The Great EU Swindle

I witnessed first hand what I can only describe as a naked class war that targeted the weak and scandalously favoured the ruling class. Yanis Varoufakis

Trust is a dead word! The EU political elite have sapped the hopes and aspirations of millions of ordinary people throughout Europe. Nearly a decade of austerity has cheated them out of €billions to save the French and German banks.

In a stampede to maximise their profit the European banks lead the ‘Charge of the Light Brigade’ into the cesspit of derivatives. They wanted their cut, to cash in in the quick buck world of finance. They stood to make €millions but, there is always a but, the 2008 financial crash squeezed their balls till they screamed.

Thoughtless in their pursuit of dosh (€/£/$) and fearing they might lose out and look like idiots to the rest of the financial mob, they galloped headlong into the fray. BOOM! BOOM! Their bonuses blowing in the wind they trundled back to beg governments to bail them out. Governments did at phenomenal cost and then passed the bill to the ordinary people. Austerity!

“I witnessed first-hand what I can only describe as a naked class war that targeted the weak and scandalously favoured the ruling class.”1

The Double Whammy

The people were bludgeoned twice. This was a heartless mugging; the subprime mortgage crisis left millions without homes, struggling to survive and then came a decade of austerity. Such is irony. Joseph Stiglitz shoots with both barrels when he states, “…U.S. subprime crisis meant exploiting the poorest and least-educated among us.”2

As the 2008 crisis hit the governments of the EU passed power over to the troika: the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF). All decisions about bailing-out fell to them. The crisis appeared to suggest the collapse of the EU.

Angela Merkel berated the Americans for causing the debacle but soon had to eat her words as she handed over an initial €406 billion to German banks. She hadn’t realised they were burst too. Moreover, the German banks had previously loaned $477 billion to the weaker states of the EU.  Later, Merkel would hand over another huge amount.

The banks of France, Germany, Netherlands and UK had a $30 trillion exposure, which meant that if the slightest thing went wrong they would collapse. A massive bailout was needed and quick.3 The troika with their gang of technocrats were called to action.

The Sting

Five countries needed transfusions: Spain, Portugal, Ireland, Italy and Greece. In 2010 Greece received a €110bn loan from the troika. “As soon as the bailout loans gushed into the Greek finance ministry, ‘Operation Offload’ began: the process of immediately siphoning the money back to the French and German banks.”4

Of the money given over some 66% came from the EU taxpayer and 33% from taxpayers throughout the world. Thus the banks were salvaged at the expense of the people. Greece was left to cope. During the period 2010 – 2012 Greek government spending dropped by 15%. More bailouts required.5

A second then a third bailout was needed in 2012 and 2015. The Greeks got the blame for mishandling their finances as the people of Europe made snide remarks about the Greeks, not realising that it was Merkel and gang passing it on to the banks.

Little Cyprus suffered too at the hands of the troika. In 2013 Cyprus got a 10bn bailout but the strings attached were severe, the Popular Bank (Laiki Bank) was forced to close. Like other countries within the block Cyprus had to accept austerity. Wikipedia March 2013

Outside of the corridors of power the deal was condemned.

  1. Paul Mason, then a reporter for BBC Newsnight queried,

    “What is Germany doing? It triggered the Cyprus crisis and is playing hardball,…”

  2. Economist Richard D. Wolff described it as “blackmail”.
  3. Dr Jeffery Stacy believed “…it hurt Cyprus and Europe”.
  4. The economist magazine described the deal as, “…short-sighted and self-defeating.”

They were small, they were weak, they were used as a lesson plan to the rest; don’t step out of line! Democracy be damned – and it was! The BBC put the blame firmly in Merkel’s corner. While the Guardian newspaper warned that Cyprus would suffer.

www.bbc.co.uk/news/business-18586532

www.theguardian.com/money/blog/2012/may/18/euro-crisis-cyprus-next

The bailout of Cyprus, “… raised profound questions about the democratic nature of EU decision-making.”

www.Ise.ac.uk/

The people had no say, democracy was ignored, the needs of the elite were met. Meanwhile the poor had to take the medicine without exhibiting any symptoms.

Anyone who reads Yanis Varoufakis book Adults in the Room and still believes in the EU need to see someone!!! But don’t take the word of Varoufakis. The German finance minister Wolfgang Schäuble makes it as plain as daylight when speaking to Varoufakis:

“In the Eurogroup you are probably the one who understands that the eurozone is unsustainable. The eurozone is constructed wrongly.”6

The ‘powers’ may argue that they done what they did to save Europe for democracy. It was merely a temporary suspension and, strong arm tactics were necessary to achieve restitution. BUT!

  1. The cost was one-sided. Ordinary Joe paid in full.
  2. Banks were saved without consequential costs.
  3. Banks continue to make huge profits and top employees to make awesome bonuses.
  4. The ‘powers’ never explained their actions
  5. The ‘powers’ succeeded in smashing the concept of fairness.
  6. And succeeded in destroying trust.
  7. Political leaders could not think of an alternative plan.
  8. The elite went scot free!!!

Democracy was cast aside; kicked in the balls and dismissed as a troublesome kid. There can be no clearer evidence that the people were used as pawns to benefit the elite.

“It is unfair to accept benefits but refuse to pay.” The bankers did!!! Johnathan Wolff  7

  1. Yanis Varoufakis, Adults in the Room (481)
  2. Joseph Stiglitz, The price of Inequality (xlv11)
  3. Y V (38)
  4. YV (27)
  5. YV (19 + 499 note)
  6. YV (407)
  7. J. Wolff, Political Philosophy Third Edition (59)

 

 

