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The grasshoppers and the ants – a modern fable

By Martin Wolf

Published: May 25 2010 20:33 | Last updated: May 25 2010 20:33

Pinn illustration

Everybody in the west knows the fable of the grasshopper and the ant. The grasshopper is lazy and sings away the summer, while the ant piles up stores for the winter. When the cold weather comes, the grasshopper begs the ant for food. The ant refuses and the grasshopper starves. The moral of this story? Idleness brings want.

Yet life is more complex than in Aesop’s fable. Today, the ants are Germans, Chinese and Japanese, while the grasshoppers are American, British, Greek, Irish and Spanish. Ants produce enticing goods grasshoppers want to buy. The latter ask whether the former want something in return. “No,” reply the ants. “You do not have anything we want, except, maybe, a spot by the sea. We will lend you the money. That way, you enjoy our goods and we accumulate stores.”

Ants and grasshoppers are happy. Being frugal and cautious, the ants deposit their surplus earnings in supposedly safe banks, which relend to grasshoppers. The latter, in turn, no longer need to make goods, since ants supply them so cheaply. But ants do not sell them houses, shopping malls or offices. So grasshoppers make these, instead. They even ask ants to come and do the work. Grasshoppers find that with all the money flowing in, the price of land rises. So they borrow more, build more and spend more.

Martin Wolf’s exchange

Martin Wolf

Martin Wolf elicits readers’ views on current economic issues

The ants look at the prosperity of grasshopper colonies and tell their bankers: “Lend even more to grasshoppers, since we ants do not want to borrow.” Ants are far better at making real products than at assessing financial ones. So grasshoppers discover clever ways of packaging their grasshopper loans into enticing assets for ant banks.

Now, the German ant nest is very close to some small colonies of grasshoppers. German ants say: “We want to be friends. So why do we not all use the same money? But, first, you must promise to behave like ants forever.” So grasshoppers have to pass a test: behave like ants for a few years. The grasshoppers do so and are then allowed to adopt the European money.

Everyone lives happily, for a while. The German ants look at their loans to grasshoppers and feel rich. Meanwhile, in grasshopper colonies, their governments look at their healthy accounts and say: “Look, we are better at sticking to the fiscal rules than ants.” Ants find this embarrassing. So they say nothing about the fact that wages and prices are rising fast in grasshopper colonies, making their goods more expensive, while lowering the real burden of interest, so encouraging yet more borrowing and building.

Wise German ants insist, gloomily, that “trees do not grow to the sky”. Land prices finally peak in the grasshopper colonies. Ant banks duly become nervous and ask for their money back. So grasshopper debtors are forced to sell. This creates a chain of bankruptcy. It also halts construction in the grasshopper colonies and grasshopper spending on ant goods. Jobs disappear in both grasshopper colonies and ant nests and fiscal deficits soar, especially in grasshopper colonies.

German ants realise that their stores of wealth are not worth much since grasshoppers cannot provide them with anything they want, except for cheap houses in the sun. Ant banks either have to write off bad loans or they must persuade ant governments to give even more ant money to the grasshopper colonies. Ant governments are afraid to admit that they have allowed their banks to lose the ants’ money. So they prefer the latter course, called a “bail-out”. Meanwhile, they order the governments of the grasshoppers to raise taxes and slash spending. Now, they say, you must really behave like ants. So the grasshopper colonies go into a deep recession. But grasshoppers still cannot make anything ants want to buy, because they do not know how to do so. Since grasshoppers can no longer borrow, to buy goods from ants, they starve. The German ants finally write off their loans to grasshoppers. But, having learnt little from this experience, they sell their goods, in return for yet more debt, elsewhere.

As it happens, in the wider world, there are other ant nests. Asia, in particular, is full of them. There is a rich nest, rather like Germany, called Japan. There is also a huge, but poorer, nest called China. These also want to become rich by selling goods to grasshoppers at low prices and building up claims on grasshopper colonies. The Chinese nest even fixes the foreign price of its currency at a level that guarantees the extreme cheapness of its goods. Fortunately, for the Asians, or so it seems, there happens to be a very big and exceptionally industrious grasshopper colony, called America. Indeed, the only way you would know it is a grasshopper colony is that its motto is: “In shopping we trust”. Asian nests develop a relationship with America similar to Germany’s with its neighbours. Asian ants build up piles of grasshopper debt and feel rich.

Yet there is a difference. When the crash comes to America and households stop borrowing and spending and the fiscal deficit explodes, the government does not say to itself: “This is dangerous; we must cut back spending.” Instead, it says: “We must spend even more, to keep the economy humming.” So the fiscal deficit becomes enormous.

This makes the Asians nervous. So the leader of China’s nest tells America: “We, your creditors, insist you stop borrowing, just as European grasshoppers are now doing.” The leader of the American colony laughs: “We did not ask you to lend us this money. In fact, we told you it was a folly. We are going to make sure American grasshoppers have jobs. If you do not want to lend us money, raise the price of your currency. Then we will make what we used to buy and you will no longer have to lend to us.” So America teaches creditors a lesson from a dead sage: “If you owe your bank $100, you have a problem; but if you owe $100m, it does.”

The Chinese leader does not want to admit that his nest’s huge pile of American debt is not going to be worth what it cost. Chinese people also want to go on making cheap goods for foreigners. So China decides to buy yet more American debt, after all. But, decades later, the Chinese finally say to the Americans: “Now we would like you to provide us with goods in return for your debt to us. Thereupon, the American grasshoppers laugh and promptly reduce the debt’s value. The ants lose the value off their savings and some of them then starve to death.

What is the moral of this fable? If you want to accumulate enduring wealth, do not lend to grasshoppers.

martin.wolf@ft.com

More columns at www.ft.com/martinwolf

Read and post comments at Martin Wolf’s blog

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  1. Report Jordy_A | June 4 2:01am | Permalink
    Correction:
    "Politics sells with ideology but sadly aplies with a collection of all human defalut, most of the time of course."
  2. Report Jordy_A | June 4 1:54am | Permalink
    Very interesting Martin Wolf!, a long time ago those stories were written to demonstrate flaws that were very flagrant but couldnt be directly told, since royalty of that time ruled everything.
    It is interesting to see how adapting (so well) this story now a days can let us understand that the real "core" of the issue is, maybe not as dramaticaly defended, but still very much defended anyhow. As goverments from around the world, some most than others, had showned that real interest of there actions are never shown to the people or society, there for, a certain "distance" or separation in knowledge is being created betwen what a few "powerpeople" know and do and the rest of the nation believe and do.
    That rest of the nation simply follows that carrot on the top of the stick, sometimes thinking its the best way since its propaganded that way. But when the true and real intentions of those decisions are uncertain or based in short term benefits as well as for the wrong reasons (self interest), the results of the reactions of the whole mass becomes dangerous for their counterparts and due to the interconection of the relacions between them, even them selfs. Politics sells with ideology but sadly aplys with those good intentions of real progress....
    The elimination of that gap is definitively the only measure. Progress and an international one must be in minds all the time or else selfichness decisions like those made in high financial "cercles" and by poor minded politicians will continue to create those great errors that had been seen on and on in Europe, Americas, Africa, Asia.... every time theres a crisis style issue, wrong human intentions are behind them. So the fable is a very good idea to present the situation since it gives a conclusion base on MORAL, what lise at the core of every good/bad decision, and What some of the world's country should REALLY REFORM.
    My regards from D.R.
  3. Report metanex | June 3 9:55am | Permalink
    Martin,

    Congratulations for this rather entertaining story. To begin with, I personally consider myself a grasshopper. In fact, I strongly believe that all of the Bulgarians are true grasshoppers since all of the ants were transformed or died after 1989. But this is a different story, let's jump forward to year 2007. These were fabulous times to be a grasshopper - the foreign ants were buying lots of sunshine home and we, the happy grasshippers were building hundreds of shopping malls, new gigantic sunshine homes, and all this without any thought, without infrastructure, no quality, and funding the "progress" with huge amounts of debt. Ourselves being grasshoppers were laying at the beach and watching happily all those massive buildings appear as quickly as mushrooms after rain. We were thinking: "Good years are to come, hundreds of thousands of ants are going to come and buy those cheaply built sunshine homes and flood our shopping malls, we are going to be happy and careless grasshoppers, our bellies full and our problems gone forever. Sadly, only a year later, our secret plans burned down - the ants never came. The massive empty sunshine buildings started to look gloomy, the sea resorts covered with construction waste, the roads full of potholes, the malls started to go bankrupt one by one. The grasshoppers started to lose their jobs and their salaries begin to shrink. Today, 2007seems like centuries away and we, the grasshoppers, do now realize it is not coming back. So now we try to tighten our belts. It seems it was impossible to tighten our belts when our bellies were full, so we do it when they are empty. But look at the poor ants, they are always fit, seems like their bellies are always empty.

