Disturbing trends: About the worshipping of fake entrepreneurs and the dehumanization of workers

“Get the funk out, Superman”; “Move over, Wolverine”; “Hush, Spidey”: the latest superhero in The Netherlands is “Captain Entrepreneur”.

Since the end of the eighties, the Dutch society went through a long period of liberalization, privatising and ‘marketization’, in which the country changed unrecognizably.

Many former state companies, like utilities companies, national transport companies, telecom companies, housing cooperatives and organizations for public services and public health became privatized and suddenly had to stand on their own two feet from a commercial and financial point-of-view. At the same time the market was opened for domestic and foreign competitors, who had to battle for the customer with the former state monopolists.

In some exceptional cases, this strategy indeed became a massive success, with lower prices and better service for the customers. The best example over the years has been the former Dutch national telecom company aka KPN Telecom.

However, in most cases the success was questionable at best and in the worst cases, it had been a blatant failure, where the service level collapsed and/or prices exploded, because companies started to behave commercially, instead of in the interest of their customers and stakeholders: health care and home care are examples of this category.

What happened since the eighties, is that many formerly down-to-earth directors of midsized and large companies and former public officials suddenly felt themselves like CEO’s, ‘leaders’ and ‘entrepreneurs’.

They started to hand out commercial and ‘marked to market’ salaries to themselves: not for the risk they were bearing in their job (i.e. as there was virtually no risk in most cases), but just because American CEO’s and managers in the same industry earned the multi million bucks salaries that they wanted to earn too. Chairmen of school-boards, pension funds, healthcare insurance companies and hospitals all felt entitled to a salary of almost half a million euro’s or more, while the directors of some commercial companies felt they should earn even multi-million euro salaries. The looting of companies and semi-public organizations had started.

All those Dutch “civil-servants-and-managers-feeling-entrepreneurs” forgot their valuable and hard-learned lessons from the past and started to look for the holy grail of “leadership, efficiency and effectivity”. It was the upcoming era of the management book, in which American heroes like Tom Peters, Stephen Covey and Deepak Chopra wrote their “books of the new testament”. As the number of management books with their different solutions and opinions soared, the confusion among our Dutch ‘leaders’ came to a peak.

At the same time they lost connection with their personnel at an alarming speed and instead adopted the Anglo-Saxon business babble, in which concepts like FTE (i.e. full time equivalent) as synonym for a worker, MI (management information), dashboards (Excel control screens based on graphs and charts) and KPI’s ( Key Performance Indicator) for managers ruled.

Self-steering, self-aware and cooperatively thinking personnel became out of fashion (i.e. Theory Y-personnel).

Instead, the managers and their ‘robotized’ personnel had to follow the ‘brilliant’ thoughts and wild, thoughtless ideas of their leaders and ‘entrepreneurs’ to the last syllable. Almost every new management technique brought new reorganizations to sometimes already shell-shocked companies. Since then it has become the time of Theory X with its explicit notions that people are lazy and dishonest in nature and have to be forced to work.

Loyal and motivated workers lost the implicit trust from their superiors and had to be bound up in KPI’s, evaluations and assessments, while being subdued through seminars, workshops, management courses and personal effectivity trainings etc. Instinct was out of fashion, while personal effectivity training was in. People that wanted to have personal freedom, became either executive in a company, independent entrepreneur or sometimes even unemployed.

Since those days Captain Entrepreneur (the fake, no-risk-involved, entrepreneur) has been starting his reign in The Netherlands, being worshipped by his fellow would-be entrepreneurs, conservatives and political leaders in our country. At the same time the worker has been sinking deeper and deeper in the quicksand of management techniques, conditioning and constraints, while being more and more dehumanized.

On the (business) talk-radio stations Captain Entrepreneur is ruling. Almost every third radio commercial is aimed at the entrepreneur and offers him various services, in order to ‘give him enough time to do what he does best: doing business!’

Lifestyle magazines, dedicated to Captain Entrepreneur, offer expensive travel, clothes, restaurants, art, watches and cars and boring stories to feed his hedonistic behavior and skin-deep lifestyle. For real interesting stories about real, interesting people you might better read an eighties Playboy than a current lifestyle magazine; I am really not kidding.

Don’t think that I’m against entrepreneurs. To the contrary. You could remark that the core of entrepreneurship is running risks: risk of failing, defaulting and losing your life savings and business after years and years of hard work. Therefore it takes brave, fearless and energetic people to start their own business; especially in times of economic hardship. After they stumble and fall, the real entrepreneurs stand up again and give it another try. The less successful or daring ones find a regular job or life in poverty, while paying their dues.

In this matter, the real entrepreneur should be considered a (small) hero, as his efforts and ‘battles for glory and personal wealth’ can offer innovation, opportunities, employment and prosperity to many people. Many fail, but also many succeed and offer numerous jobs to millions of workers all over the country.

However, many CEO’s and executives of midsize, large and multinational companies, which have already existed for many years and offer virtually no risk for their CEO’s, feel also like entrepreneurs. And the former civil servants and public officials of privatized, ex- government services feel also like entrepreneurs, although they never ran a risk and never had to battle against poverty and hardship.

The result of these developments have been:

• Successful real entrepreneurs, but also many, many ‘fake’ entrepreneurs – the CEO’s (!) and executive managers, the traders and dealers and former government officials – are the superheroes in The Netherlands: Captain Entrepreneur;
  
• Many other real entrepreneurs – the small business-owners, the small shopowners and the freelancers  who run the real risks in the business- have been hit very hard by the economic crisis, as they feel the ubiquitous loss of unemployment and consumer confidence the most. Especially many freelancers and small business owners should have or would have never started a business, when they would have had a real choice in the past;
  
• And last, but not least, the worker, who was mostly happy and satisfied with his job and his salary and who had never further ambitions for becoming an entrepreneur, has become the pathetic loser in the eyes of the leading political and economic caste. 
  