Europe: Death Throes


Europe is at a crossroads and its survival may depend on the route taken. It is very clear that large numbers of ordinary folk have fallen out with the concept of ever closer integration, and with mass migration. Multinational companies are advocates of the EU, according to the analysis of focus-economics.com. This body paints a bright picture of vibrant colours for the immediate future of the Eurozone.
While the few, (big boys) find it exhilarating, hundreds of thousands, if not millions, of the poor throughout the EU fear the dark and unappealing clouds. Who is right and why the divergence of opinion?
Since the crash of 2008 not a lot has changed for the poor. Unemployment remains persistently high at around 11% for the Eurozone as a whole. The only country doing well is Germany with the lowest unemployment rate in 25 years.  www.focus-economics.com/germany
In contrast France has seen its unemployed rate rise above 10% as recently as December 2016. In Italy it’s almost 12%. In Spain youth unemployment is a persistent 24%. As the economist.com points out, there is “…high unemployment almost everywhere.” (October 2016).
Therein lies a major problem and to compound it we have the arrival of significant numbers of migrants. The figures vary, according to Frontex the EU border agency 1.8m came to Europe in 2015 with an estimated further one (1) million illegal entrants. Significant numbers continue to arrive. It really doesn’t matter whether you think it is a good idea, the humanitarian thing to do, or not. The crucial point stems from the impact. And the impact has proven seriously negative for the poor.
In highlighting the negative we need only look at the UK and that 73% of local councils take few, while councils in the most affluent areas take no migrants. Whereas, places like Boston in Lincolnshire has witnessed a huge influx. In consequence 72% of the electorate voted ‘Leave’ in the referendum of June 2016. Thus the burden of coping with migration has been firmly placed in areas with a high concentration of working class people. A class issue?
It is slowly being accepted that such an influx of numbers has a direct effect on: housing, rented accommodation and the cost of rent, school places, dentists, doctors’ appointments and the NHS especially the accident and emergency (A&E) departments. The same difficulties are not a part of daily life for those who castigate the poor for stating the obvious.
Therefore, it is the poor who carry the burden of migration. The well-off and the political elite berate the poor for moaning, and are unconcerned by the growing frustration and mounting anger of the people. As a means of demeaning and controlling any outbursts from the lower classes the establishment and their luvvie bedfellows demonize them as: ‘ignorant, uneducated, stupid or racist’ as experienced by Lord King, former governor of the Bank of England. (Daily Mail 2017/02/10)
A blind adherence to their prescribed agenda by the political class and their groupie acolytes has served only to alienate millions of voters. The consequence is now obvious.
Similar patterns are to be found throughout Europe. In Germany the altruism of Angela Merkel and her subsequent rise to fame has waned considerably. When the emotional high withers the harsh reality, the practical everyday environment comes to the fore. Germany was magnanimous but the rise of opposition has increased steadily. The AfD (Alternative for Deutschland) has been growing and estimates that it can now command roughly 25% to 30% of the electorate with an anti EU policy.
Now the Social Democratic Party (SPD) with their new leader Martin Schulz ex EU President, think they can muster a campaign. The youth movement of the party JuSos are filled by enthusiasm and think they could actually steal the election in September. www.theguardian.com/      15/02/2017
However, there are more fundamental consequences as many of the migrants are now feeling trapped in camps. Thousands complain that they cannot find work and their frustration and anger grows. Those who find work are usually a source of cheap labour paid below the minimum wage. Illegal workers are simply used and abused.
Nonetheless, the true horror comes from the sheer number of single male migrants, hundreds of thousands who have needs beyond that of shelter and food. Existing brothels will not cope with the increased need and so the void is likely filled by people traffickers to help satiate the overload. In consequence, thousands of women and children will be brought in and forced to meet the demand.
The sanctimonious will continue to berate their opposition with their abusive language and remain immune to the tragedy behind the closed doors. I’ve met their friends who accompany them everywhere they go:  see no evil – hear no evil – speak no evil! It’s unfortunate but reality cannot by itself break down a fixed ideology.
Throughout Europe there is fallout from the high unemployment, the migrant crisis and the deafness of the political class. In Sweden, once considered the hallmark of social democrat achievement has fallen foul to these undercurrents. In the city of Malmo the local police have asked for national assistance to combat the steep rise in crime.
One area particularly affected is the district of Rosengard which has an 80% migrant population but less than 40% of the total population have a job. A growth in social unrest, gang warfare and multi-ethnic violence has led to eleven (11) murders, 80 attempted murders and a spate of shootings, arson attacks and bombings. Little wonder that the local guys want additional help. (Reuters)
Si se puede
Meanwhile, a Spanish member of the EU parliament (MEP), Javier Lopez has written a piece on the ‘defense of democracy’. By democracy he means the maintenance of the existing order as he abhors the “bigoted populist movements”. Along social democratic lines he is calling for the reconstruction of the EU to incorporate a fiscal branch, harmonization of taxes, a minimum income throughout the Eurozone and better public services.
Lopez believes such a programme will curtail the build-up of populism. However, his ideas will necessitate closer integration which is the opposite of what many of the new parties in the EU want. Also, the Guardian newspaper, (theguardian.com October 2014) points to political scandals and corruption as prime reasons for the existing political parties losing ground.
In his homeland of Spain, has seen the rise of Podemos (We Can) founded in March 2014 and now the second largest party in Spain with a membership of 456,000 as of April 2016. It is also the third (3rd) largest group in the Spanish parliament. The party is a strong left leaning organisation that wants an end to austerity and changes to the Treaty of Lisbon. But to Lopez’s logic all members of Podemos and all those who voted for them are ‘bigoted populists’. Unfortunately for Lopez the motto of Podemos is – se si puede – Yes We Can!
www.socialeurope.eu/2016/12/europe-globalization-unrest
Of course all eyes are on Greece at this time and whether it can meet its debt repayment plan. There is little understanding from the ‘powers’ in Brussels of the political reality in Greece. The parties that once held sway, PASOK, centre left and New Democracy could look forward to 70% – 85% of the vote at elections.
Such numbers create a self-assuredness and in consequence a relaxed approach to the everyday needs of the electorate. The vote for PASOK has fallen to 5% at points and their joint vote to 31% at the May election of 2014. It is difficult to understand how such a change can go unheeded by the Brussels politburo.
The Greek economy has fallen by 25% which is equivalent to the 1929 crash in America. The country is on its third (3rd) bailout with the forth due soon. In the summer it has a debt of €7.5bn to repay before receiving its next tranche.
There is now an open rift between the IMF (International Monetary Fund)) and the ECB (European Central Bank) over how Greece should be bailed out. The debt problem of 184% of GDP which equals some €350bn means it will find it extremely difficult, if not impossible, to pay off any of its debt. The IMF says the debt is ‘unsustainable’.
If Greece had a vibrant economy it could possibly reschedule its debts. However, the country is still in the doldrums; high unemployment, poor investment levels, poor productivity and the fact that the people don’t have a lot to spend means it’s between a rock and a hard place.
Hence the IMF wants the next bailout package to include some debt relief. But, the ECB want more austerity and are really none too happy that the Prime Minister Tsipras gave a Christmas bonus to pensioners and free school meals to children of the poor.
Now you’re aware of the priorities of the ECB and the German finance minister Wolfgang Schäuble. Of course they may argue that the poor in Greece will be better off in the longer term but that don’t help when you’re hungry now. And that don’t help if you’re a political party trying to stay in power. And that don’t help unless it’s a stone cast guarantee!
www.theguardian.com/business/economics-blog/2017/feb/05/                   (A good read.)
BBC Business News 2017/02/15
Poor Greece (literally as well as metaphorically) has suffered years of austerity. And while other nations get a boost from retail sales Greece doesn’t have that luxury. Instead it is under pressure to cut pensions again which would be the thirteenth (13th) time. Unlucky for some – no pun intended. Therefore the Greek debt problem is a headache and perhaps, that’s why the German newspaper Bild has suggested that the German government would welcome Greece leaving the EU.
www.marketwatch.com   www.taieitimes.com/news/editorials/  (2017/02/06)
According to the economist Paul Krugman forcing Greece to suffer austerity which comes with every deal, “…it’s a grotesque betrayal of everything the European project was supposed to stand for.”
https://krugman.blogs.nytimes.com/2015/07/12/killing-the-european-project/?_r=0
CIAO Italy? (chow)
Another nightmare stirring in the background readying to wake the dead is Italy. This nightmare can truly disturb the sanity of the EU: dozing, dozing, dozing; alarm! The banks are described as “…an inexhaustible source of financial instability”. Unemployment hovers around 12%. It has the highest inflation rate (Feb: 2017) since 2013. Public debt continues to rise and there is no sign as yet of any economic recovery.
Interestingly, none of the major rating agencies: Standard & Poor, Moody or Finch is prepared to give the country a rating. The reasoning may be because the country’s debt stands at 132.6% of GDP the second largest in the EU. Bonds sold to keep Italy afloat are not being bought by private investors but by the ECB. Aggressively!!
The Times also reports that Italy has gained little from the euro. The paper also claims that the poorer countries in the EU can’t reach their potential because of poor growth and poor investment. Such a scenario may have fed into the logic of the Mediobanca report that states that many parts of the EU are caught in a “mouse trap” and adds “Without a major restructuring of the Eurozone, there is nothing you can do under these rules”
. www.focus-economics.com/countries/italy   www.times.com/2017/02/08/business/
Business Insider in discussing the problems of the EU concludes that “Actually, a lack of reforms, slow growth, a troubled banking sector and high government debt in Italy may be a bigger risk for the Eurozone.” Than Greece! www.businessinsider.com
La France – la sortie?
France the second biggest economy of the Eurozone has many of its own problems. Unemployment is up above 10% again and tales of political corruption have been in the headlines for a number of years. Add migration and terrorist attacks and the government is under severe pressure.
Since Hollande came to power taxes have risen to an all-time high at 47.9%, the highest in Europe. The real indicator of the well-being of the country is summed up thus, “… no significant economic improvement over the past five years”.
In terms of trade France exports 17% to Germany but imports 19% from the Germans. Their deficit is also high, while debt stands at around 102% of GDP. That only leaves Germany with a positive outlook.
www.ndtv.com/world-news/   citing an article by Reuters 2016/12/04.
It doesn’t look promising as the IMF say that the euro is about 15% undervalued but their analysis suggests that based on the French economy it is 6% overvalued. This is a problem faced by all the economies of the Eurozone but that of Germany. How would the other nations fare if the euro was 15% higher? The alternative is to leave the EU and devalue or a complete overhaul of the EU.
The French election should be an interesting one, Emmanuel Macron standing as an independent is now running high on the polls aided no doubt by the corruption scandal surrounding Fillon the right-wing conservative candidate.
Unfortunately for the French workers Macron is proposing more austerity with a package that includes cutting pensions and severely restricting trade unions to operating at company level rather than across the whole industry. Maggie’s back in town!
Marine Le Pen seems the likely opponent of Macron. The National Front programme is to leave the euro and devalue. Or create bedlam along the way.
Generally, the economic picture is not one to win investment and the policy of austerity has proved a disaster, so much so that it has been abandoned by some countries. Therefore there is no common policy to deal with the desperately slow growth that hangs over the Eurozone like a huge dark and brooding cloud as far as the eye can see.
The chief European economist for Goldman Sachs Huw Pill suggests at best the EU will stumble along making small gains. However, he warns that the EU needs ‘institutional and structural’ changes to overcome the weaknesses of the block.  www.goldmansachs.com
A further nail in the coffin comes from the economist.com (October 2016) and their assessment that there are “…deep flaws in the single currency’s design.” Flaws in the currency have been known for some time through the work of J Stiglitz and Paul Krugman both Nobel Prize winning economists.
Having already bailed out Greece, Spain and Ireland; the question must be how long can this process carry on. How long before the moneymen run for the hills?
On the political front the EU is open to severe attack from several flashpoints. In Austria Norbert Hofer of the Freedom Party lost the presidential election by a mere 0.6%. The latter is far-right politically as is the AfD in Germany and other such movements have sprung up in many areas of the EU.
Austria’s new chancellor Christian Kern has made it abundantly clear that he expects the Eurozone to make big changes. He at least recognises that the writing is on the wall unless the people’s wishes are given a hearing.
The Danish People’s Party has increased its vote by 50% in eight years. In the Netherlands the far-right party of Geert Wilders the PVV with its anti-EU stance could possibly win in the next election. In Italy the Five Star Movement (M5S) has gained the mayor ships of Rome and Turin and is polling nearly 30% of the electorate. www.theguardian.com/world/2016/may/25/
Just over a year ago Martin Schulz, the president of the European Parliament was quoted as saying, “The worst nightmare for the European project is an outbreak of populism or political upheaval in Germany. Now it is looking like a real possibility.” He went on to say that the Schengen area is ‘buckling’. www.express.co.uk/news/world/ (2016/01/15)
Which road will the politicians take? It seems that they have run out of rope but are afraid of the consequences once their actions become apparent. A Hungarian commissioner Sandor Lederer has demanded to know why the EU Commission has not released the extensive report on corruption.
He is of the opinion that “Corruption is rampant in Europe” and that transparency should be a “…top priority at all levels of governance.” Frans Timmermans reputedly told the Civil Liberty Committee that he sees no point in releasing the document. Hmm, interesting!
www.euractive.com/section/justice-home-affairs/opinions
Corruption stories keep coming up all over the continent and yet there are no sackings, no heads roll, it’s a carry on as usual syndrome. Meanwhile, ordinary Joe goes to prison for fraud. Hmm, interesting! The stories of corruption are causing a dust cloud.
It is little wonder that the populace have a growing contempt for the politicians. It doesn’t matter the party in power they follow roughly the same line of thought; it’s just different shades of grey.
There is a sweeping antagonism and a deep mistrust of the politicians and of the opaque bureaucracy they have installed. No one is accountable. No one takes responsibility for any wrong doing. No one admits to failure. Everything is fine in La La Land!
The most telling point comes from an 86 year old Frenchman Maurice Beauzac from Chartres during a street poll held by Reuters:
 “We are living at a time when the word integrity is becoming meaningless to our politicians.”
www.uk:reuters.com   2017/02/09
The crossroads has roadworks! Trapped in the mire of their own making all the politicians can think to do is attack with ever more disparaging language. Sad isn’t?
This year is one of crucial elections in France, Germany and the Netherlands the outcome could seal the fate of the European project.
If we assume that the establishment parties win by whatever margin will they read into the result a clear acceptance of their programme? Or will they note the size of the opposition, an opposition that did not exist a few years ago and concede that change must follow?
It may well be that they will carry on down that same road and continue with the policy of austerity. They may turn a blind eye to the exposé of corruption and continue their role as the proverbial ostrich.
Meanwhile, several notable commentators, Goldman Sachs, Mediobanca have called for serious institutional and structural change. The Economist magazine notes a weakness of the euro as have several leading economists. Many have commented on the sluggish performance of most of the economies of the EU and see few prospects in the near future.
The most recent set of stats from the German official statistical office Destatis paints a bright picture for Germany and the Eurozone. Germany it concludes has achieved 1.9% uplift in activity in 2016 making it the fastest growing of the top 20 nations, due to higher exports and the weak euro.
For the Eurozone it suggests the highest lift since 2011. Destatis also points to the French service sector as ‘booming’. However, this contrasts with France24.com when they highlighted that tourism, a major contributor to the French economy, had a steep decline and that Paris had seen a drop of 1.5m visitors alone.
Martin Baccardax, The Street 2017/02/23  reported in msn.com/news
Unemployment is too high throughout Europe it’s a persistent harbinger of poverty and causing a persistent distrust of the politicians. Ordinary Joe is not feeling any upsurge in their personal well being and there are few good signs on the horizon.
Note the point by the New York Times: 50% of all new jobs since 2010 are temporary jobs in Europe. It’s a job but one without prospects and one that simply keeps the debt man (raptors) from the door.
https://www.nytimes.com/2017/02/09/business/europe-jobs-economy-youth-unemployment-millenials.html?smid=tw-nytimesworld&smtyp=cur&_r=1
Part time work feeds many problems down the line. If people are barely managing then how can they save for a rainy day? They cannot contribute to a pension for their retirement, a tab that will in all probability have to be picked up by the state. Tax increases?
Big business is screwing ordinary Joe now with part-time work and zero hour contracts. And will screw Joe later when Joe has to rely on a pittance of a pension from the government to survive.
Alternatively, people just fuel their own debt by taking out loans at exorbitant rates of interest and spend. Keeping up with the Jones’ is such fun – until the bubble bursts.
Nonetheless, at some point a state of listlessness creeps in, anxiety increases, stress leads to a host of other problems: break up of relationships, increase in violence fed by a growing anger, illness and crime.  Add a less than causal approach to productivity, all of which help to dampen the economy and force more fuel into the fire of discontent that has been growing.
Add to the mix the migrant crisis. These are people with as many aspirations as anyone else but many are finding that Europe is not the Promised Land. Lack of employment, trapped in camps, their culture clashing with local beliefs and other migrant groups. Desperate for the good life many enter illegally and too many become sub-human cheap labour for the profit hungry businesses.
“…traffickers are increasingly bringing in vulnerable people for the sex trade and as slave labour.”
Such is the problem created by traffickers that Frontex recognises that they are a       “…significant threat to the EU”.
On integration: “The high numbers of economic migrants – mostly with low educational qualifications and with a different cultural background – are not truly integrated into European societies. This causes social conflicts and critical perceptions of migration.”  http://frontex.europa.eu/assets/Publications/Risk_Analysis/Annula_Risk_Analysis_2016.pdf

