Category Archives: Politics

So what really lay behind Syriza’s victory?

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Paul Mason has a hunch:

Syriza’s economics people have been crystal clear: they will no longer deal with the Troika (the EU/ECB/IMF body that runs the austerity programme). They will deal as a sovereign country with each institution separately. They argue the Troika itself was illegal.

So there is a real possibility that, as Tsipras annuls austerity this week, the hawks in the ECB – centred on Germany – will threaten to pull the Emergency Lending Assistance that keeps Greek banks afloat.

Right now Syriza’s economics team are trying to mobilise political support to stop this – from Francois Hollande, Matteo Renzi and, I am told, George Osborne. We’ll see.

For now make no mistake: this is going to become about sovereignty and democracy and the soul of the Eurozone.

Yes the Syriza people like to sing the Italian left anthem Bandiera Rossa; but if you could see the young people’s faces as they sing the anthem of ELAS, the resistance movement that defeated the Wehrmacht in 1944, you would understand what drives leftism here.

Note that last paragraph.

So what’s driving the deficit reduction mania?

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I’m not a conspiracy theorist, but…

Neither is Simon Wren-Lewis, the Oxford economist. But consider this interesting post on his blog:

I have searched hard to find a macroeconomic rationale for Osborne’s policy stance. A belief that QE is as effective as conventional monetary policy (there is no liquidity trap) comes close, but as I explained here it does not really fit with what Osborne has said (or not said). Osborne is certainly no market monetarist, as he has shown no interest in nominal GDP targeting. So there does not appear to be a coherent case for Osborne’s fiscal proposals that a macroeconomist could take seriously.

Second, the idea that the real motive is a small state is not the preserve of some small group of left wing conspiracy theorists. Here I quote Jeremy Warner, economics editor of the Telegraph (for non-UK readers, a newspaper firmly to the right): “In the end, you are either a big-state person, or a small-state person, and what big-state people hate about austerity is that its primary purpose is to shrink the size of government spending.” He also wrote: “The bottom line is that you can only really make serious inroads into the size of the state during an economic crisis. This may be pro-cyclical, but there is never any appetite for it in the good times; it can only be done in the bad.” I also think many of my non-UK readers will wonder why I am having to justify what is obvious in their countries.

Third, it must have become clear to many people now that reducing the deficit cannot be the overriding priority when there have been so many tax giveaways (50p rate, Help to Buy which creates large contingent liabilities, Cameron’s conference commitments, stamp duty changes that are far from fiscally neutral, pensioner bonds). Putting these down to ‘politics’, but counting spending cuts as ‘economics’, will not wash. (See Brad DeLong for the equivalent in the US). You cannot pretend that deficit reduction is driving government policy, when that driver only operates on the spending side of the accounts.

Economists in the media are beginning to realise this. It is really important that political commentators do so as well, so that those without an economics background get a clearer idea of the nature of the choices they will have to make in 100 days time.

Of course, it’s also conceivable that Osborne & Co don’t really know what they’re doing. It’s been known to happen with British governments.

And then, later this from Joseph Stiglitz:

For the past six years, the West has believed that monetary policy can save the day. The crisis led to huge budget deficits and rising debt, and the need for deleveraging, the thinking goes, means that fiscal policy must be shunted aside.

The problem is that low interest rates will not motivate firms to invest if there is no demand for their products. Nor will low rates inspire individuals to borrow to consume if they are anxious about their future (which they should be). What monetary policy can do is create asset-price bubbles. It might even prop up the price of government bonds in Europe, thereby forestalling a sovereign-debt crisis. But it is important to be clear: the likelihood that loose monetary policies will restore global prosperity is nil.

This brings us back to politics and policies. Demand is what the world needs most. The private sector – even with the generous support of monetary authorities – will not supply it. But fiscal policy can. We have an ample choice of public investments that would yield high returns – far higher than the real cost of capital – and that would strengthen the balance sheets of the countries undertaking them.

The big problem facing the world in 2015 is not economic. We know how to escape our current malaise. The problem is our stupid politics.

Bill Clinton was famous for his mantra “It’s the economy, stoopid”. The mantra we need now is “It’s the politics, stoopid”.

We know the answer to “who blundered?”. So why the delay?

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Lovely column by Simon Jenkins on the fiasco of the Chilcot Inquiry into Britain’s involvement in the Iraq war, which has taken longer to write than War and Peace and looks like coming out at twice the length. He argues that we all know who blundered — it was T. Blair with his personal infatuation with George W. Bush and the need to play poodle to the US. All of which seems obvious to most observers, but worth saying again. I particularly like this crack:

The Chilcot inquiry was a ploy of Blair’s successor, Gordon Brown, somehow to get his own back. At the time, in 2009, David Cameron said it was “an establishment stitch-up”. He little imagined it would be still be there when he was the establishment, and had to defend it.

Facebook’s fantasy economics

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This morning’s Observer column.

Last week was Davos week, the time of year when 2,900 movers and shakers (only 17% of whom are women, incidentally) congregate in a small town in Switzerland to talk the talk. It also means that it’s the week in which Facebook issues its annual Bullshit Report, claiming that it is not only a Force for Good but also one of the world’s economic powerhouses. In 2012 the report claimed that Facebook – an outfit which then had a global workforce of about 3,000 – had indirectly helped create 232,000 jobs in Europe in 2011 and “enabled” more than $32bn in revenues.

Now, two years on, Facebook has more than 1.3 billion users, and its claims have become correspondingly more extravagant. This year’s Bullshit Report asserts that in the year ending October 2014 the company’s “global economic impact” amounted to $227bn – which is roughly equal to the gross domestic product of Portugal – and that Facebook accounted directly and indirectly for 4.5m jobs.

