According to legend and some historians, by making a stand in the Thermopylae pass 300 brave Spartans valiantly saved the day for the entire Greek army in the face of a Persian force of overwhelming strength and manpower. More than 2,000 years later some 11 million Greeks might be considered to have carried out a rather similar operation by single handedly facing-off a massed horde of frantic global speculators on behalf of the entire Euro Area population – at no mean cost to themselves in terms of wealth, employment and general well-being. Or at least that is the conclusion which could be drawn from reading through the latest self-critical review issued by the IMF dedicated to the lessons which can be learned from the to-date handling of the country’s deep economic and social crisis. Continue reading
Here’s something about Turkey, and everyone else
So, the urban development that kicked off all the protests in Turkey.
“This is the only place to hang out here,” says Yavuz Selim, 17. “And everything is very expensive. As students we cannot afford it.” His friends agree. “We are quite bored here. There is nothing to do for us.”…
While the municipality has increased local transport over the past year, the last buses leave at 10pm and many of the families living in Kaya?ehir cannot afford cars.
“We feel isolated from the city centre here,” Yusuf Sari, 16, points out. “A bit cut off, really.” Analysts say this kind of segregation changes the idea of a city – a space where different parts of society coexist – and will create long-term social and economic problems.
“It is very likely that these will end up like the banlieues in France,” said Adanal?. “Spatial isolation and the social concentration of certain segments of society will create discontent. This discontent, too, is isolated from the rest of society. People start to feel that they cannot escape this isolation, which makes matters worse.”
Actually, then, it’s not an urban development but a suburban development, or perhaps more to the point, an anti-urban development. As Jamie Kenny says:
Historically, the whole thing has a 19th century French feel to it, in the sense of government dominated by a pious, provincial bourgeoisie wanting to tame the big city antinomians. But reading about this stuff it’s amazing how well a certain type of – in this case – Islamic piety dovetails with neoliberal concepts of modernization. Maybe that shouldn’t be so surprising when you look at places like Dubai, but it’s remarkable how exact the comparisons are. The same basic suspicion of ‘urbanity’ in the widest sense of the word, the dislike for forms of life, commerce and culture perceived to be messy or low prestige, the way in which a form of commercial standardization seems to complement or substitute for a repressive moral code and the way in which the only unthreatening secular activity that the economic, political and in this case religious establishment can imagine is shopping.
Or, over here:
They started sinking their teeth into Taksim first by imposing a table ban two years ago: No tables on the streets. This deceptively simple move instantly drained much of the spirit of Taksim, since much of the charm was just walking around in seas of people who felt like your friend simply by virtue of being there, and probably were if you dug deep enough. That shattered the sense of community.
This reminded me of my review of The Spirit Level, and specifically this bit.
The states of the Deep South are reliably terrible. They are highly unequal, and they get the effects – but they are far off to the top right of the trendline. In a sense, their marginal productivity in terms of inequality is unusually high – for every extra point on the Gini coefficient, they manage to produce a sharply higher degree of suffering than the national average.
On the other hand, there’s the importance of being urban. The more metropolitan the state, the less it suffers from the impact of inequality – New York has the social problems of the average, despite being very unequal.
There are good reasons for this. Big cities tend to be unequal because they have some rich people. This does not preclude having a well-funded school system; in so far as the rich want to live there, it may be possible to squeeze some tax out of them. Further, there are limits to how far you can send the people off to the suburbs for the whole thing to work. It is hard to opt out completely in town. You may take a cab to the bank headquarters, but you’ll still curse in traffic.
Pulling this together, people fight over urbanity because it’s a sort of substitute for equality. In some ways, it’s real equality, as the institutions of the city are often open to all. In others, perhaps more important, it’s potential equality – we can all be the minority, we can all fall into the path of a tube train, the mob is out there.
