The author wrote about the last "Greek Crisis" three years ago, when it was (last) having to submit to long-term economic decline in order to pay off its debts. Having toppled the governments in Greece and Italy and replaced them with obedient technocrats, in order to enforce the countries' debt obligations, it left few at the time in doubt about who was really in charge: Angela Merkel. It was clear what the ultimate price of losing the "Game Of Debts" would be.
This time around, the list of characters in Europe's ongoing saga is somewhat different. Angela Merkel of Germany, still rules the roost as the effective matriarch of the Eurozone, with her deputy, Wolfgang Schauble, sterner and meaner-looking than ever. The French had replaced Nicolas Sarkozy with the Francois Hollande. Meanwhile, in Greece itself, the unpopular, pro-austerity leader Antonis Samaras, who had been the beneficiary of the events of 2012, was ousted in late January 2015 by the Alexis Tzipras, leader of the radical leftists. The leaders of various other nations of the Eurozone would also have a part to play, one way or the other (and depending on what side they took). Then there were the other fringe - but at times, extremely key - players that represented the other byzantine layers of Europe's bureaucracy: the European Parliament, the Commission, and, last but not least, the ECB. Oh, and there's also the IMF, who aren't European at all, but were somehow roped into getting involved in the Greek debt crisis. Go figure.
"Game Of Thrones" meets Game Theory
Alexis Tzipras, as leader of the radical leftists in Greece, was elected for one key reason: to abolish the onerous terms of its debt obligations, and bring the country out of crippling, humiliating, austerity.
His followers were an odd bunch; an alliance of radical leftists, Greens, and Feminists. However, in order to have a majority, he needed the support of another party. He opted for the Independent Greeks, mostly comprised as an anti-austerity off-shoot of the former governing party of Antonias Samaras. This is a little like trying to imagine a British government that was a coalition between the Greens and UKIP.
Among the characters that comprised the government, the finance minister Yanis Varoufakis, was the most loquacious and outspoken. An academic and economist, he was also a proponent and apparent expert in "Game Theory": very roughly speaking, a confection of economics, mathematics and psychology. Varoufakis was set to be the bane of Wolfgang Schauble's life.
In the first weeks of the new Greek government, Varoufakis, as finance minister, was happy to go on a "charm offensive". However, this quickly came to a grinding halt with the first sets of talks between the other governments later in February, which then dragged on and on over the following weeks and months like a never-ending, interminable soap opera. It got the point where, in June, the Greeks told the IMF (the other major player in this saga) that they would be the first developed country to miss its loan repayments.
By this point, it became abundantly clear to others in the Eurozone that Tzipras and Varoufakis' "Game Theory" was taking the rest of the Eurozone for a bunch of fools. The final insult - in Merkel's eyes - was when Tzipras suddenly walked out of talks at the end of the month and announced a referendum to take place the following weekend, where he would recommend a big Greek "NO" to the bailout terms. This then leads to the "double whammy" at the end of June of Greece missing its IMF payments, and then the ECB decided that enough was enough. For some weeks and months, Greece's banks had been effectively living on ECB life support, as Frankfurt had kept on allowing Greece greater and greater lines of credit. At the end of June, this limit was frozen.
The next two weeks were the "endgame" of the saga, as it currently stands. The Greek government were forced to close the banks and implement capital controls to preserve its fast dwindling supplies of capital. During the week of "campaigning" for the bailout referendum, Tzipras made attempts to restart talks with Merkel, only to be rebuffed: they could talk again only after the referendum made things clearer. It seemed his "gambit" was failing. Then, to general shock all-round, the referendum came out as a decisive "NO"; Tzipras was in the position where his bluff had been called, not only by Merkel, but by his own people. What was the plan now?
The final week of the saga sees two major changes in Greece itself following the referendum: Varoufakis - having offended just about everyone in Europe with his undiplomatic manner - is eased out of his role as finance minister, seemingly as a sop by Tzipras to ease talks with the rest of the Eurozone; meanwhile, Antonias Samaras, leader of the former governing party, steps down after so clearly being on the losing side of the referendum campaign.
So talks resumed again. The situation continued from tragedy to farce as the new Greek finance minster arrived at talks the next day - but with no new plans. Finally, Tzipras gets the message, that time really is running out. Given an ultimatum to have a "real" plan by Friday or prepare for Greece to be out of the Eurozone and effectively insolvent on Monday. By now Tzipras' "Game Theory" was shown to be truly wanting against the raw power play in Merkel's version of "Game Of Thrones". Tzipras' "gambit" - that Greece ultimately wouldn't be allowed to leave the Eurozone, at any price - rested on a fatally-flawed assumption. In the end - as we shall see shortly - Merkel would take Tzipras' false assumptions and throw them back in his face. Tzipras would be hoist by his own petard.
It is at this point that the French, for their own reasons, decide to send some of their senior people to Athens. The French, so it seems, have had enough of Germany's high-handed strategy, and seek their own "moment of glory", by trying to hold the Eurozone together. So the Greeks - with French assistance - at last put forward something approaching a "real" plan, that looks a lot like the one that was rejected in the referendum only a few days earlier.
