Harley Hahn - Economics Explained - Time, Money, and the Bail Out of Southern Europe

Money and
Economics

Time, Money, and the
Bail Out of Southern Europe

(December 13, 2011)

Summary: Time sense — how a culture perceives and organizes time — influences national economies. The time sense found in southern European cultures is significantly different from that found in northern Europe. This dichotomy is important if we are to understand the economic bailouts of Portugal, Spain, Italy, Greece, and Cyprus.

In the aftermath of the 2007-2009 economic contraction, it became apparent that virtually all the European countries with serious economic problems were clustered along the north shore of the Mediterranean Sea: Portugal, Spain, Italy, Greece, and Cyprus. Why should this be the case? The answer lies in an aspect of life these five countries share that is different from the rest of Europe: their sense of time.

As a general rule, northern Europeans are "monochrons", while southern Europeans are "polychrons". The distinction, which are significant, has to do with how people perceive time and integrate it into their lives.

Monochrons see time as something discrete, divided into fixed elements — seconds, minutes, hours, days, weeks, and so on — that can be organized, quantified and scheduled. Monochrons love to plan in detail, making lists, keeping track of their activities, and organizing their time into a daily routine.

To a polychron, time is continuous, not discrete, and has no particular structure. Polychrons see time as a never-ending river, flowing from the infinite past, through the present, into the infinite future.

In the workplace, monochrons usually prefer to work on one main goal at a time, staying with a task until a big chunk of it is finished; then, and only then, will they move on to the next task. To a monochron, switching back and forth from one activity to another is not only wasteful and distracting, it is uncomfortable. (This is why the modern trend of multitasking causes so much anxiety.)

Polychrons, however, prefer to keep their time unstructured, changing from one activity to another as the mood takes them. Although polychrons can meet deadlines, they need to do so in their own way. A polychron does not want detailed plans imposed upon him, nor does he want to make his own detailed plans. Polychrons prefer to work as they see fit without a strict schedule, following their internal mental processes from one minute to the next. To a polychron, switching from one activity to another is both stimulating and productive and, hence, the most desirable way to work. (I am a polychron, by the way.)

In monochronic cultures, people will not tolerate lateness. In polychronic cultures, it is not important to be punctual.

The terms monochronic and polychronic were first used by the anthropologist Edward Hall in his 1959 book, The Silent Language, to describe cultural differences. According to Hall, most cultures are traditionally either monochronic or polychronic. In a monochronic culture, time is linear. People are expected to do one thing at a time, and they will not tolerate lateness or interruptions. In polychronic cultures, time is cyclical. In such cultures, it is not important to be punctual, and it is acceptable to interrupt someone who is busy.

If you live in the United States, Canada, or northern Europe, you live in a monochronic culture. If you live in Latin America, Africa, the Arab part of the Middle East, or southern Europe, you live in a polychronic culture.

Monochronic cultures value efficiency and organization, which makes them, in the aggregate, highly motivated to devote themselves to building and maintaining profitable businesses and generating wealth. Polychron cultures see the world in terms of personal experience and relationships. To a polychron, we live to experience and to enjoy, not simply to make money. As such, interpersonal relations are more important than schedules.

One of the most powerful descriptions of the polychronic way of life is illustrated by the Italian expression, Dolce far niente. Loosely translated, this means "How sweet it is to do nothing".

Be honest now. How does such a thought dovetail with your personal outlook on life? My guess is that if you live in a monochronic culture, you spend very little time doing nothing. Indeed, you are probably overwhelmed by your personal- and work-related responsibilities (not to mention your email, voice mail, and text messages). I would further guess that the biggest complaint shared by you — and everyone you know — is that there just isn't enough time in the day to get everything done.

A polychron, however, living in Portugal, Spain, Italy, Greece, or Cyprus would have no trouble understanding Dolce far niente. To them, the "sweetness" of doing nothing is a desirable state of mind that favors the enjoyment of life over the making of money.

Now scale up these differences to the level of the European Union (EU). Of the 27 member states that comprise the EU, 6 of the 7 countries that are having the most serious economic problems have traditional polychronic cultures. (Ireland, a mostly monochronic country, is also in deep trouble, but that is a different story altogether.)

The rest of the EU, the northern member states that are being called upon to bail out the south, are strongly monochronic. As a result, the north of Europe sees the economic crisis much differently than does the south. This has important ramifications when it comes to implementing long-term economic changes. To see why this dichotomy is so important, we need to take a quick tour of 20th century European history.

A Historical Persective

World War I (1914-1919) was, at the time, the largest, most horrible human conflict in European history. Indeed, what we now call World War I was originally called the "Great War", a name that reflected the enormous devastation caused throughout Europe. The results of the Great War were so terrible, it was widely thought that they would, once and for all, put an end to large-scale human warfare.

Nevertheless, within a generation, Europe was to experience an even worse war. World War II (1939-1945) was the largest, most deadly, and most expensive conflict in the history of mankind. Again, Europe was devastated, this time by the increasingly powerful brutality of modern warfare, as well as by the large-scale massacre of millions of people (including the Holocaust). By 1945, Europeans were determined that no such wars should ever occur again, and they began to look for ways to create a pan-European union, one that would be so strong as to guarantee that no European nation would ever again raise its hand against one of its neighbors.

