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Why invest in culture is good for the society and the economy?

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cultureOne of my friends shared on Facebook a video named « La parabole des tuileries », demonstrating the positive impact of culture on economy and society. The video shows a man seating in the Jardin des Tuileries in Paris in a sunny day. The person is thirsty and goes to a pub to drink something. If you order a few glasses, the first glass gives you a deep pleasure, the second one gives you a bit less pleasure than the first one, the third one no pleasure at all as you don’t feel thirsty anymore. This demonstrates a fundamental rule of the economy, named the law of diminishing marginal utility. This law is valid for most of consumption goods. When you buy a new smartphone or a new car, the pleasure is short-lived and the desire to acquire a bigger car, a more sophisticated smartphone is for some of us already in our head. The marketers name also that phenomenon the post-purchase consumer regret.  This phenomenon encourages people to buy always more and to impact positively the economy. But are people happier, and is such way of consumption based on the frustration sustainable? There is an exception to this: the culture. When, for instance, you listen to the music, you want to listen more. When you like books, you want to buy more books. The pleasure remains and is growing too. This is certainly because teachers at schools have taught you the taste for music, for book, for culture. This video demonstrates that when governments spend money in culture, they can expect a return on that investment. Culture is a necessity, an asset for the society and for the economy, for many reasons. Let’s have a look on this.

–          Basic knowledge: Culture, like education, is a fundamental basic that contribute to people development. Reading books for instance, contributes to our literary culture, but more basically to growth our vocabulary. Vocabulary is the basic of communication. Today, some statistics reveal that a range of adults shows lack of vocabulary and don’t understand what they are reading. Such lacks cause problems in the professional life, when some people don’t understand some given instructions and run things on a wrong way.

– Openness: culture is something contributing to openness, to develop our reasoning capacities. We can learn different reasoning and compare them with others. It nurtures our critical mind and judgment capacities. The knowledge of different cultures, from foreign countries is an opportunity to see the wealth of our differences. In the era of internet and social media, openness and language knowledge is clearly an asset to catch opportunities and develop global projects.

– Creativity: Culture is a reference that feed our creativity. The philosophy, for instance, includes concepts about human being principles and things, about their role in the universe. The knowledge of these concepts gives us the possibility to transpose them in another context. Luc De Brabandere, a Belgian consultant in creativity, was a mathematical engineer. His passion for creativity made that he made studies in philosophy in order to understand our environment and to apply philosophical and mathematical concepts in the creativity domain.

– Actor of the society: Culture is something you can acquire but is also something you can create. Culture is a never ending story, and by subscribing to cultural activities, you become the actor of your own life, and enjoying the fact that you can be creative, you can achieve personal goal. To consume is an act, but consumer is not an actor.

– Serenity: Culture, like education is the main thing we need to conquer our freedom. By acquiring our knowledge thru education and culture, we expand our possibilities, but we empower also our self-confidence, and reach serenity. By feeling good with yourself, you are good with other people, and build communities contributing to a better world.

– Economy:  Culture creates local economic activity. As described in the video, when people enjoy the museum, they contribute to create activity and jobs within the museum. The museum contracts goods and services to sustain the cultural activities, but contributes also to develop the tourism activity, what is benefit for hotels and restaurants around, for public transports, etc. Here is what we call the multiplier effect of the investment in culture.

Culture is something immaterial, but is probably the best investment a society can do. Culture is an investment that gains value, for a community as for each member of the community. Culture is the ferment of a sustainable and progressive society, where people can conquer their freedom.

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Written by Eric Saint-Guillain

May 30, 2014 at 06:35

Profits but also liabilities

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Lehman Brothers ….short terms profits and finally long term liabilities

In our economical environment, the social entrepreneurship trend seems to increase. The social entrepreneurship appeared in Europe and in the United States during the 90’s. This economical model, by opposition to the traditional economy, is not based on the maximization of profit, but is focused on social en environmental aspects, and these enterprises allocate their profit to meet these two requirements.