Except that by now, Germany, Schauble, Merkel and their Northern and East European allies seemed to squeeze the thumbscrews even tighter in their negotiation strategy. By Saturday, citing fundamental issues of "trust", Germany was making demands that were almost off the charts, beyond anything that a reasonable person could possibly agree to. If Greece were to remain in the Eurozone, it would have to pay for it - dearly.
But this was the point: Merkel's "gambit" was that she wanted Greece out of the Eurozone, and would offer conditions that would make it extremely difficult for Tzipras to agree to. Either way, it was a win-win scenario. She would have Tzipras over a barrel regardless.
What followed over the weekend was a marathon session of negotiations: two sets of inconclusive negotiations, followed by a sixteen-hour session between the leaders. Around dawn on Monday, it has been said, Merkel and Tzipras were about to walk their separate ways, only to be brought back together by Donald Tusk. In the end, seemingly a broken man, Tzipras agreed to the conditions. He had got a few cosmetic amendments, and some vague sounds about debt relief in the future, but the deal he signed was far, far worse than anything that had been proposed - and rejected - before.
Tzipras had played Europe's Game Of Thrones and had lost, big time. The question is: what happens now?
Showing posts with label Greece. Show all posts
Showing posts with label Greece. Show all posts
Monday, July 13, 2015
Wednesday, February 27, 2013
Guiseppe Grillo, the Italian Elections and The UK's "Waldo Moment"
Monday evening saw an interesting coincidence.
In the UK, Channel Four was broadcasting the last installment of Charlie Brooker's "Black Mirror" second season, called "The Waldo Moment". It was a sharp political satire about a foul-mouthed blue bear cartoon character called "Waldo", who stands in as an independent candidate in a by-election, as a protest against the political status quo.
In Italy, the national election was being counted, which resulted in an inconclusive result. The two main parties were more-or-less tied (the centre-left PD narrowly ahead), with the third "party" being a non-partisan, anti-establishment movement led by Guiseppe (Beppe) Grillo, a comedian and satirist. Grillo's most famous epithet was, uncannily like the UK's fictional "Waldo", simply "Fuck Off" to the establishment.
Call it Italy's "Grillo Moment". Let's be clear: what has happened in Italy is unprecedented in modern European political history, certainly in a major European country. In Greece last year, the left-wing SYRIZA coalition came close to victory on an anti-austerity ticket. In the end, their moment passed, and the self-destructive foreign-imposed austerity has continued as before.
But nine months on from that election in Greece, attention has turned to Italy, in a much more financially-dire situation that even Greece. What Beppe Grillo has achieved has been to turn the system against the establishment. He bypassed the normal means of electioneering, turning to the internet and a massive grassroots movement that has mushroomed in exponential terms in a matter of months. Grillo has been able to tap into the massive undercurrent of apathy, turning the disillusion into a focused rage against the broken corrupt political system. The "Indignados" movement in Spain has close parallels, but seems to lack one central figure for people to direct their attention on. With luck, that may change.
Southern Europe is now in the throes of different popular, grassroots uprisings: SYRIZA in Greece, the "Indignados" in Spain, and now Beppe Grillos' "Five Star" movement in Italy. SYRIZA, as a loose political alliance, is the more conventional of the three, and has an identifiable and articulate leader in Alex Tzipras. But while SYRIZA represents the "traditional" left and an easily-identifiable enemy for the political and financial establishment to target, Grillo's "Five Star" movement represents something far more difficult to identify - and therefore far more dangerous to the establishment.
What makes Grillo's movement so effective is the way it cuts through the traditional pigeon-holes of politics. As Grillo himself has said, his movement is against the established left and right parties and political system. What Grillo wants is to disengage, to resist against the system as it currently stands. In this sense, Grillo's methodology implies an anarchic approach to resolving political and national problems. Grillo's success in the Italian elections is perhaps the first political success of an anarchist movement in a major European country. The "MPs" that will represent his movement in parliament are not politicians, but ordinary people, from the unemployed, to students, to housewives. Grillo has found a way of bypassing the system.
One possible outcome of this is an eventual informal deal between the biggest party, the centre-left PD, being supported on a case-by-case basis in parliament by the "Five Star" movement: called "confidence-and-supply" in the UK. Some of the PD's MPs have already dismissed working in a "Grand Coalition" with Berlusconi's party; the other alternative to an informal PD-5SM deal is paralysis in parliament, with Mario Monti staying on in a caretaker government. This would find it virtually impossible to get anything done through parliament, so would also be a non-option for effective government.
Judging from the masterly way Grillo has turned the electoral system against the establishment, it is unlikely that Grillo's movement will fade away. It is just possible that this "Grillo Moment" may not be just a "moment", but a turning-point, and an inspiration for other similar movements across Europe.
This brings me back to the fictional version, "The Waldo Moment". Charlie Brooker sharply shown how to tap into the deep well of apathy and disgust at the political system in the UK. Grillo's movement became so popular because many people saw their political system as corrupt and closed, and saw a way of getting their own back. But in some ways the UK's system is even more closed.
Italian politics may well be more openly corrupt than in Britain. But at least Italy's political system is representative. The entire reason why Grillo's movement has become the key broker in Italian politics is because its PR electoral system is a fair representation of the votes cast. A grassroots movement like Grillo's would have no chance of gaining anything like the same proportion of seats in Westminster, due to the FPTP system.