    Cheers.
  4. Report kire | June 2 8:06pm | Permalink
    Your moral is do not lend to grasshoppers. But if you are a saver (an ant), you cannot lend to any other because in your fable, Martin, there are only ants and grasshoppers. You can put your savings in the bank, but the bank lend to grasshoppers.
    The point is that savers (Germans) and spenders (Greeks) cannot live in the same monetary house without getting into conflict.
  5. Report kake84 | June 2 6:13am | Permalink
    Martin,
    Thank you for your correction. I think that synecdoche is a subordinate of metaphor, but anyway I agree that 'grasshoppers and ants' is not synecdoche.
  6. Report spook3 | May 31 10:19pm | Permalink
    Munzoenix and NB, being a countryman of NB with one foot in Europe, one in the US, your exchange of views is interesting. I have often posed the same question as NB myself - why do the US ants put up with the US locusts? I appreciate the explanation by Munzoenix below, point 1, put I think that it sits deeper than just the effect of the Cold War. The Americans are still very much a "frontier" nation, believing in the American Dream - you work hard and you will succeed. It just does not work that way anymore (if it ever truly did...) , as munzoenix below points out, but a lot of Americans just do not want to let go of that idea - and since a lot of them are relatively little versed in the ways of other nations, thanks to the less than informative news media, it is easy for populists to wave the flag and keep the people believing.....The negative attitudes to "socialism" take on almost a religious fervor. The financial crisis has woken up a lot of people, unfortunately many direct their anger at the wrong target - see under heading "Tea Party". But the Tea Party phenomenom (correct spelling?) in fact is a reflection of the refusal to accept reality that goes against the American myth of unlimited freedom fixing everything. As to Obama - is he a harbinger of change? We will see the first omens of that in the mid-term elections. So far, does not look good.
  7. Report Martin Wolf | May 31 7:18pm | Permalink
    @ alangudis, Yes.
  8. Report Martin Wolf | May 31 7:17pm | Permalink
    @Roeland Noellen, Why should I be aware of the article in French by someone I have never heard of?

    As I have also now told many people, this fable is not invented by La Fontaine. He retold an ancient fable (http://en.wikipedi...nd_the_Grasshopper).
    My version is more original than La Fontaine's was.

    I look for some more original thinking from you in future.
  9. Report Roeland Nollen | May 29 10:12pm | Permalink
    It really seems that journalists like the Grasshoppers and Ants fable. Are they all inspired by La Fontaine or is it just a result of standard thinking / copy & paste? I write this because on 25th of April 2010 I read a very similar article written in french by Stéphanie Villers (http://www.slate.f...e-fourmi-allemagne).

    I hope to see more original thinking in the future.....

    Best
  10. Report tonito1000 | May 29 6:50pm | Permalink
    I would go a step furher in the conclusion and say that the ant owes is existence as an ant to a grasshopper, thus any real or apparent wealth in a credit system must have its counterparty, call it an individual or a nation . If so, what is the crisis all about? If debts cannot be paid ( their interest or principal ) we have a problem in the real sphere i.e. the profitability of capital cannot meet the terms of the loans.
  11. Report gbz | May 29 7:54am | Permalink
    Wasn't martin wolf arguing a year back that the entire financial crisis was the fault of the ants who created such enormous imbalances by not consuming enough (the asian export-or-die model). Unless i misunderstand, are we shifting blame within the same thesis or ...?
  12. Report alangudis | May 28 8:28pm | Permalink
    Do you need this long a story to make the point?
  13. Report Nieel | May 28 4:46pm | Permalink
    Dear Mr Martin Wolf,
    If you are ever to write a children book let me know.
    I will buy a copy and read it to my kids.
  14. Report Munzoenix | May 28 2:17pm | Permalink
    Thanks for the reply. I'm not sure of the exact reasons why the average American has tolerated this. I can only guess as to the reasons.

    1) Most of the generation that runs the corporate and political systems in America grew up during the Cold War, and were taught to have a strong aversion to socialism. In their minds, socialism is the same as Stalin-type communism (even though democracy is a socialist program). They forgot that there are capitalists societies that are highly competitive because of strong social programs in infrastructure, healthcare and higher education (like those in Scandinavia, and one right near us called Canada). And they think any form of socialism is bad. So right now in the media, everyone is promoting Greece's problems as a failure of socialism, even though it is socialist countries like Germany and Finland that is bailing them out.

    2) The same generation of people grew up during the Vietnam era. Prior to Vietnam, American's view of their government was in the high 70-percents. It never recover that high esteem. After Vietnam, people wrongly blame the government when anything bad happens, instead of the corporate interests that treat the government as their puppet. This reduces voter turnout and participation, creating a political power vacuum that is now being filled by even more corporate interests. (In the 60s, it was the military industrial complex to influence the government since the Depression destroyed the corporate power of other sectors. The long period of prosperity saw corporate power return, and with it, corruption).

    3) Low taxes and very little social spending was actively promoted by Reagan, who was well loved by the wealthy-class (that has strong media power). When he walked into office in 1981, oil prices collapsed and lifted the economy. People confused the growth from cheaper oil with his policies. His policies of low taxes (which caused inflation) and high interest rates (to contain the inflation), were counter-cyclical. Latin American nations borrowed heavily from US banks in the 70s, and with Reagan's foolish policies, Latin America was crushed by high interest rates.

    4) The wealthy has tremendous media power. The US does not have an equivalent to the BBC (The Public Broadcasting Station -- PBS, is too weak). And one thing that is tragic about US media is presents the views of both sides, but it does not provide a third-view which is the facts. So, two politicians maybe debating about global warming on the media (one against doing anything, and another who wants to stop global warming). The viewers see a 50-50 debate, but the media never shows the detailed facts that each debater is using, nor do they tell the viewers that the person who is against action on global warming is in the extreme minority of scientists. Another case in point is healthcare -- it is so obvious that all other developed nations have universal healthcare which is cheaper and with better outcomes. This should clearly end the debate, but the media wants conflicts because it is private and therefore needs to make a profit. This is an example of market failure of the media sector in America.

    There are obviously more reasons to why Americans have not revolted at this injustice. You should read Naomi Kline's book, "Shock Doctrine." It explains the issues facing the American citizen very well.
  15. Report joseph belbruno | May 28 1:45pm | Permalink
    @ munzoenix and @NB - How about a compromise? What if we enriched the 'fable' by saying that the "grasshopper colony" was actually made up of a class of "locusts" (financial capitalists) whose voracious practices (speculation) by selling inflated assets to their "ants" which nearly brought the entire colony to extinction (financial holocaust) but then forced their friendly "locust-politicians" to take over the devastation and blame it on the poor class of "ants" by painting (mimetising) them as "lazy grasshoppers" and forcing them to pay for it.

    Meanwhile, amongst the "ant colony" there was a class of "moles" who smuggled the earnings of their poor "ants" underground and lent them to the "locusts" as bonds (out of which the "locusts" developed their voracious practices) in the hope that they would be repaid with interest and that they would not be "inflated away" by central-bank "monetisation" of the loans!

    Like this, by breaking animal colonies up into "CLASSES" with antagonistic interests we manage to make some sense out of the entire unseemly mess.

    When I proposed to use the word "hypostasis" to describe this fable, instead of "metaphor" or "synecdoche" or "metonymy" below, I was not joking. If we start with "households" and "firms", WE WILL ALWAYS end up with "households" and "firms". THERE IS NO HISTORY, BECAUSE THERE IS NO POLITICS in this "fable"!! If we start with "surpluses" and "deficits", again we will NEVER be able to UNDERSTAND what is going on - because these are just ACCOUNTING IDENTITIES!! They have neither history nor POLITICS. Some might say, there is no "class", but only in the political acceptation of the word.
  16. Report NB | May 28 11:18am | Permalink
    @ Munzoenix, I can share your views even if from far away (The Ant country of Finland) it is hard to see other than the US being a bunch of priviliged grasshoppers. ( I do understand this is not the case) Question to you: Why aren't the ants of America doing anything about the distorted "grasshopper democracy"? Why do I see no revolts to change the way things are handled? Or is Obama being the President a start of this revolt?
  17. Report Sherman McCoy | May 28 5:45am | Permalink
    I like Tom Wolfe's 'grasshoppers' better - somehow they fit better the bill.
    Martin Wolf's grasshoppers are puppets on the Wall Street carnivorous praying mantis' string. Those are the puppeteers that run the show. No! 'we the people' -- tax payers, shouldn't have lent them the money on such easy terms. But who listens?
    The point is, as Reverend Bacon conveys, the steam is building up... and with it the Bonfire of the Vanities.
  18. Report Argonaute | May 28 5:38am | Permalink
    Since the time I watched the film "A fish called Wanda" I never had so many tears in my eyes, from laughter. Mr Wolf, you are not only a brilliant commentator but also a magnificent script writer. I hope we can make a Monty Python movie out of all this mess one day and laugh it off again. Alas, before we come any near that stage we will have to suffer more pain and shed more tears, real tears I mean.
  19. Report Munzoenix | May 27 3:36pm | Permalink
    @Martin Wolf

    To your reply: you mentioned "industrious grasshopper colony", while also beginning your piece with the insinuation (as all Westerns, including myself are aware) that grasshoppers are lazy. Thus, isn't an industrious grasshopper colony a paradox?