I often hear some remarks about social businesses who receive some subsidies from the authorities. People are wondering if the authorities are doing a good usage of their money when they are giving subsidies to social enterprises, subsidies that are necessary in some cases, in order to be on a break even position. This question is totally justified. The public money need to be allowed to projects that presents a real added value for the society, projects providing a return on social, environmental or public investment. But by asking such question, it is interesting to analyze two aspects of businesses or activities: profit and liabilities. The goal of companies, and specifically the one’s quoted on stock exchange markets,is to maximize and to make comfortable profits. We agree that profit is necessary to ensure the financing of growth and development of activities on a long term basis, but this maximization of profits is not always based on a long term view. By cutting costs in order to increase their short term profits, we nearly hear each day companies cutting in jobs. But by suppressing jobs, you are losing know-how. The question is to know, what the return value of the know-how is, on a long-term basis. By cutting in your know-how, you are cutting also in a potential source of long-term revenues. By re-injecting your profit in manpower development, you will probably do a better investment. And the cost for the collectivity would be less expensive. Indeed, people loosing their job depend of the collectivity. Here is a first example of the privatization of profit and the socialization of the liabilities.

Let us talk also about the financial crisis, linked to the sub-primes, where banks made profits at a certain time, and when the wind began to change, with a flow of bad news, with the bankruptcy of some banks like Lehman Brothers, the bills were presented to the governments, who had to inject money in safety plans, to protect the money of the citizen. In fact, it is the citizen who had to pay the bill to protect his savings.

And what about the environmental liabilities? Many industries are consuming raw materials, extracted from the hearth. The impact on the environment is important, when the companies try to minimize the preventive action to avoid a negative environmental impact, in order to minimize costs related to that prevention. Here again we are in front of a new example of privatization of profit, and socialization of liabilities. In a social enterprise model, the environmental impact will be minimized by using alternatives that will be probably more expensive, but financed with a part of the generated profits. In this case, the financial profit will be lower, but the environmental liability will be lower too. And let us take about the potential social positive impact. By using for instance recycling businesses and technologies to minimize the environmental impacts, we can create jobs for low or non qualified people, and so decrease also the social liability impact.

By mentioning these few examples below, I wanted to underline that it doesn’t make sense if you consider only profit and not liabilities, only private profit and not public liabilities. And often, the short profits are lower than the long term social, environmental or financial liabilities. These are the consequences of lack of long term view, of ethical vision. Some companies probably created financial value on a short term basis, but destroyed value on a long term basis, and the invested amounts and energies to reach finally such results appear to be a huge waste. Long term vision, quality and ethic are the component of sustainable businesses, and it is not so stupid to say that each business should be social, if you consider that the economy is there to serve the human being, and not the opposite. Economy can not exist without human being. There are running the economy and each of them should benefit of it.

Written by Eric Saint-Guillain

November 19, 2012 at 21:39

Non-profit organizations, an added value for the society.

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In our society where economy is an important component creating wealth, I often heard critics about the non-profit organizations and associations. People are wondering if the subsides these organizations are receiving are correctly used. In other words, people are wondering if the institutions which do not create economical wealth, are not a charge for the society, and if there are useful. It is of course a pertinent question and people have the right to know how the taxes there are paying are used. People have the feeling that the taxes they are paying are not correctly used, but does it mean that non-profit activities are useless for the society? It should be a quick and wrong conclusion.

Non-profit organizations and associations, in different sectors, cultural or social are playing an important role in the society. We can see different interesting aspects of this sector of activity, but there are also conditions that need to be filled and which are filled in a lot of cases, making that people can have the feeling that their money is correctly used. What are these conditions?

  • Selection of project and the benefit they will produce: there are several needs to be covered in the society, needs that the private sector is not covering because there is no link with their activity and because the final goal is not the profitability. A detailed presentation and activity plan, and determined goals need to be presented in order to see what are the positive effects on economical, social and local level. The allocation of subsides need to be voted by a committee including independent members.
  • Project management and competences: non-profit organizations and associations are non-profit enterprises. It means that they have to face several challenges and issues on financial, legal and organizational level. In order to reach the goals on an efficient way with the allocated funds, some skills and competences are needed. As investing time myself in non-profit associations, I often see some lacks in term of competences, which has a negative impact in term of sustainability.

  • Concrete results: The associations launching projects have to produce concrete results, to justify the allocated amounts. They have the obligation to show the return on invested amounts, not on an economical point of view, but on social, educational, environmental level, depending of the scope of the project.

  • Financial sustainability: The allocated funds have to be spent correctly and each association has to implement controlling process in order to maintain the finance in break even. By creating debts and not paying contractors or employees, you do not reach the social goal of such organization. This is in my mind the weakness of some associations. The goal of a non-profit organization is not to make profit, as the name is saying, but it does not mean that the financial management is useless. I often see projects failure due to lack of management, with negative consequences.