The last election was a case in point, where the LibDems gained nearly a quarter of the vote (almost as much as Grillo), but less than ten per cent of the actual seats in parliament. UKIP, whatever your views on its politics, is being prevented at every turn from even having a single MP in the national parliament. Although it regularly gains around ten per cent of the vote in national polls, the only way it can get even a single MP is by convincing the voters in a single constituency to vote for it above all other parties. This makes the UK political system the most closed in the EU, if not Europe (barring Belarus). In other words a party could get thirty per cent of the vote in every constituency in the country, and still have no MPs in parliament. This is the system we have in Westminster, the so-called "mother of all parliaments". It is worse than a joke; it is a national disgrace. It is this reason that there is so much apathy towards the political system in the UK, and why British people feel so disconnected from their political masters. If you know that your vote will be wasted because you happen to live in a party's "safe" seat, or a "marginal" between two parties you don't like, then what other feeling can you have?
So how could a "Waldo Moment", or even a real-life "Grillo Moment" happen in the UK?
The first time it happened in modern British politics was in 1997, in the Tatton constituency, when local people voted tactically for the Independent MP Martin Bell, in order to remove the incumbent Conservative. Since then, there have been a few other independent MPs, as well as a Green MP for Brighton, and the left-wing demagogue George Galloway. But these are people working with the system, not against it. In the UK, it is the voting system itself that keeps the political establishment closed to new movements.
So unless you can somehow manage to persuade a vast apathetic cross-section of society to vote tactically in key constituencies, the chances of a "Grillo movement" gaining a good slice of parliament using the current system are next to nothing.
The last time the UK political establishment was terrified of its people (as all good democratic governments should be) was during the infamous "Winter Of Discontent". I described these events in more detail here, but the way that ordinary workers gained the attention of government then was by mass, spur-of-the-moment strikes. The country was effectively paralysed for a number of weeks, but the workers got what they wanted: better wages and conditions. Mass civil action would be the most obvious method to use to, and is most likely to get politicians attention. Unfortunately, with current UK laws, it is also likely to get many people at the wrong end of the police. So you would need to gain the trust and implicit support of the police. Police are unable to strike; however, they are allowed to interpret the law as they see fit.
So some kind of agreement between the police and a mass civil movement (which offered the police better working conditions and fewer unworkable laws to enforce) would be the most effective way to terrify the political establishment. Remove the link of subservience to government: give the police genuine independence from government, and reducing its workload by allowing it to give more discretionary cautions against unworkable or politically-motivated laws. That would be the first step, and would make police less over-worked and our criminal justice system more efficient. This would also terrify and emasculate the government in equal measure.
The second step, like Grillo, would have to be disengagement from the orthodox political system. UKIP, and Nigel Farage, in particular, have found a way around this, by discrediting the political system. The problem that UKIP has is that it hasn't managed to find a way to get tactical voting, or a political stalemate, to work in its favour. The 2010 election was the nearest thing we've had so far to a "Grillo Moment": that turned out to be a "Clegg Moment". And we all know the result of that.
The problem with the UK political system is that to change it, you have to do it from within. So how do you disengage from the political system while also bringing about change from within?
Political change only comes about after a social crisis. Political reform in the UK happened this way, and is the most likely way it will happen in the future. In order for this to happen, the people themselves have to realise that there is a crisis to begin with. And for that to happen, there has to be a turning-point; a moment of revelation.
After the government's "bedroom tax" kicks in, and changes to DLA, perhaps that "moment" will not be long in coming...
In the UK, Channel Four was broadcasting the last installment of Charlie Brooker's "Black Mirror" second season, called "The Waldo Moment". It was a sharp political satire about a foul-mouthed blue bear cartoon character called "Waldo", who stands in as an independent candidate in a by-election, as a protest against the political status quo.
In Italy, the national election was being counted, which resulted in an inconclusive result. The two main parties were more-or-less tied (the centre-left PD narrowly ahead), with the third "party" being a non-partisan, anti-establishment movement led by Guiseppe (Beppe) Grillo, a comedian and satirist. Grillo's most famous epithet was, uncannily like the UK's fictional "Waldo", simply "Fuck Off" to the establishment.
Call it Italy's "Grillo Moment". Let's be clear: what has happened in Italy is unprecedented in modern European political history, certainly in a major European country. In Greece last year, the left-wing SYRIZA coalition came close to victory on an anti-austerity ticket. In the end, their moment passed, and the self-destructive foreign-imposed austerity has continued as before.
But nine months on from that election in Greece, attention has turned to Italy, in a much more financially-dire situation that even Greece. What Beppe Grillo has achieved has been to turn the system against the establishment. He bypassed the normal means of electioneering, turning to the internet and a massive grassroots movement that has mushroomed in exponential terms in a matter of months. Grillo has been able to tap into the massive undercurrent of apathy, turning the disillusion into a focused rage against the broken corrupt political system. The "Indignados" movement in Spain has close parallels, but seems to lack one central figure for people to direct their attention on. With luck, that may change.
