The Eurozone’s Great Big Network Crisis

Tuesday, July 14, 2015 - 15:00

Greece’s perilous posture in relation to its Eurozone partners should make everyone working in networks perk up and pause.  During the last year of repeated standoff and negotiation, something very instructive to all those involved in networked action has been unfolding in full view of the world. The 19-nation partnership that makes up the Eurozone, after all, comprises a very complex, high-risk, high-stakes brand of multi-state collaborative network. Networks of nonprofit organizations and institutions working toward effective collaboration, even with members much smaller in scale than a nation, invariably encounter some of the same challenges and pitfalls now coming into sharp relief in the Eurozone. 

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Recent events tell a cautionary tale about what happens when one network member behaves in toxic ways that violate formative agreements. Enshrined in the network’s charter, those agreements backstop the essential bonds of trust among members despite their often very understandable differences. No two members in a network are exactly alike, ever. Therefore, the charter’s core operating “rules” create level ground on which network members can confidently go forward to achieve their purpose. Consider the Eurozone’s dilemma in the context of well-known network principles:

    • Shared purpose drives priorities, tasks and activities. Nineteen independent member nations agreed in 1999 to convert from using separate currencies to a common currency, the Euro, with the aim of integrating and spurring the growth of the European economy. Such a bold move had never been tried before, especially among such different countries and cultures as Greece and Germany or Latvia and Spain. Warnings from the start predicted that a currency merger without wider, deeper and more deliberate political union could spell disaster down the road. In the case of Greece, the complexities underlying culture, politics and core governmental attitudes toward managing a national economic system, it turned out, overshadowed the somewhat more straightforward, yet no less complicated, shared purpose of monetary union.  
    • Members evolve from independence to interdependence. Explicit in the agreement among the very different Eurozone nations is the aim of achieving “ever closer union,” a vague, but potentially powerful hope that leaves open a wide range of reshaped relationships well beyond a common currency. Using the same currency may symbolize a kind of cultural sharing, yet political differences – as seen when a leftist Greek government grows combative around hardcore capitalist expectations – requires forbearance in problem solving and flex on both sides. The Greek situation has stretched all players to the point of snapping.  The element of trust, essential to growing interdependence, has been shredded.
    • No single authority is in charge. The structure of Eurozone governance – as in any collaborative network – does not allow any one nation to tell another nation what to do. Rather, voluntary cooperation lies at the core of the deal. Despite the fact that Germany is acknowledged as the dominant economy by far of all the Eurozone partners and therefore wields outsized influence, Chancellor Angela Merkel cannot actually tell France, or even the Greeks, what to do. The Eurozone – again as in any collaborative network – therefore operates on a “divided authority” basis which requires a very high degree of negotiation and concurrence about big decisions, like whether Greece stays in the Eurozone or not. Agreement at this point has assumed the character of exasperation, not a good atmosphere for compromise. 
    • Complexity compounds the level of network risk. There’s huge downside potential in trying to unify currencies among nations when some of the members notoriously operate by looser principles of economic management than others. Such has been the case with Greece. In the eyes of many economists at the time of the Eurozone’s creation, Greece barely met basic qualifying requirements for responsible economic management when compared to other member nations.  The sober early analysis of Greece’s marginal position – downplayed in the ebullience of the Eurozone’s birth – has come home to roost with a vengeance. Ignoring problems such as Greece’s at the point of entry into the network makes exit all the more painful and costly to the other members.
    • Agreement on conditions for entry and exit are essential. No country has ever exited the Eurozone and, crucially, there are no provisions in the charter for doing so or for other members to expel a member. This was a fundamental formative mistake. Every network charter needs a “bad actor” clause that allows a process first by which members have a chance to voluntarily toe the agreed-upon line. Failing that, the other network members need the option of imposing intermediate sanctions as a condition for the toxic member to return to the collaborative fold. Finally, a provision for expelling a disruptive member – such as requiring member agreement in the 75-80 percent range – spares the network from being cratered by the disruptive or destructive behavior of one member. It’s important to note that requiring a demanding percentage of member agreement should never mean requiring complete unanimity. Complete unanimity would mean a single wavering or recalcitrant member – or even the member who’s been behaving badly – could block timely and decisive action. 

Much of what has spawned the present Eurozone crisis could have been anticipated – in fact was anticipated – in the formative stages of the network. Whatever the outcome of the Greek matter, the Eurozone will prosper going forward from this bitter period with a searching dose of judicious scenario planning around two important questions: 

    • What are the matters most likely to cause us conflict and interfere with our work together?  
    • What dispute resolution mechanisms and minimum standards of collaborative behavior should we put in place and practice now to address those conflicts if and when they arise?  

Ignoring or giving short shrift to these questions and to the fundamental principles by which networks operate wastes precious reserves of time, money and goodwill and imperils all the hopeful good that organizations, institutions and countries set out to achieve when they start down the path of networked action.

 

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ClkerFreeVectorImages License: CC0 Public Domain