Cultural Impact: the eurozone crisis
In considering the eurozone crisis from a cultural perspective — you’d be amazed at how many things are impacted by cultural norms and expectations. Hofstede and Hofstede’s research on cultural dimensions and expectations contain five dimensions: individualism vs collectivism, masculinity vs femininity, uncertainty avoidance, long term vs short term orientation, indulgence vs restraint, and power distance. This looks at the elements of the crisis that are and are not impacted by culture, as well as the domino effect of events in several countries on the rest of the world.
Elements impacted by culture
The Greek crisis was triggered by the 2009 revelation that the Greek government had falsified its economic data to make the country appear like it was in good standing of the eurozone. $117 billion owed to private banks was written off, therefore the $380 billion remaining is owed to the other EU nations — the German, Dutch, French, and other European taxpayers. Greece has been slow to implement structural reforms it agreed to for the bailouts.
Individualism vs collectivism
Taking the work of leading cultural ethnographers, Hofstede and Hofstede, on cultural dimensions and expectations into consideration, of the major countries most discussed in the research, five of the six are highly individualist cultures: France, UK, United States, Netherlands, and Germany. Greece, on the other hand, has a more collectivist culture. Individualist cultures tend to value pulling oneself up by one’s bootstraps and not depending on others to succeed. What is considered “right” and “moral” depends very much on culture. A collectivist culture like Greece’s will expect a friend to help them, to break the rules when needed, while a more individualist culture like that of Germany will insist on following the rules. The Greeks, Spanish, and Italians and other southern Europeans, which are more collectivist, feel that Germany will not help a friend in need, insisting on adherence to rules when the situation is clearly unique. Greece’s collectivist culture means that it is committed to its “in-group”, especially extended family. This type of favoritism (known as “nepotism” in many countries) also leads to corruption, as no one is willing to turn in someone who is breaking the rules, but who helped them when they needed it. Helping your friend is more important than adhering to rules in collectivist societies, thus if we consider the fact that the majority of Greeks are now favoring Grexit as a result of these austerity measures and high unemployment, it makes sense — they want to leave their friend who is not helping them, namely Germany and the rest of the EU.
Masculinity vs femininity
Of the six individualist cultures, the Netherlands is strongly feminine, while France is also feminine. This means that they value relationships and security over the masculine cultures’ valuing assertiveness, competition, earnings and advancement. France shows this by adopting a largely paternalistic management style, where employees are part of a family and managers look out for the employees’ emotional state as well as their professional growth.
The UK, US, and Germany are strongly masculine. Greece is medium masculine — people want to be successful and are driven to succeed. Men consider it an honor to care for their family. However, the debt crisis and financial austerity measures have reduced most Greeks to poverty, thus taking that away from them, they can’t be successful, so why try? It is a destructive cycle, with corruption becoming even more rampant, as everyone tries to do the best they can for their own families, and does not worry about the well-being of the larger Greek society, and certainly not of the other European taxpayers who provided the bailout money in the first place. Defaulting on repayments and not quickly enacting reforms to meet the terms of the bailout are further examples of this devotion to their in-group at the expense of everyone else.
If we look at world events that impact each other, in particular Brexit, the US election upset and the upcoming French election, we can see the effects of culture as well. Because Great Britain is a very masculine and individualist culture, this lent itself to the current Brexit — wherein Great Britain is leaving the EU. Great Britain had already shown itself unwilling to join completely by continuing to keep the British pound, rather than the euro. The United States, especially under Trump, is also a highly masculine and individualist culture, and is showing that it will turn back the more socialist changes Obama made with the repeal of the ACA, the deportation of not only illegal aliens, but even the Dreamers Obama put rules in place to protect. The fact that Trump won the US election can be attributed to the individualist culture of the US — people want to support their families, but cannot, because the factories have closed, there are hardly any coal mines and car manufacturing plants anymore. Because many US people do not live with their extended families, there is not as much of a financial and emotional support system and families have more expenses. What used to be the blue collar middle class has largely faded away, with the advances of technology and business. They aren’t coming back.