    Also to your reply: The motto protrayed in the media is "In shopping we trust." Please see Elizabeth Warren's study on real consumer consumption in America since the late 1970s ( "The Over-Consumption Myth and Other Tales of Law, Economics, and Morality,"). Real consumption has declined by 30 percent, despite higher labor force participation and longer working hours.

    However, the matter of American private sector indebtedness is very obvious despite this decline in real consumption -- the only way to explain this (in my view) is that real incomes have been declining faster than Americans can adjust their consumption lower. But, how is this possible if productivity has risen so much? And the real economy is obviously much larger?

    My view is that there are industrious ants in America who are not seeing their increased productivity rewarded with higer wages. As you are aware, economics can boiled down to one simple rule: The more you produce, the more you'll consume. I can't produce data here, but if you graph US productivity and real incomes from 1950 through 2000 (the last data I saw), you'll see a tight link between productivity and compensation. This relationship is found in other countries. However, very noticeably for the United States, the relationship breaks down in the late 70s and early 80s, when increased productivity is not being tracked by the same increases in compensation, which have been flat. This means that there are a few grasshoppers in America who are eating way all the labor stored up by ants in America.

    To me what was offensive is that what is protrayed of the average American is so off the mark of what is really happening at the ground level. People are far more industrious, have been working long hours, and have delayed major life choices by pursuing higher educations with increased indebtedness. And on top of that, Americans, according to Elizabeth Warren's study, have made the painful choice of consuming less. But, you're right that consumption has increased statistically in America... What explains this statistic?

    What is happening to the majority of Americans is well represented by the median figures, than the "average figures" whereby the average is held up by those few grasshoppers. I suppose my feeling of being offended might mean that I'm more emotive than economists, but then again, I feel that most economists are so removed from the average person and only see people as numbers.
  20. Report Martin Wolf | May 27 2:54pm | Permalink
    @ Munzoenix, this is what I wrote: "there happens to be a very big and exceptionally industrious grasshopper colony, called America. Indeed, the only way you would know it is a grasshopper colony is that its motto is: “In shopping we trust”." I can't see why you should be offended.
  21. Report Adam Bartlett | May 27 1:10pm | Permalink
    And then something happened, which the wise old story teller already knew about except when under the effects of a melancholy spell.

    The ants in the Chinese nests began to behave a little more like grasshoppers, the younger ones discovered the joys of shopping. And the wise boss ants passed laws to gradually improve health care and make houses more affordable so the worker ants felt less need to save. They did this partly by taxing the ant factories, which anyway had far more savings than the workers.

    Conversely, the American grasshoppers nest began to behave a little more like ants. The International Market loving grasshopper Foundation even reversed its recommendations on many issues, advising how ants could transition out of their surpluses while still letting the poorest worker ants have enough to eat, and how grasshoppers could block unwanted savings from causing debts with the right capital controls.

    A few decades on, the remaining savings were put to good use. In both the Chinease Ant and the German colony, there hadnt been that many babies for a while. So there were less workers, and as ever the older ants like to live like grasshoppers. In America there were had been lots of babies, and they grow up to be very productive workers, making stuff for themselves and for the older ants.

    Only the Gnomes of Zurich had cause to complain, cos they liked the old ways as that let them makes load a money at the expense of everyone else. No one fell for their anti Keynes propaganda any more, no matter how much they spent on it. But even they still had their money.

    So everyone lived happily ever after.
  22. Report joseph belbruno | May 27 12:55pm | Permalink
    @ Robert Rudd - ANOTHER chance to be perfectly pedantic. "Parables", as in the Gospels, involve human beings. "Fables" involve animals or objects - which is why some situations are "fabulous", things happen that can happen only in the imagination. But Wolf's can also be a "parody" because it is a humourous narrative of all-too-serious events. Cordially.
  23. Report Einstein | May 27 10:47am | Permalink
    Quite simply, the discrepency lies with superimposing our own values/views on others. To the well-supported in developed countries who treat 8 hour workdays and a wage of US$2000 a month as a right, a life in a factory earning US$100 a month is unimaginable suffering. To those who do not have the education and/or the wealth/resources to read the western press or orange-red papers like the FT, US$100 guaranteed in a factory with accomodation and food provided is so much more preferable to depending on the earth and weather to provide grain and water and to subsist on a daily basis.

    The trouble is, peoples' greed knows no end. My parents who grew up farming treat their house and their comfortable savings as a blessing, my generation, who grew up coddled with food, education and clothing all provided grumble about not being able to eat out all the time and have a car and nice house easily, by boon of us having been blessed with security and safety growing up.

    The solution? Look at what you have, and be grateful. The cycle of eternal greed and wanting will never end, unless you choose to remove yourself from it.
  24. Report robert rudd | May 27 10:05am | Permalink
    Parables are what they are---reductionist. Parables are transferred from mouth to mouth just like Chinese whispers, with all the omissions and transgressions that converting stories from imagination into the world of 'Finite' articulation with all the prevailing litigation that implies. Thank our lucky stars there are more creatures than ants and grasshoppers. You seem to forget the Locusts out there, and without your Grasshoppers the ants would be starving. Are the Locusts --Chinese, Japanese, North Americans, British, Spanish, Italian, Portuguese, Greek? I think your analogy is far to restricted for "commonsense" to prevail RDR
  25. Report gareth davies | May 27 8:15am | Permalink
    Does anybody know the number of workers that have committed suicide working at Porsche. I'd like to volunteer to take their place.

    On the other hand working under the jackboot at Foxconn doesn't appeal.
  26. Report Dong Joo Park | May 27 6:07am | Permalink
    Very impressive. Mr. Wolf refered to both country China and Japan. We Korea have been synonymous with them. Surging prices of propety, equity, and so on. and have accumulated enormous supplus account. We have around 1/4GDP usd reserve. but recently some disruptions have been found across the marekt. thru your view, I am feeling upcoming sharp correction near.
  27. Report joseph belbruno | May 27 5:42am | Permalink
    @ Martin Wolf - sorry Martin, I kow you have MUCH better things to do.....but I forgot to mention, when discussing Aesop's "personification" in his fables that this is an instance of 'PROSOPOPOEIA" - literally, "speaking through objects (animate or inanimate"). This also covers your use of those now-famous insects. Eagerly awaiting more exciting discussions, JB.
  28. Report joseph belbruno | May 27 5:31am | Permalink
    @ Martin Wolf - I thought kake84's reference to 'synecdoche' was well 'picked up' in an age where "figures of speech" are ubiquitously used but rarely....detected. And I agree that 'metaphor' is the broader and perhaps more accurate term, - after all, "meta-pherein" is "to carry beyond" the meaning of an object (animate or inanimate). So here a "grasshopper" becomes a parody for a string of concepts.

    Perhaps I ought to have pointed out that 'analytically' the best description for Aesop's "personifications" of concepts is METONYMY where the part stands for the whole (eg "the pen is mightier than the sword"). But....I did not wish to be "pedantic" at the time!

    But NOTE also George Krimpas's use of "onomatopoeia" for the Greek "tzi-tzi-ki" - "grasshopper". Regards.