Southern Europe is now in the throes of different popular, grassroots uprisings: SYRIZA in Greece, the "Indignados" in Spain, and now Beppe Grillos' "Five Star" movement in Italy. SYRIZA, as a loose political alliance, is the more conventional of the three, and has an identifiable and articulate leader in Alex Tzipras. But while SYRIZA represents the "traditional" left and an easily-identifiable enemy for the political and financial establishment to target, Grillo's "Five Star" movement represents something far more difficult to identify - and therefore far more dangerous to the establishment.
What makes Grillo's movement so effective is the way it cuts through the traditional pigeon-holes of politics. As Grillo himself has said, his movement is against the established left and right parties and political system. What Grillo wants is to disengage, to resist against the system as it currently stands. In this sense, Grillo's methodology implies an anarchic approach to resolving political and national problems. Grillo's success in the Italian elections is perhaps the first political success of an anarchist movement in a major European country. The "MPs" that will represent his movement in parliament are not politicians, but ordinary people, from the unemployed, to students, to housewives. Grillo has found a way of bypassing the system.
One possible outcome of this is an eventual informal deal between the biggest party, the centre-left PD, being supported on a case-by-case basis in parliament by the "Five Star" movement: called "confidence-and-supply" in the UK. Some of the PD's MPs have already dismissed working in a "Grand Coalition" with Berlusconi's party; the other alternative to an informal PD-5SM deal is paralysis in parliament, with Mario Monti staying on in a caretaker government. This would find it virtually impossible to get anything done through parliament, so would also be a non-option for effective government.
Judging from the masterly way Grillo has turned the electoral system against the establishment, it is unlikely that Grillo's movement will fade away. It is just possible that this "Grillo Moment" may not be just a "moment", but a turning-point, and an inspiration for other similar movements across Europe.
This brings me back to the fictional version, "The Waldo Moment". Charlie Brooker sharply shown how to tap into the deep well of apathy and disgust at the political system in the UK. Grillo's movement became so popular because many people saw their political system as corrupt and closed, and saw a way of getting their own back. But in some ways the UK's system is even more closed.
Italian politics may well be more openly corrupt than in Britain. But at least Italy's political system is representative. The entire reason why Grillo's movement has become the key broker in Italian politics is because its PR electoral system is a fair representation of the votes cast. A grassroots movement like Grillo's would have no chance of gaining anything like the same proportion of seats in Westminster, due to the FPTP system.
The last election was a case in point, where the LibDems gained nearly a quarter of the vote (almost as much as Grillo), but less than ten per cent of the actual seats in parliament. UKIP, whatever your views on its politics, is being prevented at every turn from even having a single MP in the national parliament. Although it regularly gains around ten per cent of the vote in national polls, the only way it can get even a single MP is by convincing the voters in a single constituency to vote for it above all other parties. This makes the UK political system the most closed in the EU, if not Europe (barring Belarus). In other words a party could get thirty per cent of the vote in every constituency in the country, and still have no MPs in parliament. This is the system we have in Westminster, the so-called "mother of all parliaments". It is worse than a joke; it is a national disgrace. It is this reason that there is so much apathy towards the political system in the UK, and why British people feel so disconnected from their political masters. If you know that your vote will be wasted because you happen to live in a party's "safe" seat, or a "marginal" between two parties you don't like, then what other feeling can you have?
So how could a "Waldo Moment", or even a real-life "Grillo Moment" happen in the UK?
The first time it happened in modern British politics was in 1997, in the Tatton constituency, when local people voted tactically for the Independent MP Martin Bell, in order to remove the incumbent Conservative. Since then, there have been a few other independent MPs, as well as a Green MP for Brighton, and the left-wing demagogue George Galloway. But these are people working with the system, not against it. In the UK, it is the voting system itself that keeps the political establishment closed to new movements.
So unless you can somehow manage to persuade a vast apathetic cross-section of society to vote tactically in key constituencies, the chances of a "Grillo movement" gaining a good slice of parliament using the current system are next to nothing.
The last time the UK political establishment was terrified of its people (as all good democratic governments should be) was during the infamous "Winter Of Discontent". I described these events in more detail here, but the way that ordinary workers gained the attention of government then was by mass, spur-of-the-moment strikes. The country was effectively paralysed for a number of weeks, but the workers got what they wanted: better wages and conditions. Mass civil action would be the most obvious method to use to, and is most likely to get politicians attention. Unfortunately, with current UK laws, it is also likely to get many people at the wrong end of the police. So you would need to gain the trust and implicit support of the police. Police are unable to strike; however, they are allowed to interpret the law as they see fit.
So some kind of agreement between the police and a mass civil movement (which offered the police better working conditions and fewer unworkable laws to enforce) would be the most effective way to terrify the political establishment. Remove the link of subservience to government: give the police genuine independence from government, and reducing its workload by allowing it to give more discretionary cautions against unworkable or politically-motivated laws. That would be the first step, and would make police less over-worked and our criminal justice system more efficient. This would also terrify and emasculate the government in equal measure.
The second step, like Grillo, would have to be disengagement from the orthodox political system. UKIP, and Nigel Farage, in particular, have found a way around this, by discrediting the political system. The problem that UKIP has is that it hasn't managed to find a way to get tactical voting, or a political stalemate, to work in its favour. The 2010 election was the nearest thing we've had so far to a "Grillo Moment": that turned out to be a "Clegg Moment". And we all know the result of that.