These numbers were plucked out of the air by Deloitte, the consulting company regularly employed by Facebook’s fantasy economics division. I use the word fantasy advisedly, having read the disclaimer at the head of Deloitte’s document…

Read on

What David Cameron doesn’t get: the difference between privacy and secrecy

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My colleague Julia Powles has a terrific essay in Wired on the implications of, and fallout from, the Charlie Hebdo massacre, in which she says this:

Cameron claims that there should be “no safe spaces for terrorists to communicate”. What he expects in technical and legal terms is unclear, but the sentiment is stark: no safe spaces for “them”, means none for us. Security is cast as the ultimate law and first priority, while privacy is something for bad people to hide bad things. In truth, privacy is fundamental to all of us, individually and collectively. It is the foundation of trust, relationships, and intellectual freedom. It is a core tenet of a free and healthy society — security’s ally, not its enemy.

It’s strange how the political establishment in most democracies now seem unable to distinguish between secrecy and privacy. Privacy — as Cory Doctorow observed last week on Radio 4’s Start the Week programme — is the ability to control what other people know about you. It’s the state of being unobserved. Secrecy is the act of keeping things hidden for various reasons, some of which may be legitimate — and some conceivably not. We are all entitled to privacy — it’s a human right. Secrecy is a different thing altogether.

She goes on to remind readers that Cameron’s political assertions

are propped up by a formidable line-up of security officials from MI5, MI6, and the ISC, who have been notably more vocal in the last two weeks than at any moment in the last two years. They echo the tone set by the GCHQ director and Metropolitan police commissioner in November. It is only if we can get at everybody’s communications data, they claim, that we can tackle the terrorist problem. But mass data collection, the necessary precursor to recent and proposed laws, can be shown mathematically to make it more difficult to catch terrorists, plus it has a very significant and irrecoverable environmental cost. It is in clear breach of human rights. It also creates unnecessary, unwanted, and costly data storage — and, with it, new vulnerabilities to malevolent actors that far outnumber plausible terrorist threats. What works, by contrast, is well-resourced, targeted intelligence, complemented by strategies directed at mitigating the causes of disaffection and social unrest.

Well worth reading in full.

Beyong outrage and mourning

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Terrific summing up by Gideon Lichfield of Quartz:

But as the outrage dissolves and the mourning ends, the question will remain: What is the right relationship between free speech and a free society? Freedom of speech is never absolute. There are restrictions for hate speech, libel, state secrets, and so on. A blanket insistence on free speech at all costs is no less dogmatic than a blanket insistence on sharia law. Charlie Hebdo’s brand of satire was arguably racist and deliberately provocative. What we are defending when we defend its journalists is not their right to publish without limits, but their right not to get killed for doing it.

American graphic journalist Joe Sacco addressed this elegantly in a cartoon published on Friday. After affirming—and exercising—his right to vilify Muslims, Jews, black people, and anyone else, he wrote, “But perhaps when we tire of holding up our middle finger we can try to think about why the world is the way it is and what it is about Muslims in this time and place that makes them unable to laugh off a mere image. And if we answer, ‘Because something is deeply wrong with them’—certainly something was deeply wrong with the killers—then let us drive them from their homes and into the sea… for that is going to be far easier than sorting out how we fit in each other’s world.”

And then there’s Simon Jenkins, who at the moment is a fountain of good sense. For example:

Today’s French terrorists want a similarly hysterical response. They want another twist in the thumbscrew of the surveillance state. They want the media to be told to back off. They want new laws, new controls, new additions to the agenda of illiberalism. They know that in most western nations, including Britain, there exists a burgeoning industry of illiberal bureaucrats with empires to build. This industry may be careful of public safety, but it is careless of the comfort and standing it offers the terrorist. There will now be cries from the security services and parliament for more powers and more surveillance.

Few would be so foolish as to want any group, in this case journalists, to be left unprotected from acts such as those that have occurred in Paris. Huge resources have already been allocated to forestalling terrorist acts, and that is appropriate. But these acts are crimes and should be treated as such. They are for assiduous policing, at which Britain has so far been reasonably successful. They are not for constitutional deterioration.

Only weakened and failing states treat these crimes as acts of war. Only they send their leaders diving into bunkers and summoning up ever darker arts of civil control, now even the crudities of revived torture. Such leaders cannot accept that such outrages will always occur, everywhere. They refuse to respect limits to what a free society can do to prevent them.

Well, yes, but what we’re overlooking here is the role that Western media and electorates play in all this. One of the reasons why politicians react so irrationally to atrocities is because they fear that they will be crucified by the mass media and its readership if they are not seen to react theatrically, promise new measures, increased resources, more surveillance, etc. It seems that cool heads garner no votes, or editorial plaudits either.

Europe’s real failure

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From Joe Stiglitz

Those who thought that the euro could not survive have been repeatedly proven wrong. But the critics have been right about one thing: unless the structure of the eurozone is reformed, and austerity reversed, Europe will not recover.

The drama in Europe is far from over. One of the EU’s strengths is the vitality of its democracies. But the euro took away from citizens – especially in the crisis countries – any say over their economic destiny. Repeatedly, voters have thrown out incumbents, dissatisfied with the direction of the economy – only to have the new government continue on the same course dictated from Brussels, Frankfurt, and Berlin.

But for how long can this continue? And how will voters react? Throughout Europe, we have seen the alarming growth of extreme nationalist parties, running counter to the Enlightenment values that have made Europe so successful. In some places, large separatist movements are rising.

Now Greece is posing yet another test for Europe. The decline in Greek GDP since 2010 is far worse than that which confronted America during the Great Depression of the 1930s. Youth unemployment is over 50%…

Stay tuned.