    @ munzoenix - class analysis (perhaps in the sense of C Wright Mills "The Power Elite" and not necessarily that of Karl Marx) helps in these matters. But I still think that the THRUST of Martin Wolf's analysis at the geo-political-economic level is entirely valid. We should not mistake a "fable" for a "treatise". Cheers.
  29. Report Andrew Purdy | May 27 4:54am | Permalink
    Ahh. But future grasshoppers and ants will be automated drones, invented by DARPA-funded scientists for the purpose of waging war. China will of course develop their own versions. Both powers, devastated by Great Depression II, will put their massive numbers of unemployed back to work building artificial ants and locusts. But arming for war eventually results in the real thing, and WW III will be fought by locusts that only hurt men - just as prophesized in the Book of Revelation. The slaughter will persist for 3 1/2 years (as prophesized), until the drone version of DDT, otherwise known as EMP, is used to wipe out the artificial ants and grasshoppers. Then the armies will have to fight the old fashioned way, with a man and his rifle.
  30. Report sushil choudhary | May 27 4:38am | Permalink
    technology has fiercly been shatterring geo-political barriers bringing all grasshopers
    together on one side sweepingly. Saving ants would sooner than expected get out of business of financing. Fooling around, in the present format, has overrun as both grasshopers and ants have become one.
    i did enjoy reading martin fable all over again with interesting comments( surprisingly full of anger most of them)
  31. Report Munzoenix | May 27 3:34am | Permalink
    To Martin:

    I'm deeply offended by your presumption that Americans are grasshoppers (i.e. lazy, debt-binging consumers). The reality is that in America, there are grasshoppers who are wealthy, and therefore have power. The majority of Americans are ants, who invested in human capital such as Bill Gates and Steve Jobs to produce Microsoft and Apple, only to see grasshoppers in China manipulate their currencies so the surpluses of producing those wonderful, valuable technological goods go to Chinese ants so they don't revolt against Chinese grasshoppers.

    Chinese ants, who make up the majority of the Chinese people do not store up anything for the winter. In fact, savings rates in China has been flat for the past decade. Chinese grasshoppers (their government) controls valuable companies who have seen their profits soar. Those profits are used to manipulate its currency to be cheaper so Chinese ants do not buy artificially expensive goods from American ants. In fact, it gets so expensive that some American ants lose their jobs and sees their jobs go to Chinese ants who work really hard to feed the Chinese Corporate grasshoppers who are well connected politically.

    American grasshoppers have no problem with this because they control the financial system (and political system through lobbyism, or better known elsewhere in the world as blatant bribery). They love the cheap money handed over to them by Chinese grasshoppers who harvested it off Chinese ants.

    American ants, who are now unemployed, try really hard to find work in parts of the economy that does not compete with artificially cheap Chinese ants -- the lovely service sector which has been expanding since the 1980s when another Asian grasshopper (Japan) crushed American ants ability to work by taking Japanese ants savings (in Japan Post) to manipulate its currency.

    The surge in American ants entering the service sector depresses wages in that sector (which is why America is a cheaper place than Japan or Europe where labor have options such as manufacturing). Some American ants try desperately to escape poverty by working long hours -- far more than German ants. These desperate Americans trying to escape poverty go to colleges in record numbers -- since demand easily outstrips supply for advanced education college tuition costs have risen so fast that some ants are deeply indebted and are disrespectfully called grasshoppers because most economist have lost their connection and empathy to fellow human beings since most of them are so removed from the average person. If they are notable economists, they mingle with their local grasshoppers.

    All the while, the system goes on, with wealthy grasshoppers who sit in positions of power while ants in China toil away while American ants drown in debt when all their human capital surpluses (ipods, computers, etc) are stolen by Chinese grasshoppers so Chinese ants can work and not revolt! American grasshoppers are happy because they continue to get cheap capital, and when winter comes, it's not their problem -- it's the heavily indebted American ants problem.

    Are American ants consumer addicts? According the Elizabeth Warren, an administration official and professor at Harvard, American real consumption has declined 30% since the late 1970s (you can watch her Harvard lecture on Youtube). Yet, the economy has grown -- where has all that surplus gone? To grasshoppers. The biggest salary increases went to bankers, and you cannot tell me that they "deserve" that pay. So, please don't refer to 99% of Americans as lazy, mindless consumers. That's the public media blitz, owned by grasshoppers and funded by other grasshoppers for advertising, to brainwash ants so they can spend money. Actual data, as Elizabeth Warren has shown, proves that Americans consume 30% less since the late 1970s, despite increased work hours, and greater labor force participation.

    I therefore disagree with your article. I understand your point, but by glossing over some important details, I don't think readers fully understand want needs to be done to correct the current world economy. USA and Greece look similar, but they truly are not. If Greece cuts its deficit from 13% of GDP to 0%, it's not a 13% decline in GDP -- it's much larger because of the negative multiplier effect on the private sector. Instead of bailing out Greece, the EU should have injected massive capital into their banks, partially nationalizing them. But OH NO, those grasshoppers in the bank won't like that. And they have a lot of money to change politicians' minds.

    Though the USA look like Greece, it is unique and vastly different. The USA needs to put tariffs on China -- brining China's weak nominal exchange rate closer to its real exchange rate, allowing the real economy to adjust better than a violent currency realignment. If China has issues with that, then it better start digging into its 2 trillion dollars of reserves. That is not simply 2 trillion dollars of "lost demand" -- the multiplier effect on the Chinese and world economy means that the real "lost global demand" is much higher than 2 trillion dollars. It is lost demand from the Chinese ants. This is why I disagree with your gross simplicity -- Countries may look the same economically on the surface, but the causes are vastly different. Understanding the different causes allows people to understand that different approaches are needed to rectify the situation.
  32. Report Doug | May 27 2:57am | Permalink
    Martie's words:-

    ...But, decades later, the Chinese finally say to the Americans: “Now we would like you to provide us with goods in return for your debt to us....

    Doug's words:-

    Like ag products, i.e. chicken feet, etc...

    Martie's words:-

    ...What is the moral of this fable? If you want to accumulate enduring wealth, ...

    Doug's words:-

    Barter for food.
  33. Report George Krimpas | May 27 1:43am | Permalink
    Dear Martin Wolf,
    My awfully direct ancestor Aesop must be angry with you, for the virtuous-baddie 'it' of your version of his tale was decidedly not a grasshopper, a jumping predator cousin to the locust, an entity so alien as to never be even metaphorically akin to our German [EU and Eurozone] partners. For Aesop's creature is precisely what the French, starting with the La Fontaine aesopic version, called 'la cigalle', a sheer idiot, not a producer at all nor even an otherwise parasitic reproducer, to be oecologically destroyed by the female of the species, having fulfilled his purpose in the scheme of things.
    This is not, even metaphorically, a way to treat the Germans.
    As for the real 'la cigalle', we, Aesop's purest offspring, now call 'it' Tzi-tzi-ki, an onomatopeic version of their being, from their sound. Interestingly, when you approach them or even stare at them they go silent and vanish in their camouflage on the bark of the pine trees, once again a thoroughly ungermanic mode of being, other than they, without a conductor, all go silent at once.
    More useful to your purpose of political economy through fabulous analogy is Aesop's treatment of corporate stupidity.
    By logic, Aesop being a slave had a master, a philosopher called Xanthus, who bid him to go to the agora-market and report, and here it is:
    The subject of debate being foreign policy and defence, the polity of Samos then facing the tyrant Persian lord across the half-mile straight, the corporations representing the citizenship addressed the assembly in order. First came the stonebuilders, they said that against the aggressor defence preparations were necessary so the city should be protected by a wall, built of stone. Then came the woodworkers, they said that ... ditto, ... but that the wall should be built of wood. Then came the leatherworkers, they said that ... ditto, ... but that the wall should be built of leather, and he stopped.
    And then?, asked Xanthus, and the the hapless slave Aesop replied, I left, and was therefore logically and duly beaten as a slave must be before confession and after.
    As a philosopher without slaves, dear Martin Wolf, would you treat the ant-like 'germans' or their equally fabulous logical 'grasshoper-locust' converse in the same way as the stupid philosopher Xanthus treated his 'evidence', not as a fabulous hypothesis but a real problem?
    I trust you prefer reality to the fable, Europe is a rabble without hegemony, America is not the same as the power which constructed the peace which we are still enjoying after the second Great War, is it not now time to grow up and again join up, I leave the rest of the argument to you.
  34. Report Eleftherios Leontaridis | May 27 12:22am | Permalink
    @Martin Wolf

    Fair enough. The ants-vs-grasshoppers argument is now much more balanced and consistent, after your Money Supply posting.

    What puzzles me though is that you keep referring to tradeable goods only, apparently excluding services? This brings back a manufacturing-based wealth paradigm that most advanced economies have now left behind. There's only one way to re-balance those economies backwards, and it's called protectionism. Admittedly a likely development, in my view.

