Monthly Archives: June 2009

Policy Dilemmas For Next Week’s Fed Meeting

Posted on by

Krishna Guha in his assessment in the Financial Times this morning of the key policy issues facing Ben Bernanke and his team at next weeks Federal Reserve meeting had this to say:

“Meanwhile, the Fed is likely to reiterate that it expects to keep rates near zero for an “extended period”, challenging market expectations of early tightening.”

Which struck me as interesting, since in an article which I wrote for yesterday’s (Sunday) edition (offline and in Spanish) of La Vanguardia newspaper (English text below) I said the following:

Investors are, on Krugmans view, simply erroneously positioning themselves in the face of what they now feel is inevitable. This view is erroneous he argues, since the road to full blown recovery is likely to be longer and harder than market participants are currently envisioning, and the only way to really get interest rates back under control would be for Bernanke to commit himself to holding down short term interest rates for a lengthy and indefinite period of time.

This is what is called keeping yourself just nicely ahead of the curve I think. The article which follows is basically a journalistic rewrite of this post (which appeared on Afoe last week). It does have the advantage of being considerably more digestible for the non specialist than the Afoe original Continue reading →

The Clock Is Ticking Away Under Latvia

Posted on by

As the European Commision and the IMF toil tirelessly away, testing out their latest post-Keynesian “social and economic experiment” in Latvia – in an attempt to see whether it is possible to revive an economy which is contracting under the weight of massive debt deflation at an annual rate of 18 percent (Q1 2009) by relying almost exclusively on a process of drastic fiscal cuts (a process which today is glorified with the name of “internal devaluation” but which in the 1930s was simply called what it is: wage and price deflation) – a new problem now starts to looms its head before us. What, we might like to ask ourselves will be the long run consequence for Latvia’s already fragile demographic dynamic if we don’t get a most-optimistic-scenario-best-case outcome here? That is, if instead of a devaluation-driven “V” shaped recovery, we get not a “U” shaped one (the optimistic scenario), but rather “L” shaped stagnation (a distinct possibility on my view, if wages and prices simply take too long correcting to competitive rates) what will be the implications for the longer term future of the country?

The question I want ask here is simply whether or not short term decision taking on the part of the Latvian government (the crisis “exit strategy”) may not produce knock-on effects on the short term decision process of potential Latvian parents leading them to postpone decisions on parenthood, such that the impact of the crisis is a further deterioration in long run population dynamics, and hence, ironically, in potential economic performance? What I am asking is whether or not there may be a kind of “vicious circularity”, whereby one negative feedback process influences another in a way which produces a very unfortunate outcome. Not for nothing do we say that social systems are complex ones!

But before we go into the nitty gritty of all this, I would like to just take a quick look at two charts.

Structurally, they look quite similar don’t they? They are both output charts, showing year-on-year changes in production. The second is a chart for industrial products, and the first is a chart for children. Strange they should look so similar, isn’t it? Or is it? Below I will go into some recent work by economists and demographers which providing a theoretical background within which we may be better able to understand the sort of complex processes we can see operating in Latvia. At the end of the post we will then breifly take a brief look at some of the conclusions it might be possible to draw from what is happening. Continue reading →

Green Shoots?

Posted on by

Tehran tense, says CNN. Unrest challenges Iran’s republic, says the BBC headline writer, choosing understatement. The reporter, Jon Leyne, is less restrained: “As demonstrations against the Iranian election result continue, the situation in Tehran is becoming unpredictable and potentially explosive.”

The story got close to a third of Germany’s main news broadcast last night, too, with heavy emphasis on the government’s efforts to keep international reporters away from any stories. ARD filmed from the correspondent’s office, and told how revolutionary militias had forced their way in earlier, threatened everyone and abducted one of their technicians. According to the report, international journalists are also being regularly detained by government forces, but usually released after a few hours.

Despite these efforts, there’s lots of news getting out of the country. In addition to all of the media, here is a list of English-language Twitter feeds coming from Iran. (Thanks, Tobias.)