• He can be called and seen as an FTE by his bosses, who treat him with disdain and pseudo-compassion;
  
• The worker is tolerated as long as he follows the instructions and techniques of his management and increases his efficiency and output per day, even through a neverending flow of reorganizations and efficiency-increasing programs;
  
• Many workers – especially in large companies – have no direct interest anymore in helping their company-as-a-whole to become more effective and successful; Instead, they are busy with helping their superior line manager to earn him his KPI’s, so he receives his bonus. This behavior leads to companies, operating like ‘islands in the stream’:
  
• It is often more appreciated and even tolerated to help your manager solve a €50,000 problem than to help somebody from another department to solve a €5 million problem that hits the whole company.
  
• In large companies, many personnel members have never seen their executive management in real life, even after years and years of working at the same company. Except for images on the intranet and on television, these people are total strangers, who come and go in blinded limousines and only enter restricted parts of the offices, where normal personnel doesn’t have access;
  
• During these days, many companies announce mass-lay offs with the comment that ‘they have to diminish their production capacity with 1500 FTE’s in order to stay competitive in their line of business’. With such a message 1500 people or more (in case of part-time workers) lose their job: man as the perfect dehumanized means of production. 

Of course, this bleak picture is not true at every company. There are still lots of compassionate directors, who still call themselves ‘director’ and who know every personnel member by name.

Or executive managers and entrepreneurs in large and growing companies, who visit every department on a regular basis and still look at every detail with the love for the job that they felt in the beginning of their careers.

People, who don’t feel more important than their personnel and only want the best for them and their families, sometimes even at their own expense.

However, unfortunately the number of fake entrepreneurs and leaders is growing: people, who think only about themselves, their careers and their own wealth and never about their personnel. One of the worst examples of this species might be Jan Bennink of DE Masterblenders.

At the same time, the dehumanization of personnel is increasing:

• Loyal workers, who are replaced by people that don’t do a better job, but just earn less income. Just because the competition also does the same;
  
• Workers that work in increasingly risky circumstances, as freelancers, as their bosses don’t want to have personnel with a fixed contract anymore and don't bother to pay for a safe working environment and protective clothing. 

• And personnel that are almost on a 24x7 working duty, as the flow of telephone calls, emails and direct messages never stops during their spare time and an immediate response is always expected. 

The worst example of this dehumanization was perhaps last week’s case at Merrill Lynch in the London City. 

A young, German student and would-be banker – Moritz Erhardt - collapsed and died, reputedly after a working period of a fortnight with no less than eight sleepless nights and – at the moment of his death -, reputedly three sleepless nights in a row upon his sleeve. The Daily Mail wrote upon this story:

Mr Erhardt was nearing the end of a seven-week internship with Bank of America Merrill Lynch’s investment division. It has been claimed he had worked through the night eight times in two weeks at the firm’s London office to impress his bosses.

Reports suggested that Mr Erhardt, who was found collapsed in the shower in his Bethnal Green flat and was said to suffer from epilepsy, could have had a seizure.

A fellow intern at the bank said Mr Erhardt was ‘the superstar’. He added: ‘We typically work 15 hours a day or more and you would not find a harder worker than him. He was very popular with everyone. He was tipped for greatness.

Unsurprisingly, those who make it through and become interns are desperate to prove their worth. They know that if they land themselves a full-time position it could potentially earn them a six or even seven-figure pay packet in the future.

According to one senior figure who has worked at a number of major investment banks, the idea is to throw them in at the deep end and see who sinks and who swims.

‘It is like a baptism of fire really,’ she says. ‘What people have to get their heads around with banking is that it is different from other industries.

‘Your competitor isn’t necessarily the trader in another bank, your competitor is the man or woman sitting next to you. Because if you don’t hit the profit targets — for an intern it would be a performance target — and the person sitting next to you does, then he is going to get the job. You’re competing all the time.'

Of course this is an outlier. At least I hope so! Still, this must be the epithomy of dehumanization of work and workers.

The Almere Icedôme revisited: when the smoke blows over, a financial ‘black hole’ might reside for Almere’s tax-payers.

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The sickening violence in the Arab territory in Africa and the Middle-East ; is there any hope for the future?

I didn’t write upon the civil wars in Syria, in Egypt and in other Arab countries in Africa and the Middle-East region for a very long time.

This was not because I didn’t care; to the contrary, I am disgusted with the sickening violence in these countries.

I grief, because of the despair in the situation of the people there, knowing that there is not a real solution. What seemingly started two years ago as a battle for a little bit more personal freedom and democracy in the Arab parts of Africa and the Middle-East, derailed in religiously/tribally/politically inspired civil wars between the numerous factions in these countries.

Factions, consisting of people with a shiite or sunnite background, or with a secular, ba'atistic, salafistic or wahabistic view at the world. Moderate and fundamentalist people, who at some time started to hate each other for religious, economic, political or historic reasons. Often these factions have a strong, centuries-old tribal background.

Many of today’s difficulties are caused by the troubled history of most of these countries, with bitter wars and foreign domination, by initially the Turks (through the Ottoman Empire) and in a later stadium the French and the British. The British and French influence in many of these countries had developed either due to the colonial years or as a consequence of the First and Second World War, in which he British and French fought together with the Arabs against the Turks in Ottoman Empire. The Turks had built an alliance with the German-Austrian axis and where therefore the enemy of Great Britain and France, while the Arabs themselves were sick and tired of the Turkish rulers and wanted to liberate their countries.

During the war in the Middle-East, the British and French military leaders made all kinds of promises to the different factions that were unitedly fighting against the Turks. Unfortunately, they broke most of these promises after the war had been won. Instead, Arab countries like Syria, Jordania, Saudi Arabia and Iraq turned into British and French mandate zones. This situation lasted until the middle of the 20th century, when the Second World War ended and many colonies and mandate zones successfully battled for independency eventually.

