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Rating agencies of legitimating economic gossip Rating agencies of legitimating economic gossip
by Thanos Kalamidas
2011-07-09 10:30:46
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For one more time rating agencies are under fire from the European leaders and the European Union, so what? Is like saying capitalism is bad? Fine, we all know it by now but what are we doing by now for that except nagging because that’s what we are doing, nagging, nagging, nagging.

The problem was never with rating agencies but the way they work and how they are received by the system and the international economic institutions. Rating agencies are not independent and they never pretended to be they are – and sorry for using this term and I hope semantics will not confuse the term with organizations that play a very serious role in international life – nongovernmental organizations or better non government controlled organizations and totally funded from the private sector and obviously serving the interests of the private sector. Actually some of them are part of investing companies with international influence and what they are doing is ignoring every other aspect point what gives the best profit and what is risky for the investors.

And this is fine while they are pointing companies or stock market balloons but doing it with states is not the same. There they play with human lives and not with accounting numbers and something they have never understand is that capitalism – since these agencies are loyal servants of the capitalism – is not working with destroyed states; consuming and producing are critical elements for capitalism. A destroyed country means destroyed citizens and that means no money to circulate, that means no market and yes there is profit for some but this is a very short term profiting period since soon the ones who can consume become less and the ones who get angry because they cannot consume more. And the more they become higher the anger becomes and then the bosses of those agencies are in serious trouble seeing their agencies literally on fire.

And if I can understand these things, the people who govern us they are oblige to know and instead of nagging do something. These agencies playing an advisors role and this is where they should be reduced with one more very important detail. They should kept away of rating countries. Last week an economic expert was wandering who’s going to bankrupt first, USA or Greece pointing that all the signs show USA to be the rest if nothing happens with the federal debt soon. Have the rating agencies moved, said anything or rate the USA government? No bloody way. They don’t even think about it, they don’t dare. Who dares devalue the capital of the capitalism?

That alone should be a sign of the game the rating agencies do and this should be a blue print for what the European Union’s leadership obliged to do. Fine these agencies are not controlled by the governments but they are controlled by laws and they are obliged to obey the laws, that’s what needs to change and the EU commission with the help of the EU parliament have the power to do so.

You know what I find amazing? But the global economy is depending on agencies that really legitimate gossip and speculations. Professor Emanuel Paparella often in his articles and comments here in Ovi magazine makes references to Machiavellianism; I believe that the rating agencies are the top example of contemporary Machiavellianism. I bet they even advised Luis XVI and they were informing him in from the guillotine that they are going to rate badly France. These agencies are not trusted more than betting agencies and they shouldn’t be. Actually with all happening at the moment they should have lost any credibility and rated very very low.

So that’s exactly what the EU should do, rate them and constrain them as the most unreliable economic advisers actually dangerous for the society and send them where they really belong but not just nag, act! And act now before we find out that Barosso’s visit to the toilet is an element to rate the European Union negatively. But then again this demands political power and will and today’s EU leadership can only nag!


         
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Emanuel Paparella2011-07-10 10:52:10
Indeed Thanos, since you have brought Machiavellism in causa, perhaps a personal anecdote and a further comment may apply to this crucial issue, i.e., the sacred cow called “the capitalistic market.” Many modern economists look upon the market as a sort of demiurge or a compass allegedly guiding capitalism. I still remember a lecture given by one such economist a few years ago. He put on the board an impressive looking economic formula buttressed by mathematical theorems which made the whole scheme look very scientific and unassailable. Everything was quantified and made to look as logical as a philosophical syllogism: if this and that applies, then it logically follows that such and such applies also. The whole thrust of his argument was that if the laws of market capitalism were applied, then capitalism was not only logical but indestructible and it would only make steady progress, a sort of deterministic and almost unavoidable progress.
In these economic schemes progress of course is ultimately understood as “the bottom line” or the profits accruing to a corporation and its share-holders.

And here is where Machiavellism applies: for the sake of that ultimate goal, profits, the bad dehumanizing unethical means to achieve it are overlooked and the overarching fact that quite often bad means corrupt the goal too is overlooked. Never mind the dehumanizing tendencies of such a mind-set.

I still remember asking a simple question at the end of the above mentioned lecture and it was this: where, within this formula, is the equation of human greed? The lecturer looked at me as if I were some kind of lunatic and an ambulance for the insane asylum should be immediately summoned. He answered that of course progress is inevitable as he had shown, and those who don’t believe it to be inevitable, are still stuck in medieval times. Which is to say, he had failed to grasp that to violate the human elements of the equation made by man and supposedly serving man, and reduce economic activity to simply production and consumption and profits is to end up with the Machiavellian proposal that the end justifies any means. If those means are unethical, the end will also be unethical. As everybody now knows, a few years after this lecture we had the famous Madeoff case and a persistent recession still afflicting the whole of the Western World.

I have often wondered if the economist in question has had to re-think his “scientific” formula. Probably he still sees no need for it; in fact, he may still be moving the furniture around on the sinking Titanic, or the sinking Market or the sinking Civilization as the case may be.


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