Banksy

And the sanctimonious speak to their best friends: – see no evil – hear no evil – speak no evil!   Happy to smile for the cameras while playing politics with people’s lives!

Such is the political cauldron we live in today. There is but a tinge of hope that one day a door will open and objectivity will enter but alas – don’t hold your breath.
Do some good join – Robin Hood!

The Rape of the Poor

 

Try not to live as a pretender,

But so try to manage your affairs

That you are loved by wide expanses,

And hear the call of future years.

Boris Pasternak – It is not Seemly to be Famous – stanza 3

It is now well documented that while the super rich have grown richer the poor have travelled in the opposite direction. According to several economic writers the blame lies squarely with the neo-liberal economic model*, and, that its demise signals the last rites for capitalism. It’s a stretch to suggest that because one economic model has failed that we must prepare for a new world order.

However, there is one truth and that is that the poor have been raped. They have been raped of income, of opportunity, of prospects, of their self-esteem and of their very dignity. Let’s draw our picture with a few succinct and powerful quotes from notable writers.

The USA, under neoliberalism, boosted profits by impoverishing its own citizens.” Paul Mason (p19)1

“…income inequality has reached extreme levels not seen since the 1920s, and before that, the 1890s.” James Rickards (p236)2

The general thrust of these quotes are supported by other economists that I have previously quoted in earlier posts: Stiglitz, Chang, Rodrik, and Krugman. There can be no doubt that the poor have not kept pace with the distribution of wealth that has been generated. The push to globalization and its fellow rider free trade have cost the poor of the western nations much.