From a protest in Turkey (via fb) twitter.com/DarthNader/sta…
— Nader (@DarthNader) June 2, 2013
This draws out different responses. One is an intense identification with the city, which turns out to be a latent coalition across all kinds of groups. Another is a deep horror of the mess of it all. Erdogan, like the mayors who went after Occupy, is constantly whining about needing to clean up and vandals and did you know some of them have dogs? Better to move out to somewhere on the motorway.
I met this response back in 2001, on the scene of a long-term occupation protest. Austrians, or possibly more importantly, Viennese who didn’t want Jörg Haider in government had set up a camp called the Concerned Citizens’ Embassy (BBB in German) outside the prime minister’s office in part of the old imperial citadel. Others held demonstrations marching there every Thursday. I remember vividly that on one of these, people carried a blank banner and pulled a projector on a supermarket trolley, throwing a documentary someone made about the campaign itself up on the banner so we could watch it.
Suddenly, the Fortress Captain – that was his title, the guy in charge of the Hofburg, a school friend of the prime minister – discovered that there was some rubbish lying about, it was ugly, there were rats, he had to clean it up, I quote. This completely circumvented the various legal protections of protest. The rubbish, of course, was us. There was stuff, nobody claimed to own it, and the imperial stormtroopers moved in.
We whined and sued and marched harder, but it was the finish. Anyway. We’ve established the motive. Here’s a piece about the characteristic protest style that goes with it. It doesn’t seem to work. Perhaps because the theory of victory for such a campaign is a flash revolution, like something from 19th century France?
And that reminds me of Pierre Mauroy, who died last week. As French prime minister, he insisted on sticking with European fixed exchange rates, but also on (as he said) holding out on the ridge line at 2 million unemployed. Looking back, it seems unsurprising given the first point that he lost the ridge and resigned. He then set about pulling money towards his home town and power base, Lille, specifically through the Euralille megaproject around the TGV station.
I have never seen a grimmer public space. It seemed to symbolise the combination of Euro-austerity macroeconomics and the effort to build shinier things on top of the city, as two halves of the same project. Similarly, the empty neon of Budapest’s EU-membership centre the last time I was there howled with blankness.
Godfather.gov
Niall Ferguson in the Wall Street Journal ahead of his new book The Great Degeneration —
In only one category out of 22 (in World Economic Forum Global Competitiveness Report) is the U.S. ranked in the global top 20 (the strength of investor protection). In seven categories it does not even make the top 50. For example, the WEF ranks the U.S. 87th in terms of the costs imposed on business by “organized crime (mafia-oriented racketeering, extortion).” In every single category, Hong Kong does better.
The chart above is the actual responses from the WEF survey of US executives asked to rank the top 5 constraints on business (page 360). The weighted response is 1.1 percent for any kind of crime. That’s lower than the responses for “foreign currency regulations.” Apparently moving dollars around is somewhat difficult too. Somehow WEF is able to translate these country-specific responses into a global ranking that conveys American businessmen cowering in the executive suite as mobsters rampage on the factory floor. It’s a miracle the country has any growth at all!
Use your illusion
Q&A portion with Mario Draghi during the ECB news conference yesterday —
Q: […] Are you telling the Spanish, Portuguese, Irish or even Italian people that the ECB can’t do anything else with inflation actually lower than 2%?
Draghi: Well, I am not sure I get the point, but I think I get it. First, the fact that inflation is low is not, by itself, bad; with low inflation, you can buy more stuff.
Advice to students of economics: don’t begin your essay on inflation with the claim “with low inflation, you can buy more stuff,” even if cited to Draghi, M, 2013.
UPDATE: More from Paul Krugman.
Growth is truth
From the IMF assessment of its 2010 program for Greece, the section dealing with relations within the Troika i.e. European Commission (EC) and ECB (p31) —
And from the Fund’s perspective, the EC, with the focus of its reforms more on compliance with EU norms than on growth impact, was not able to contribute much to identifying growth enhancing structural reforms.