The haphazard way in which many Arab countries had been established by the British and French in Africa and Asia, had a devastating effect on the stability. Many borders between countries had been drawn with rulers, irrespective of historic territories and tribal areas. Countries like Lebanon, Libya, Syria, Iraq, Jordania, Saudi-Arabia and Israel seemed almost ‘glued’ together, without having a mutual foundation and history. Large groups of people, like the Kurds and the Armanians unsuccessfully fought for their own countries in Iran, Iraq and Turkey.

Religious, political and tribal tensions have been omnipresent during the 20th Century and the first years of the 21st Century, but they were (violently) suppressed by the (often) ruthless leaders. These leaders acted like the cork on a Champagne bottle and kept the population quiet and under control. Just like Josip Tito did in the Balkan countries.

However, when the leaders like Saddam Hussein in Iraq, Moammar Ghadaffi in Libya and Hosni Mubarak in Egypt were removed and especially after people started to seriously challenge Bashar al-Assad in Syria, Pandora’s box had been finally opened. 

This was something that I already feared in March, 2011:

It is uncertain how this operation “Desert Mess” ends. If Gadhaffi wins, the whole uprising in the Middle-East:

• might fizzle out like a damp squib or
• might make the insurgents in other countries more ruthless and determined to win their own fight. 

However, if Gadhaffi loses his (final) war, he might find himself and his whole family back standing at gunpoint of a firing squad, for a departure in Nicolae Ceaucescu style. There will be no mercy then under his victors.

At this moment the rulers in all Arabian countries and even countries as far as China and Russia are grinding their teeth and wringing their hands about the ending of this Libyan war. Even today the number of uprisings in the Arabian countries is increasing and I think that the insurgents will be as determined as they can be, now they know that the price of their uprising can be plain civil war, with lots of people getting wounded and killed.

One thing is sure: when the Arab world comes to rest again, it will have been at the cost of many, many lives. In the meantime the process will be carefully watched by the Russian and Chinese leaders.

Needless to say that most of the aforementioned predictions were right, unfortunately. The Syrian war alone has claimed almost 100,000 lives, with as its moment of rock-bottom the poison gas attacks near Damascus of last week. 

Although the situation in Egypt is not yet as serious as in Syria, the seeds for a full religious/tribal/political conflict have been sown with the two-year reign of the Muslim Brotherhood and the subsequent military intervention there.

The most sickening thing is that every kind of intrusion by the western world can and will have numerous, undesired side-effects. It could spark a total war in the Middle-East and Africa, with eventually millions of deaths and wounded people. Regardless of who ‘wins’ and who loses in these countries, there are always large groups of people who will suffer from it, as 'old bills will be settled' by the victors: Pandora’s box is open and cannot be closed so easily.

This is the true diabolic dilemma of the current conflicts in the Middle-East and Africa: if the western world sits on its hands and does nothing about the situation, hundreds of thousands of people might be killed. However, if the western world acts again, like in Iraq and Afghanistan, and sends in a large military force, hundreds of thousands or perhaps even millions of people might be killed in the subsequent wars and military domination phase. 

Intrusion by the rest of the Arab world is out of the question too: a Sunnite invasion, powered by Qatar or Saudi Arabia, would spark a tidal wave of violence and hatred from the Shiites, who are the suppressed minorities in many Sunni countries  and / or from opposed Sunnite factions. The opposite would happen, when Iran would try to “help” the Shiite minorities or would overpower the Sunni or secular governments (Egypt) in these countries.

There is just no simple solution, which helps all opposed parties in these countries at the same time. You cannot act without making choices and every choice that you make, might have devastating results. Notice, that doing nothing is also a choice. Every political leader in the (Western) world with more than one brain cell knows this and that is the reason that most Western leaders are dragging their feet, when it comes to finding a solution. 

Suffice to say that this is the reason why China and Russia are not showing their hand of cards too, turning the Arab question in a giant game of geo-political chicken.

However, there might still be one glimmer of hope for these countries in the Arab world: it has not always been like this. There have been long times of relative peace and quiet in the Middle-East: times wherein Shiite and Sunnite Muslims, Jews and Christian people lived together in mutual acceptance and with a certain, minimal kind of respect for their mutual beliefs and cultures. 

Times when the Arab world was a melting pot of progress, science, art and architecture. A time wherein the dazzling, mathematic tile mosaiques and window dressings and the stunning buildings, mosques and castles have been created, which f.i. can still be seen in the Alhambra in Granada, Spain and numerous other places in the Arab world. Times, when people were traveling from the West of Africa until the East of India, in a world that had been influenced by the Arab culture. 

Somehow, the Arab world must try to find these times back again.

Dutch Finance Minister Jeroen Dijsselbloem seemingly plans to sell the ABN Amro bank at the shortest possible notice. Well, he might be in for a rough ride, if he wants to return all tax-payers money!

ABN Amro is the ‘oldest’, Dutch state-owned bank. In 2008, the bank came in Dutch state hands, after the sale of ABN Amro to the troika of Royal Bank of Scotland, Banco Santander and Fortis Bank went totally awry in the fall of 2008 and ‘new owner’ Fortis came into nearly fatal liquidity problems. The same happened in a later stage to RBS, who also took a bigger bite than it could chew with ABN Amro.

Would Fortis Bank and Fortis Insurances not have been rescued by the Dutch and Belgian state, both ABN Amro (i.e. the Fortis part of this bank) and Fortis would certainly have defaulted.

In 2011, the nationalization and merging process of Fortis Bank and ABN Amro was well underway and the new ABN Amro bank was developing its key strategy. This strategy was: aiming for a strong position at the domestic market, while abolishing almost all former international ambitions, except for those lines of business wherein ABN Amro was a renowned competitor in the ‘champions league’ of banking (for instance: the derivative trade). At that time, it seemed a sensible, albeit not very ambitious strategy for a former (G)SIFI-bank, before the abbreviation G-SIFI even existed.

At the same time, however, CEO Gerrit Zalm (perhaps prompted by Finance Minister Jan Kees de Jager) expressed his opinion that ABN Amro should return to the Dutch / international stock exchanges in (about) 2014, in order to not let the bank reside in the state’s hands forever.  