*www.en.wikipedia.org/wiki/Neoliberalism    

 Multinationals have simply used their capital to invest elsewhere, mostly in Asia and China in particular, to utilise the cheap and at times slave labour. A prime example, quoted in several books is that of Apple. This company pays to have its phones etc. manufactured in China by cheap labour but when the finished product comes back to USA and Europe, Apple charge a price that would equate to the phones being manufactured in America or Europe. The company makes huge profits from such an arrangement. Huge!

We are all now aware why the big boys have been promoting globalization and free trade; it’s of great benefit to their profit margin. The rest of the populace can go take a hike!

Banksy

But wait! The hoi polloi have not sauntered off with their cap between their legs. No, they’ve used their democratic right to vote against the elite. They have done what our politicians have been afraid to do.

Stunned, the elite stare in amazement at the audacity of the low-life. Some have voiced their anger at this popular wave of sentiment: the Brexit vote in UK, the Trump victory and the referendum outcome in Italy. Shit! they cry. The bastards are ganging up on us! However, the real reason is that the elite have been blinkered by “decades of denial” Rickards (p230) Paul Mason (p258)

Nonetheless, the elite have sent out their Stormtroopers to defend their rights. Politicians of various hues have marched to the given tune. Jean-Claude Juncker, head of the European Commission has made it clear that events should not be dictated by populism. John Major, ex-Prime Minister of Britain bemoaned the “tyranny of the majority” (John Stuart Mill 1859). Meanwhile, Labour MP Chuka Umunna, speaking on the BBC News channel spoke of the “elective dictatorship”.

·         These little men are so full of their own self-importance.

Let’s try and explain to these political hacks why populism is so in vogue:

“Once the election is over, voters are ignored and winning elites carry out preconceived plans”. Rickards (p238) Ring a bell? Been here before?

This leads nicely to philosopher Michael Sandel, (p13) 3

“Disillusion with politics has deepened as citizens grow frustrated with a political system unable to act for the public good, or address the questions that matter most”.

I would make one quibble with Sandel with his use of the word ‘unable’; I would have used the adjective ‘unwilling’.

Michael Sandel’s book was published in 2012 and was probably written therefore in 2011, if not before. Five years later and the elite still had not grasped the significance of what was happening right under their noses! The logical explanation is that they couldn’t give a shit. And now the shit has hit the fan!

One can only learn if willing to. It seems our political masters are unwilling. Their attack on democracy, for that’s what it amounts to, is a clear attempt to diminish the power of the majority. We cannot as a society, have a democracy that does not adhere to the majority vote, whether we agree with the vote or not. Let those who talk of the “tyranny of the majority” stand up and demand a dictatorship.

I appreciate that Karl Popper in his work the Open Society had a dilemma accepting a majority vote in favour of a fascist party. My response to his concern is that society should never get so low down that it is faced with such a prospect. A democratic society has failed if it reaches that stage.

In the midst of a crisis people hanker for a solution, a solution with the least trouble. The question is should people push forward in a direction of which they are unsure, full of doubt but advised to dare. Or will people be more cautious and look for something vaguely familiar or perhaps rely on the political party that appears to know what it wants and how to get everyone there. The road to fascism!

Democracy: The Only Road Forward

In the general election of 2015 in the UK, the Conservative Party polled 36.9% of the public vote and secured power as the next government. The Labour Party won 30.4% of the popular vote and is now trying to override a majority decision of 52% that voted to leave the EU.

The Scottish nationalist with 4.7% of the national vote are busy screaming in alto from the upper circle; joined by the Liberals who saw their percentage of the vote fall by a staggering 16%. The refrain of this unlikely choir is, ‘All we are saying, is let’s stay in’. They’ll still be singing as the gravy train goes rolling down the track – out of sight.

www.bbc.co.uk/news/election/2015/results

We have reached an impasse, will the political class respond positively and accept that the times are changing or must they be pushed to the wayside. Will it be the death knell of capitalism as espoused by Paul Mason and James Rickards? There is little doubt that neoliberal policies have proved a nightmare for the overwhelming majority. Those at the top end of the table had a feast out of neoliberalism. The question is are they now willing to share?

Perchance they will remain in denial as both Rickards and Mason state. If so what are the consequences? I doubt the elite can carry on much longer on their present course. The deep frustration with the elite will turn increasingly to anger which will beget activist groups taking up the cause of the people.

Such a scenario will not strengthen the elite as the use of force against these factions will break down quickly. It will not bring out the silent majority against the perpetrators. That old reliance was only solid when there was trust and most people felt good about their lifestyle. The rise of populism is a clear indication that many are genuinely feeling downtrodden.

Many of the elite may feel just as Mitt Romney does, “…inequality is the kind of thing that should be discussed quietly and privately.” J Stiglitz (p33)4  Those days I’m afraid are gone, if they ever existed outside the comfort of elite homes and country clubs.

Winter for all Seasons

According to Paul Mason (p262) quoting from a survey from the OECD that world development will be weak for the next 50 years and that inequality will rise by an estimated 40%. If these figures are anywhere near accurate then winter is going to be all year round for the poor. And if winter is all year round people are going to get mighty fed-up! Guy Fawkes might get reinvented for real.

Mason also states that the only way to keep globalization and free trade is by having the costs borne by the poor. Again if he is right – its winter! He gains support for his view from James Rickards (p227) who argues, “Yet free markets and free trade are flawed in theory, non-existent in practice.”

This assertion is proven when we look again at the practises of Apple and other conglomerates. Such businesses gain comparative advantage because their money buys more in China and the cheap labour make it a double whammy. China also gains comparative advantage by having the investment and the jobs. Who loses? The workers in America and other western nations!

Further examples are the manipulation of the Chinese currency the yuan or of their interest rates. Other nations have also made great use of the manipulation of both as well as the corporate tax which for example, is due to reduce from 28% in 2010 to 17% in the UK by 2020. Therefore there are no free markets or free trade; everything has a fix.

Nonetheless, the lack of truly free markets or trade does not spell the end of capitalism. The system has witnessed upheaval before, several times, and by hook or crook the system has mutated or morphed and we carry on. In living memory for some is the horror of the 1920s and 1930s – ‘Buddy can you spare me a dime’.

Another period of uncertainty was in 1968 when many of the young at the time believed they were on the brink of revolution particularly in France. In the USA there was the anti-Vietnam protests, civil rights, the rise of the Black Panther movement, and woman’s lib. The Prague Spring, trouble was brewing all over the world. “Many protests were a direct response to perceived injustices…”

www.en.wikipedia.org/wiki/Protests_of_1968

Most recently the 2008 financial crash has kicked many, right where it hurts. Ouch!

What is increasingly likely is turmoil in the EU. The euro () has never been stable and the single market is hurting many countries. These nations: Spain, Portugal, Greece, Ireland among their number have been on the receiving end of the slump that followed the 2008 crash. For eight (8) years they have held to the philosophy of the single market but, and it’s a big but, for how much longer.

Paul Mason (p261) argues that the EU is just one ‘political accident’ away from collapse. In this I would be in agreement with him. The self-interest of politicians from one of the nations mentioned above may be the trigger in a struggle to stay in power.  Moreover, the euro () was a political construct not a financial one and therefore weak from, GO. The bureaucracy is too big, and wields too much political power. A bureaucracy should never hold political influence; otherwise we enter the realm of Stalin.

However, any possible collapse can and should be managed. The EU needs to reinvent itself and those in power must surely be aware of the need for radical reform. The euro is but a starting point. It’s about the political class’s ability to face reality. If not – KA-POW!

Moreover, Mason and Rickards are not the first economic writers to predict the fall of capitalism. Joseph Schumpeter (1883 – 1950) had a whole school of economics named after him and prophesied the evolution of capitalism into socialism. It didn’t happen, as you are aware.

Schumpeter recognised that capitalism adapted and adopted but felt that the very nature of the system and the changes it goes through would cause its mutation.  Schumpeter  termed it ‘creative destruction’ thus the process of regular change and the growth of multinationals and management teams would stymie the entrepreneur, as a result  the system  would lose its dynamism and, the bureaucracy and the State would play a greater part in the new socialist world.