We’ve seen some of this story before, but the ending is far from certain. Is it like Kiev, where electoral fraud brought people out for long enough to force change? Is it like Belarus, where the opposition stayed intimidated? Is it like China, where the powers that prevented change with a massacre? This morning, all of these seem possible.

But with the Khameini calling Ahmadinejad’s alleged victory “a divine miracle”, the power structure looks to be lining up behind the status quo. The government is not shrinking from using violence, and with non-uniformed “militias” and “activists” committing much of the violence — what would be criminal in other countries — this looks like a severe test for Moussavi supporters. Do they have countervailing powers? Any police or militias or military going over to the opposition? Absent something along those lines, change is unlikely. At least not now.

(Just want add that Google’s News page is fantastic. Quick links to full coverage of articles, blogs, local sources, images, quotes and videos. In decades past, presidents were probably not so well informed.)

La Francophonie again

Posted on by

I’m in Senegal for a couple of weeks, on business.

Pretty much everything I wrote about French in Burundi in this post last year applies to French in Senegal. All educated Senegalese speak French; most speak it really well; they’ve also picked up a lot of distinctly Gallic tics of gesture and conversational patterning. The French fascination with their former colonies is a lot easier to understand once you’ve visited; if you’re French, it must be so pleasant to be someplace where French is the language of learning and prestige, where everyone who matters speaks French, and where there’s never a need to break out the English.

There are some differences. Gallicization seems to run deeper here than in Burundi. No, that’s not exactly right. More like: the European influences seems more assimilated. In Burundi, rich and elite Burundians can seem like wannabe Belgians, cut-and-pasting the culture of the former colonists. Elite Senegalese seem to be more comfortable integrating the different influences. It may just be that Senegal is a much less desperately-screwed-up place than Burundi, and so has less of a cultural cringe… I’m not sure. Continue reading →

VAT Hikes And Ageing Costs

Posted on by

I think anyone, even those with a sceptical view on the importance of demographics, can agree that there have to be ageing costs for any society, and specifically so in a macroeconomic context. . Moreover, as a natural consequence of ageing population economies need to grow and progress if they are to be able to financially support the ongoing demographic transition. We really don’t need to be growth fundamentalists here, but it is abundantly clear that if an economy such as Germany is going to finance its current and rising old age liabilities it needs growth in output (and income); otherwise the system falters.

Of course, in the absence of growth another way to pay for ageing oncosts is through tax hikes, and in this particular context Germany has provided us with a truly wonderful experiment, since a couple of years ago (1st January 2007, to be exact) the VAT consumption tax was hiked 3 % – in part to try to secure the good functioning of German welfare institutions in the future. As I argued at the time, I found the general interpretation of this initiative strange, and so I tried to provided a rather wonkish theoretical argument to justify my opinion. Time has now passed, and as we can see in countries like Latvia and Hungary this German initiative is now being repeated (or at least the possibility of repeating it is being discussed). So what can we say about what has happened in Germany in the meantime? Continue reading →

Lost In The Latvian Translation?

Posted on by

According to reports in the Baltic Course newspaper, Latvian Finance Minister Einars Repse (of the New Era party) is not against the strikes and rallies that are being organised in response to the proposed state budget cuts, he is, however, opposed to any violent protests and subsequent civil unrest.

Rallies and strikes are a good thing, but disturbances will not solve anything,” Repse pointed out after a meeting with Latvian Free Trade Unions Association representatives today. As the finance minister explains, he realizes that “people are really concerned and desperate”, however, damaging government buildings will not contribute to improving the situation in any way as repairing the buildings would have to be paid for with state budget money anyway.

I’m sure he can’t have quite put it like this – if he did then a Finance Minister actually supporting strikes against his own measures would be a first, I think (what is happening in Latvia is surreal, but not this surreal, surely) – and that the question is a translation one, but still. It does illustrate the difficult position local politicians are being put in when it comes to defending the EU Commission and IMF inspired measures in the face of their own voters – as I already forecast it would be in my post The Long And Difficult Road To Wage Cuts As An Alternative To Devaluation back in January. More to the point is this, which is real enough:

Working pensioners’ pensions will be slashed 70%, all other pensioners will see their pensions shrink by 10%. Also maternity and child care benefits will be cut by 10%.