The problem with the UK political system is that to change it, you have to do it from within. So how do you disengage from the political system while also bringing about change from within?
Political change only comes about after a social crisis. Political reform in the UK happened this way, and is the most likely way it will happen in the future. In order for this to happen, the people themselves have to realise that there is a crisis to begin with. And for that to happen, there has to be a turning-point; a moment of revelation.
After the government's "bedroom tax" kicks in, and changes to DLA, perhaps that "moment" will not be long in coming...
Sunday, May 6, 2012
The politicians' fear of "the markets": the real tail wagging the dog
We all know that finance and the stock markets guide so much of what governments, especially in The West, do. But it's worth reminding ourselves what the purpose of the stock market is.
Companies float create shares (float on the stock exchange) in order to increase the revenues of the share-holders, and therefore the company. But what causes the price of shares to go up or down is "events", and confidence in the future. Buying and selling shares is, as is well-known, a glorified form of gambling. If you've ever looked the frenetic behaviour of stock-brokers in the FTSE or anywhere else, and their knee-jerk reaction to bad news, you'll quickly get the (correct) assumption that stock markets are the arenas of capitalism. And it is far from pretty. To be a successful stock-broker takes nerves of steel and complete ruthlessness: in other words, to throw your humanity out the window.
Stock markets operate as reactive rather than pro-active entities. By definition, stock markets themselves are not supposed to "make news" but instead, are designed to react to it. Stock markets operate mainly on confidence. If they hear news of a war in an oil-producing country, they react with human nature: fear, and the values of stocks and shares suffer. If they receive news of positive jobs figures, they react with confidence, and so rise.
The growth of the financial sector in the last thirty years has seen the financial sector have more and more influence on politics, with governments breaking down decades of regulation on the power of the stock market. Ronald Reagan's chief of staff was a former financial chief. Even Obama's government has been called "the government of Goldman Sachs"; George W Bush and Bill Clinton were similarly in awe of the financial sector. The same can be said of Thatcher's government, and every UK government since. But Why?
For the past thirty years there has been a conventional wisdom that "the markets know best", therefore it is best to do whatever you can to indulge them. By indulging the wishes of the financial sector, governments sold into the argument that this would feed an endless cycle of economic growth.
We now know that this is a simplistic fallacy. The "growth" that was created by deregulating the financial sector, instinctively feeding the growth in the stock market, was simply a credit phantom. The stock markets are fiendishly complicated to understand, but the stock brokers that work in them are just human beings, working to human nature. That aspect of human psychology is not complicated at all. Eventually, when that confidence trick was shown to be the illusion that it had been all along, the markets panicked. And so we had a financial crisis.
But the politicians' treatment of the stock markets in countries like the UK since that crisis has been difficult to explain rationally. The Conservative-led government seems to have a quasi-reverence for "the markets"; the government's policy has been to have an economic policy that should not upset "the markets". But the price of stocks and shares should not dictate government policy; that is to completely misunderstand the cause and effect relationship between the stock market and reality. Stock markets do not create the reality, they react to it. The dog is supposed to wag the tail, not the other way around. But the Conservative government do not intellectually understand this fundamental truth.
Gordon Brown's government were also guilty of this fatal error at times, but the Conservatives under chancellor George Osborne make it almost official government policy. In Greece and Italy, their technocratic governments have also held themselves hostage to "the markets". This is intellectual madness, where the financial tail wags the government dog. What is more extraordinary is that this takes place after an almost apocalyptic financial crisis. The whole financial sector was seen to be utterly incompetent; yet governments across The West have decided to effectively hand over national economic strategy to financially discredited banks, and their financial growth strategy to a stock market that has the collective psychological mentality of a five-year-old.
Now that Greece is effectively a commercial colony to the ECB (itself effectively ran by Germany), the fate of a country of more than ten million people (and the "cradle of democracy") is in the hands of the stock market.
These days, "conventional wisdom" has logic turned on its head: when governments are subservient to markets, it is the same as doctors asking patients what they think their diagnosis should be, and asking patients what they think their remedy should be. Yet this is the counter-intuitive world that we are living in: where lowering taxes on the rich is supposed to help the poor; where cutting government investment and jobs is supposed to encourage a more positive economy.
It seems that there must be a government department where an advisor comes up with an idea and the minister asks: "Does is make any sense? No? Then it's probably the correct thing to do!"
Companies float create shares (float on the stock exchange) in order to increase the revenues of the share-holders, and therefore the company. But what causes the price of shares to go up or down is "events", and confidence in the future. Buying and selling shares is, as is well-known, a glorified form of gambling. If you've ever looked the frenetic behaviour of stock-brokers in the FTSE or anywhere else, and their knee-jerk reaction to bad news, you'll quickly get the (correct) assumption that stock markets are the arenas of capitalism. And it is far from pretty. To be a successful stock-broker takes nerves of steel and complete ruthlessness: in other words, to throw your humanity out the window.
