROWN
BANKRUPT COUNTRIES
FOLLOWING THE 2008 FINANCIAL CRISIS, I consumed information on how it happened and why and which countries and their respective governments it would effect the most. Those especially exposed economies profiled in Michael Lewis’ book “Boomerang: Travels in the New Third World” included Iceland and Greece. That was published in 2011. A lot has happened since.
Seven years ago Iceland essentially went bust after it relaxed its rules overseeing banks and the largest of those subsequently collapsed. In all, it saw about $100 billion in banking losses, which, as Lewis points out, is “roughly $330,000 for every Icelandic man, woman and child.” This in a country of roughly 300,000 citizens.
Meanwhile, in Greece, the recession arrived and has never subsided. In the aftermath of the crisis when the country was unable to pay its bills, officials with the International Monetary Fund (IMF) looked at its books. What they found was astounding. Greece’s public sec- tor was simply unsustainable and functioning amid a culture of bribes. In contrast to Iceland, “in Greece the banks didn’t sink the country,” Lewis wrote. “The coun- try sank the banks.”
Now fast-forward to present day. Two countries that were essentially bankrupt have taken two far different paths.
In Iceland, after the stock market there fell 95 per- cent, the government implemented strict capital con- trols, prohibited its citizens from buying foreign stocks and currency and sent several bankers to jail.
As Jenny Anderson wrote in the New York Times, “Iceland was willing to prescribe itself tough medicine to repair its tattered reputation.”
And it has largely worked. Iceland’s economy is grow- ing, buoyed by an increase in tourism, and the jobless rate in that country is about 4 percent. Now it is consid- ering lifting some of its capital controls, which, despite their apparent effectiveness, have hurt local businesses. It’s a remarkable turnaround.
Iceland, of course, is not Greece. It’s much smaller and perhaps more importantly has its own currency, whereas Greece is tied to the euro – for now. But even if it leaves the currency and returns to the drachma, Greece faces more of an uphill battle in getting its finances in order.
The problems in this nation of 11 million are system- atic and widespread. Not only are Greece’s government agencies, such as its schools, more bloated than its Euro- pean counterparts, they are more inefficient. Equally problematic is that Greek taxpayers have a long tradi- tion of not paying taxes.
Since Greece has failed to pay its bills, the rest of Europe has loaned it money under the condition that it implement austerity measures – basically raise taxes and cut spending. This hasn’t worked. Compounding Greece’s opposition to its lenders’ demands is a jobless rate hovering around 25 percent, which is much higher among younger Greeks.
Now the relationship between Greece and the rest of Europe is at a breaking point. Over the weekend, in a hastily arranged vote called by government offi- cials, Greeks decisively rejected the terms of receiving another loan.
Whether Greece actually leaves (or is kicked out of) the currency union remains to be seen. It missed its 1.6 billion euro payment last week. The IMF says it won’t loan it any more money. The country has exhausted most of its options and goodwill. It may want to look to Iceland for some “tough medicine.”
BY TIM BALDWIN
America just celebrated Independence Day – when the
American colonies formally separated from Great Britain in 1776. This declaration stares us in the face every year and forces us to study certain realities of political life. Here are a few.
1) Political science confirms the right of people to abol- ish and form new government. This science is based on the principles of both natural law and utilitarianism: that human happiness and survival are primary to our existence.
2) Conditions may be required to justify separation. For example, our Constitution was formed by the people’s del- egates from their states in special conventions called by state legislatures. Unlike the Articles of Confederation, this union was not formed by state legislatures. Thus, as Abraham Lincoln noted, the only way states can separate is by the same method they created the union. But for peo- ple who continually suffer from government oppression and usurpation, separation is mere survival. (For example, see southern Sudan). Thus, political separation is objec- tively weighed on a scale of necessity.