In one of my early articles, I challenged this opinion by Gerrit Zalm and told him that the chance that the Dutch state would earn back 100% of the total state aid invested in Fortis / ABN Amro (approximately €30 billion) was very limited:

If you then state as ABN AMRO that you are planning to return to the stock exchange in 2014, in my opinion you are busy with a ´mission impossible / implausible´: 

• The amount of state support that ABN AMRO received is estimated at about €25 bln, including the state support for rescuing Fortis Bank:
  
• The chance that an IPO in 2014 will yield this amount of money for the state is about 0,00000000001%, especially if you read what the target customer groups of the bank are.
  
• I don´t know if Jan Kees de Jager (finance minister) or PM Mark Rutte are ready to tell the Dutch taxpayers that they can wave goodbye to at least €15 bln in state support when the IPO is over and done?
  
• Fact is that if the state remains a partial owner by majority of the bank, the other shareholders know they don´t stand a chance when the bank comes into trouble again. The state comes first. 

There isn’t one cell in my body that has a different opinion now; especially after ABN Amro has been prominently involved in the Vestia drama and still doesn’t know what is ‘bakin’ at the stove’ for the bank, when it comes to criminal / prudential punishments by the criminal court, the Authority Financial Markets or De Nederlandsche Bank (Dutch national bank).

Nevertheless, the Dutch finance minister Jeroen Dijsselbloem, who is now the ‘happy owner’ of two banks (ABN Amro and SNS bank) and three insurance companies (Reaal, Zwitserleven and ASR Insurances), is seemingly planning to sell ABN Amro at the shortest possible notice.

In the Dutch media, he expressed the desire to decide on the future of ABN Amro within one or two weeks. His preference goes to a full sale of ABN Amro, without continuing state possession of shares.

Het Financieel Dagblad wrote upon this developing story:

Dijsselbloem prefers a total sale of ABN Amro

Dutch Finance Minister Jeroen Dijsselbloem (PvdA) seems to aim at a full sale of ABN Amro by the state. These days the cabinet takes a decision upon the future of the bank, which came in hands of the Dutch government in 2008.

Dijsselbloem expressed his preference for a full sale on Monday-night, during an assembly of the social-democrat PvdA labour party in Amsterdam.

The finance minister called it crucial for the decision upon ABN Amro that the circumstances which caused the crisis in 2008, cannot be repeated anymore in the future. To prevent this from happening, banks should have a more solid financial position, supervision must be sharper than in the recent past and banks should focus on their core activities, according to Dijsselbloem. According to him, banks should not speculate on or deal with stock and derivatives for their own profits.

“I can warrant this without being a shareholder”, answered Dijsselbloem upon a question from the public ‘if stateownership was not the best guarantee to avoid these past events in the future’.

Dijsselbloem seemed not sensitive towards arguments to not sell the bank soon. ‘If the market allows us, I want to return as much money as possible to the Dutch state’, Dijsselbloem stated concerning the billions of euro’s that The Netherlands invested in ABN Amro and Fortis bank. He made clear that he wants to do this at the shortest possible notice: ‘This deal goes about a whole lot of money and we should make critical choices where we invest the state’s money’. This was a clear reference to the additional austerity measures and burden increases that the cabinet is planning to introduce.

In these eyes, there is only one probable reaction from the ABN Amro bank to Dijsselbloem’s statement in red and bold: “Talk to the hand, Dijsselbloem, ‘cause the face ain’t listening anymore. As soon as the state and Zalm have left the building, we return to our old plans and ambitions. National champion instead of a internationally respected bank?! No way, José…”.

To illustrate this supposed opinion of ABN Amro, I show a quote in a second FD article upon ABN Amro:

After an IPO of ABN Amro, the bankers within the bank would like to say goodbye to CEO and ex-finance minister of The Netherlands, Gerrit Zalm. Even when people inside and outside the bank are praising him in public for the ‘peace and quiet that he brought to the bank’.

However, this peace and quiet is colliding with the ambitions of those bankers. They want to play a leading role again as soon as possible. ‘This would bring back their sense of honour and freedom’, according to anonymous sources.

Once a maverick bank, always a maverick bank…

ABN Amro never really said goodbye to its past attitude, when the world was their playground and the sky was the limit. This in contrary to other Dutch banks, like ING Groep NV, who really seem to have returned to more financially sound business. ABN Amro was forced by the circumstances to change its behaviour, but never felt this attitude change by heart.

I’m convinced that we will hear a lot from the ABN Amro in the future; unfortunately it will not be all good news!

And that IPO that Dijsselbloem is planning? It probably will yield €10 – 12 billion Euro at best (just like I said two years ago ), immediately burning €20 billion of the invested tax-payer’s money in ABN Amro. If Dijsselbloem wants to collect more at the international stock exchanges, he will be in for a very rough ride, probably badly damaging his ego.

Only losers in the credit crisis?! Well, not really… From a budgettary point of view, Germany is a big winner!

The winner takes it all

The loser has to fall

It's simple and it's plain

Why should I complain?

Abba – The winner takes it all

Today, there was surprising, but not really, news from Germany. This day, the German national Finance Ministry, the Bundesfinanzministerium, published the answers to an official inquiry by Joachim Poss, member of the Bundestag (German national parliament) for the SPD (social-democrat) party.

Poss had asked the Finance Ministry about the real costs of the euro-crisis for the German citizens.

The answer that Poss received today, might surprise the unsuspecting reader: as a direct consequence of the euro crisis and its enormous effects on the spreads between the various sovereign bonds of the Euro-countries, Germany saved(!) more than 40 billion euro’s in borrowing costs for public loans. 

Of course, the euro-crisis also led to extra expenses for the German government: an impressive €599 million(!). Balanced out, however, Germany has profited enormously from the Euro-crisis.

This story came not really as a surprise for me. I knew that investors bought ‘Bunds’ (and also Dutch public loans) at ridiculous prices, at the peak of the euro crisis. This led to near-zero interest rates for bondholders and almost free loans for the German national and regional governments.

