We are surrounded by news of the Eurozone. But what positive solutions have we offered by way of Big Society neighbourly help? Or have we just covered our own backsides?
I am proud that our country punches above its weight in creative talent. In technology, music, drama, film, television, comedy and, yes, advertising, Great Britain is a creative force.
Have we mobilised this talent? Can we help by finding a creative solution to this crisis? In this spirit, I would like to offer some ‘upstream’ creative thinking of my own.
Let’s be brutally simple.
We start with what Euclid called axioms.
I am asking you to accept the following five points as the truth:
1. The Eurozone is a clumsy mish-mash of politics and economics.
2. The politics, based on history, is that Europe is better united than divided.
3. The Euro is an economic problem.
4. Politicians are attempting to resolve economic, non-political problems.
5. In times of desperate economic crisis, it is necessary to park the politics.
Please bear with me and accept the above as axiomatic, even if you are a politician.
Having accepted these axioms, let’s unpick this Euro problem and start again.
What is the Euro?
The answer, again, is brutally simple.
The Euro is an exchange-rate mechanism where a number of countries are ‘pegged’ to one currency. There is nothing new in this.
For nearly ten years, I worked with The Bahamas Tourist Office. Lovely people. Lovely place. As part of my job, I had to visit The Bahamas almost every year. Tough client.
The Bahamian dollar is ‘pegged’ to the US dollar on a one-to-one basis.
Please note this very important sentence.
Do you know what it means?
It means that, when you go to The Bahamas, you will find in your pocket a mish-mash of American and Bahamian dollars.
But relax, don’t worry, stay on the beach, have a swim, chill, float – because It doesn’t matter which dollars you have. They only look different. Some Bahamian dollars even feature pictures of the Queen. But each Bahamian dollar has the same value as the US dollar.
I was brought up in Hong Kong where, even since 1997 when, disgracefully in my view, we gave the place and its people back to China, the Hong Kong dollar is ‘pegged’ to the US dollar.
Do you get that?
In our world, today, a province of China has a currency ‘pegged’ to the American dollar? Which politician would have made that up let alone happen?
“In 1972, the Hong Kong dollar was pegged to the US dollar at 5.65 HK dollar = 1 US dollar. In 1973, this was revised to 5.085 HK dollar = 1 US dollar. Between 1974 and 1983, the HK dollar floated.” (Wikipedia).
You may not be an economist or even be privileged enough to work in our financial service industries but please, please read the above sentence very carefully.
For this is the solution to the Eurozone crisis.
What it means is that a currency can be ‘pegged’ to another currency but, in times of crisis, the exchange rate can be revised.
It can even float.
Now, the Euro is in crisis.
And what follows is what needs to be done.
Let’s move to Greece. I love Greece. For one glorious summer, immediately prior to commencing my career at Ogilvy, I taught water-skiing in Corfu.
The only solution for Greece is, in principle, to stay pegged to the Euro.
But for now, and until this crisis is over, Greece needs to do two things:
1. Re-launch the drachma. At this sad time, this will help the Greek people soar with pride in their wonderful country. All those heroes – Hercules, Achilles, Odysseus, Socrates, Plato, even my friend Euclid – come back and be noted!
2. Stay pegged to the Euro but float the drachma at a new exchange rate to the Euro (within whose fiscal rules the drachma will remain).
(This is not as difficult as you might think. All shopkeepers need is a till that gives you a price in two different currencies. You will find this in airport Duty Free shops. At one time, even, there was discussion of High Street retailers in Britain accepting Euros as well as pounds. In practical terms, it is not a problem. You can even pay tax in Euros).
Do know why this should happen?
It is because Greece is in crisis and the drachma cannot survive at an exchange rate of less than 1.2 Euro to the pound. It needs to be at least 1.5 and anywhere up to 1.99.
At this rate, the people of Europe will want the drachma!
Governments and banks will buy bonds in drachma!
People will buy things sold in drachma!
People will go on holiday Greece!
Everyone will be happy!
Greece is not the only country that should do this, of course.
So the creative solution to the Euro problem is for all the countries in the Eurozone, other than the ‘base’ currency (Germany or France or both?) to:
1. Relaunch, reprint and redistribute each Eurozone country’s national currency (apart from France and/or Germany).
2. Meet to agree new, more achievable exchange rates in proportion to each country’s national debt.
3. Don’t invite David Cameron.
That is the solution.
If ever we join the Eurozone, unlikely as it may seem today, all we will be doing is ‘pegging’ the pound to a centralised European currency. It is an economic decision.
Once we have done this, if we are in crisis, we can float if we need to.
Either way, we can even keep the Queen and our British heroes like David Ogilvy on our currency, thus helping – emotionally – to overcome any political fears there may be.
We would not be selling our souls.
And, by retaining our own ‘currency’, it would be easier to pull out if we had to.
As I hope I have shown, when in a crisis, you need to throw everything up in the air.
You need to be creative.
And you need to be brutally simple, as demonstrated above, and argued by Maurice Saatchi in his book ‘Brutal Simplicity of Thought’.
By nature, economists will not want to be brutally simple. The more qualified, more highly regarded and more intelligent the economist, the less simple he or she will want to be.
Their instinct will be to find theorematic complexities to do with balanced budgets, deficit limits, the current value of Greek bonds, the need to submit budgets to Brussels and conformity to an Economic Planning Commission.
But they have to be more open minded than this.
They have to accept that the only way to recover from this brutal crisis is what used to be called devaluation and the facility to float exchange rates to the centralised currency, just like the Hong Kong dollar did to the US dollar between 1974 and 1983.
After agreeing that principle, the economists and eurocrats can work out implementation. But they must be prepared to make a creative leap.
In this economic crisis, the politics is the problem (Euclid liked problems).
And the problem needs a creative solution (Euclid liked solutions).
As I hope I have shown.