Cyprus: The limits of financial engineering (3)

 While Cyprus is small and far from our shores, their crises have global implications and do have collateral and direct consequences as well as lessons for our dear country. In Cyprus, it is a season of weeping, wailing, mourning and gnashing of teeth. There is immediate collapse in standard of living and those businesses that had cash assets are facing real tough times. That is in the short run. In the long run, shocked Russians would escape with their deposits as soon as they can and as much as they can, and with the uncertainties surrounding several aspects of the package, it is doubtful if Cyprus is on the way out of the emergency ward so soon. But the whole Europe is one huge economic – and even political – emergency ward and Cyprus is an extra indication that the Eurozone crises are far from over. Unemployment in Spain [the 4th largest Europe economy] is heading to 30 percent and the UK narrowly escaped a recession [3 months consecutive economic decline] last quarter. The crises have generated bad blood and Europhobic feelings among Cypriots who feel treated with unnecessary highhandedness. Their deposits were raided without notice and the debt restructuring that was readily offered to other distressed nations was denied them. As the Eurozone crises drag on and have got to the extent of expropriating private property, global investors may start showing preference for US dollars as currency of choice. Being the first rescue effort in recent times that targeted deposits, it may affect how people perceive Euro area banks. The Russian dimension is also there and European powers will continue to explain that the whole scheme was not targeted at Russia or aimed at destroying Cyprus as a financial centre; there will always be conspiracy theories. And as Cyprus banks got their fingers burnt while trying to save the Greek economy, other banks and bankers would now be a little bit more careful when other countries are in trouble – and that is if and when they can help it.

Meanwhile, given the complexity of these rescue packages and their multidimensional effect on people, it is time to re-examine those who are involved in designing the packages and managing their usually disastrous consequences. For now, it is obvious that lawyers, economists, finance experts, accountants, mathematicians and politicians are involved in packaging and managing these deals. But looking at the extent of 

socio-psychic and economic cum financial problems caused in Cyprus, I think it is time to include sociologists and psychologists, social psychologists, trauma experts, poverty consultants, crime control and prevention operatives, live coaches and spiritual consultants in these rescue efforts, especially in managing the usually negative outcomes.

There is still one more proverb. When a slave sees his colleague being buried alive, he doesn’t need anyone to tell him the fate that awaits him. So, all weak/poor countries, all distressed economies, especially when they are politically weak and strategically insignificant, and all depositors from all over the globe should take note of a new disease called ‘Cyprus Syndrome’ [unannounced raiding of deposits for rescue purposes]. It may/will be their turn tomorrow. The US led the whole developed world to reject and denounce the Invisible Hand doctrine and admit that the market forces were VERY imperfect; the EU has now led the way in violating the sanctity of private property by unrepentant raiding and confiscation of private property [deposits]. Only God knows what they will denounce and renounce next, in words and or in action. This is also a lesson for our expats [expatriate nationals] who are always insisting on global best practices: there are no global best practices. In tandem with the theory of contingency, what is the best depends on the totality and peculiarity of the circumstances.

Back home, the lessons are enormous. Our people must become less docile generally, but particularly as regards how the economy [OUR economy] is managed or mismanaged. The rejection of the satanic clause [general haircut] was possible because the people said no. We have also seen that the advice of EU, WB, IMF and their various experts and expats are questionable and should be rejected when need be. Bailout is not just an economic affair, it is also political; it had to be approved by the parliament and the political stakeholders know that their future is tied to their views on economic issues. It is not a CBN/Ministry of Finance affair. Cyprus banks were closed for two weeks and I wonder how Nigeria can manage a week’s closure of banks. Furthermore, legislators, apart from lining their pockets, must be on the side of the people. Quarrelling with the executives over constituency projects and allowances, padding and mutilating budget figures and conspiring on how to sack/cut the tail of ‘unrepentant’ public servants are not the core of legislators’ job. All the sanctimonious advice and orders to LDCs have fallen flat: they have rescued, taken over, poured in trillions of public funds into private businesses, admitted that the free market model is woefully deficient and practiced a visible hand philosophy. Only God knows what next the white man would renounce tomorrow. As for Cypriots, my compassion goes out to them. But that is what we have been through all the years since SAP which was designed by their fellow white men. [concluded]

Meanwhile, whenever the police announce that a kidnap victim was rescued without the payment of any ransom, just ignore the story and keep on with whatever you are doing. The press in the last two weeks told us the truth: Okonjo – N13m paid; Chudi Nwike – N5m paid; Regina Obi – N2m paid; and Bamigbeton, chairman of Ejigbo LCDA, Lagos – N15m. The matter is settled; it is a big and deadly business! 

IK MUO

Muo is a lecturer and management consultant in the department of business administration, Olabisi Onabanjo 

University, Ago-Iwoye

muoigbo@yahoo.com

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