    You also seem to consider services as contributing to the asset bubbles that fuel (or are fueled by) large deficits, if only through real estate. And if I am not mistaken, you advocate public expenditure in service infrastructure, to avoid private sector excesses?

    Linking this back to the eurozone problems, and an earlier, though inconclusive on your part, debate on the 4 policy options, it seems that the logical conclusion from your argumentation is that fiscal transfers through the common EU budget are a more efficient way to spend out of the debt crisis rather than piling up more debt?

    IN reality the big, intractable problem is how to get finance back to the ground without massive and indiscriminate asset destruction. Discussing what constitutes real wealth (goods and services in my view) is a good starting point. And if governments should "have a view on how big an external deficit their country should run and how well the money is being used", then shouldn't they have a say in how much finance inflates "real" assets in their economies?

    We have yet to see a sensible proposal on how to reign in finance.
  35. Report paul.andrews | May 27 12:22am | Permalink
    Obviously a massive oversimplification, but also dangerous because it leads one to potentially incorrect conclusions.

    The biggest flaw in this metaphor is that big creditors know no national boundaries. And the interests of big creditors are completely different to the interests of national governments.

    "Promptly reduce the debt's value"? Who? The government or the privately controlled Federal Reserve? How? By what they call "printing", which manifests as the Fed lending more money to the government (which they will do their best to ensure is paid back by taxpayers)?

    Perhaps you think that central banking will fail and the government will print debt-free money? I wouldn't bet on that as it is a bet against "Big Credit", which usually gets its way.

    More likely, US taxpayers will have to find ways to produce goods and services that the world needs. Beats hyperinflation.
  36. Report joseph belbruno | May 27 12:18am | Permalink
    @ Davis Wilkins - well said. But I would focus more on the Chinese dictatorship and its cynical exploitation of its own poor workers. Chinese workers need and deserve welfare provision, higher wages through currency appreciation and above all ENFRANCHISEMENT.

    It is evident that exchange rates will have to be adjusted, otherwise.....well the Beijing Politburo can just focus their telescopes on Pyongyang to 'telescope' what the future holds for them.
  37. Report Betablocker | May 27 12:12am | Permalink
    Perhaps the Chinese 1 child policy will come to the rescue...1 child, 2 parents,4 grandparents equals 6 ageing adults and 1 spoiled kid with ambitions to become a banker or lawyer or estate agent .....3 high spending grasshopper careers. Having said that the explosion in ant numbers will continue elsewhere....in 50 years we have seen the world's population grow from 2.5 billion to 7.5 billion. Ant/grasshopper population balance studies is deserving of a few PhD papers. Martin Wolf could well have started something.
  38. Report David Wilkins | May 26 11:26pm | Permalink
    As new ant countries emerge as sources of cheap, efficient production of manufactured goods, longer-established ant countries need to turn themselves into grasshopper nations if the global balance between ants and grasshoppers is to be preserved.

    But Germany, in particular, has been reluctant to undergo this ant to grasshopper metamorphosis, instead effectively devaluing within the Eurozone by screwing down unit labour costs in order to hang onto manufacturing jobs rather than letting (economic) nature take its course, b*ggering up the whole Euro system in the process.
  39. Report Martin Wolf | May 26 10:45pm | Permalink
    @ kake84, I don't want to get into a war of the pedants. But I think this is metaphor, not synecdoche. See http://en.wikipedia.org/wiki/Synecdoche.
  40. Report gareth cooke | May 26 10:20pm | Permalink
    David Wilkins |

    When it comes to German companies and bribery and corruption i think the word leaches comes into it some where and don't forget scroder and nord stream project,Signed it in as chancellor and after leaving office ends up as chairmen.
  41. Report bahadir koc | May 26 9:47pm | Permalink
    If you owe the bank 10 thousand dollars you have a small problem. If you owe the bank 1 trillion dollars, the bank has a big problem.
  42. Report LL | May 26 9:35pm | Permalink
    Aesop... These Greeks are everywhere these days. But where do the greek shipowners fit? They are not grasshoppers or ants. Perhaps they are ospreys? And what about the US, buzzards? And the UK,pPeacocks? Rating agencies, ostriches?
  43. Report David Wilkins | May 26 9:18pm | Permalink
    One of the problems is that the Germans have mistaken relatively harmless Anglo-Saxon grasshoppers for locusts (Heuschrecken) and have, in effect, declared war on them rather than trying to enter into some sort of friendly, mutually beneficial relationship with them.

    Mind you, if you look at pictures of the two insects, you will see that it is quite difficult to tell them apart if you are not an expert.
  44. Report gareth cooke | May 26 9:12pm | Permalink
    And along came huge spider and ate them all yum
  45. Report A nature fun | May 26 8:07pm | Permalink
    Leaving the content apart, it is rather difficut to read the story thinking of grasshoppers instead of cicadas.
  46. Report Martin Wolf | May 26 7:37pm | Permalink
    A number of commentators say I should not conflate Germany and Japan with China. But this discussion is not about political morality. It is about economic behaviour. All these countries are building up net claims on grasshoppers. In some cases, the decision is taken by households and private companies (Germany and Japan) and in other cases by the government (China). But the economic outcome is much the same.
  47. Report Alan Morley | May 26 7:36pm | Permalink
    Thank you so much! I haven’t laughed so much at the crises in such a long while. I work in Global Risk and Compliance as a consultant to the world’s major banks and this just sums it up beautifully. I am a UK expat here in the US and I do so miss such witty journalism.

    One a more serious note, I have been working with banks and law makers about the need for a national loan identification number (NLIN) here in the States. It is gaining ground as a sound and practical means to stabilize FI markets over the long term. Better than expedient regulation with built in surveillance. The UK should think about it too if we want to reduce the likelihood of this happening again.
  48. Report Charles Gordon | May 26 6:37pm | Permalink
    The appreciation of the Chinese Yuan is an inevitability of the emergence of an economic superpower - any economy of that magnitude coming from such a low base that is determined to grow through exporting cheap goods can do that relatively easily in a world where other countries are richer. As the economy matures and capital accumulates into government and private hands it is only natural and beneficial that the domestic economy becomes more important and exports less so through an appreciating exchange rate. However the emergence of an intelligentsia and a transformation of a society into one with a large aspirational middle class with wealth presents huge challenges to an autocratic state. However this works in China it will not be a straightforward journey; the narrative of ants and grasshoppers is a side story to this - the Chinese will have to live with devalued US T-bills as a necessary cost for the development of a large Chinese manufacturing base and the rest of the world will have to learn to make more goods for consumption. No bad thing.
  49. Report William Waack | May 26 6:10pm | Permalink
    Genial
  50. Report Bill Goedecke | May 26 5:39pm | Permalink
    This separation between the grasshoppers and the ants is an unfortunate one. The US once had the largest industrial base anywhere in the world. It was also the largest producer of oil before the 1970s. During the post world war 2 consensus it was deemed necessary to, so to say, expand the wealth, to build up the middle class through the deliberate expansion of the suburban/consumer economy. During this period labor (i.e. – the ‘ants’) got an increasing amount of the generated exchange wealth. This solved the problem of the depression where there was no effective demand for product. However, this happy picture did not last much past the 60s as profit from industrial production slimmed and, therefore, there began a movement to disenfranchise labor. This meant that, eventually, manufacturing was moved to places like China where labor is ruthlessly exploited. This entails all sorts of developments, like container shipping and finance.

    The people who lost their jobs in textile mills in North Carolina did not seek to relieve themselves of productive employment. It was the ruthless seeking of enhancement of capital holdings that destroyed the manufacturing base in the US. So in essence I agree with joseph belbruno above.
  51. Report Mary Mary | May 26 5:24pm | Permalink
    I agree with eco- accountant except for the last paragraph : the ants will turn the cleaning up into a profitable business and make the grasshoppers pay !! again !!
  52. Report eco-accountant | May 26 4:52pm | Permalink
    Clearly at some point in the next ten or so years, China will have exhausted the usefulness of its co-dependent relationship with the American grasshoppers. But I draw a different lesson from that in your final paragraph.

    Without having "poached" so much of America's demand, China's economic growth would have crept along at a snail's pace, its capital accumulation "fettered" by its miniscule domestic market. Instead they lured American manufacturers to relocate production to factories teeming with industrious, low-paid workers and permitted them to "externalize" other costs such as environmental protection and worker health and safety. Historic rates of growth compounded year after year, pulling hundreds of millions out of poverty, into mega-cities far more glitzy than any in the US or Europe, and provided with the trappings of western-style affluence.