Now, I know the aim is to bring prices down, but how can a country which is effectively dying for lack of children (post coming on this later) be actually cutting child allowances. Frankly I find this even harder to believe than the idea of a Finance Minister supporting strikes against his own policies. It is nevertheless true. Everything, I see, is possibile in Latvia, except, of course, devaluation.

Not so socialist Europe

Posted on by

In case you’re wondering why there’s such an rightwing dominance in the first place (and it’s pretty much always been that way in parliament elections): Some countries aren’t polarized between a leftwing block and a rightwing block, which has meant nonsocialist parties are dominant.

Some, like Benelux countries and Finland, have centrist supermajority coalitions and aren’t unusually rightwing in policy. Ireland and Poland and the Baltics are a different story.

Then there’s the Lib Dem’s, and various other left-liberal parties that belong to ALDE in the European Parliament.

The caucus groups are fairly important, and sometimes vote as a block. So even if from one perspective, the rightwing dominance is an illusion, it does give rightwingers a bit of a structural advantage in the Parliament.

The new parliament: A bit like the old one

Posted on by

By some wonderful magic, all media reports of an event tend to go with the same storyline, often kind of off. The storyline after the elections was “The right and anti-immigrant parties win big.”

Figuring out if it was accurate took some work, because some parties, for example the Tories and the Italian Democratic Party, plan to change caucuses and the official results site counts them as unattached. I had to do a lot of very tedious counting and adding up to make this post, the kind of thing journalists need us bloggers to do. I’ve assigned most nominally unattached parties to a group. This is based on known plans plus a few educated guesses, but the guesses mostly involve tiny parties.

As it turns out, PES+greens+commie parties will go from a combined 38, 3% of seats in 2004 to 36,2%.

If we count the liberals (reasonable-ish in the Parliament context), the present mainstream right went from a combined 55,0% of seats to 56,2%.

By my count, 2% of the old parliament’s non-inscrits were extreme nationalists, and 3,1% of the new parliament’s.

Results by group:

EPP-ED+UEN parties (including the Tories and ODS and Law) 44,2% of seats. (42,3% in the old parliament)

Counting them separately is pointless since they’re about to merge and split. This process of musical chairs tend to happen after every election.

* ALDE/ADLE: 10,9%. (12,6%).
They’re the liberal group (well, basically). The members parties mostly line up as center-right domestically, but some are center-left or just vaguely centrist.

* PES 25,2% (27, 6%)
Worse than it seems, because all parts of Italy’s Democratic Party, which didn’t exist in 04 is included in my count.

*Greens/EFA 7,1% (5,5%)
Impressive considering the many countries with no green representation

*GUE/NGL 4,5% (5,2%)
This is the far left

ID, the eurosceptic group went from 2, 8% to 2, 6%

So the storyline’s not flat wrong, but the changes aren’t very dramatic.

Throwing the bums out, in Iran

Posted on by

It’s polling day in Iran and a monster turnout is expected. Both leading candidates have been spotted appropriating bits and pieces of the style of the Obama campaign; incumbent president Mahmoud Ahmedinejad has been using the slogan “Yes We Can”, his main rival has been on a Web-enabled youth organising drive, and has been sending network-hammering numbers of text messages to get out the vote.

Oddly, US political comparisons are in the air. Laura Rozen asks if Ahmedinejad reminded anyone of Sarah Palin. I disagree – he reminds me most of all of George W. Bush.

An ambitious but limited regional politician who has spent time in the air force, he achieved election through a campaign for vague “reform” – whether with results or not is a good question – heavily tinged with religion or at least religiosity. In office, his term has been marked by a string of spectacular gaffes and crowd-pleasing rhetoric aimed at the hard right of the political spectrum, as well as a deliberately provocative foreign policy. Coming up to the election, Ahmedinejad leaves the Iranian economy in considerable trouble after over-spending on the belief that the boom would go on forever, and passing out considerable sums in favours to his clientele. Politically, he relies on low-information rural voters in parts of the country where the integrity of the ballot is frequently in doubt.