The following lines come from Der Spiegel:

Profiteering: Crisis Has Saved Germany 40 Billion Euros

German Finance Minister Wolfgang Schäuble has every reason to smile.

Germany has profited from the euro crisis to the tune of 41 billion euros in reduced interest payments. Strong demand for its debt has cut yields and made it cheaper for Germany to borrow. Meanwhile, the crisis has only cost Germany a mere 599 million euros thus far.

Germany is profiting from the debt crisis by saving billions of euros in interest on its government debt, which has enjoyed a steep drop in yields due to strong demand from investors seeking a safe haven.

According to figures made available by the Finance Ministry, Germany will save a total of €40.9 billion ($55 billion) in interest payments in the years 2010 to 2014. The number results from the difference between actual and budgeted interest payments.

The information was released in response to a parliamentary inquiry from Social Democrat lawmaker Joachim Poss.

On average, the interest rate on all new federal government bond issues fell by almost a full percentage point in the 2010 to 2014 period. Financial investors regard Germany as a particularly safe creditor because of its solid state finances.

The Finance Ministry is trying to maximize the benefits of the low interest rates by placing more longer-term bonds at favorable rates. Between 2009 and 2012, the proportion of short-term debt issues with maturities of less than three years fell to 51 percent from 71 percent.

According to the Finance Ministry, the costs of the euro crisis for Germany have so far added up to €599 million.

I’m pleased for the Germans and I’m equally pleased that the Dutch government has saved so much money on its public loans.

However, there is something bothering me about this story:

Since 2010, the same countries Germany and The Netherlands have been constantly nagging and whining within the European Council and the EU Euro-Group meetings about the costs of the euro-crisis for their dear citizens.

The Bundesverfassungsgericht in Karlsruhe ( i.e. the German Constitutional Court) has been holding the whole EU as a hostage, due to their verdict that every important decision within the EU must be approved by the German Bundestag. This ridiculous verdict turned the European Council almost into a lame duck.

Wolfgang Schäuble, Jan Kees de Jager and Jeroen Dijsselbloem, the three finance ministers of Germany and The Netherlands, have acted like real ‘Scrooges’ during the last three years and blocked every serious rescue attempt for the PIIGS-countries most in need: Portugal, Spain and Greece.

Not only did these people tackle the development of a Marshall plan for the Southern European countries, which also dealt with the socio-economic consequences of the Euro-crisis.  No, with the division of the emergency loans into ‘small’ tranches of a few billion euro, they have prolonged the Greek, Spanish and Portuguese problems for years and years, making the citizens of these countries suffer from economic hardship, like a fish on the hook of a patient angler.

Of course, the eventual bill for the rescue packages and numerous state guarantees handed out for the EFSF (European Financial Stability Facility) and ESM (European Stability Mechanism) can be much, much higher than the current €600 million, before the crisis is over. However, I seriously doubt that it will ever be north of €41 billion.

So, today’s news means that it became finally clear that the credit crisis does not only have losers. No, there is also one clear winner. And yes, like in many football matches, the winner is: Germany!

The Vestia case enters the blame and claim zone: where the legal battle begins, the learning process ends

It was the shocker of February 2012 and many months afterwards: the Vestia case in The Netherlands.

A very large, Rotterdam-based building cooperative is used to buying credit interest rate swaps, as a hedge for the interest risks that the organization runs on their vast housing and land investment projects with (partially) borrowed money. By itself, the usage of these credit interest rate swaps is an acceptable and quite normal way of doing business in this very capital-intensive, non-profit industry. However, here it didn’t stop for Vestia.

One or more executive officers of this organization, blinded as they were by their own success, boldness and intelligence and without being challenged by their supervisors or their subordinates, decide to gamble upon an upward direction of the interest rate. They thought ‘that the official interest rates could not stay so low for such a long time and would definitely go up again’. They took a gamble.

The executives eventually decide to invest no less than €23 billion in naked credit interest rate swaps: swaps that were not used as a hedge for a risk-bearing investment, like money borrowed from the bank for housing and land investment projects, but stand alone as an speculation vehicle. At that moment, the ING Groep NV (INGA) already had decided that it didn’t want to burn its fingers on Vestia, due to the increasingly erratic investment behaviour of the building cooperative.

However, four other banks – Deutsche Bank AG (DB), ABN Amro, BNP Paribas SA (BNPQY) and Barclays (BCS) – were less scrupulous and sold the credit interest rate swaps with an understanding, service-oriented smile.

Vestia’s investment goes terribly awry: instead of rising, the official interest rate drops further and further. This interest movement makes that the swaps eventually need to be covered with more than €2.5 billion in deposit money, with the risk of even higher financial damage; enough to almost bring Vestia with its 89,000 houses and buildings to its knees.

Suddenly, the Ministry of the Interior and all kinds of supervising organizations, like De Nederlandsche Bank (DNB; Dutch national bank) and the Authority Financial Markets stepped in, where they first neglected their duties concerning Vestia. Finally, a national scandal is born.

When the case is thoroughly investigated, a cesspit of corruption, bribery, money-laundering and fraud is opened (the aforementioned links lead to two of the (at least) ten articles that I wrote about Vestia; please use Google and the links enclosed in the articles for my other articles).

Bank operatives of Deutsche Bank and other banks have at least bribed Vestia CFO Marcel de Vries and probably other executives of Vestia too. They did so with fancy London dinners, hosted by dozens of luxury call-girls, and enormous kickbacks of millions of euro’s for De Vries.  

Their profits? Commission fees on the credit interest rate swap deals that were ten times higher than normal. For the banks, Vestia was a juicy cash-cow of which Deutsche Bank, ABN Amro, BNP Paribas and Barclays profited scandalously.

Today, there were two separate news items upon Vestia:

• De Nederlandsche Bank (DNB; Dutch national bank) penalized ABN Amro for the way it handled business with Vestia;
  
• A justice of the (disciplinary) Accountancy Chamber officially blamed accountancy firm KPMG for neglecting their legal auditing duties at Vestia, thus clearing the road for legal claims from complainers.