Of course others preceded Schumpeter. We can look back to Marx and Engels, to the world of Lenin and Trotsky, to Mao and the likes of Ho Chi Minh. With the exclusion of Marx and Engels, the other attempts at the promised land directed by the state from the centre came crashing down. The failure in all these enterprises was the insistence on ‘democratic centralism’ – basically the central committee told everyone what to do. It was the vision of the Politburo or nothing.

The other side of the coin of failure was trying to control development and trade in a predominately capitalist world. In essence they could not compete which forced their leaders to become increasingly totalitarian. And as usual the workers paid the price!

Market Economy?

Nonetheless, the state has a role in the capitalist system. Neoliberalism may want a minimalist state but we’ve never heard the big boys moan when regularly bailed out. In every economic downturn or crash as in 1929 and 2008 the state stepped in with tax payers’ money to prevent the catastrophe that would have followed in consequence.

Ha-Joon Chang (p456)5 is adamant that the state has a crucial role and may even be critical in maintaining a society for the public good. “The economy is much bigger than the market. We will not be able to build a good economy-or a good society-unless we look at the vast expanse beyond the market.” He cites Herbert Simon of the Behaviourist School, that 80% of economic activity happens inside organizations not in the market. (p159)

So what can the state do to help rebuild our broken economy? Many jobs can be created by investment especially by improving infrastructure: build more and better roads etc. Even Donald Trump threatens to help America get going again by infrastructure programmes.   

Retreat is another way to help our economy, retreat to the Bretton Woods agreement of July 1944 and claw back the free rein given to the banking sector through deregulation by Reagan, Bush and Clinton. Perhaps there’s a need for another clever intervention as with the New Deal 1933-1938 which held back the growing tide of anger at the depth and extent of poverty at the time. Of course the economy really took off with the Second World War but I’m not advocating a third.

The Bretton Woods agreement was an attempt to bring lasting stability to the world economy, and it worked until dismantled. The team which drafted the programme described the world of finance as “…a casino instead of a driver of economic well-being.” Rodrik (p97)6 Rodrik (p111) after examining a lot of evidence, stated, “The inevitable conclusion is that financial globalization has failed us.”  

Trade globalization can also be restricted and more power shifted to domestic governments. Let’s leave it to economist Ha-Joon Chang (p446) to lay down the case for a rethink:

“In the last three decades of hyper-globalization, economic growth has slowed down, inequality has increased, and financial crises have become far more frequent in most countries.”

Michael Sandel (p64) adds, “Economists often assume that markets do not touch or taint the goods they regulate. But this is untrue. Markets leave their mark on social norms. Often, market incentives erode or crowd out nonmarket incentives.”

Sandel argues that to put a price on everything diminishes the human interaction. He gives several examples such as the selling of kidneys and blood. Such enterprises hurt the lower class the most; it is therefore unfair, as here survival often necessitates the action. His philosophy demolishes the logic of neoliberal economists that we are all motivated by self-interest.

The trafficking of women and children for sex is a clear example. The kidnappers / sellers are self –interested as are the men who pay to use these unfortunates. But can it ever be justified? Would we or should we ever permit it as a legitimized trade transaction?

The human factor cannot be discounted from any understanding of how the world works. Money is but one example of a motivator. However, it’s also regarded as the ‘root of all evil’. Somebody knew something. Economists don’t like nouns like ‘altruism’ because they can’t quantify it and therefore can’t add it to their constructed model.

Let’s refer once again to the philosopher Michael Sandel (p130)

“Altruism, generosity, solidarity, and civic spirit are not like commodities that are depleted by use. They are more like muscles that develop and grow stronger with exercise. One of the defects of a market-driven society is that it lets these virtues languish.”

This is an area that I don’t think Mason has fully taken on board; emotion is a most powerful part of our makeup and can lead us in many directions. I’m thinking of religion and its hold over people and their decision making. Any move to socialism may be blocked, unless we let God in, because religion can be very intractable.

Obviously, the market is not all that the neoliberal /classical economists would have us believe. But is the capitalist system doomed as Mason and Rickards suggest. I have an alternative view of what is taking place. I believe it’s a war of the elites.

Clash of the Titans

Wealth creation has a direct relation with power and consequently the Middle East has become one of the richest areas on the planet. Therefore, presumably, it could become the prime powerhouse of the globe and its elite the most powerful group. Add to that scenario the emergence of China and its record breaking productivity which casts it into a power player. Then of course, we have the West, led by America.

On the outskirts of this game lies Russia, rejected by the elite of the West because Putin won’t play ball by the set rules. Putin cannot be trusted to conform to the big picture. So, Russia gets up to as much mischief as it can in an attempt to be heard and still retain some credibility as a big player.

So here we have it, three main players at the table and an outcast screeching on a bench nearby. The Middle East has vast wealth and can turn on a tap to get as much as it wants. China has been accumulating significant wealth over the last few decades and can screw its people for more if needed – bang goes their saving plans.

The West has a fair back up but needed a whole lot more, hence the rape of the poor. It needed to replenish the coffers to make the banker feel good. But the West had an ace up its sleeve; it could cause big trouble in little China and particularly in the Middle East.

War! The Iraq war was only partially about oil and more about destabilizing the region. The Arab world was then encouraged to turn against each other. In Libya, under the guise of introducing democracy the West invaded – the nation is still torn apart. A similar ploy was utilized in Syria. For generations the different brothers of Islam, Shiite and Sunni lived in calm cohesion, now there is nothing but killing of their brothers.

 China has built a powerful industrial base but this has been on the back of Western capital. The multinationals can at any time transfer their allegiance back to their home nation leaving China with a major industrial wasteland.

It may seem that the West have the resource to come out on top. Perhaps, but the rise of populism has taken the gloss off their cosy abode, unless they come up with something new damp and rot will set in and they could lose any advantage.

Therefore the contention is that the world is in trouble because the elites are at war. Once this battle is resolved it will be back to business. Thus capitalism is not falling apart; it is being used by the elites to fight their respective corner.

There is so much more to this theory: industrial espionage, the deliberate interference on manufacturing of products. In this war some industrial giants are being forced to recall damaged goods which have been sabotaged, costing them $ millions. It’s nasty out there!

Notwithstanding, neoliberalism has proven a disaster movie: the steadfast, independent and strong individual (read – elites) have fought off the greedy bandits’ (read –poor) and secured world domination. Not quite! Ordinary Joe is back with a new army armed with the knowledge that:

·         Financial globalization has failed

·         Trade globalization has failed

·         That inequality has greatly increased.

The people want a better managed, more fair, more decent society than the ‘grab what you can mentality’ of the present system. Citizens want a ‘civic spirit’; they want to flex those ‘muscles’ to strengthen the positive values to take us forward. The people want a fair share of the goods they help produce.

So we are getting close to the crossroads, there will be change but I don’t think it will be revolutionary, it will be a while yet before the end to the capitalist system. Capitalism will not meld or morph into socialism; we are simply not ready intellectually for that stage of development. How damned unfortunate!

Instead governments will spend as Keynes advised. They will also introduce a degree of protectionism while continuing to promote free trade. Currency, corporate tax and interest rates will be manipulated. The financial world will be regulated as before. This will be a period of stabilizing the economy. Government investment will become a crucial element in future development.

Much may be determined by the political class. Whether they have the nous to change, the strength of will, the character, and a sense of civic duty. Or will they besmirch the aspirations of the people and cry foul as have British politicians over the Brexit vote.

We move on, perhaps a tad slower than before but hopefully happier.

1.       Paul Mason        POSTCAPITALISM A Guide to our Future.

2.       James Rickards The Road to Ruin

3.       Michael Sandel                 What Money Can’t Buy

4.       J.E.Stiglitz            The Price of Inequality

5.       Ha-Joon Chang Economics: The User’s Guide

6.       Dani Rodrik         The Globalization Paradox

 

Europe: Moving Politically Right?

  • Our politicians

There are fears that Europe is moving inextricably to the right in politics. The numbers voting for the parties of the right has grown. Nationalism and an increase in xenophobic

If only it was about food waste.

attacks have prompted scaremongering.  The parties of the left in politics are equally loud in protest and actions. The increase of extremism can be laid squarely at the door of politicians; they will not admit it but their poor management has brought us to this juncture.

America is also witnessing a political phenomenon. And this is where our story begins. The decision of the American administrations of Reagan, Bush and Clinton to deregulate the financial system led us directly to the banking crisis of 2008. The repeal of the 1933 Glass – Steagall Act which brought regulation to the banking sector after the great crash of 1929, lead the way. Suzanne McGee (p269). The crisis of 2008 still has us in the doldrums. Thank-you cowboy Ron!