Stock markets operate as reactive rather than pro-active entities. By definition, stock markets themselves are not supposed to "make news" but instead, are designed to react to it. Stock markets operate mainly on confidence. If they hear news of a war in an oil-producing country, they react with human nature: fear, and the values of stocks and shares suffer. If they receive news of positive jobs figures, they react with confidence, and so rise.
The growth of the financial sector in the last thirty years has seen the financial sector have more and more influence on politics, with governments breaking down decades of regulation on the power of the stock market. Ronald Reagan's chief of staff was a former financial chief. Even Obama's government has been called "the government of Goldman Sachs"; George W Bush and Bill Clinton were similarly in awe of the financial sector. The same can be said of Thatcher's government, and every UK government since. But Why?
For the past thirty years there has been a conventional wisdom that "the markets know best", therefore it is best to do whatever you can to indulge them. By indulging the wishes of the financial sector, governments sold into the argument that this would feed an endless cycle of economic growth.
We now know that this is a simplistic fallacy. The "growth" that was created by deregulating the financial sector, instinctively feeding the growth in the stock market, was simply a credit phantom. The stock markets are fiendishly complicated to understand, but the stock brokers that work in them are just human beings, working to human nature. That aspect of human psychology is not complicated at all. Eventually, when that confidence trick was shown to be the illusion that it had been all along, the markets panicked. And so we had a financial crisis.
But the politicians' treatment of the stock markets in countries like the UK since that crisis has been difficult to explain rationally. The Conservative-led government seems to have a quasi-reverence for "the markets"; the government's policy has been to have an economic policy that should not upset "the markets". But the price of stocks and shares should not dictate government policy; that is to completely misunderstand the cause and effect relationship between the stock market and reality. Stock markets do not create the reality, they react to it. The dog is supposed to wag the tail, not the other way around. But the Conservative government do not intellectually understand this fundamental truth.
Gordon Brown's government were also guilty of this fatal error at times, but the Conservatives under chancellor George Osborne make it almost official government policy. In Greece and Italy, their technocratic governments have also held themselves hostage to "the markets". This is intellectual madness, where the financial tail wags the government dog. What is more extraordinary is that this takes place after an almost apocalyptic financial crisis. The whole financial sector was seen to be utterly incompetent; yet governments across The West have decided to effectively hand over national economic strategy to financially discredited banks, and their financial growth strategy to a stock market that has the collective psychological mentality of a five-year-old.
Now that Greece is effectively a commercial colony to the ECB (itself effectively ran by Germany), the fate of a country of more than ten million people (and the "cradle of democracy") is in the hands of the stock market.
These days, "conventional wisdom" has logic turned on its head: when governments are subservient to markets, it is the same as doctors asking patients what they think their diagnosis should be, and asking patients what they think their remedy should be. Yet this is the counter-intuitive world that we are living in: where lowering taxes on the rich is supposed to help the poor; where cutting government investment and jobs is supposed to encourage a more positive economy.
It seems that there must be a government department where an advisor comes up with an idea and the minister asks: "Does is make any sense? No? Then it's probably the correct thing to do!"
Friday, February 17, 2012
Greece's collective nervous breakdown
Greece is a country and civilisation with a long history, the longest in Europe. But in its four thousand years of history, what it is going through now must rank as being one of the most humiliating episodes in its national history.
We'll forget about some of the ancient past for the sake of brevity; the 300 Spartans, the wars with the Persians, and so on. We'll forget Greece's occupation by the Romans for four hundred years. Moving on, we'll forget (for the moment) about the Fourth Crusade; that moment when Constantinople, Christendom's richest and most populous city at the time, as well as it's intellectual heart, was looted bare and half burned to the ground by fellow Christians. We'll forget about the Byzantine's long and painful decline after the Fourth Crusade until its eventual overthrow by the Ottoman Turks. We'll forget about Greece's occupation by the Turks for nearly four hundred years. We'll forget about Greece's occupation by the Nazis during the Second World War, and the bloody civil war afterwards. And we'll forget about the time when Greece was ruled by a brutal military junta, backed by the CIA during the middle of the Cold War.
We'll forget all that for now. It's worth remembering that words like "trauma"and "psyche", as well as pretty much most words to describe government, such as "democracy", "tyranny"
and "anarchy", are Greek. These could all be applied to describe in different ways the state of Greece today.
Greece as a nation-state is in collective meltdown. It just hasn't realised it yet. For decades (since the fall of the military junta, but moreso in recent decades), successive governments gave generous salaries and benefits to their population, in order to satisfy their wants and to garner popularity. At the same time, Greeks, from politicians down to hairdressers, were doing what they could to defraud the system, subsequently draining the government's revenue while at the same time the government was doing what it could to spend even more of it.
So it's no surprise that Greece would eventually find itself in a state of virtual bankruptcy. The question was what to do when the government eventually was forced to admit the truth to itself and to the public.
What it did do, considering that Greece was in the Euro, along with sixteen other countries, was ask for help. And because of the collective nature of the Euro (that when one country is screwed, the rest may well follow) the European Central Bank (mostly bankrolled by Germany, the Eurozone's strongest country) was obliged to provide it.