Both articles were printed in Het Financieele Dagblad (www.fd.nl):

DNB penalizes ABN Amro for Vestia error

State bank should have earlier discovered irregularities surrounding the building cooperative.

De Nederlandsche Bank (DNB) penalized ABN Amro for tresspassing the anti money-laundering laws, concerning building cooperative Vestia. This was stated by sources in the financial world. DNB neither acknowledged nor denied the sanction. ABN Amro states that it ‘never comments upon penalties’.

The penalty is for breaking the ‘Law for the Prevention of Money-laundering and Financing Terrorism’ (i.e. Wwft). This law was introduced after the 9-11 attacks upon the Twin Towers. According to DNB, the bank made mistakes, while accepting Vestia treasurer Marcel de Vries as a private customer. When the bank had properly applied this anti money-laundering law, it had discovered that this corporation employee was remarkably wealthy. Maybe, in this case the supervisors would have intervened earlier and the Vestia affair would not have become its eventual magnitude.

The State Prosecution suspects De Vries of corruption, since last year. As buyer-in-chief of the €23 bln in credit interest rate swaps for the country’s largest building cooperative, De Vries received €10 mln in briberies and kickbacks from the derivative trade, according to the prosecution. Financial aid from the other building cooperatives prevented Vestia from defaulting, as a consequence of its derivative speculation.

DNB blames ABN Amro that the bank didn’t investigate the origin of De Vries’ wealth, when his banking affairs were promoted from retail banking to private banking. Only customers with more than €1 mln in money, available for investment, are allowed to bank at ABN Amro’s private banking division.

Although DNB had the authority to penalize the bank for a maximum of €4 million, the penalty was relatively low: €27,000. Within ABN Amro, there is broad dissatisfaction about this penalty. The bank thinks it had followed its standard procedures satisfactorily, but that the procedures themselves were not waterproof.

In 2010, the bank was one of the first to stop selling derivatives to Vestia and it had to accept millions in losses in order to save Vestia.

If I was ABN Amro, I would have paid the €27,000 penalty without a frown and afterwards I would have thrown a big party to celebrate the fact that the bank escaped with virtually no damage done, in spite of the overwhelming set of facts, seemingly pointing in the direction of ABN Amro. However, I really doubt whether this kind of self-knowledge and ‘sense of conscience’ is present at ABN Amro.

Like I wrote before, the Vestia case seemed to be a very smelly case and the involvement of the mentioned banks was not uncontroversial, to say the least.

Although ABN Amro was seemingly one of the first banks to step out of the Vestia derivate syndicate, I seriously doubt if this bank is indeed so innocent, as they hope you would think now.

In my humble opinion, the penalty for ABN Amro for tresspassing the money-laundering law is truly ‘a walk in the park’, Personally, I thought that bank employees would be and should be sent to prison for this Vestia case. A case, which cost the Dutch taxpayers and participants in Vestia and other building cooperatives litterally billions of euro’s.

Justice of the (disciplinary) Accountants’ Chamber clears the road for Vestia claims against KPMG

The accountancy firm KPMG can expect large claims in the Vestia affair. The Accountants’ Chamber (official Disciplinary Chamber concerning the accountancy in The Netherlands) officially blamed the KPMG accountant, who audited the Vestia Annual Account for 2010.

Two of the three complainers in this case, Pieter Lakeman of Sobi and the new executive board of Vestia, have left the possibility for claims deliberately open. The accountant of Deloitte, who checked the annual accounts in the years before 2010, is however dismissed without official blame.

This is the core of the verdict that the Accountants’ Chamber has made today in the Vestia case.

Marco Noorlander of KPMG got chided by the Accountants’ Chamber for the affair. The disciplinary justice accepted and approved of all complaints by the AFM, the third complainer in the Vestia case.

Noorlander had planned and executed his audit with ‘insufficient thoroughness’ and with an insufficient ‘professional-critical attitude’. The result was that he administered a consenting accountant’s declaration, without a reliable basis.

In the famous game Cluedo and in some of Agatha Christie’s murder mysteries, the butler was often the criminal.

Here, in the Vestia case, the guilty ones were Marcel de Vries and the accountant Marco Noorlander. Erik Staal has been blamed for having been an arrogant SOB with too much power and that’s it.

Case closed… We found the guilty ones…

But hey, that is not what the case looked like last year.

Last year, the case looked like it that a syndicate of banks (with Dutch state-owned bank ABN Amro in a prominent role) deliberately scr*wed Vestia (and of course its tens of  thousands of private participants) into buying €23 billion in credit interest rate swaps, which Vestia really couldn’t afford. The banks seemingly used tricks like bribery and fraud to sell this outrageous amount in credit interest rate swaps and earn ten times as much money as they should have done normally in the process.

With the ‘token’ penalty of €27,000 for ABN Amro, administered by the DNB, this case is not even close to supplying a feeling to the Dutch citizens that justice has been done. To the contrary: Vestia blames the accountants and the banks. The banks blame Vestia and the accountants and the accountants blame Vestia and the banks.

A perfect stalemate… Everybody is guilty, so nobody is guilty.

To me it seems that this penalty has been an attempt by DNB to shove everything under the rug, where it concerns the role of ABN Amro and perhaps the other banks in this Vestia case.

The sad side-effect is that this case has seemingly not been properly investigated by the government and the supervising officials yet. As a consequence, nobody has really learned its lesson from this gruesome case, with its enormous financial consequences.

And now, as the ‘blame and claim-game’ starts right now, nobody is interested anymore in learning his lesson from this case. Instead, people try to push as much guilt to the other involved parties as possible, while minimizing their own role.

This makes that such a case could happen again in a few years, when the sky in the financial industry is again the limit. In the end, everybody washes his hands clean of this…

Reaction to the Op-Ed of Minister Lodewijk Asscher about diminishing the free traffic of labour within Europe: ‘I understand your point, but let’s not throw the baby out with the bathwater’

Lodewijk Asscher (PvdA; Dutch labour) is the Dutch Minister of Social Affairs and vice-PM in the cabinet Mark Rutte II.

