The analogy of business as war works to a point, but is weak in actual corporate life. War is synonymous with waste, and business runs on the idea of efficiency, whether from economies of scale or simplified processes.However, the analogy works better when you move away from managers at individual companies to government officials running national economies. I’ve been thinking about strategy this week as I watch the European Union struggle to deal with Greece’s debt. Athens is near defaulting on some international loan payments and the ensuing panic rattled international markets, particularly the euro zone.
As the richest country in Europe, Germany is in the spotlight as the ultimate arbiter of any EU rescue plan for Greece, but Chancellor Angela Merkel has coalition partners who insist that German citizens should not pay for Greek officials’ lack of fiscal discipline. Merkel also knows that her public approval ratings have fallen since her September re-election, that Germany this week lost its title as world export champion to China, that the population has dropped below 82 million for the first time since 1995, meaning fewer taxpayers to shoulder the EU tax burden.
EU officials said no to the proposal that Greece turn to the International Monetary Fund (IMF) for emergency loans, the idea being that the IMF is fine for economic development cases like Zimbabwe or Ukraine, but would be degrading for a member state of the European Monetary Union.
European finance officials and government leaders worry about the risk of “moral hazard” -- that if they step in to help Greece, other weak states will fail to take the painful austerity measures needed to get their budgets in line with EU standards. Yet Greek Prime Minister George Papandreou told the French daily Le Monde that Greece “needed the psychological and political support of Europe.”
What will Europe do? Military theorist Edward Luttwak said the logic of strategy induces the coming together and reversal of opposites; what is good becomes bad, and bad becomes good. But when do opposites reverse? When does the long way round become the shortest way home? Has not aiding Greece become a greater moral hazard than helping?
Investor perceptions determine whether a policy is successful or not, for once the investors turn down their thumbs, the policy fails. Now the solution to Greece’s debt problem is political, but the ramifications of the problem are both political and economic. The core economies of Europe stand to gain from a weakening euro, which helps exporters, but at the same time they suffer from any weakness in the euro zone itself. If the contagion of investor concern over high public debt spreads to Spain, Portugal and Italy, that also would hurt the perception of the EU as a world-class player. Incidentally, slower growth in those countries resulting from budget cuts could also crimp the economies surrounding them.
Luttwak also said, “It is only in the realm of strategy, which encompasses the conduct and consequences of human relations in the context of actual or possible armed conflict, that we have learned to accept paradoxical propositions as valid.” But he is wrong, for people also accept paradox in the spiritual realm: Surrender yourself to God and win new mastery; die to reach eternal life; give in order to receive.
The commonsense solution would be to help Greece out of its troubles, make them sign some note saying how very sorry they are and how very seriously they take the eurozone rules, and then everyone can return to the status quo. But in military strategy you are supposed to do the opposite of what commonsense tells you, even if the enemy will be expecting you to do just that.
The EU has been a free Euro Disney ride for too long. So let the Greeks go down the drain and pull every weak-willed southern sister along; but let everyone know we’ll be praying for them on their way down.
