Labour’s ‘leadership’ contest

This morning I watched one of the most depressing TV programmes of 2015 — Andrew Neil on Sunday Politics grilling the four candidates for the Labour leadership. At times, one had the impression that all four inhabited a parallel universe to the one in which the party was roundly defeated in May. This Observer editorial puts it well:

Two months after a disastrous election defeat, Labour is mired in a lengthy, inwardly focused leadership election. The debates are of micro-politics, not existential crisis. There is an assumption of relevance, just as the party is stalked by irrelevance. It is as though the election never happened. Maybe Labour needs reminding what happened on 7 May. It not only lost but was routed in many heartlands, crushed in marginals and rendered virtually invisible in the south. To paraphrase the now infamous foreign football commentator who relished an England defeat, “Labour, your boys took one hell of a beating.”

If a leaked poll is any guide, then a growing number of the Labour party membership now seem to view Jeremy Corbyn as the answer to that drubbing. This is like a pupil who, on being told they answered incorrectly, repeats the same answer shouting ever more forcefully. It’s still the wrong answer. The party faces a choice. It can strive to get re-elected and thereby have an impact on those it purports to represent. Or it can sink in to a warm bath of delusion and face an even larger wipeout in 2020.

On top of that, there are two looming problems: (i) the total wipe-out of the party in Scotland, and (ii) the impending revision of electoral boundaries in England. The implications are that Labour may never again win an election in a country effectively consisting of England, Wales and Northern Ireland. So the game’s up for the party hitherto known as “Labour”.

The only thing that will work is a radical conceptualization of it as a technologically-savvy progressive centrist party focussed on the socio-economic problems and challenges that will emerge in the next three decades. Reconceptualization on this scale is at least a ten-year project, which also means that Labour will not win the next election in 2020. So what the leadership election ought to be about is who could lead the re-invention of a party along the lines that are needed.

But — as today’s TV hustings showed — it isn’t about anything like that, but simply about which Westminster insider will get the nod and the official car.

So is Grexit really Germany’s policy?

Barry Eichengreen (who is currently the Pitt Professor in Cambridge) thinks so:

Germany wants Greece to choose between economic collapse and leaving the eurozone. Both options would mean economic disaster; the first, if not both, would be politically disastrous as well.

When I wrote in 2007 that no member state would voluntarily leave the eurozone, I emphasized the high economic costs of such a decision. The Greek government has shown that it understands this. Following the referendum, it agreed to what it – and the voters – had just rejected: a set of very painful and difficult conditions. Tsipras and his new finance minister, Euclid Tsakalotos, have gone to extraordinary lengths to mollify Greece’s creditors.

But when I concluded that no country would leave the eurozone, I failed to imagine that Germany would force another member out. This, clearly, would be the effect of the politically intolerable and economically perverse conditions tabled by Germany’s finance ministry.

Barry thinks that German Finance Minister Wolfgang Schäuble’s idea of a temporary “time out” from the euro is “ludicrous”.

Given Greece’s collapsing economy and growing humanitarian crisis, the government will have no choice, absent an agreement, but to print money to fund basic social services. It is inconceivable that a country in such deep distress could meet the conditions for euro adoption – inflation within 2% of the eurozone average and a stable exchange rate for two years – between now and the end of the decade. If Grexit occurs, it will not be a holiday; it will be a retirement.

Economically, what this means is that

the new program is perverse, because it will plunge Greece deeper into depression. It envisages raising additional taxes, cutting pensions further, and implementing automatic spending cuts if fiscal targets are missed. But it provides no basis for recovery or growth. The Greek economy is already in free-fall, and structural reforms alone will not reverse the downward spiral.

So the ‘agreement’ will eventually trigger Grexit, either because the creditors withdraw their support after fiscal targets are missed, or because the Greek people rebel. “Triggering that exit”, Eichengreen concludes, “is transparently Germany’s intent”.

Appeasement over encryption is a *really* bad idea

This morning’s Observer column:

Ever since the internet emerged into public view in the 1980s, a key question has been whether digital technology would pose an existential challenge to corporate and governmental power. In this context, I am what you might call a recovering utopian – “utopian” in that I once did believe that the technology would put it beyond the reach of state and corporate agencies; and “recovering” in the sense that my confidence in that early assessment has taken a hammering over the years. In that period, technology has sometimes trumped politics and/or commercial power, but at other times it’s been the other way round.