But Germany and the ECB were not in a sympathetic frame of mind, and in order to give Greece the money it needed to keep functioning, it asked for a lot in return, and (as the Greeks did not have trustworthy history of keeping to commitments) in a fairly short space of time. The result of that? The Greek government is forced to tear the guts out of its own institutions: government assets sold off to (foreign) privatisation; massive government lay-offs, salaries and pensions cut and cut again; meanwhile taxes are increased again and again. The consequence? Fury on the streets; 100,000 homeless in Athens; middle-class workers forced to queue for church handouts - a population and a country of modern Europeans, reduced to virtual poverty to pay off a loan.
Greece, in other words, is no longer in control of its own fate. The government, paralysed by the fear of being kicked out of the Eurozone and having to fend for itself under its own currency on one hand, and a fury at being a virtual hostage to a foreign power on the other, is stuck in a death-spiral trajectory. But this death-spiral of poverty is due to last for several more years at least, if Greece is to pay back its debts to the ECB/Germany. Meanwhile, in the real Greece, outside the parliament, it is clear the people cannot tolerate this forever. Already there has been looting and burning of buildings.
Greeks have been here before, though a long time ago. The Fourth Crusade of 1204 occurred when Crusaders were sent to Constantinople, then the capital of the Byzantine (Greek) Empire, in order to replace one emperor with his nephew on the throne. The nephew had promised a large financial reward to the Crusaders for this service. However, the empire at this time was practically bankrupt due to governmental mismanagement. The Crusaders forced the nephew, once installed on the throne, to raise taxes and loot the churches of gold and valuables. Riots were not long in coming, and within a matter of months the nephew was forced from the throne and replaced by a Greek who was not a pawn of the Crusaders. As a result of this, the Crusaders attacked the city a second time; this time, when they entered the city, it was looted bare of valuables and partially burned to the ground.
Greece these days is in a similar bind of its own making; only now, instead of being held hostage to Crusaders, it is held hostage to bankers in Frankfurt.
It's not Germany's or the ECB's fault that Greece is a financial colony. Greece could have decided that the best thing to do, given the kind of strict conditions that the ECB offered, was to choose to leave the Euro and fend for itself, using its own strategy. Some German politicians, secretly would prefer that; it would make it easier for them, and easier on the stability of the Eurozone.
There is to be an election in Greece in a couple of months, and I guess the question that most Greeks will be asking when the make their vote will be "Who runs Greece?". It is up to them to decide.
Monday, November 14, 2011
The Decline And Fall of The Roman Empire, And The Rise Of The New Holy Roman Empire
History is full of dejavu.
The politics of Europe of the early 21st century is really not so much different from that of Europe in the 11th century.
The recent histories of the modern states of Italy and Greece, and that of France and Germany, contrast oddly with their more medieval counterparts; the Holy Roman Empire, the Papacy (and Italian city-states), and the Byzantine Empire.
The Treaty of Rome, signed in the 1950s, created the prototype for the EU, beginning with the core members, France and Germany. After the moral and economic wreckage of the Second World War, hitherto mortal enemies France and Germany vowed to a future of economic alliance. Italy, amongst others, joined this association some years later, followed by Greece.
This suited all parties well, and then this association became a formal economic union with one currency. And this is where it became much more complicated. While Germany and France were the two strongest powers on Continental Europe - a contemporary "Holy Roman Empire", economically joined at the hip - Italy and Greece, the two ancient imperial powers, had been economic basket cases since the Second World War.
Both Italy and Greece had been through a succession of elected governments since the war. Greece even had a period of miliary rule. But both countries' governments, especially in the last forty years upto the 2008-11 financial crisis, utterly failed to manage their countries responsibly. In stark contrast to Germany, whose economy was destroyed after the Second World War, yet had gone from strength to strength, the ancien regimes of the Med, Italy and Greece, had gone from modest growth to profligate insanity.
Both Greece and Italy's problems were essentially the same, albeit that Italy's were much worse as their economy was much bigger than Greece's. Their governments, until very recently, had run their countries as a weak parent appeases and spoils an errant and tantrum-throwing child: the state provided generous subsidies and pensions, because they didn't want pensioners and unions marching on the street; the state turned a blind eye to rampant tax evasion and corruption because they didn't want the middle-classes and shopkeepers on the streets.
In other words, the Greek and Italian governments were repeating the same mistakes that all failing empires in history made - through governmental weakness, allowing their country to live beyond its means and avoiding the uncomfortable (but inevitable) truth.
So, it came to last week, as the New "Holy Roman Empire" of Europe (the Franco-German economic duopoly) ultimately calls the shots on the Eurozone, called time to Italy and Greece's governments.
Italy's premier, Emperor Silvio (whose title can be sybolically conferred as being the longest ruler of Italy since the time of Mussolini, and since his moral exemplar sometimes seemed to be Caligula), after ruling his state for much of the previous twenty years through corruption, mismanagement, and moral indifference, was forced to symbolically relinquish his crown to Italy's ceremonial President. Then the President, acting in the role once held by the Pope a thousand years ago, shortly after bestowed the title of Italian premier (once called by the name "Emperor of the Romans" in the days of the Papacy) to an Italian bureaucrat experienced in the politics of the Eurozone. In other words, a person far more suitable to the New "Holy Roman Empire" for the sake of European stability.