3) Independence can advance liberty and prosperity. People must apply correct science and not irrational emo- tions here. Like a doctor treats illnesses in the human body by proven principles of medicine, biology, etc., soci- ety must similarly treat the political body. Of course, the greater the illness, the greater the remedy needed.
Regardless of political persuasions, Americans should be thankful for the principles advanced in our Declaration.
BY JOE CARBONARI
When we, the United States, declared our inde-
pendence we did so because we were fed up with unfair treatment. Chief among the grievances was taxation without representation. When decisions were made, as to who was going to have to pay how much, when, and on what, we didn’t have much of a say. We, as a colony, did not adequately control our lives. We did not consider the decisions fair or conducive to our well-being. We revolted, and we won our independence.
The Greeks are doing something similar now. Their country has run up a great deal of debt, rel- ative to the size of their economy. Most is owed to European banks. When unable to pay they have been bailed out, on a couple of occasions, by the European Central Bank and the International Monetary Fund. Little debt has been forgiven, but rather the payback period extended. This has not worked well.
As part of the extensions the Greeks have had to agree to cut expenses and raise taxes. This has not stimulated the economy but rather worked to further constrict it. Unemployment is high; aver- age citizens are struggling, and the future looks bleak. The Greeks would like to see their debt load reduced and some stimulative measures intro- duced into their economy. Their creditors say tighten your belts and pay your bills. This isn’t working. Greece voted to rebel. Good.
AMERICAN RURAL DIANE SMITH
SOCIAL CAPITAL – 21ST CENTURY GOLD?
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neighbors in larger urban centers. And, while our cock- tail parties might not net millions, they often produce the kinds of contacts that can produce serious returns for our entrepreneurs and growing businesses.
When I was building a tech company in Northwest Montana, we were helped by so many amazing people right in our backyard. These kind folks gave us entrée to investors all over the country, high level executives from ESPN to Oracle, and potential customers that were willing to back us with prepayments and price- less business insight. In other words, we survived our early days by vigorously seeking and deploying our Social Capital. And, because we did so successfully, we were able to build a great business on a few million dollars while our competitors (from much larger cit- ies) spent hundreds of millions yet never managed to catch up with us.
Today, I’m part of an angel capital fund based in Montana. In addition to investing, we often wind up coaching and sharing contacts, and not just for our portfolio companies. We’re not a huge angel fund in terms of funding, but we have a lot of Social Capital and don’t hesitate to use it. The role of money in support- ing start-ups is pretty clear, but plenty of failed start- ups have had access to lots of dough. Obviously there’s more to the equation than just money.
So, if you’re an entrepreneur in rural America, pay attention to Social Capital. It’s been working in Silicon Valley. You can make it work for you too.
VERYONE IN THE ENTREPRENEURIAL COM- munity has watched Silicon Valley’s success
over the past years. I’ve been particularly sur- prised by the emergence there of an asset that has sped organizational growth and eliminated some serious hurdles for entrepreneurs. Nope, it’s not financial; it’s Social Capital.
While there’s no shortage of academic writing about it, even Wikipedia’s description is cumbersome: “Social capital is the expected collective or economic benefits derived from the preferential treatment and cooperation between individuals and groups.”
Here’s my take: Social Capital is the willingness of people to help those that they know or know of.
Stories abound about Silicon Valley cocktail par- ties where millions of dollars have been raised for a start-up or a chance meeting at a Palo Alto coffee shop that resulted in the perfect match between the Hus- tler, Hipster and Hacker.
Established VC’s are pretty clear about their reli- ance on Social Capital. Sean Jacobsohn of Emergence Capital wrote in Venture Beat, “Personally, the pri- mary reason I don’t meet in person with in-bound requests is that the entrepreneur was not vetted by someone I trust.”
Out here, in rural and small town America, we are rich in Social Capital. We know each other, or at least know enough of our friends and neighbors that our networks are often more robust than those of our
Learn more about Diane by following her column here or visit American Rural at AmericanRural.org.
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JULY 8, 2015 // FLATHEADBEACON.COM