    US retailers flocked to buy China's cheap goods and pressured American manufacturers to meet the "China price" or lose their contracts. In short order, the US hollowed out its manufacturing base. But China recycled enough of its surplus to the US to keep interest rates at rock bottom and capitalized on the ensuing housing bubble and the ocean of cheap credit to keep American consumers buying those cheap goods long after a gold standard or Bretton Woods circuit breaker would have shut down such a radically imbalanced arrangement.

    Now, with its forces of production fully matured, its infrastructure fully developed, and its coffers filled with the world's reserve currency, China can lock up long term contracts for oil, coking coal, iron ore, copper and all the other raw materials needed to sustain its economic machinery--even if it's forced to wean itself off its export-orientation on to one focused more on its domestic market.

    By the time the US is forced to monetize its debt and thereby destroy whatever's left of China's T-bill/USD cache, China's economy will stand quite sturdily on its own. The US will have to start over.

    The Chinese ants' fatal flaw, however, will be that it so thoroughly fouled its own nest with decades of rampant ecological destruction, that the long-awaited "modern prosperity" will prove to be as empty and useless as King Midas's gold-besotted world. Cold comfort to the land of grasshoppers who must share the same biosphere.
  53. Report Donal Lafferty | May 26 3:35pm | Permalink
    Point taken.

    Now, how do I protect my pension pot from grasshoppers and their ludicrously high management fees? ETFs?
  54. Report Martin Wolf | May 26 2:55pm | Permalink
    Those who are interested might like to read a brief exchange with my colleague, Robin Harding, which can be found here: http://blogs.ft.co...shoppers-and-ants/
  55. Report Ramanathan N | May 26 2:48pm | Permalink
    brilliant article... You have used the analogy of the "ant and the grasshopper" to aptly reflect the current financial crisis . Tx
  56. Report wjanek | May 26 2:40pm | Permalink
    Brilliant!
  57. Report Betablocker | May 26 2:31pm | Permalink
    Correct me if I'm wrong...didn't Nigel Lawson say that the balance of payments was a private industry problem as they would be borrowing the money to buy the goods from the ants? How did we get dragged into this mess? Shouldn't the owners of BHS, B&Q, AMAZON, M&S, CURRYS, ARGOS etc etc etc etc, the people that built big sheds staffed with low cost labour now cough up and pay down the outstanding cost?
  58. Report Danny | May 26 2:18pm | Permalink
    It says it all. What a fabulous piece of writing...
  59. Report sheeshgar | May 26 2:16pm | Permalink
    Excellent story. But what would happen when the ants refuse to supply anything to the Grosshoppers?
  60. Report joseph belbruno | May 26 1:56pm | Permalink
    @ akazaran - excellent comment. You might like to look at the third 'wolfexchange' on capital flows.
  61. Report Dagouxiong | May 26 1:40pm | Permalink
    This is a wonderfull story and certainly the readers attention is focused,however you perhaps underestimate the cunning and savy of the Ant Tribes, particularly the Chinese Ant Tribe.
  62. Report joseph belbruno | May 26 1:40pm | Permalink
    @ Eleftherios - good point about the credit bubble and the discussion at 'wolfexchange'.

    @ kake84 - clever reference to "synecdoche" (another Greek metaphor or figure of speech). Might it be a case of "hypostasis" instead, after reading my comment?
  63. Report akazaran | May 26 1:27pm | Permalink
    According to the statistics of the OECD, greeks peoples work about 30% more hours than german peoples... for an hourly salary which is about 40 % lower.
    Producing more doesn't necessarely mean working more, especially when there are such competitiveness gap between countrys. Pretending that greece problem are only du to lazziness is a negation of some obvious macro economic fondamentals, beginning with theyr highly overvalued currency (thanks germany). German trade surplus with his european parrners has been growing dramatically since the introduction of the euro ( largely undervalued given the huge trade surplus of Germany) which has to lead to CA and ultimately fiscal defict in the less competitve economys. I am not neglecting the high quality of german industry, but they were already highly competitive in the seventies. What really changed since 99 is the fact that germay could expand his surplus by sharing a currency wuth far less competitive economy. The german surplus could never has become so big whith the DM which would have already been going through the roof for longtime given the huge growth of theyr surplus. Interestingly, the growth of the grman surplus during the last ten years have largely focus on trade with european parrtners (trade with asia has been growing a lot too of course, but Germany has a trade deficit with asia). Of course the system is unsustainable on the long rush if german don't finance greeks deficit... Remember that there is no growth inside Germany.
  64. Report Andre.heggli | May 26 1:15pm | Permalink
    Mr Wolf is great
  65. Report Anonymous | May 26 12:42pm | Permalink
    Thumbs up
  66. Report Ahmed Amine KANDIL | May 26 12:37pm | Permalink
    Everything is said there. The loosers are not the one you think!
  67. Report joseph belbruno | May 26 10:57am | Permalink
    Martin Wolf's "fable" is valid and enlightened but, with all my humble respect, it is in need of embellishment.

    The PROBLEM with the "fable" (with apologies to Aesop - gee! another Greek! they are ubiquitous now! maybe we owe them a....'debt' after all!)....
    the problem is that it tends to obfuscate the OVERRIDING role played by the capitalist elites of both so-called "grasshopper" countries and "ant" countries in enriching themselves from what seem like 'zero-sum' games.

    For in reality the workers in "grasshopper" economies are being called to pay with "austerity" for the debt obligations incurred by finance capitalists (investment banks foremost) that speculated unconscionably on securitised assets....precisely because it was DIFFICULT for them to invest in "productive' investments that would further 'emancipate' those workers and enfranchise them from the yoke of the wage relation!

    Seen from THIS point of view, the "fable" looks a little less..."fabulous" and in dire need of further explication. When we look at the “ant” economies (China, Germany and Japan), here we find that the capitalist elites in each of those countries have a HORRIFIC PAST (and for China, present) RECORD AS TOTALITARIAN REGIMES (Mao, Hitler, Hirohito) that have ruthlessly (especially in the case of China to this day) SUPPRESSED wages in order to ensure their enrichment through the accumulation of capital AS WELL AS to the repressive deflationary contraction of domestic demand and consumption that has further enslaved their workers to the wage relation!

    Rather than a “fable”, we should rework this into a dirge so powerful “that tears shall drown the wind”.

    One final anomaly or dissonance with the story. It is true that “grasshoppers” can be bankrupted. But as I have sought to explain at ‘wolfexchange’, trade surpluses DO MAKE NATIONAL "ANT" CAPITALISTS WEALTHIER because (a) debts are often paid back AT THE EXPENSE of “grasshopper” workers, (b) accumulated capital in the form of debt may be used in NEW territories to subjugate new working populations (Africa, Latin America) as long as currencies are convertible and (c) as we have seen, export bias serves to suppress domestic wages.

    I would invite readers to follow the forum at ‘wolfexchange’ for deeper analysis.
  68. Report Simon Taylor-Gill | May 26 10:39am | Permalink
    Without stretching the author's fable than it was intended, I would just point out (as some other posters have)

    1. Aesop's ants and 'shoppers used a common 'hard' currency: food. No fiat.

    2. The ants and 'shoppers have been very bloody enemies in recent history. Some would say that the EU has done a great political job at binding those wounds even if it has done a mediocre job at economic harmonization. Perhaps a trade-off.

    3. As 20th century biology tells us (Maynard Smith ESS evolutionarily stable strategy et al), these two populations may be in balance. Martin Wolf's characterization of cautious but foolish ants and spendthrift 'shoppers may be an ESS. After all, both kinds have been around since well before Aesop.

    As a farmer I'd worry more about the locusts. As a townie, I keep some ant spray to hand. And I never, under any circumstance, extend credit to wolves.
  69. Report ZACK | May 26 10:37am | Permalink
    The irony is that the US did it with Japan in the '80s; selling them even the Rockfeller center, pushing the Yen up to 140 from280 ! here we are again but on a more globalised scale!more ants and more grasshoppers
    will high inflation and competitive devaluations destroy this "instable order "?
  70. Report rodrigues.caio2004 | May 26 10:12am | Permalink
    Excellent piece of advice!
    I liked it!
    Moreover, it is highly useful for us, we 3rd World below the ecuator.
    Thank you and Congratulations, Mr. Wolf.
  71. Report Cynic | May 26 10:04am | Permalink
    Ants need to become more like Grasshoppers - it's called evolution - buying things they don't need from renegade ants in grasshopper colonies - this will strengthen the renegades and turn grasshopper colonies into ant colonies in time - perhaps... or else they will all die and intelligent apes will take over (we can but dream).
  72. Report Eleftherios Leontaridis | May 26 10:01am | Permalink
    Very entertaining piece by Martin Wolf.. But...