The same story can be said of Greece: after months of indecision and instability, the Greek premier bowed to the inevitable and resigned, to be replaced by a Greek bureaucrat experienced in the politics of the Eurozone, friendly to the interests of the New "Holy Roman Empire".
It could be argued, then, that what has happened in the ancient imperial territories of Greece and Italy is a kind of New "Holy Roman Empire" economic regime change. That may be so, but niether is that something that should surprise anyone who understands the modern world.
Or, for that matter, the medieval world. The Papacy had been a plaything of the Imperial Powers of Europe, such as the Holy Roman Empire, for centuries, especially around a thousand years ago, when there were Popes and anti-Popes for much of the time. Italy and its city-states were a plaything of Popes, Holy Roman Emperors and Byzantine Emperors (all three of whom, by the way, claimed the title of ruler of the Romans); not long afterwards, the same became true of what is now Greece and the Balkans.
So, who runs Europe these days? The answer is, basically, the same as the answer was a thousand years ago: Germany. A thousand years ago, England was peripheral to the fate of Europe; France was still figuring out where its loyalties lay; Spain was a mess; Eastern Europe was in transition, while Constantinople/Istanbul was maintaining its position economically, and had made diplomatic in-roads in the Middle East.
So what's new? At least Germans these days are pacifists.
The politics of Europe of the early 21st century is really not so much different from that of Europe in the 11th century.
The recent histories of the modern states of Italy and Greece, and that of France and Germany, contrast oddly with their more medieval counterparts; the Holy Roman Empire, the Papacy (and Italian city-states), and the Byzantine Empire.
The Treaty of Rome, signed in the 1950s, created the prototype for the EU, beginning with the core members, France and Germany. After the moral and economic wreckage of the Second World War, hitherto mortal enemies France and Germany vowed to a future of economic alliance. Italy, amongst others, joined this association some years later, followed by Greece.
This suited all parties well, and then this association became a formal economic union with one currency. And this is where it became much more complicated. While Germany and France were the two strongest powers on Continental Europe - a contemporary "Holy Roman Empire", economically joined at the hip - Italy and Greece, the two ancient imperial powers, had been economic basket cases since the Second World War.
Both Italy and Greece had been through a succession of elected governments since the war. Greece even had a period of miliary rule. But both countries' governments, especially in the last forty years upto the 2008-11 financial crisis, utterly failed to manage their countries responsibly. In stark contrast to Germany, whose economy was destroyed after the Second World War, yet had gone from strength to strength, the ancien regimes of the Med, Italy and Greece, had gone from modest growth to profligate insanity.
Both Greece and Italy's problems were essentially the same, albeit that Italy's were much worse as their economy was much bigger than Greece's. Their governments, until very recently, had run their countries as a weak parent appeases and spoils an errant and tantrum-throwing child: the state provided generous subsidies and pensions, because they didn't want pensioners and unions marching on the street; the state turned a blind eye to rampant tax evasion and corruption because they didn't want the middle-classes and shopkeepers on the streets.
In other words, the Greek and Italian governments were repeating the same mistakes that all failing empires in history made - through governmental weakness, allowing their country to live beyond its means and avoiding the uncomfortable (but inevitable) truth.
So, it came to last week, as the New "Holy Roman Empire" of Europe (the Franco-German economic duopoly) ultimately calls the shots on the Eurozone, called time to Italy and Greece's governments.
Italy's premier, Emperor Silvio (whose title can be sybolically conferred as being the longest ruler of Italy since the time of Mussolini, and since his moral exemplar sometimes seemed to be Caligula), after ruling his state for much of the previous twenty years through corruption, mismanagement, and moral indifference, was forced to symbolically relinquish his crown to Italy's ceremonial President. Then the President, acting in the role once held by the Pope a thousand years ago, shortly after bestowed the title of Italian premier (once called by the name "Emperor of the Romans" in the days of the Papacy) to an Italian bureaucrat experienced in the politics of the Eurozone. In other words, a person far more suitable to the New "Holy Roman Empire" for the sake of European stability.
The same story can be said of Greece: after months of indecision and instability, the Greek premier bowed to the inevitable and resigned, to be replaced by a Greek bureaucrat experienced in the politics of the Eurozone, friendly to the interests of the New "Holy Roman Empire".
It could be argued, then, that what has happened in the ancient imperial territories of Greece and Italy is a kind of New "Holy Roman Empire" economic regime change. That may be so, but niether is that something that should surprise anyone who understands the modern world.
Or, for that matter, the medieval world. The Papacy had been a plaything of the Imperial Powers of Europe, such as the Holy Roman Empire, for centuries, especially around a thousand years ago, when there were Popes and anti-Popes for much of the time. Italy and its city-states were a plaything of Popes, Holy Roman Emperors and Byzantine Emperors (all three of whom, by the way, claimed the title of ruler of the Romans); not long afterwards, the same became true of what is now Greece and the Balkans.
So, who runs Europe these days? The answer is, basically, the same as the answer was a thousand years ago: Germany. A thousand years ago, England was peripheral to the fate of Europe; France was still figuring out where its loyalties lay; Spain was a mess; Eastern Europe was in transition, while Constantinople/Istanbul was maintaining its position economically, and had made diplomatic in-roads in the Middle East.
So what's new? At least Germans these days are pacifists.
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