Worried about the uncertainty of Brexit and the US, France has not been doing well under Hollande’s socialist policies and is suffering from high unemployment and very low economic growth — some of the same issues Trump promised to fix, if you were watching the path to the US election. As Hollande steps down, another leader needs to take his place — the French have been concerned for years about the encroachment of American values on their culture. French people see the protectionist and nationalist actions of the Trump administration, which in turn has strengthened the Front National and Marine Le Pen’s chances at winning their upcoming election rounds in April and May. France was instrumental in starting the EU and has traditionally been a strong supporter of Greece, but the winds seem to be changing. Following on the tails of Britain’s Brexit and the Trump upset (which is to a large degree “exiting” from the national focus and taking on an inward focus), Le Pen is advocating a Frexit from both the EU and the eurozone.
Another cultural dimension, uncertainty avoidance, is also a major factor — both Greece and France have high uncertainty avoidance, while the Netherlands, US, and UK have lower uncertainty avoidance. Germany has a medium ranking of uncertainty avoidance, which aligns with their desire to have rules and ensure that those rules are followed, with consequences for non-adherence. Due to Greece having the highest uncertainty avoidance ranking, Hofstede states that this means that laws and rules are very important for safety, and also that Greeks need to have relaxing moments every day, and that they are not comfortable in ambiguous situations. Just having laws and rules does not necessarily mean Greeks are conforming to them, since the needs of the in-group take precedence. If they can’t fulfill those needs, the bailout rules that Germany is trying to force them to adhere to must seem particularly unimportant compared to the uncertainty of daily survival.
Yet another factor, long-term orientation, is defined by Hofstede as every society needing to maintain some links to its past while dealing with the challenges of the present and future. Greece has a medium score here, while Ireland has a low score, and Germany has a high one. A higher score means that a culture will adapt easily to changing conditions, and will save, invest, and persevere to achieve results. This also ties into the indulgence vs restraint dimension. Even when Germany, which is a restrained culture (not indulgent), was making money during the good times, they were still saving and thinking towards the future, while the Greeks and the Irish, medium indulgence and high indulgence, respectively, were not thinking about the future and were having fun while the fun lasted. If you think of the Grasshopper and Ant tale, Germany is the ant and Greece, in their eyes, is the Grasshopper, the one who wanted to have all the fun, but not to pay the piper when the time came.
Of the three countries that reached a crisis point as their economies collapsed, Greece, Ireland, and Spain, all had to deal with austerity measures as a condition of their respective bailouts, but interestingly, only Ireland did not protest. Although Ireland scores low on Hofstede’s long-term orientation, this seems related. The Irish have a strong collective memory of troubled times in their history and an understanding that violence and protests do not solve social problems. These cultural expectations were borne from a difficult history — “when the going gets tough, the Irish hit the road.” Many Irish people emigrated as a result of the potato famine. They also have a history of violent rebellion against being occupied and controlled, however, Power points out that the Irish have a “collective memory of the violence and social denigration in Ireland during ‘the Troubles’” which reminds them that violence doesn’t help in solving social problems. Reaping what you sow is a strong moral foundation of the Irish, rooted in their strong Roman Catholic religious beliefs. Since they had played hard when times were good, so they had to suffer when times were bad. They believe that they are partly to blame for their own financial and social position, so have no motivation to protest.
Since power distance between all of the countries mentioned is either low or medium, this is probably not a major factor, but if you consider that the higher the power distance between a leader and his/her people, the less likely they are to act out, then it does factor in. For example, Germany’s Angela Merkel has a lot of experience and is very professional and diplomatic. She knows how to play the game and how to win friends and influence people. Through her efforts, Germany has gone from a reluctant participant in the EU to the major player. Greece’s Alex Tsipras, on the other hand, is known for his informal attire, his wife and he were both Communists, and it seems that his pride is very wrapped up in the crisis, as he uses words like “humiliation” to describe the bailout terms. When a leader has created a good economy and the people are financially secure and stable, their faith in that leader increases.
Due to the horrors of the Holocaust, Germany is not allowed to have a standing army, and thus has been able to invest everything directly back into its infrastructure and in building a solid, thriving economy. It is the chief economic engine and banker for the EU. Prime Minister Angela Merkel is a strong-right leader in her third term. She and her finance minister, Wolfgang Schauble, both exhibit German diplomacy and deference, but insist on there being rules, that the rules are followed, and that there be dire consequences to countries that fail to adhere to the rules, which has its roots in German cultural expectations.