    ...too bad that reality is more complicated and oversimplification can be dangerous when it distorts the picture in what seems like a quest to arrive at a specific proposition.

    If it were that simple, then how would you explain the fact that French banks are much more exposed to southern European sovereign debt that German ones? Are the French a more industrious ant nest? (Hardly) And in the case of Portugal, the country that's over-exposed is actually Spain. Or are the traders in London and New York merely allocating German and Japanese (not to mention Chinese) savings? Please.

    The reason for high borrowing by certain countries is not just that the trade surpluses of the industrious economies need to be diverted somewhere to pay importers. Sure, this is partly what happens (with lots of hindsight) but, as was evident in the recent wolfexchange on capital flows, the importance of capital movements in themselves can easily be exaggerated.

    The root of the problem is that the creation of paper wealth using financial instruments and without real assets backing it (this would be impossible) has run so wild and the gap has become so enormous that the financial system is overextended and has already started to burst at the seams, even partially implode in stages. It is not by accident that implosion happens where that gap between paper wealth and real wealth is at its most extreme (subprime mortgages, Greek debt, and so on - anyone's guess on the next episode is as good as mine)

    But this is what happens when a purely financial and economic analytical framework is used to tackle complicated issues. Particularly when the financial industry's excesses (natural, in my view) are conveniently kept aside. The problem is reduced to fit the tools, opinions, and assumptions of the observer.

    If the world's governments do not come together in a post-WTO arrangement to devise a framework for the orderly reduction of the wealth gap, involving coordinated, and real changes in financial regulation, then the overall financial system will face severe trouble ahead.
  73. Report Hans Suter | May 26 10:00am | Permalink
    Grasshoppers jump and fly.
  74. Report Luis H Arroyo | May 26 9:48am | Permalink
    Beutiful. I offer another one. The Grasshopper, the Ant & the Wolf:
    The grasshoppers´ land is in a messy financial situation; the grasshoppers must pay its debt in Euromark, as it has been agreed with the creditor Hans-the-ant.
    But They cannot. With the complicity of the ECB, they have invented a new money, the dracmark. Hans-the-ant, the creditor,ask for his credit in Mark, but the debtor offered devalued Dracmark. To sustain the Dracmark,Hans-the-ant, following the criteria of of a great economist (the wolf), must put much more money in the hands of lazy grasshoppers. So, Hans the creditor ask himself: Is it really sensible to finance these lazy grasshoppers and to get in exchange these f... Dracmark that nobody will buy? END (ps: The Wolf is the king of the woods)
  75. Report happy2263 | May 26 9:43am | Permalink
    Hi all,

    I am a finance student. There are something new here which I don't really understand:

    1) We are going to make sure American grasshoppers have jobs. If you do not want to lend us money, raise the price of your currency. Then we will make what we used to buy and you will no longer have to lend to us.”
    ---> China is the lender, she has the right to choose to lend or not to lend, isn't it? But why from this paragraph it sounded like she is being threaten by US?
    ---> Why must China raise her currency if she does not want to lend US money?

    2) “If you owe your bank $100, you have a problem; but if you owe $100m, it does.”
    --> I don't understand. What is meant by "it does"?

    2) “Now we would like you to provide us with goods in return for your debt to us. Thereupon, the American grasshoppers laugh and promptly reduce the debt’s value
    ---> US has to provide China goods in return for his debt to her, but why the US has the right to reduce it's debt value?

    Can someone help me with this matter? You can reply me @ happy2263@hotmail.com. Thanks a lot for your help. :)
  76. Report Georg Ruckenbauer | May 26 9:43am | Permalink
    Very very very true.

    I have never understood Germany's ambition to provide more goods to the world than the world provides to Germany. Seems to be a combination of masochism (real wage stagnation etc) and arrogance (we do not need your shabby goods...). It is alright to export as much as you can, as long as you enjoy life (ie, increase wages) and import the same amount of goods from the world.

    Well, it seems that it is the "enjoy life"-thing that distinguishes Germany (and probably Japan and China) from the rest of us. This is written by an Austrian: we do export as much as the Germans. As a matter of fact, most of our exports go to Germany. Fortunately, in parallel, my real wage has increased and is spent on yoghurt from Greece, US-made iphones, Italian wine and Spanish fashion. Life is good.
  77. Report Narinder Chahal | May 26 9:33am | Permalink
    Martin- great read, the reality is there will always be ants, there will always be a need for grasshoppers AKA shoppers. You have looked at Macro level issues we just need to glance into the UK to see the micro mess. We can take any model of any given country and apply your thinking, the net outcome will be the same. The adage I believe in is 'buyer be aware'.
  78. Report Samantha Hughes | May 26 9:27am | Permalink
    Grasshoppers are heroes. When I walk down the High Street, I see thousands of them spending their money on what I consider to be substandard rubbish. Most of them are net recipients of public expenditure, so as an ant myself I subsidise them, maintaining their standards of housing, healthcare and just enough education to keep them doing what they do (not to mention the disposal of said rubbish into landfill sites). Whilst I might complain sometimes, I know that my personal savings would suffer horribly if they were to stop. So I keep bailing them out, and everybody is happy.
  79. Report Credit Controller | May 26 9:21am | Permalink
    Ants said:
    Grasshoppers will buy more of our goods if we lend them the money to do so.

    Grasshoppers said:
    Ants are willing to lend us lots of money at historically low interest rates; so let's go ahead and borrow. Ants are clever; so if they're willing to lend to us, it must be alright.

    All in all, unlimited vendor financing is not a very good long run business decision.

    It's worth noting that some grasshoppers did borrow from ants and then used the funds to set up new colonies of ants. These grasshoppers now own some ant colonies and live off the labour and profits of their ant colonies (aka: direct foreign investment).
  80. Report namd0gma1 | May 26 8:40am | Permalink
    Very funny! LMAO. Excellent article.
  81. Report Graham Cox | May 26 8:37am | Permalink
    Looking forward it looks like the Chines ant is metamorphosing into something else . They seem to think they have enough in stores sine die ( ie FX reserves are judged large enough to preserve political independence) and the risks of not looking after the population's welfare are now too great .

    Just like the arrival of the Chinese ant on the big scene, the new version's arrival is an exogenous impact on the world. Let's hope analysts do a better job than they did ten/fifteen years ago is predicting the impact of this huge population .
  82. Report john | May 26 8:33am | Permalink
    This is as good and insightful a summary of the of our multifaceted economic system as one could hope to find - and for me, a very powerful argument against the globalglobalglobal turkey-talk . As Mr Wolf infers, there are far too many conflicting interests to ever be sure what's going to happen next. Deconstruct globalism and it would be tough for a while, but much better afterwards.

    It is for precisely the same reason that we have what I call 'indeflation' at the moment: a global situation with so many cycles in it, it is near-impossible to call deflation or inflation as the likely result.

    http://nbyslog.blo...ion-and-slump.html
  83. Report anlizpa | May 26 8:31am | Permalink
    There are big grasshoppers and feeble ones. The big grasshopper is the US, who can economicaly cheat the working and greedy ants. The small grasshoppers are in Europe. When the German ant has realised that their lazy neighbours may not pay, German forces them to eat meagerly. Spain eat a lot of German food during the crazy real state boom, however it did not build muscle, it only became obese. Now Spain has to go on a diet and lose its overweight.
  84. Report gareth davies | May 26 8:11am | Permalink
    Dear Martin

    This nonsense started when Kohl handed out dmarks to the Ossies at 1:1 thus condemning the former East Germany to years of further and worsening impecunity.

    Fools that have lent free money to folk that can never pay iot back because they think somebody else is going to pay it back it their stead should be left to learn a short sharp lesson.

    May I add my voice to those that suggest it is an unacceptable distortion to conflate the democratic industriousness of Japan, Germany, Holland etc. with the totalitarian enslavement of the Chinese populace by the barbarian regime in Bejing.
  85. Report Daniel Tischer | May 26 8:06am | Permalink
    Well written text with an important, yet long known message.