Asscher was a bright, intelligent and eloquent social-democrat alderman in the city of Amsterdam before he was called for ‘duty’ in The Hague. Since then, his star has somewhat started to fade. Although he can be considered as one of the relative ‘stars’ in this bleak and weak cabinet, his profile during the last year has been too low and his policy has been too non-descript, to make a lasting impression.

This was a consequence of the weak and ‘cowardly’ government agreement wherein the liberal-conservative VVD and the social-democrate PvdA never made real choices. Instead the ‘architects behind the cabinet’, Mark Rutte and Diederik Samsom, have played the card game ‘quartet’: “This one is for you. This one is for me. This one is for you…”.

Here I quote some of my own lines in November 2012:

The whole government agreement is very schizophrenic on the Dutch economy.

The PvdA aims at green, green, green. This is hardly surprising, as Diederik Samson has been heavily involved with Greenpeace in the not too distant past. Topics as durability, green energy and electric vehicles are omnipresent in the lines that have clearly been written by Diederik Samsom. Also the lines upon the banking industry are clearly from his hand.

The VVD is strongly into entrepreneurship of especially the Small and Medium Enterprises and sees Schiphol and Rotterdam as the answer to every economic question. Foreign policy seems exclusively aimed to protect the interests of Dutch people and companies abroad. The platitudes on promoting human rights and the international legal order seem very out of place here.

Non of the aforementioned lines carry a real sense of urgency on the Dutch economy, except for the fact that (to put it simply in my own words): ‘austerity is necessary to get the state budget in order. When the state budget is finally in order the economy will start to grow by itself’. Hallelujah!

The lack of  real, even painful choices made by the cabinet and the blatant lack of any vision on the future by Rutte and his peers, made it probably impossible for Asscher to shine in the past ten months. He had to keep ‘the shop open’ and the development of wages had to be very limited with him at the helm: that was all he had to do. Nothing else…

Yesterday, Asscher made clear that he had not totally forgotten about his social-democrat roots. In combination with the British publicist and writer David Goodhart, he has published an Op-Ed in the Dutch Volkskrant and the British Independent about the free traffic of labour within the European Union.

Their point: the total freedom of labour traffic within the European Union threatens to push the poorest and worst educated workers within the Western European countries into unemployment and/or poverty, due to the large influx of cheap labour from the former Eastern Block countries.

Here are the pertinent snips of their Op-Ed:

Code Orange for free traffic of labour within the EU

The combined EU should take care of the negative aspects of the free traffic of workers, according to Minister Lodewijk Asscher and publicist David Goodhart.

In The Netherlands, a ‘Code Orange’ is submitted when the water in the rivers reaches an alarmingly high level. It is now time for a similar alarm, concerning the negative consequences of the free traffic of persons (workers) within the European Union. We have to watch out: at some places the dikes are at the brink of a breakthrough.

The free traffic of workers within the EU has advantages for most people. It is in the interest of our economies, especially for the segment of professions, which demand highly trained professionals. In these professions, the contours of a European labour market are visible. Besides that, the free traffic of labour within Europe is justifiably seen as one of the pillars of the European ideal. We would not like to see this pillar being broken down, as a consequence of diminishing support among the population.

The right to live and work in other EU-countries is one of the basic principals behind the Treaty of Rome of 1957. This right was hardly used until halfway the 2000’s. In the year 2000, only 0.1% of all European citizens lived in another EU-country.

  

That changed in 2004, when the UK, Sweden and Ireland waived their rights for a transition period and immediately opened their labour market for the new member-states in Mid- and Eastern Europe. In especially the United Kingdom, this had a dramatic effect: in the six years afterwards no less than 1.5 mln people arrived from these countries. Since 2011, about the same happened in Germany and The Netherlands, when these countries opened their doors for the new-comers.

In hindsight, there has been too little attention for the size of these influxes. With the entry of the Mid- and Eastern European countries, a group of countries entered – with combined 80 million inhabitants – with an average income that was about one quarter of the income in the richer (Western) European countries.

This has been an enormous stimulus for a (temporary) migration from their countries to Western Europe, especially for the people looking for low-qualified labour. This had a devastating effect on a part of the poorer and less educated citizens in the richer EU-countries.

It is now time to come to a new agreement, which is fair for people from the ‘sending’ as well as the ‘receiving’ countries. And it is time to stop abuse. Workers from poorer EU-countries are sometimes abused by consciousless employers, who get a competitive edge towards their competitors, who play by the rules. Too often these workers receive too little money (sometimes below the legal minimum wage rate), they work too long hours and they pay too much rent for extremely poor dwellings.

Even if the system has not been openly abused, there is still a sort of competition and displacement of native workers, which can be considered as unfair, especially in times of high unemployment. At the labour market our weakest citizens lose against better educated and skilled people from elsewhere.

It is useless to treat their complaints as the usual ‘nagging about foreigners’. It is a recognizable reflex, which we yet should take seriously. Otherwise it poisons the atmosphere and triggers possibly outbursts of hatred against strangers.

In my opinion, this is a must-read article of which I – unfortunately – could not translate everything, as this would take too much time (I advise non-Dutch readers to look up this article in the Independent. This is what I also should have done, instead of translating the article - EL).

I do agree that this is indeed a problem in some aspects. Especially the abuse of low-paid and (sometimes) helpless workers from Eastern Europe can be very brutal:

That not everything is well in The Netherlands as well, proves the story on a Dutch female vegetable grower that was accused of executing the practice of ‘modern slavery’.

Her vegetable-growing farm, specialized in growing asparagus, was situated in a very isolated spot in the province of Brabant. It was mainly run by Polish and Portuguese personnel, under extremely poor working and living circumstances.