In Europe the crisis was handled badly, made worse by our political leaders. Joseph Stiglitz (pxxv) Greece had been allowed to spend aided by Goldman Sachs bank until the bubble burst. The EU refused to bail Greece out and instead insisted that the country go cap in hand to the IMF. A political farce ensued, Dani Rodrik (p218). Panic engulfed the EU caused by political ineptitude particularly on the part of Germany.

Greece was forced to pass laws on cutting its health service, on trade union rights including collective bargaining and to cut the minimum wage to secure a bail out. Austerity, austerity the catchphrase of the neo-liberal economists had taken hold. Prune back, was the rallying call, in order to pay your debts. Believing in the ‘confidence fairy’, Paul Krugman (p200) e.g. make the markets believe that you are not being profligate and they will continue to invest. Mm, the very people who caused the crash!

Prune, hack, slice; wages, jobs, the welfare state. Prune, hack, slice, the debt man’s at the gate. That was the basic spin from our politicians. Somehow the economic mire we found ourselves in was the fault of the workers and the poor. A telling analysis of the absurdity of such a political logic is given by Krugman (p200)

“The trouble with the current situation, [2012] insisting on perpetuating suffering [austerity] isn’t the grown-up, mature thing to do. It’s both childish (…) and destructive”.

We can add the voice of Stiglitz (p76) to that analysis:

“The irony is that in the crisis that finance brings about, workers and small businesses bear the brunt of the costs”.

Income inequality has been rising since the 1980s. Ha-Joon Chang (p333). The trend is acknowledged by many economists. The trend was marked in the USA and UK who have followed the neo-liberal economic school of thinking — austerity. Thus over a sustained period ordinary people have witnessed a decline in their living standards and the failure of politicians to protect their well-being.

Dissatisfaction has been brewing, the kettle is not yet boiled, but. Wages depressed, jobs scarce at the lower end of the market, the economic crisis not yet resolved, forced cultural change with growing concerns over migration / immigration. A very large section of society is concerned by the onslaught of politically correct doctrine and worry about their culture and way of life. The negative response of politicians has many feeling that their voice is irrelevant.

In the midst of this cacophony the politicians in the UK gave themselves a pay rise. The gulf has just got wider!

The sustained barrage of political correct idioms to be learned coupled by the demeaning labels: racist, bigot, NIMBY, old and backward etc. etc. etc. leaves many feeling they are being brainwashed by New Stalinists. Having to mind your P’s and Q’s every time you speak, support their interpretation of events. Perception is everything!

A note of caution from Howard Gardner the eminent Harvard psychologist (p51);

“…emotion is often a more powerful factor in influencing our behaviour than logic”. He suggests that there are: “…more neural connections going from the limbic emotional centre to the intellectual cortex”.

With the establishment of Sharia courts in the UK and the seemingly endless mention of the rights of minorities tends to suggest that the needs of the majority have already been met. This does nothing to broker acceptance or respect. Frustration and anger builds!

On and on the assault comes with an absence of someone to turn too. No political outlet because all the recognised parties are seen to be in cahoots. There is tiredness with interest groups hogging the limelight and achieving their demands. Politicians have forgotten the wisdom of Edmund Burke: cited in Charles Handy (p103)

“ Because half a dozen grasshoppers under a fern make the field ring with their importunate clink, while thousands of cattle, repose beneath the shadow of the British oak, chew the cud and are silent, pray do not imagine that those who make the noise are the only inhabitants of the field,…”

The real danger of the present situation is that the dissatisfaction with the establishment becomes ingrained. It could make a good Shakespearian play:         Macbeth Act 1V sc.1

“Double, double toil and trouble,

Fire, burn; and, cauldron, bubble.

No surprise that the electorate, middle-left and middle-right scour the horizon for an escape route. The far-right too has quickly recognised an avenue to explore and found many alienated folk standing on the roadside.

 Germany            –              NPD (neo-Nazi???)

France                  –              National Front

Austria                  –              Freedom Party

Netherlands       –              Dutch People’s Party

Sweden              –              Sweden Democrats

Finland                 –              Finns

The list could go on but the point is made.

Much of the anger at this time is generated by the migrant crisis and once again political ineptitude rears its ugly head. However, many of the parties of the far-right are also opposed to the EU – the mammoth without ears. Some of these hard-line groups have secured up to 30% of the popular vote and together hold an approximately 33% of the seats in the European Parliament. Amazing!

www.huffingtonpost.co.uk/2014/05/26/

The crucial point here is that they don’t want to reform the EU. They want to kill it off.

In the UK voters floundered in various directions, some finding solace with Ukip, but the electoral system (first past the post) dented their enthusiasm; 4 million votes but no parliamentary seats. Others took revenge on the Liberal and Labour parties leaving the Tories with a strong hand.

In the USA the republican right are being trounced by Trump, whilst the democrats have found an alternative voice in Bernie Sanders. Why?

The story unfolds with a Sky news correspondent Tuesday March 1 2016. A question of why a woman was voting for Bernie Sanders brought an illuminating response: she said it was not about Bernie but the doors his campaign opened to a wider discussion of many important topics.

Here an articulate, grey hair, voice of reason is seeking an explanation for her feeling of alienation from political life. Her voice is echoed in multiplies of millions around the globe. For decades the political class has ambled on impervious to ordinary folk and disparaging of their concerns. They had been emboldened by the lack of an opposition.

Floundering in the political mire, ordinary Joe felt powerless. Their only source of power they believed was their vote, but all the recognised parties were proving to be equally crap. Along came the extremes and sat down beside them and brushed their powerlessness away.

I can hear echoes of Caliban:      The Tempest   scene 2 187 – 195

No more dams I’ll make for fish,

Nor fetch in firing

At requiring,

Nor scrape trenchering, nor wash a dish.

‘Ban, ‘Ban, Ca—Caliban

Has a new master. Get a new man!

Freedom, high day! High day, freedom! Freedom, high day, freedom!

 

It seems that the political class are akin to an oil tanker, nice and steady when crossing the Atlantic Ocean but slow and in need of a lot of space when it has to turn. It has to turn.

Are we adrift?

Not quite but we are getting there. There is a growing feeling of unfairness out there in the world. Fairness is a powerful psychological trait. It is so strong that it can dictate people’s thinking, tied, perhaps rigidly, to a person’s emotion.

There is a sense of tiredness with the grab society; the, me, me, me philosophy of some. And with the flashy, look at my wealth occultists.

Charles Handy (p198) puts it well, “…it is ultimately not tolerable for the many poor to live beside the fewer rich”. Jealousy? No, disgust! During the so called ‘Golden Age’ of the 50s, 60s, 70s, everyone seemed to share in the prosperity created. Since the 80s times have changed.

The trickle-down effect

Many of the working class accepted the ‘spin’ of government that by cutting taxes for the rich this money would be used to create more employment hence the new wealth would ‘trickle down’. A similar ‘spin’ is given to corporate tax reductions. This view was entrenched until, “…in the face of considerable evidence that it is untrue”. Fukuyama (p465) Further evidence can be found in: Chang (p451), Stiglitz (pp 8, 78), Rodrik (p165) and Krugman (p84).

Quid pro quo

The rich and our politicians appear more focussed on feathering their own nests than being responsible leaders. The concept of clientelism: you scratch my back and I’ll scratch yours, is very much alive in the corridors of power.

In the UK members of parliament (MPs) were able to employ their wife and offspring at the expense of the tax payer. The expenses scandal of recent years is still haunting some of them. Others have been caught doing dodgy deals.

In America clientelism is all but a business whereby interest groups give generously to a politician’s campaign for election and in return gain influence in the corridors of power. Fukuyama (p87) suggests it undermines democracy because it “…strengthens existing elites and blocks democratic accountability”.

Therefore we can see why the people feel alienated from the political system. The feeling of powerlessness is not a fleeting will-o-the-wisp experience. As Ha-Joon Chang (p106) points out, austerity governments in the Netherlands, France, and Greece were voted out in 2012 followed by Italy in 2013. It made no difference; the austerity package of the EU was nonetheless imposed.