The early battles were over intellectual property. Since computers are essentially copying machines, making perfect copies of digital goods became child’s play. As a celebrated trope put it: “Copying is to digital technology as breathing is to animal life.” So began the copyright wars, triggered by widespread piracy and illicit sharing of copyrighted files, which emasculated the music industry and led to the emergence of new corporate masters of the media universe – Apple, Spotify, YouTube and the rest – and the taming of the file-sharing monster. Result: Technology 1, Establishment 1.

The second battleground was the monitoring of network communications. The internet enabled anyone to become a global publisher and to exchange information via email with anyone who had a network connection. And this posed acute difficulties for established powers that were accustomed to being able to control the flow of information to their citizens. Since nothing on the net in the early days was encrypted, everyone communicated using the virtual equivalent of holiday postcards – readable by everyone who handled them en route to their destination. The only difficulty that states experienced in monitoring this unprotected torrent was its sheer volume, but Moore’s Law and technological development fixed that. It became feasible to collect “the whole goddam haystack” (to quote a former NSA director) if you threw enough resources at it. So they did – as Edward Snowden revealed. Result: Technology 0 Establishment 1.

But the biggest battle has always been about encryption…

Read on

The German question redux

Since I’ve been ranting on about the evaporation of sovereignty in the Eurozone, I think it’s only fair to cite Gideon Rachman’s thoughtful reservations on the subject.

EUROPE WOKE UP on Monday to a lot of headlines about the humiliation of Greece, the triumph of an all-powerful Germany and the subversion of democracy in Europe.

What nonsense. If anybody has capitulated, it is Germany. The German government has just agreed, in principle, to another multibillion-euro bailout of Greece – the third so far. In return, it has received promises of economic reform from a Greek government that makes it clear that it profoundly disagrees with everything that it has just agreed to. The Syriza government will clearly do all it can to thwart the deal it has just signed. If that is a German victory, I would hate to see a defeat.

As for this stuff about the trashing of democracy in Greece – that too is nonsense. The Greek referendum on July 5 was in essence a vote that the rest of the eurozone should continue to lend Greece billions – but on conditions determined in Athens. That was never realistic. The real constraint on Greece’s freedom of actions is not the undemocratic nature of the EU. It is the fact that Greece is bust.

Quite. Roger Cohen also had a terrific piece in yesterday’s New York Times in which he mused on the way “the German question” has returned to preoccupy both the Germans and the rest of the European Union.

In the immediate post-war era, Cohen writes, the Question was clearly posed:

How to rebuild the country while keeping it under American tutelage? How to ensure it remained a political pygmy even when it had grown from the ruins to become an economic titan? Whether to reunite it, and how to do so within the framework of NATO and the European Union? How to integrate Germany so completely in Europe that it would never again be tempted to stray down some wayward path, or “Sonderweg”?

By the early 21st century, he continues, these issues had been resolved.

The United States had helped fashion the German Federal Republic and underwritten its security. The European Union had defused Franco-German enmity, Europe’s perennial scourge; a tacit understanding gave France political primacy even if Germany had the economic muscle.

Three things then upset this applecart. The first was the “poisoned chalice” of the euro.

Conceived to bind Germany to Europe, it instead bound far-weaker European countries to Germany, in what for some, notably Greece, proved an unsustainable straitjacket. It turbo-charged German economic dominance as Berlin’s export machine went to work. It wed countries of far laxer and more flexible Mediterranean culture to German diktats of discipline, predictability and austerity. It produced growing pressure to surrender sovereignty — for a currency union without political union is problematic — and this yielding was inevitably to German power.

The other two developments which combined to propel Germany into the driving seat were the declining economic and political power of France and its presidential leadership, and the withdrawal of the US from the continent’s affairs. In that context, it’s interesting that the Minsk ‘accords’ — which are supposed to restrain Putin from further troublemaking on the fringes of the EU — do not have the US as a signatory.

And the implications of all this?