    I wish you'd produce a book of similar fables that finally teach business men and politicians that their is more to life than personal wealth amassment: stability, security and sustainability!
  86. Report Niina Bergring | May 26 7:38am | Permalink
    The lesson here is that those responsible for capital allocation should forget financial modelling and pure number crunching and efficient market hypotheses and the like which has allowed the investor community to become lazy and detached from the real work, assessing long term credit quality and allocating accordingly. Only if capital works hard and UNDERSTANDS the risks will it be allocated efficiently and hence will force the invisible hand on inefficient and unnecessary activity (the grasshoppers). Soros et al who understand this, please do find a new theory for financial markets, one that makes sure no-one is lazy in the role of a capital allocator. Forcing some accountability would help too.
  87. Report kake84 | May 26 7:38am | Permalink
    Dear Martin,

    This is a very clever and witty piece of synecdoche. Not only I enjoyed it but learnt a lot about the similarity between current Euro crisis and rather elusive US - Asia relations.
  88. Report whatdoiknow | May 26 7:23am | Permalink
    Ants being ants will just keep saving, just as grasshoppers will continue to be gluttonous. We need nothing short of a new genetically engineered self-contained insect species. A tall order indeed! What is more likely to happen is that new colonies of ants will let themselves be conned by new colonies of grasshoppers.
  89. Report William Hooper | May 26 7:20am | Permalink
    Great article thanks. By the way if property bubbles are the main driver of imbalances (1930s and today) perhaps we should consider a new model in which property is leased by government on term lengths long enough for development but short enough to reduce speculation. This simple move not only solves problems going forward, nationalisation could also repair public finances in a very progressive way.
  90. Report David Seaton | May 26 7:13am | Permalink
    In the original fable, winter's coming was the grasshopper's ruin. The ants had stored up food and the grasshoppers hadn't. The grasshoppers starved and froze, the frugal ants survived. Of course the ants weren't storing up grasshopper bonds, they were storing up food. Wolf's metaphor is good, but I wish he would elaborate on it.
  91. Report Sushil Choudhary | May 26 7:01am | Permalink
    ants keep doing what they do and few grasshopers have become tech-savvy at least ; smart enough to alibaba into such hard earned treasures...possibly sounds more modern now dear martin!
  92. Report billthayer | May 26 6:00am | Permalink
    Yes, Spend-Spend-Spend Obama should be called "Obama the Greek."
  93. Report cygnusx1 | May 26 5:43am | Permalink
    now that you have read the fable by Mr Wolf (of germanic stock somewhere?) you should go on to read the works of akio mikuni and richard koo!
  94. Report GKB | May 26 5:30am | Permalink
    One may or may not agree with BigJim about gold, but he very validly points up a limitation in the concluding moral. Agreed, do not lend to grasshoppers. But what should one do instead?
  95. Report Ishimura | May 26 2:33am | Permalink
    Dear Martin

    Thank you for your interesting article.

    From a splendid isolation country.
  96. Report lolseanlol | May 26 2:14am | Permalink
    Mr/Mrs/ M-Machida, your comments are rather misinformed and are "[lumping] all the [misconceptions] together" without any thought or analysis. Its rather sad that you see the developing economies like China in such a light, and I hope you read/learn more economics before you make anymore comments for I doubt you will understand much of the economic reasons that will be said against your argument.
  97. Report charles monneron | May 26 2:05am | Permalink
    I could never had expected to read Edith Cresson's "ants" analogy resurrected in the Financial Times, and especially by Martin Wolf !
    Do you also realize what "do not lend to grasshoppers" entails ? It means "don't trust each other", and especially "don't trust foreigners" ! Did you already forget "Why globalization work" ? Or is it that your next opus will be titled "Why globalization doesn't work actually" ?

    It would be more helpful to address the problem of "How globalization could work" . As it is crucially a matter of trust, one cannot avoid the moral dimension of the problem. Reckless or dishonest economic agents always end up creating a sub-optimal economic situation. The highest priority should be put to fight this recklessness and this dishonesty.
  98. Report m-machida | May 26 2:00am | Permalink
    Don't lump all the ants together. There is a difference between the Chinese ant who is artificially competitive due to artificially lower currency value and the Japanese/German ant who has learned to compete with free floating currencies. Moreover the Chinese ants do not have any global manufacture brand of their own. Why? because the Chinese ants are actually grasshoppers pretending to be ants because they can think they can make money and one day live like real grasshoppers. For them, motivation for making money came first while for the German/Japanese ant, striving for perfection and excellence did.
  99. Report Akira Chimura | May 26 1:47am | Permalink
    "Frailty" japain is just on the vege of a failed state, very similar to Afpac, by far over the problem of "grasshopper and ant" or the worst possible scenario of disintegrated Eurozone. I have serious concerns about military coup d'etat against leaders, decisively with no trust such as Hatoyama and Ozawa, like the cases of military coup d' etat of 5.15 and 2.26 during the pre-wartime. History seems to repeat itself. I cannot expect any real reforms or meaningful changes by the DPJ. In reality, "Frailty" Japain did nothing meaningful about reforms or changes especially after the collapse of bubble, just as Paul Samuelson said, "Once decided, even if mistaken, unchangeably forever!. Before, likewise, you clearly indicated "genuine diffiulty" of Japain's malaise. Now, you and Samuelson prove just right. Europe seems able enough to recover trust by real reforms or meaningful changes. Certainly, what matters most importantly exists in conflicts or divisions between "grasshopper and ant", because just as Lincoln said, "A house divided against itself cannot stand."
  100. Report kingaj | May 26 1:34am | Permalink
    Perhaps the fable would read better if one made it clear that it is the power elite that determines the character of the regime. There are plenty of American ants, but since Reagan proved that "deficits do not matter" it is the grasshoppers who have been in charge.
  101. Report forxabarca | May 26 12:50am | Permalink
    The United States does not have a manufacturing base. The thinking in Washington and other-similar circles continues to be that all Americans will be either computer programmers, genticists, and patent inventors. Blue collar jobs have the appeal of a 5 cent pole dancer of years past. Perhaps, if the Chinese valued their currency in line with the real world, then American industrialists will be persuaded to bring back manufacturing jobs complete with pension and health benefits allied with decent wage structure. This in turn might allow for an economic base who could afford just mortgage payments, and better way of life. However, thanks to the freemarket thinking Americans, these glittering lights will never allow American to metamorphose from a grasshopper, addicted to cheap credit no less, into the industrious ant it once was.
  102. Report forxabarca | May 26 12:41am | Permalink
    An alternate conclusion. So when the American grasshopper sneezed, the industrious German, Japanese, caught a bad cold, a very, very bad cold. Sadly the Chinese ants caught the pneumonia, and all the anthills of cheaply made Chinese goods could not save Chinese Jack ever again.
  103. Report BigJim | May 26 12:29am | Permalink
    'But, decades later, the Chinese finally say to the Americans: "Now we would like you to provide us with goods in return for your debt to us." Thereupon, the American grasshoppers laugh and promptly reduce the debt’s value. The ants lose the value off their savings and some of them then starve to death.'

    And then all the other ant colonies finally realise that grasshopper money is just paper and turn to other currencies printed by colonies that actually produce stuff, or currencies backed by something real, like gold. Thus the grasshopper currency is no longer used as the reserve currency, and collapses, and most of the grasshoppers starve too.

    What is the moral of this fable? Get gold.
  104. Report Frigate | May 25 11:40pm | Permalink
    Martin,
    Just to drag the last drop our of this metaphor; every few decades there are, often in America, plagues of grasshoppers that devastate all before them. The question is not how to change their character and make them behave like ants, but how to discourage the destruction of occasional plagues. The Obama administration wants to use DDT. This cure is more grievous, and affects more people, than the disease itself.
    Answers on a postcard...
  105. Report Lee accounting | May 25 11:27pm | Permalink
    I agree with your brillient ideas. However, I am not sure how to survive grasshoppers without any economic wars throgh this article. Who can solve this problem beside ants? I think ants as well as grashoppers should take proper actions promptly. Of cource it requires their sacrifices for the time being.
  106. Report ST | May 25 11:20pm | Permalink
    Where does an ant colony like India stack up in this? Is India an ant colony that makes goods for mostly itself and sends some stuff out to grasshoppers in America and Europe? Or is it in the same boat as other ant colonies in Asia?
  107. Report Patrick Vincent | May 25 10:58pm | Permalink
    Regarding the adage quoted in the 3rd from last paragraph, do you think one can also say:

    If the bond market loses faith in one country, that country is in trouble. But if the bond market loses faith in all developed countries, it's the bond market that is in trouble.

More from this columnist

A question for chancellor Osborne

Fear must not blind us to deflation’s dangers

The grasshoppers and the ants – elucidating the fable

An ABC of financial shocks and fiscal aftershocks

Spare Britain the policy hair shirt

The grasshoppers and the ants – a modern fable

Eurozone plays ‘beggar my neighbour’

The economic legacy of Mr Brown

Governments up the stakes in their fight with markets

A bail-out for Greece is just the beginning

Britain’s historic general election


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