There’s also a certain Cheney- or Rove-esque quality to his campaigning; he regularly violates Godwin’s Law. For Ahmedinejad, everyone seems to be Hitler for fifteen minutes, just as they are for Jonah Goldberg. He would probably be Winston Churchill all the time as well, if Winston wasn’t chiefly remembered in Iran for nationalising the Anglo-Persian Oil Company and ordering the joint British-Soviet intervention of 1941. And he indulges in the partisan exploitation of supposed secret intelligence information, an odd reflection of the Plame affair.

Further, his election in 2004 was at a historic high point of Iranian influence, just as Bush was elected in a time when US power, wealth, and influence seemed beyond questioning; the US invasion of Iraq had begun to radically reconfigure the political balance between Sunni and Shia powers, whilst tying down the US military’s reserves and poisoning the US’s reputation. High oil prices made everything seem achievable. Unlike Bush, you can’t say he squandered it, but you can certainly question what, if anything, he achieved. As Marc Lynch points out, Iranian soft power would be instantly strengthened if the crazy guy failed to win re-election.

Yes, it sounds provocative, but it’s no more so than describing Iran as “totalitarian”. This is a country where the last two presidents were elected against the wishes of the establishment, in votes that came as a total surprise to the rest of the world. Here’s a wonderful quote:

But Rahnavard has been highly visible, especially after Ahmadinejad dragged her into the middle of the campaign by holding up what appeared to be an intelligence file about her during a debate with Mousavi and accusing her of skirting government rules in obtaining her degrees.

Rahnavard appeared to relish publicly defending herself, demanding that the president apologize.

“Either [Ahmadinejad] cannot tolerate highly educated women or he’s discouraging women from playing an active role in society,” she told reporters.

You might have thought this was the obvious statement of the year, but read the whole thing about women and the mobilisation for Mir Hussein Mousavi’s campaign.

Demonstration

What do his supporters want? Essentially, most things you do.

“Liberalization, a more forward thinking government, they want civil liberties — they want the whole gamut.”

Don’t, of course, imagine that a Mousavi government would immediately hand over the keys to the kingdom, or more to the point, the Natanz uranium enrichment plant. Talking in terms of “pro-Western” factions seems ridiculous in the context of someone like Mousavi, who was a revolutionary, a wartime prime minister, and is now a critic of the system. One thing that stands out is the intellectual flexibility and intellectualism of such people; you may not agree with the ideas presented here, but you can’t odds the commitment to ideas they represent.

It is nowhere near as surprising as it should be that Daniel Pipes says he would vote for Ahmedinejad.

Review: Alistair Crooke, “Resistance: the essence of the Islamist revolution”

Posted on by

I’ve been asked to crosspost this from my blog…

Resistance – The Essence of the Islamist Revolution is Alistair Crooke’s survey of modern Islamist thought. It would be clearer to say it is a couple of books occupying the same space; one would be a history of Islamist thought since the origins of the Iranian Revolution, with a polemic for greater understanding of such thought, and another would be a slightly eccentric, neo-Platonist rant with overtones of Ian Buruma’s notion of Occidentalism.

Well, that sounds fun, doesn’t it? Then you have to add in Crooke’s career; the book glosses him as an advisor to the European Commission on the Middle East, but makes absolutely no mention of his term as SIS station chief in Tel Aviv, in which role he negotiated a ceasefire between Israel and Hamas, which lasted until an unfortunate air raid resulted in the deaths of a round dozen civilians and not the Hamas man the Israelis were after. (The story is here.)

The war resumed, and Crooke was recalled; officially this was for “security reasons”, but if anything imperilled his security it was probably that after the event, the Israeli tabloids discovered his job title, identity, and photograph with un-mysterious suddenness. He eventually fetched up in Beirut, running a thinktank called the Conflicts Forum, devoted to contact between Western powers and Islamists. (Time was, it would have been a nightclub, but we live in fallen times.)

So, what upshot? Crooke makes a strong case for modern Islamism as a classical reaction to colonialism and modernisation, or rather an interwar vision of modernity. He relies on an impressive battery of reading ranging into cultural Marxism at one end and into hardcore conservatism at the other. More controversially, he tries to place Islamism since the 1950s in a context of rebellion against free-market economics drawn from Naomi Klein; but the Ba’athist and similar regimes hardly qualify as Friedmanites, with their nationalised oil companies, state military industries, and extensive Soviet influence in administration, secret policing, and military doctrine and structure.