Precisely the thing that Germans were most uneasy about, and their neighbors, too, has now occurred. Germany dominates Europe to a degree unimaginable even 15 years ago. When I lived in Berlin around the turn of the century, Germans were still debating whether they could ever be a “normal” country and whether they could ever feel “proud.” Now such rumination just seems quaint. Germany has decided it has no choice but to assume its power.

It wants to use it well. But its domination is stirring resentment, on a massive scale in Greece, where flip references to the Nazis are common; in France, where the feeling has grown that German severity with an already humiliated Greece is overblown; in Italy, where German-imposed austerity is resented; and in other countries of high unemployment and economic stagnation, where old anger toward Germany has not been entirely effaced by the passage of seven decades.

That phrase — “flip references to the Nazis” — reminds me of something Paul Mason said during the Greek election which brought Syrzia to power. He noticed that the anthem being sung by party activists was the one partisans used to sing when resisting the German occupation in the 1940s.

I’ve always admired modern Germany. I still do, especially when I compare its enlightened industrial system and federal, non-monarchical constitution (things which were imposed upon it, ironically, by Britain and its allies after the war) to the UK’s demented neoliberalism and hierarchical non-constitution. But yoking all kinds of less efficient economies to the German one was a catastrophic error, even if the intentions behind it were good. Everything that the sceptics warned would happen has happened.

And the oddest thing of all is that we in the UK have Gordon Brown to thank for keeping us out of it. If Tony Blair had had his way we would now be in it up to our necks.

CORRECTION: I incorrectly credited Simon Kuper with the first quotation in this post. It was in fact from a piece by another Financial Times columnist — Gideon Rachman. Thanks to Gerard de Vries for pointing this out.

The thoughts of Chairman George

Lovely piece by Glen Newey in the London Review of Books. Sample:

In accordance with the new five-year plan, the people’s economy will sustain yearly 2.5 per cent growth and a permanent budget surplus. Public sector deficit will be outlawed and consigned to pulped editions of the encyclopedia. In his address to the congress of people’s deputies the chancellor was able to announce that from next spring the old bourgeois-reformist ‘minimum’ wage will fade into the background. There will be a compulsory ‘living wage’ of £7.20 an hour for all workers (over the age of 25), to which the work and pensions secretary reacted with a spontaneous, rhapsodic outburst to convey the gratitude of the people. Younger workers will continue to enjoy the fruits of social solidarity by earning a minimum but not a living wage. They will receive £5.30 (if aged between 18 and 20) or £6.70 (if 21 to 25) per hour under the minimum wage from 1 October; apprentices will get a very generous 19 per cent increase to no less than £3.30. The rate for 16 and 17-year-olds will soar by a full 8 pence to £3.87 per hour. This is truly a pioneering moment in the life of the working masses.

The choice: Scylla or Charybidis?


The Greek ‘bailout’ neatly embodies the choice that now faces Western societies. In thinking about it I was reminded of Homer’s celebrated difficulty with the mythical sea-monsters, Scylla and Charybidis, summarised thus by Wikipedia:

Greek mythology sited them on opposite sides of the Strait of Messina between Sicily and the Italian mainland. Scylla was rationalized as a rock shoal (described as a six-headed sea monster) on the Italian side of the strait and Charybdis was a whirlpool off the coast of Sicily. They were regarded as a sea hazard located close enough to each other that they posed an inescapable threat to passing sailors; avoiding Charybdis meant passing too close to Scylla and vice versa. According to Homer, Odysseus was forced to choose which monster to confront while passing through the strait; he opted to pass by Scylla and lose only a few sailors, rather than risk the loss of his entire ship in the whirlpool.

(Fuseli’s painting doesn’t quite capture this. Artistic licence, huh!)

OK: how does this play out in our time? Answer, we’re caught between two pernicious economic dogmas: neoliberal austerity from the Anglophone world on the one hand; and, on the other, the German phobia about debt.

So much for national sovereignty

So the Greeks are having a repeat lesson in what it’s like to live under German domination. Or, as Paul Mason puts it

It was hard to see last night what the rulers of Europe wanted.