These are some conditions needed to ensure that subsides are usefully allocated to projects. The quality of a project can be measured by the provided benefits. These benefits can be found on different levels, and make that non-profit activities are complementary of the economy. What are the benefits?

  • A positive contribution for the society: the associations are covering a range of services to the society, services not ensured by the private sector. It goes from social or medical services for aged people, for people facing temporary difficulties, also services in the education giving an access to knowledge and culture for everybody.

  • Local employment: this sector is creating local employment. Employment is a important key of social integration.

  • Local economical benefits: these associations are using local services. There are in fact a vector of wealth redistribution, as the allocated subsides have to be spent. The money they are receiving do not remain blocked and sleeping on bank accounts. It has a positive impact on local economy.

  • Personal positive effects: Some non-profit organization and associations are working with volunteers. Some studies show that people having a volunteer activity are in a better psychological and physical health. As mentioned, age is a question of mind. It is not because you reach a certain age that you are unable to contribute to a project, that you are unable to have activities. The fact to contribute to the community, empower the feeling to be useful and the feeling of social integration. We can see also a positive effect and cost reduction for the social security. If people are going well, they need less medical services. Globally, and as already mentioned in other postings on this blog, people need to have a project, to face challenges. The gained successes are an important factor of self- trust and wellness. Such activities have to be recognized, and encouraged. People should be encouraged to do an activity with the rhythm it agreed to them.
  • Social and educational benefits for the community: some social activities, related to education, are contributing positively to a better social and public environment. For instance, structures taking care of the children during holidays or when they are coming back from school and when the parents are still at work. These structures where animators are helping them to do the schoolwork, or by organizing games or activities, avoid these children to stay in the street, abandoned to the boredom, and avoid them to go to delinquency.

By mentioning these points, I tried to show that non-profit organizations and associations have a positive function in the society, on social and economical level. They have to be seen as a complementary activity of the economical activity. Do not forget that the economy is providing taxable wealth and that of course, without a strong economical activity, the public and associative world can not work. It is a question of balance, where each actor has to play the game, by respecting rules and with transparency, where initiatives have to be encouraged and supported.

Written by Eric Saint-Guillain

March 28, 2011 at 07:19

Economical growth or economical development.

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Dominique Strauss-Kahn, director of the IMF

At the opening of the International Forum for Human Development in Agadir (Morocco), Dominique Strauss Kahn, the director of the International Monetary Fund, said that the financial and economical crisis destroyed around 30 millions jobs around the world. He said that in a perspective of a new globalization, the first priority should be the employment.

By reading these figures about employment, could we say that the economical and financial crisis is over, beside the fact that the company results are better than in 2009, and that the stock exchange markets recovered more or less their level from before the crisis? It should be premature to take such conclusions.

I was reading an article about the crisis effects in the United States of America, where there are now the mid-term elections, and where the consequences of the crisis on job market are a real issue for Barack Obama re-election. The particularity of the United States, and also of the United Kingdom, is that people are deeply indebted, and the level of unemployment remains high. People are facing real problem to reimburse their loans and credit card invoices. The risk of personal bankruptcy remains high, and as consequences, the financial system remains fragile. Within these two conditions, it is difficult to re-start the sustainable economical growth. And we have not to forget that main countries are facing to a high public debt, after their monetary intervention to save banks from bankruptcy. To try to restart the economical growth on a sustainable way, by allowing people to contract new debts should not be a good idea. Such strategy would be a risk to weaken the financial system, with the risk that the states could not intervene a second time to rescue the banks.

It does not surprise anybody to see that millions of jobs were lost in these particular exceptional economical circumstances. Companies were obliged to take restructuring measures in order to preserve their profitability. We heard at that time, companies which did not want to take the risk and were unable to make some forecasts in such misty circumstances. But since many years, we can see companies cutting jobs in order to maximize their profits and to give more return to the investors. Is it a sustainable logic?

If you want to create economical growth, it implies that people needs to have revenues in order to contract produced goods and services. Main of the people earn revenues from their work. A company hiring people to produce goods or services, is paying a salary to the employees, and so, is creating a wealth re-distribution mechanism. A company can only be profitable, if people can pay the price of the produced goods or services. This equation is easy to understand. These last years, the maximization of short-term financial profits was the main objective of investors and not a sustainable economical development. The financial and economical crisis induced significant value impairments, and in some case, a negative return on investments.