France, a country with high uncertainty avoidance, is facing its own economic struggles, and analysts worry that the economic conditions of Italy and France are the next big risks for the EU. As I work for a French company, I know first-hand that the culture tends to avoid risk and insist on well-documented decisions made by committee, where everyone gets their say and everyone’s opinion counts. It’s a paternalistic management style that tries to make everyone happy and puts a high value on compromise and negotiation. Foreign investment in France is also down significantly. Under left-wing socialist Hollande, the French felt that they should support Greece as another left-wing party that was in trouble, but Hollande has decided that he will not run again. With him stepping down and Italian voters having rejected Prime Minister Matteo Renzi, Germany’s Angela Merkel is the only strong pro-European Union person among the economic leaders.
The powers that be in three of the major countries may be changing. Germany, the Netherlands, and France have upcoming elections in March (Netherlands), April-May (France) and September (Germany). In Germany, Merkel is expected to win thus far. But France’s political position could be changing rapidly. French citizens (and colleagues of mine) are worried about the upcoming election, where there is a possibility that far-right National Front Party leader Marine Le Pen would win, as she advocates Frexit from the Eurozone and the EU. Due to the high unemployment and very low economic growth, this aligns with the French desire to avoid uncertainty with a movement away from the more socialist principles of Francois Hollande, which have caused these conditions. Le Pen’s economic proposals are strongly nationalist and protectionist. This will have a strong impact on the euro, as France is 15% of the European GDP and holds almost 10% of the European parliament seats, so it is an important decision maker.
Meanwhile, Britain is trying to handle Brexit, which will also impact the Greek crisis. A devalued pound would negatively impact real estate, tourism and Greek exports. Germany is the biggest tourist market for Greece, followed by the UK. Greek students in the UK will lose their EU resident status and possibly limited access to welfare benefits and less favorable working conditions, as well as a 40% increase in tuition fees. All of this will cause a mass influx back to Greece, where unemployment is already around 20%. Britain also is 7th highest for Greek exports (over 1 billion euros a year).
However, other countries that needed bailouts, Spain and Portugal, have made changes to fix their economies, so having one problem child versus three or more makes the risk seem smaller. Italy, Portugal, and Spain still have very low economic growth, making it difficult to pay off the accumulated debts.
Total cultural impact
Greediness from other European countries, America, and investors could be tied to higher masculinity and individualist scores, making a quick buck wherever possible with no regard for the consequences to others or the long-term ramifications. Greek widespread corruption could also be tied to its more masculine culture, valuing earnings and advancement over good working relationships. Its higher collectivism makes it value its in-group of people more than others. I ran into this in-group concept when working remotely with a team in Bulgaria — in a more collectivist society especially, one must spend time building relationships and trust to ensure good team dynamics, appropriate interactions, and effective management.
Not everything has cultural roots
Many things can be tied in to culture, but not everything. Economists have various explanations for the Eurozone crisis in general, including the Greek one, which include: easy availability of credit, property bubbles, poor regulation, unscrupulous banking practices, people manipulating the system. Remind anyone of the market crash and housing bubble bursting in the US?
The economic crash was not reflective of the cultures, but of greediness and overspending and higher salaries when economies were doing well and borrowing was basically free. Ireland, Spain, and Greece all overborrowed, which also made them less competitive, which became very obvious when economic growth slowed (Swanson), The austerity measures and tax cuts forced by the bailout terms have decimated Greek citizens’ incomes. High Greek unemployment is causing young people to look for a future outside Greece.
US administration and Russian ties
With the Trump administration seeming to have strong ties with Putin’s Russia, all of Europe must face the question of whether to improve Russian relations. As Greek tensions with the EU increase, its government has been talking with Russia about a gas-pipeline through Greece, against the wishes of the United States. Another problem, according to Lachman, is that if Greece decides to leave the EU, it will clearly signal to financial markets that EU membership can be revoked, which could spead the crisis to larger European countries, and impact the deep trade and financial links between the US and Europe.