Meanwhile, in the UK the conservative government is busy cutting away at areas of the state in the name of efficiency. Slice by slice it is cutting into the National Health Service (NHS).

Perhaps politicians should take note of the wisdom of Fukuyama (p532)

“When governments cease being accountable, they invite passive noncompliance, protest, violence, and in extreme cases, revolution”.

Abuse of power

A further hard hitting policy is the raising of the retirement age in the UK. Women had their retirement age raised from 60 to 65 in line with men. Now everyone has to put in several more years before they can escape the workhouse. The ‘spin’ by the government is that as a result of people living longer the pension bill will be much higher and needs to be offset by people working for longer.

Some women will have had their work life extended by up to 10 years. How much is the government saving by that little manoeuver??

The true implication is that successive governments have sanctimoniously mismanaged the economy. For 50 years many have paid income tax and national insurance tax and god knows how many other taxes and now when retirement looms they are a burden. Shame!!

This is an abuse of power as it leaves large numbers of people feeling anxiety and guilt. It only affects the workers as the better off have the means and can decide when they want to retire. No such luxury for the less well off.

Thus we have the rise of the Tea Party in America and Donald Trump viewed as a saviour. In Europe the rise of the far-right and extreme left. In the UK we have Ukip on the centre right whilst the far-left are still sucking their dummies and waiting for the resurrection of Trotsky.

A few more words of wisdom for our shamelessly needy politicians – from the 17th century

“…government should benefit the people, not those in power”. Wang Fuzhi       www.en.wikipedia.org/wiki/Wang_Fuzhi

Karl Popper adds his voice: we need an open society; “…in which the political institutions can be changed by the governed”.

Do some good join Robin Hood!

 

Suzanne McGee                               Chasing Goldman Sachs

Joseph Stiglitz                    The Price of Inequality

Dani Rodrik                         The Globalization Paradox

Paul Krugman                    End This Depression Now

Howard Gardener           Multiple Intelligences: The Theory in Practice

Ha-Joon Chang                  Economics: The User’s Guide

Charles Handy                   The Hungry Spirit

Francis Fukuyama            Political Order and Political Decay

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe: No Highs.

 

Unity???

Unity???

As we spiral towards a referendum in June 2016 watch out for the spin of verbosity. It’s butter-up time at the polls. You will be near deafened by the bald tales from either side. Who has the correct answer about Europe, the stay- put brigade or the opt- out gang?

It should be obvious that big business, multinationals will favour the UK remaining in the embrace of the EU. It serves their business purpose. If Europe did not meet their needs they would be seen leading the charge to leave.

We are bound to hear stories of dire consequences, for jobs, livelihoods and a whole

Talking EU

Talking EU

gambit of other ghouls that awaits us if we depart. There will be ghosts in every unlocked cupboard which will become increasingly terrifying as we get closer to election day.

Nationalism will be bandied around like a worn tennis ball. Only Putin will be happy if we leave! However, an exit will not affect the sanctions that the EU has imposed on Russia over the Ukraine crisis. It will not affect policy on Syria. It’s all a smokescreen to remind the older voter of the Cold War.

Cameron’s position is weak because he gained only crumbs from the EU table. Did he expect anything else? Time will show that the ‘gains’ are meaningless. His cause has only brought about a poorly constructed but definite political grave.

There was no mention of structural change because it would not have reached the table for discussion. No matter that the time frame was too tight, with insufficient space for major issues to be studied and debated. Why the rush? He locked himself in a cupboard by advocating a referendum and, viewing public opinion knew he had to put his skates on.

Being kind I would say that the rush to the polls was bad advice from his advisors. If real change had been on Cameron’s agenda he would have taken his time; we have until 2020 to get a response. So why didn’t we ask for more? The answer is sky- blue; he knew it would not be negotiable.

Look closely at what the Prime Minister brought home and this tells us that the EU has no intention to change. We can have a few crumbs if we close the door behind us and shut up. The electorate has been played, duped and now we need to be herded quickly before we understand.

The EU can only survive with fundamental structural reform. It has been floundering since conception. The euro was another massive mistake. Europe is still recovering from the 2008 banking crisis; it will take several more years to swim clear.

thGUA278IXA lack of an audit and the continual escalation of spend is a sky-blue indication that the whole bureaucratic system has no direction and no leadership. It is a growing giant of an octopus. It will fail and the cost of life support will be huge.

Many leading economists had grave reservations about the introduction of the euro and misgivings about its future. Paul Krugman describes it as Europe’s big delusion (pp177-187) and a mistake from the beginning (p168) Krugman argues that it lacked a central focus such as the US Federal Reserve or the Bank of England. The European Central Bank (ECB) basically followed German thinking.

He illustrates how the euro and the ECB directly affected the countries of: Spain, Ireland, Portugal and Greece driving them deeper into recession. The policy of austerity was foisted on them. It would take seven (7) years before the ECB accepted quantitative easing (printing money to buy debt) and poured 3.2bn euros to support them.

Joseph Stiglitz another Nobel Prize winning economist lays austerity bare when he states,”…there has been almost no instances of countries that have recovered from a crisis through austerity”. (pxxv) Dani Rodrik yet another top economist has much to say on the experience of Argentina and its austerity programme. (Chapter 9 pp184-206) It was a disaster!

In essence the EU has caused many of its own problems rushing forward politically without thought of consequence. It is plagued by indecision and a thought process which operates on the basis of – what’s in it for me- (WIIFM)

The EU apparatus is divorced from the citizenry. The people don’t matter. The WIIFM syndrome is illustrative of its political absurdity. There is no unity of purpose, only agendas. Rodrik (p215) is scathing, “European Parliament operates mostly as a talking shop rather than as a source of legislative initiative or oversight”.

Such being the case gives lobbyists an open door. Francis Fukuyama (pp501-502) points to a quirk, he terms ‘jurisdiction-shop’. It works on the basis that if unsuccessful at their national level lobbyists simply pack their briefcase and head for Brussels. He cites the work of political scientist Christine Mahoney who suggests that ‘outside groups’ those seeking social change have ‘significantly less access to European Institutions’.

To further illustrate the lack of unity Rodrik (p218) is unequivocal when he says that when the EU comes under stress ‘the responses are overwhelmingly national’. The migrant crisis we are presently experiencing is a sky-blue example of such a scenario.

Europe is not for turning!! Unless it is prepared to, we must jump ship!!

 

  • Paul Krugman    End This Depression Now!
  • Joseph Stiglitz    The Price of Inequality.
  • Dani Rodrik         The Globalization Paradox
  • Francis Fukuyama            Political Order and Political Decay

Greece: Democracy to Dictatorship.

Unity

Unity

A world apart

A world apart

 

 

A Greek tragedy, it could be a re-write of the Shakespearian play Julius Caesar. The Brutus in this modern version is of course the EU. Perhaps a more apt correlation is that of Timon of Athens which is about bankruptcy and the failure of powerful Lords to refuse loans.

Act 1. Scene 1 Servant: ‘His means most short, his creditors most strait:’

It would be great to read a Shakespeare play on the present debacle. How the faceless bureaucrats of the EU forced their diktat on Greece in defiance of the peoples voice. How might Shakespeare have penned the death of democracy and the rise of the machine?

Other great writers come to mind, George Orwell – 1984 and Aldous Huxley – Brave New World. How may they have told the story about a David in his struggle for independent thought against the might of a Goliath?

There is consensus among journalists that the deal to keep Greece in the euro zone was harsh:

  • ‘brutal negotiations – punitive deal’ Financial Times
  • Euro zone leaders made Greece surrender much of its sovereignty. Reuters + NYT
  • ‘ultimatum’ NYT
  • ‘painful and humiliating agreement’ Economist
  • ‘no reason to consider the summit a success’     Sachische Zeitung

The ensuing debate has battle lines drawn. Daniel Stelter a German writer – Beyond the Obvious suggests that the problem is the euro which is ‘flawed’. (France 24 en) He has support in this analysis from two Nobel Prize winning economists; Paul Krugman – ‘a fateful error’ (p168) and Joseph Stiglitz ‘a political project’ (p276) not one based on sound economic analysis.

Stiglitz p275 identifies one of the problems: “In fact, the ECB continually threatens not to buy the sovereign bonds of the countries of the euro zone, unless they do as it says”.