Here, we can see the major difference between economical growth and economical development. It is not forbidden to think that if companies were more focused on human capital and know-how than on financial profits, they would have probably lost a few percent of profit, but they would have contributed to maintain a purchasing power level for the people, and by consequences, ensure future revenues. They could also preserve the know-how of the company. With the development of the new technologies, each people is playing a key role in the companies, and the replacement of such profiles represents a cost for the company. But this logic is not followed by some investors, more focused on personal interests than common interests. And these speculative logical is a break for the business development. Today, companies are facing difficulties to develop their business, because they can not find credits to finance their development.

In a sustainable economical development model, you are not only focused on profitability, but you are focused on a range of key factors: business development, finance management, marketing, human capital management. As in many projects, it is fundamental to determine what is the real goal. In a sustainable economical model, the goal should be the wellness of the people and the business sustainability, which implies a long term view.

Written by Eric Saint-Guillain

November 1, 2010 at 22:14

Development, a sustainable way of growth.

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BP's oil spill, an ecological disaster.

The United States of America are facing the worst ecological disaster since more than a month with the BP’s offshore platform accident. The flow was already categorized as the largest offshore oil spill in the American nation’s history, but the new figures are much higher than the previous estimates. President Barack Obama pronounced a speech, saying it is time to develop the field of new and renewable energies, cleaner for the environment.

But the question is to know if there is really a will to develop such energy field? There is a debate and different mind regarding oil reserves. The extraction of oil becomes more complicated as we have to extract it deeper. The development of more sophisticated extraction techniques shows that we are able to find new oil reserves. But this has a cost, not only on an operational level but also on the ecological level. Money is spend to develop more sophisticated extraction techniques, but have we the full control of the process in case of accident, and are the safety measures always followed? The present situation in the Mexican gulf seems to show it is not the case. As often, companies are focused on short-term profit, forgetting the risk management. Oil generates appreciable profits, but in the Gulf oil spill, the ecological and economical cost is probably much higher for the country, compared to the generated profits on the same period. The balance of such disaster is clearly negative, as the estimated cost amounts to 1 billion usd. This oil spill will have short and long term effects on an economical and ecological point of view.

I would like to make the following comment. Often, ecology and economy are considered as two distinct things, incompatible and with no links between. This is a wrong point of view. Each natural and ecological disaster generates re-construction costs and no added value. In the case of the gulf oil spill, it would have been more interesting to spend the lost money to the development of renewable energy technologies. Research and innovation are an economical motor. The development of sustainable and renewable energies resources provides long terms economical and ecological benefits.

In order to develop a sustainable economy, it is important to analyze the benefits and the risk of each choice, each alternative, but we have also to distinct the difference between growth and development. Let us take an easy example: the growth of the pharmaceutical industry in a country is a good deal for the economical statistics, but it means that the consumption of medicine is increasing, which means that people are not in good health. This is not a really positive situation. On the other side, if the building industry growth is increasing because you build new schools and empowered the education system, this growth contributes to development with future long term economical and social benefits.

Development is the key of sustainable growth. Each crisis we met is destroying values, and the time and energy we spent to recover the lost value, to be again on the start point is a pure waste. A growth based on sustainable value contributes to a long term development, where each step contributes to the next one. It means also that in a development process, each component needs to be taken into account, not only the economical side, but also the social and environmental components, and all these components need to be integrated on a long term view.

Written by Eric Saint-Guillain

June 20, 2010 at 10:27

Pension and retirement: finally the paradise?

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During the month of February, the Belgian government published the “green book”, including conclusions about the payment of retirement pension, the challenge for the coming years. The conclusions were not a surprise, but only what everybody already knew, conclusions already done by economists and demographers. The government and some political people begin to admit that if people want to get a decent pension later, they have to save money. The problem of pension payment is due to the pyramid of ages. Indeed, the percentage of retired people is increasing. It means that the weight of pension costs on shoulders of active people will be more important.

An announced conclusion of the study was that people should work 3 years more than the average. It does not mean that the legal pension age would not be 65 years but 68 years. We have to know that in Belgium, only one person over ten who are between 55 and 60 years old is still working. We are one of the European countries where the activity rate of this generation is the lowest.  How to explain such fact? In Belgium the tax level on work is very high. For somebody who spent few years or his full career in the same company, the lay off indemnities are very high. Of course, each employee agrees to have the maximum of indemnities, but should not be better to have less indemnity but to work for a longer time?