What they’ve arguably got is a global reputational disaster: the crushing of a left-wing government elected on a landslide, the flouting of a 61 per cent referendum result. The EU – a project founded to avoid conflict and deliver social justice – found itself transformed into the conveyor of relentless financial logic and nothing else.

Ordinary people don’t know enough about the financial logic to understand why this was always likely to happen: bonds, haircuts and currency mechanisms are distant concepts. Democracy is not. Everybody on earth with a smartphone understands what happened to democracy last night.

National sovereignty is an illusion in the Eurozone. But this particular penny took some time to drop in the hapless countries which joined the project. I remember well the euphoria which greeted Irish entry into the EU: at last we were a ‘proper’ country. EU membership enabled us to get out from under the shadow of our former colonial master. When it was Ireland’s turn to hold the Presidency for the first time, I was in Dublin for the first Summit. The city was en fete. I was staying in the Westbury, the conference hotel for all the national delegations except the British, who were accommodated in the British Embassy.

Outside the hotel stood the longest line of black limousines ever seen in Ireland. I fell into conversation with one of the drivers of same, who was lounging outside his vehicle waiting for his delegation to emerge from the hotel. I said that I hadn’t known there were so many stretch limos in Ireland. He laughed and said confidentially: “Between you and me, this would not be a good weekend to die in this country”. It transpired that the government had rented every funeral director’s car for the great weekend!

And so Ireland learned to strut the world stage. And then came the Celtic Tiger — an outbreak of madness and greed that still leaves one transfixed — during which my countrymen “lost the run of themselves”, as my old friend Frank McDonald puts it. And then the banks imploded and the Fianna Fail government decided in a panic-stricken weekend that they (or, more accurately, the hapless Irish taxpayers) would underwrite the foreign bondholders of those same banks, thereby saddling every man, woman and child in the country with a debt running into thousands of Euros. But it would all be ok, they thought, because the European Central Bank and the EU would see them right.

And so the ‘bailout’ came, administered by three technocrats from abroad who arrived in Dublin to teach the feckless Irish some neoliberal manners. But even then, the penny didn’t really drop.

What finally did it was the night in November 2011 when it was revealed that the top-secret details of the budget to be revealed the next day by the Finance Minister in the Dáil (the Irish parliament) were, in fact, already being discussed by members of the Bundestag in Berlin.

And then my countrymen finally understood why they had traded national sovereignty for that brief moment in the global sun.

The Greeks are now making the same discovery.

Algorithmic power

“The stakes are high, and clear and they boil down to this: if we live in a world where very important decisions about employment, credit, insurance, and other vital economic factors are made by algorithms and data that are essentially black-boxed — impermeable to inspection either because of trade secrecy, or because of real secrecy, or just because they’re hidden away — that is essentially an open invitation to regulatory arbitrage around nearly all legal values that we hold dear — be they anti-discrimination, be they die process, be they basic fairness.”

Frank Pasquale, author of The Black Box Society: The Secret Algorithms That Control Money and Information, speaking on 12 May 2015 at an event sponsored by USPIRG Education Fund and the Center for Digital Democracy.

The laziness dogma

Nice column by Krugman:

Americans work longer hours than their counterparts in just about every other wealthy country; we are known, among those who study such things, as the “no-vacation nation.” According to a 2009 study, full-time U.S. workers put in almost 30 percent more hours over the course of a year than their German counterparts, largely because they had only half as many weeks of paid leave. Not surprisingly, work-life balance is a big problem for many people.

But Jeb Bush — who is still attempting to justify his ludicrous claim that he can double our rate of economic growth — says that Americans “need to work longer hours and through their productivity gain more income for their families.”

Mr. Bush’s aides have tried to spin away his remark, claiming that he was only referring to workers trying to find full-time jobs who remain stuck in part-time employment. It’s obvious from the context, however, that this wasn’t what he was talking about. The real source of his remark was the “nation of takers” dogma that has taken over conservative circles in recent years — the insistence that a large number of Americans, white as well as black, are choosing not to work, because they can live lives of leisure thanks to government programs.

You see this laziness dogma everywhere on the right…

You do indeed. In Britain too, where all the talk is of those mythical folks known as “hard-working families”, presumably to distinguish them from the families who are supposedly scrounging off the state.