The timing of the three upcoming elections does not have its roots in culture. According to FXCM Market Insights, French economic growth has averaged less than 1% for most of Hollande’s reign — this is not cultural. Similarly, French unemployment of over 10% compared to UK and Germany rates around 4% is not cultural. Hollande’s decision to step down is not cultural, but depending on the election results, it will probably weaken the French commitment to resolve the Greek crisis. Foreign investment in France is down significantly from 2012–2015, according to FXCM Market Insights, as a result of the sluggish economy and concerns about the terrorist attacks, with France being in a state of emergency until July 2017. If the French economy does not improve, it will place a major burden on the EU and could continue to weaken the euro.
There are also problems inherent in having several countries that all use the euro, but have different tax and spending and borrowing rules, according to Swanson. She says that the Greeks can’t devalue their currency “to make its products cheaper abroad and stimulate exports” or inflate prices wherein debt in today’s prices becomes cheaper.
Tsipras’ own Communist beliefs and his atheist principles are not tied to culture. While his religious beliefs may not be as important in this case, aside from the fact that he has eschewed the traditional Greek politician’s pedigree and attended a state school rather than a prestigious institution, his having belonged to the Communist party shows that he has strong socialist beliefs, although communism is also rife with corruption. Socialism is about taking care of everyone, through affordable or free healthcare, living wages, a good quality of life for everyone, and spreading the wealth rather than concentrating all of it in the top 1%. If we take his socialist beliefs that there should be a good quality of life for everyone, then it makes sense that if you consider the EU as a large society, everyone should be enjoying a good quality of life.
What cultural impact is most important?
In considering the eurozone crisis, several cultural dimensions play a big role, including individualism vs collectivism, masculinity vs femininity, and long-term vs short term orientation, and indulgence vs restraint, these last two of which are closely related.
The fact that Greece is the only collectivist culture among all of the individualist cultures that are contributing to the bailout funds plays a major role in this cultural and political conflict. A collectivist culture like Greece’s will expect a friend to help them, in the form of debt forgiveness or at least much softer repayment terms, to break the rules when needed, while a more individualist culture like that of Germany will insist on following the rules, as we see enacted today. According to Phillips, the Greeks, Spanish, and Italians and other southern Europeans, which are more collectivist, feel that Germany will not help a friend in need, insisting on adherence to rules when the situation is unique. Greece’s collectivist culture means that it is committed to its “in-group”, especially extended family. This kind of nepotism also leads to corruption, as no one is willing to turn in someone who is breaking the rules, but who helped them when they needed it. Helping your friend is more important than adhering to rules in collectivist societies. Because Greece feels shunned by its friends, especially Germany, it is unwilling to try to play fairly.
The fact that Greece is medium masculine is also important — people want to be successful and are driven to succeed. Hofstede says that men consider it an honor to care for their family. However, the debt crisis and financial austerity measures have reduced most Greeks to poverty, thus taking that away from them, they can’t be successful, so why try? Thus, corruption becomes more rampant, as everyone tries to do the best they can for their own families, and does not worry about the wellbeing of the larger society, and certainly not of the other European taxpayers who provided the bailout money in the first place. Defaulting on repayments and not quickly enacting reforms to meet the terms of the bailout are further examples of this devotion to their in-group at the expense of everyone else.
Long-term orientation, which Hofstede defines as every society needing to maintain some links to its past while dealing with the challenges of the present and future, also plays a major role. Greece has a medium score here, while Ireland has a low score, and Germany has a high one. A higher score means that a culture will adapt easily to changing conditions, and will save, invest, and persevere to achieve results. This also ties into the indulgence vs restraint dimension. Even when Germany, which is a restrained culture (not indulgent), was making money during the good times, they were still saving and thinking towards the future, while the Greeks and the Irish, medium indulgence and high indulgence, respectively, were not thinking about the future and were having fun while the fun lasted.
In summary, if one doesn’t take the time to learn about the other cultures one is working with, to understand how cultural expectations impact the rules of the game, and how to negotiate and compromise in a way that makes everyone want to play by the rules for the good of everyone, it will be the world that loses.
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