In Belgium as in every country, there were several restructuring processes in large companies, creating social disasters. It is always a painful hardship, where people are wondering how they will pay the bills at the end of the month. Most of them, who were more than fifty five years old, were retired anticipatively. By hearing some politicians, I have the feeling they were considering this as a gift, the fact that people who were wrongfully fired, merit to be retired anticipatively. Does it mean that everybody is necessarily happy to stop working when he is fifty five years old? Does it not mean that you are considered as too old, and then useless? Some studies showed that people who were retired anticipatively, by their own or by force, have a lower quality of live after few years. So to be retired anticipatively is not precisely a gift.

It is of course more difficult for people with lower qualifications to find a job when they have a certain age. But on the other side, with such view I explained before, the qualities and knowledge acquired by experience are not valued at all. In a previous posting, I was talking about the employability, meaning that each worker needs to gain in knowledge and expertise in order to move with the environment changes, to acquire tools and develop capabilities in order to face new challenges. The combination of experience and trainings provides added value and know how for each worker and as consequence for the company too.

It has to be remembered that the education is also important, that everybody needs to have enough chances to start in the active life. There is a lot improvement to be done on that level, when we are noting that in a city like Brussels, capital of Europe, there is around 20 percent of workless people, and for young people who are between 15 and 24 years old count around 35 percent of workless people.

Work is a right, and the government should take initiative in order to give chances to everybody to get dignity to have a job, by empowering the education, by promoting entrepreneurship, by encouraging social and economical initiatives. Work is the way to ensure independence to everybody. It is only on this base that we can maintain a sustainable social system.

Work is a right, and should be more considered as this and not as a constraint. It is a constraint if you do not like what you do, or if you are not considered for what you are doing. Confucius said: “Choose a work you like, and you will never have to work a day in your life.”

Picture source: http://www.summersdale.com/images

Written by Eric Saint-Guillain

February 24, 2010 at 21:31

The financial crisis is over and good practices back! Really?

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The fall of Lehman Brothers on 15th of september 2008

Most of you probably know through the media the solvability problems some countries are facing, like Greece. And some speculators are finding an opportunity to make money by creating additional problems in an already difficult environment. And Greece is not the only country facing to budget deficit. Let us remember that with the financial crisis and the uncontrolled risks taken by some banks, a lot of countries over the world have to make actions by funds injections, in order to save then and to save the money of their customers. The consequence is that the private debts of the banks became public debts, it means a charge for each citizen.

This subject was discussed by the finance ministers of the G7, but until now, it is the status quo! And it seems that the game of speculation and risky investments started again. The problem is that in such games, like in most of games, they are winners and losers. But what is unacceptable is that the losers are not part of the game, I mean the people who will have to support the increase of the national debt and who will suffer of the consequences of budget deficits. For who is the crime profitable?

I can notice that today, in such context, there is a confusion between the speculators and the entrepreneurs. The financial and economical world is considered in a negative way. In this difficult time, it is not a good thing, as we absolutely need the creation of companies and activities in order to compensate the jobs losses. In order to maintain a social environment, we need to have a strong economy where everybody can play a role and live with dignity. But to have a strong economy, we need entrepreneurs with innovative projects and activities, and the essential tools, financing sources, to develop such projects and activities.

By meeting recently some entrepreneurs, there were mentioning to me the financing problems they were facing. They were wondering how to find financing sources and partners without dealing with sharks? The traditional banks are not enthusiastic to finance such projects, because they have not enough return on investment on it. But how could we explain and understand that they are investing in more lucrative investments but much more risky too? The explanation could be the following:  if things go wrong again for the banks, they count to the government to make new capital injections. But with the debts the governments contracted to save banks, will their still have the capacities to perform another capital injection? And what could be the economical, social and political consequences of such new intervention?

Is the human being able to learn from his mistakes? Yes, he is, but on another way, he thinks that things are linear, that he can always have control on things, and that there will be always a solution to solve a problem without too much consequence, that he can always escape to critical situations and not be concerned by then. That is what was probably thinking a certain..Bernard Madoff !

Picture source: http://www.etftrends.com

Written by Eric Saint-Guillain

February 10, 2010 at 22:22

Posted in Economy

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