He draws on a battery of confidential interviews, which are some of the most interesting things in the book, to illuminate current ideas and practice, specifically among Hezbollah thinkers. Notably, they argue, the Caliphate should now be seen as a world-wide network of loosely interconnected “communities of resistance”, rather than a state or any other kind of hierarchical organisation. The aim of these is to uphold the practice of an ideal, self-organising community of believers against a total onslaught by the forces of liberalism, which wishes us all to be atomised individuals.

In practice, this demands a sort of liberation theology/community-organising/vaguely anarchist drive to create base groups everywhere, drawn together by the practice of mutual aid and the study of critical texts, and if necessary to form the underground shadow-administration common to all good guerrilla armies.

Crooke is interesting on the military implications of this, but I think what he describes is less original than he suggests. Flat, highly networked command structures, with a high degree of autonomy down to the squad and the individual, are not characteristic of Islamic or Islamist warfare; what he is describing here sounds a lot like Auftragstaktik. Also, he describes the requirements of a Hezbollah leader as integrity, authenticity, reliability, personal charisma, and ability to mobilise others; would anyone at all disagree?

There is an interesting side-trip into Islamist economic ideas. He criticises Westeners who assume that the main aim of these is to find technical workarounds to make the normal course of business sharia-compliant; apparently the real thing is considerably better. However, a lot of it (as described here) consists of accepting a market economy but not letting money be the be-all and end-all of everything, etc, etc; in practice, this seems to mean a welfare state. No surprise, then, that one of the thinkers he quotes had to write an entire book to rebut the charge that his ideas were indistinguishable from European social democracy.

According to Crooke, the main distinction is in the field of monetary economics; but, in so far as his writing is a true misrepresentation of it, it seems to be distinct in a way which isn’t particularly original. Apparently, Islamist economists are very exercised about M3 broad money growth, on the grounds that this represents the growth of credit in a fractional-reserve banking system and that this is the root of the evils of capitalism. Instead, they are keen on…the gold standard, that most free-trade imperialist of economic institutions!

At this point you might want to halt briefly; Islamist Auftragstaktik applied to community organising? The Caliphate in terms suited to Clay Shirky? Dear God, Islamist monetarist gold bugs? Phew! And you could, perhaps, take comfort from the thought that however strange Iranian political thought may be, their economic thought is no stranger than Fraser Nelson’s or Jude Wanniski’s. Placing an upper bound on the strangeness, after all, is probably an important step towards international understanding.

Then we get into the second book. Crooke is always quoting Plato, specifically the apposition between the port and the city; he attacks Karl Popper, and uses a great deal of Horkheimer and John Gray. It is fair to say he accepts entirely the complex of critiques that argue that life is meaningless without a higher purpose usually decided by higher people, that the freedom offered by liberalism is no such thing, that trade (or commerce, or industry) is “mere”; it is harder to say whether he accepts this for the sake of argument, as much of the Islamist thinking he is discussing bases itself on these ideas.

And there is a valid argument that a lot of it claims to represent the up-side of such critiques – the need for a self-empowered, cohesive community, the problems of the free market – but might just as well be the downside. The economy should be directed, at a national level, towards certain “great concepts”; this could be post-war French indicative planning, and might well be, having been written in the 1950s – or it could be a Straussian exercise in National Greatness Conservatism. We should work and care for society; or is it, as one of Crooke’s interviewees says, that “life is not worth living without something worth dying for”?

None of this stuff about “false reconciliation” and “self-pacifying”, materialism, etc, etc, answers E. P. Thompson’s classic attack on “theories that assume that ordinary people are bloody silly“, either. Strangely enough, towards the end of the book, we have a sudden swerve back towards liberalism; freedom is not so bad after all, it turns out, compared with a neoconservatism informed by Leo Strauss.

Curiously, I left the book with a feeling that it had set out to make right-wing Americans feel closer to political Shi’ism.