Reflecting upon the banking crisis in Cyprus first led me to recall Guy de Maupassant’s short fable, The Diamond Necklace, which many of us probably read in school. You can read it at Online Literature or at Classic Reader.
I’m planning to update tonight, and there will be spoilers for both stories.
Update: As I’ve read about the Cyprus banking affair, various scenarios have been presented. To some, the initial agreement to raid the savings of ordinary depositors was a clear portent of things to come for the rest of us. Ilargi at The Automatic Earth asked, Bank Run in Cyprus; Who’s Next?:
Overnight last night, the Eurogroup (Eurozone executive committee) negotiated a deal for a bailout of the banking system in Cyprus. As part of the deal, a one-time, one-off levy on depositors was agreed: deposits below €100,000 are subject to a 6.75% levy, while those over €100,000 are subject to a 9.99% “fine”. …
Cyprus is small, … The EU core nations have so far been able to convince their citizens that they are rich and their economies recovering, and everything’s under control. Moreover, the story that Russian criminals get a 10% haircut goes down well among the respectable citizenry. …
The Cyprus bailout was ostensibly executed to “save the Eurozone”. And it was presented as a one-off. But so was Greece and its forced haircuts for investors. You can only have so many one-offs and remain credible.
A tamer story made its way throughout the US mainstream press, playing up the implication that the banks in Cyprus more or less deserved their fate for having handled so much dirty Russian money, but ignoring the reality that much of the investment capital around the world is ultimately drug money. On Omaha.com, Paul Krugman wrote, Cyprus disaster shows need for banking reform:
Why are Cypriot banks so big? Because the country is a tax haven where corporations and wealthy foreigners stash their money. Officially, 37 percent of the deposits in Cypriot banks come from nonresidents; the true number, once you take into account wealthy expatriates and people who are only nominally resident in Cyprus, is surely much higher. Basically, Cyprus is a place where people, especially but not only Russians, hide their wealth from both the taxmen and the regulators. Whatever gloss you put on it, it’s basically about money-laundering.
As the Liberal Conscience debated whether Cyprus should emulate Iceland or Ireland, ordinary Cypriot people were scarcely mentioned, nor were the bossholes at the European Union – the ones that were shocked and appalled to find gambling by banks in Cyprus. In, The Lesson From Cyprus: Europe Is Politically Bankrupt, Ilargi summed up:
The EU, with all its 1000s of highly paid employees and its multiheaded leadership structure, time and again fails to do its overseeing job, and then conceals this by turning around and bullying the victims of its failures. Of course they knew what state Cyprus was in when it switched to the euro, and the country should never have been allowed to enter. And of course the EU and ECB leadership knew all along what happened in Cyprus between 2008 and now, or at least should have. It’s their job to know. Hence, the leaders should be fired either for not knowing or for knowing and not acting. They just cost taxpayers yet another grab bag full of billions, and they should be held accountable for that.
So where does The Diamond Necklace fit in? When my fifteen-year-old self read the story, I was completely taken in. Oddly I still remember part of one study guide question: “At the end of the story, it is clear that Mme Forestier owes the Loisels a great deal of money.” At the time I thought, maybe – but so what? How could she pay them back the ten years they spent toiling to pay for something they never actually owed?
I thought of the Necklace story because the EU – the entire Western banking system, actually – invited many small countries to a party that no one could really afford. It was very easy to borrow and no one thought they could ever lose. After the crash, Iceland realized the EU diamonds were only paste, but Ireland and Greece gave their EU bankers forty carat replacements.
Boule de Suif is a timeless allegory of the exploitation of the poor by the wealthy. Finding themselves hungry her respectable fellow travelers deign to eat her food:
They could not eat this girl’s provisions without speaking to her. So they began to talk, stiffly at first; then, as she seemed by no means forward, with greater freedom. Mesdames de Breville and Carre-Lamadon, who were accomplished women of the world, were gracious and tactful. The countess especially displayed that amiable condescension characteristic of great ladies whom no contact with baser mortals can sully, and was absolutely charming. But the sturdy Madame Loiseau, who had the soul of a gendarme, continued morose, speaking little and eating much.
I always remembered that line about the Countess condescending. I had forgotten exactly how it came to the point that the society folk refused to share with Boule de Suif, but it was the result of convincing her to consort with an amorous Prussian officer that held power over the travelers:
She seemed rather shamefaced and embarrassed, and advanced with timid step toward her companions, who with one accord turned aside as if they had not seen her. The count, with much dignity, took his wife by the arm, and removed her from the unclean contact.
The girl stood still, stupefied with astonishment; then, plucking up courage, accosted the manufacturer’s wife with a humble “Good-morning, madame,” to which the other replied merely with a slight arid insolent nod, accompanied by a look of outraged virtue. Every one suddenly appeared extremely busy, and kept as far from Boule de Suif as if tier skirts had been infected with some deadly disease. Then they hurried to the coach, followed by the despised courtesan, who, arriving last of all, silently took the place she had occupied during the first part of the journey.
The rest seemed neither to see nor to know her–all save Madame Loiseau, who, glancing contemptuously in her direction, remarked, half aloud, to her husband:
“What a mercy I am not sitting beside that creature!”
And what a mercy we are not Cyprus, or Greece, or Ireland, or Iceland. Not yet, anyway.