Towards this end, in 1951, six European countries signed the Treaty of Paris, creating the European Coal and Steel Community (ECSC), the world's first supranational institution. The goals of the ECSE were twofold.

First, the basic purpose was to act as an authority overseeing the production and selling of coal and steel in Belgium, France, Italy, Luxemburg, the Netherlands, and West Germany. (This was more than a mere economic achievement. At the time, coal and steel were considered the two most important raw materials necessary to wage war.) In addition, the ECSE was seen as the forerunner of what, one day, might become a full European economic union, the only sure way to guarantee continuing peace.

This dream came true in February 1992, with the signing of the Maastricht Treaty by representatives of 12 countries, laying out the framework for a pan-European organization. After each country had a chance to ratify the treaty, the agreement was implemented in November 1993, formally creating the European Union. Today, the EU has 27 member states spanning almost all of Europe except.

To foster a lasting peace, a long-term goal of the has been to create a strong economic union.

To foster a lasting peace, one of the long-term goals of the EU has been to create a strong economic union. Towards that end, in the late 1990s, the EU created the "euro", a brand new supranational currency to replace the older, separate currencies used by each county. In addition, the newly established European Central Bank would control monetary policy, superceding many of the powers of the various national banks.

However, not all the EU member states opted to join. In fact, today, only 17 of the 27 EU countries belong to the euro-based economic union, officially called the euroarea, but referred to informally as the "eurozone". Nevertheless, the eurozone has evolved into a powerful, single-currency union that has, irrevocably, tied together at least 17 of the European countries.

The Effects of a Deep Recession

At first, the creation of a large euro-based market spurred innovation and growth, changing the emphasis from national to supranational prosperity. However, during the great economic contraction of 2007-2009, conditions changed significantly. Like the rest of the world, Europe entered a severe recession and, once the contraction ended, began to recover slowly. Unexpectedly, the five polychronic countries — Portugal, Spain, Italy, Greece, and Cyprus — had much more trouble recovering than did the rest of the eurozone.

In retrospect, it became clear that these five countries had similar fundamental problems that were unmasked by the recession. These problems proved extremely difficult to solve, for a good reason: Much of what needed to change was firmly embedded in the cultures and hearts of the people.

At first glance it looks as if, aside from location, Spain, Portugal, Italy, Greece, and Cyprus have little in common. Like the other European countries, they have unique histories and cultures. Four of them even have their own native languages. (Cyprus uses both Greek and Turkish.) Although such differences are difficult for Americans to understand, they are common throughout the European Union which, after all, consists of 27 member states.

What is so different in southern Europe is that their approach to life is based on a polychronic sense of time. Compared to monochrons, polychrons have vastly different expectations with respect to their governments, their jobs, and their economic systems.

In a monochronic culture, people are willing to work many hours in the pursuit of productivity. This makes such countries highly efficient, especially when it comes to increasing production and making money. Living in such a country, however, often requires daily sacrifice, leading to heightened levels of chronic anxiety and personal discontent.

Within a polychronic culture, people value a slow, enjoyable life experience over efficiency and sacrifice. As such, they tend to elect less-than-truthful politicians who squander national resources, often to provide the slow, enjoyable life their citizens expect. In addition, for a variety of complex reasons, polychronic countries tend to have much more political corruption than do monochronic countries (which, instead, depend on lobbying).

For many years, a staggering amount of debt was systematically hidden.

This is why, in the aftermath of the recent recession, when it was revealed that the national deficits in southern Europe were much larger than had been thought, the reason was clear. For many years, a staggering amount of debt was systematically hidden by the very governments who were supposed to be running the country.

It is at this point that the differences in time sense become significant. Because the EU was determined not to let the economic union fail and threaten the lasting peace they worked so hard to build, the monochronic countries — in particular, Germany and France — agreed to commit enormous resources to save the economies of the struggling polychronic countries. No doubt, such an act by the monochrons in the north reminded them of the well-known Aesop fable, The Ant and the Grasshopper:

During the summer, the ant worked hard, collecting food for the winter, while the grasshopper played in the sunshine. When winter came, the grasshopper, who had nowhere else to turn for help, asked the ant for shelter and food, whereupon the ant replied, "All summer, while I worked hard, you squandered your time singing and dancing. Instead, you should have been thinking about winter. I have no shelter or food for you here."

The moral of the story: It is wise to worry about tomorrow today.

Unlike the ant, however, the monochronic member states of the eurozone could not afford to shut the door on their five polychronic partners to the south. However, they could ensure that whatever largess they are forced to provide will be accompanied by a set of obligatory demands. Specifically, Portugal, Spain, Italy, Greece, and Cyprus must reform their monetary practices; significantly lower government spending; and institute highly unpopular austerity measures.

In essence, the monochrons of the north are demanding that the polychrons of the south make fundamental changes, not only to their monetary systems, but to their culture, their way of life and to their expectations as to what they can expect from their governments and their employers.

These changes are playing out slowly, but surely. Indeed, the pressure being exerted is so powerful that perhaps, one day, the entire south of Europe will be forced to accommodate their economic saviors by embracing a new philosophy of life, Dolce far il denaro:

"How sweet it is to make money."