Jacques Rupnick while supporting the deal qualifies himself by suggesting that closer fiscal integration is necessary. In doing so he is accepting the argument that the euro is the problem. Without the euro being reformed the problems will continue. The notion was that the euro would bring the different economies together; “The last decade has proved that to be illusory”. NYT

Of course the economists’ who-fly-the-flag for austerity support the deal and the Austrian School of Economics. There are several ‘schools’ of economic thought so who says the austerity mob has got it right? Being a follower of a school of thought denies the opportunity to think of alternatives.

The Greeks were given three (3) days to force law changes through their parliament to be introduced by Wednesday 15 July 2015:

  • Accept the Eurozone’s 2012 fiscal compact, which includes an independent fiscal council. Thus the Greek government cannot make decisions on its own.
  • Must introduce EU banking rules.
  • Overhaul their legal system.
  • Raise retirement age to 67 by 2022
  • Must make the statistical agency independent. It seems the EU doesn’t trust the Greeks to be honest!!!
  • Further spending cuts.
  • Raise taxes + VAT to 23% EU average = 20%

Failure to comply with the package will result in Greece being denied a sufficient loan to pay back the €3.5 billion it owes to creditors due on 20 July 2015. This is indeed a crackdown. The faceless have brought out the whip and are lashing the Greeks into submission.

One of the main creditors the International Monetary Fund (IMF) has come out against the EU proposals suggesting they are too harsh and won’t actually work! Hm. The EU negotiators were aware of the IMF report but paid it no heed. This suggests to me a strict adherence to their preferred goal – make Greece suffer; perhaps as a warning to others. Telegraph 15/07/2015

The IMF decision may have been strongly influenced by the Americans on the committee. The Yanks wanted a debt relief solution but the EU disagreed. A debt relief package would have seen a huge chunk of the debt chopped-off making it easier for Greece to repay the remainder.

Now we have the big boys at loggerheads. Fight! Fight! Fight! School playground rules, please!

It would seem that the FT called this one right by suggesting it was a ‘punitive deal’. It’s a mess caused by the € euro and the failure to implement it properly in the first instance.

Trying to hold such diverse economies together under present conditions will merely stave off the inevitable collapse. Bull by the horns comes to mind.

Why try hard to keep Greece in?

If Greece is allowed to bail out other weak economies may have to follow: Spain, Italy and Portugal among them. These are being given help under the table at the moment.

Another possible reason is that Greece has more migrants knocking on its door than Italy which has got all the publicity. If Greece opted out it could give all the migrants a free bus pass to Europe and that would cause all kinds of ramifications. A political storm is already blowing!

 

Do some good….join Robin Hood

Paul Krugman    End This Depression Now

Joseph Stiglitz    The Price of Inequality

 

 

 

He’s Here!

 

thCAAXS9NGShush! Don’t make a sound. Don’t stand up! He’ll put you down. Big Brother has arrived. His arrival is much later than envisaged by 1984 author George Orwell, neither did Orwell anticipate that the controlling hand would stem from a democratic rather than a totalitarian regime. Few could have foreseen the rise of the troika, renamed ‘The Institution’.

Poor Greece it doesn’t stand a chance against the might of the EU and its enforcers, the troika, the faceless: the European Commission (E Comm) the European Central Bank (ECB) and the International Monetary Fund (IMF) all unelected. It is their way or the highway.

This is your Europe where democracy does not matter, where decisions will be made for you. The democratically elected government of Greece tried to uphold the principles by which it was elected but has been brow beaten by ‘The Institution’. Greece wanted to opt out of the austerity economic plan followed by the rest of Europe. The new government wanted to reverse the savage cuts imposed on its workers by ‘The Institution’.

As far as the faceless are concerned there is no alternative to their adopted policy. They are wrong, very wrong. I can point them to two Nobel Prize winning economists, a Harvard university economist and a Cambridge university economist who all advocate a positive alternative to the austerity / neoliberal model now in force.

    • J.E. Stiglitz, The Price of Inequality
  • Paul Krugman, End This Depression Now!
  • Dani Rodrik, The Globalization Paradox
  • Ha-Joon Chang, Economics: The User’s Guide

 

Greece did not cause this mess, though the propaganda would have you believe otherwise. What Krugman p177 calls the Big Delusion when he points out that Ireland and Spain both had budget surpluses and low debt prior to the banking crisis of 2008 but ended in the same bog as Greece. So it was not that Greece spent more than it could afford. Krugman p179 goes on to suggest that the political, financial and banking leaders are deeply committed to their version of events. Others may define their logic as ‘groupthink’.

A large part of the blame rests with the introduction of the € euro currency but they will never admit their complicity in creating a mess. At the time of the discussion to adopt the euro many pointed out that while America had a good model, “Europe fell far short of that model”. Krugman p173   Stiglitz p30 is equally scathing in stating that there was no “…political or institutional arrangements to make it work, and they will pay a high price for that failure”. I think we can all agree they are.

Moreover, it’s not just Greece that’s in trouble: Ireland, Portugal, Spain, Cyprus and Italy are trapped in the same bog. These nations have opted to wield the axe and cut the life blood of so many families by cutting jobs by the thousand, cutting welfare, lowering wages and refusing to increase the minimum wage and allowing privatisation which entails job cuts.

Ha-Joon Chang p105 therefore concludes, “With the austerity budget, the prospect for economic recovery in many of these countries is dim”. That they might even face a ‘lost decade’ as Japan suffered in the1990s and Latin America 1980s. The point is supported by Krugman p186, “…deficit countries have been required to impose…draconian…spending cuts and tax hikes—programs that push them into deeper slumps…” Krugman p42 suggests that the ‘Institution’ should look at the work of past economists e.g. John Maynard Keynes, Irving Fisher and Hyman Minsky to find an alternative to the neoliberal austerity package.

Why Austerity?

The IMF, the World Bank and the Federal Bank of the USA are commonly referred to as the Washington Consensus as these are the guys pushing the neoliberal model, free trade and globalization. Rodrik p171 opines that it is a “damaged brand” and has abundant evidence to support his statement.

The role of the IMF is quite confusing:

  • In the years 1978 – 2009 the IMF found 173 cases of fiscal austerity in advanced countries, “And what they found was that austerity policies were followed by economic contraction and higher unemployment”. Krugman p237
  • In February 2010 the IMF document Rethinking Macroeconomic Policy, suggested that central banks such as the ECB in Europe “might be better to aim for 4% inflation rather than the 2% or less that has become the norm for ‘sound’ policy”. A policy of ‘groupthink’. P161
  • In 2011 a study by the IMF found that inequality in income affects the economy on the demand side and suggests that ‘reduced inequality’, the reverse of austerity, can lead to sustained growth. Stiglitz p114

The conclusion drawn by Stiglitz p288 is that, “The worst myths are that austerity will bring recovery and that more government spending will not”. Support comes from the Organisation for Economic Cooperation and Development (OECD) “…income inequality has a sizeable and statistically negative impact on growth”. Guardian 14/12/09

Nonetheless we find the IMF as part of the ‘Institution’ that is promoting austerity in Europe. Who are the faceless that they can disrupt the lives of millions and simply walk thILH29564away with their own pockets filled? Stiglitz p290 condemns them as akin to blood letters of the Middle Ages who cut to release bad blood and when the patient didn’t recover argue that more of the same was needed. They are fixed in their opinion. Groupthink!

 

“Groupthink is one of the most dangerous traps in our decision-making. It’s particularly likely because it taps into our deep social identification mechanisms – everyone likes to feel part of a group – and our avoidance of social challenges. But consensus without conflict almost always means that other viewpoints are being ignored, and the consequences of groupthink can be disastrous”. (p137)

Dr Nicky Hayes, Understand Psychology

A telling point by the author comes with the observation, perhaps tongue in cheek,     “…our understanding of what it is and how it happens doesn’t seem to stop politicians and others from doing it”.

The Greek people were not alone in rejecting austerity the Netherlands and France voted out pro-austerity parties in 2012. A year later the Italians did the same. Chang (p106) It will be interesting as other elections come up how the people will respond but will it make a difference. The ‘Institution’ has set its parameters and seems unlikely to budge. Can people power move them? Or are we powerless against the ‘bureaucratic order’. He’s Here. Are we witnessing the start of the overt rule by the faceless? Democracy, write it in your diaries for your grandchildren to read.

Do some good—————–join Robin Hood.