The people:

• had their passports taken away from them;
• worked for 7 days a week and much more than 8 hours per day;
• encountered physical violence and threats from the owner or her straw men;
• were stored in very small multi-person bedrooms, without proper kitchen and hygienic facilities;
• were charged more than €50 per person per week for these facilities;
• didn’t get proper nutrition;
• were fobbed off with petty advances on their salary, while being promised that their real salary would be paid very soon;
• The lady used a Polish straw man to keep the Polish personnel on the job and to suppress resistance;
• that didn’t want to work, lost the job and the money they already earned;
• that wanted to leave the farm, lost the job and the money they already earned; 

And a lot of Dutch and English (hands-on) factory-workers and truck-drivers (for instance) could complain with good reasons that their jobs have been taken away by Polish, Bulgarian and Romanian truck-drivers and factory-workers, who earn less money and don’t complain about working long, long hours in their job, under sometimes unfavourable circumstances.

Still, we must be very careful not to throw the baby out with the bathwater:

• Why did the agricultural industry always have so many problems to fullfil their vacant posts, even in the toughest times of economic hardship?
• Why were there always(!) vacancies in the milk-factory, where I worked as a student and afterwards, in spite of the good working hours, the great working atmosphere and the excellent salary?!
• Why is the cleaning and facilitary services industry almost the exclusive domain of African, Arab and East-European workers?!
• Why were so many factory-owners so happy, when the borders went finally open for Eastern European workers?! Not only, because these people demanded less money! 

I am afraid that the answer to the aforementioned questions is very simple in most circumstances: because the Dutch and British people often don’t want to do these heavy and dirty jobs anymore. And because most native workers in these countries are less motivated and less qualified for these jobs.

Every now and then the discussion rises: it is strange that we hire people from Eastern and Southern Europe (Spaniards, Portuguese!), while we have so many unemployed people here. Should we not…?!

No, we shouldn’t!

Especially in the agricultural industry, bad and unmotivated employees can ruin large parts of the harvest, by damaging fruit and vegetables. An unmotivated (unemployed) Dutch worker is worse than a disaster: he asks top-dollar for his work, works badly and damages his end-product, which costs the entrepreneur money.

Here are some snips from an article from 2011 on the same subject:

Instead the Dutch unemployed people must do the jobs these Rumanian and Bulgarian workers can´t do anymore: harvesting crops in greenhouses and on farmland (strawberries, blackberries, grapes, asparagus, potatoes or flowers) and other heavy, labor-intensive and often dirty jobs. With the kindest regards of the Dutch government.

As inquiring minds will have guessed already: the Dutch unemployed DON´T want to do these jobs. A Dutch greenhouse farmer told on Dutch television with tears in his eyes that he got fifty forms of potential Dutch job applicants from the employment office, but NONE of them showed up for a job interview. He is now stuck in the situation that he is not allowed to hire his last-year Rumanian and Bulgarian workers and he doesn´t have enough workers to harvest his crop within two weeks. And with harvesting crops it is: do it the right way at the right time, or get burned litterally!

Even if you force unemployed people to accept these jobs, they might have a thousand ways to screw up. Squashed strawberries, broken asparagus or apples with brown spots, due to harsh handling. Every glasshouse worker can tell you that unmotivated workers are worse than useless, as they ruin their harvest and diminish their yields. You could take the welfare away from Dutch unemployed workers that won´t do these jobs, but nobody in The Netherlands will find that acceptable. It´s sad, but true.

So what should Lodewijk Asscher do?! My answer: his job!!!

See to it that Dutch employers in every industry:

• play by the rules of white, properly taxed and decently-paid labour;
• don’t evade the regulations about legal minimum wages and wage-payments in collective labour agreements;
• don’t abuse people from Eastern and Southern Europe and keep them under bad working and living circumstances;
• don’t force people to waive their rights for membership of a union and legal representation;
• give every applicant a fair chance, by treating everybody equally, without making a difference between colour, race, country of origin and religion. 

Although Asscher cannot personally look after it that everybody in The Netherlands get a fair treatment, it is the task of (a.o.) his ministry of Social Affairs to check this regularly.

Too often, cabinets with VVD and CDA (Christian-Democrat) representatives in it have neglected their supervising tasks and left it to ‘the market’ and ‘self-regulation’ to fight abuse and underpayment. Too often cabinets and politicians have looked the other way, when it came to abuse of people!

Therefore I demand that Lodewijk Asscher takes this duty seriously!

And there is one more point where almost all cabinets within the last thirty years have let the Dutch citizens down: education. The Dutch people deserve better education.

Not so much at the level of scientific or high vocational education. The Dutch universities and colleges are fine. PhD-studies and MBA-studies in The Netherlands leave little to be desired in common. The same is probably true for Great Britain.

No, it has been the lower, professional education for technical and handicraft jobs, which left a lot to be desired over the last twenty years. 

So often, there has been too much emphasis on computer and language education and too little on training people to work with their hands for jobs, like:

• mason;
• metal worker;
• plumber;
• electrical engineer;
• welder;
• carpenter;
• pipefitter; 

It is no wonder that these jobs are often so desperately sought for and that the often highly skilled workers from Eastern Europe were more than welcome in The Netherlands and (probably) Great Britain.

And about the free traffic of labour within Europe?! That has indeed always been the main pillar of the EU. And although I don’t deny that this free traffic can have some serious drawbacks, we should consider very thorougly whether we should reduce/restrict it for low-qualified labour or not.

People have always travelled around the world, looking for a better place to stay, live and work. That is an undeniable human right, in my humble opinion.

Besides that, the supply of labour and the amount of vacancies in various countries work like communicating vessels: people move to the places and countries with the most available labour and possibilities to develop themselves. When the jobs in a city or country are fulfilled and there is no more labour available, then the people begin to move to other places by themselves.

Maybe the Dutch lower-qualified and unemployed workers could take a lesson from their enthusiastic peers from Eastern and Southern Europe: people who are willing to leave their safe homes for an uncertain future abroad. 

Maybe it’s time for them to become a little more adventurous again!