Two issues here. First, aren’t EU norms supposed to be growth enhancing? But second, does the Fund really think there is a definitive account somewhere of specific structural reforms that will surely result in growth within a couple of years? The back to reality reading list might want to start with Adam Smith.
Housing bubbles and capital controls
I picked up this OECD chart from Sigrun Davidsdottir on twitter:
Although many in #Iceland worry/feel that a bubble is forming inside capital controls, property prices seem balanced: oecd.org/eco/outlook/fo…
— Sigrun Davidsdottir (@sigrunda) June 3, 2013
This is something interesting, and possibly worth watching for the future. Obviously, wondering about the problems of Cyprus’s economic recovery is very much long-term thinking, but what is the betting that we won’t see more capital controls in the future?
In the event of recovery, and even more so, boom inside an economy under capital controls, there would be a substantial potential for a housing bubble, or a bubble in some asset. Depending on your preferences, as nominal incomes rose, or the money supply rose, or bank credit expanded, you could easily get a bubble as there would be a much restricted tendency for capital to get exported. That is after all the point.
On the other hand, the experiences of the European periphery, very much including the UK, suggest that inflows into an open capital account are also dangerous in this sense. My intuition is that they are more so because they can reverse quickly, and also that after all, if people whose wages go up can’t buy a house, who can? Thoughts are appreciated.
High-Trust and Low-Trust Societies, Banks, and Europe
A “banking system responsive to local needs” quickly becomes “piggy bank for local politicians”.
Well, local politicians are elected, after all. Democracy is a thing. But I know what he means. That Spanish caja that was run, into the ground, by the Catholic Church. That kind of thing. WestLB back in the day when it financed William Hague’s best friend buying all the pubs and the Ministry of Defence married quarters and Peer Steinbrück was its regulator, before it blew up and the explosion threw him all the way from Hannover to Berlin and he got to be federal finance minister, SPD leader, Mr Prudent McBluebollocks an’all.
lrb.co.uk/v35/n11/neal-a… > “The fact that the global bank disaster scarcely touched Germany, with its strictly controlled banking system”…
— Alex Harrowell (@yorksranter) May 29, 2013
Does Neal Ascherson really not know about HypoVereinsbank?
I think the operational question here, certainly as far as the UK is concerned, is “are we a low-trust or a high-trust society?” It works for the Germans (for some values of works, and except when it doesn’t work), it doesn’t work for the Spanish (except of course when it did).
Sparks = high trust, cajas = low trust. We like to think we are a high-trust, low-corruption north European country, but I often think the history of the UK post-1979 is the history of an emerging low-trust society.
Of course, when we were canonically much more trust-y, Jimmy Savile was raping everything in sight, the Met Police was basically our biggest organised crime gang, and the MOD was perfectly happy to test nuclear weapons on our own soldiers. But then, trustful Germany has had some pretty decent scandals. Do you remember before Wolfgang Schäuble was All Better Now, when he was responsible for a massive illegal party financing system linked with the Elf-Aquitaine scandal? ‘Course you do. And further back, when he did precisely the same thing with German arms manufacturers?
But trust is an interesting concept. If you knew for a fact the people you dealt with were honest, you wouldn’t need to trust them. Trust and betrayal go together. High-trust societies are ones where people behave as if they could trust each other, and that choose to deal with the inevitable abuses of trust in certain ways. Low-trust societies are ones in which people behave as if they cannot trust each other, and especially, as if there was no realistic hope of sorting out abuses of trust later.
I actually wonder if the distinction is really about what happens after a breach of trust is discovered. J.K. Galbraith’s bezzle, the inventory of undiscovered embezzlement in an economy, is a universal phenomenon but the means of dealing with it differ dramatically. When an aeroplane crashes into the ground, in the UK or, say, the Netherlands, the first people on the scene after the fire brigade are the AAIB inspectors, whose mission is to establish the facts. In Italy, or Greece, the first people after the fire brigade are the police, come to arrest any of the crew who survived. The distinction is telling. If you can’t expect justice, and you can’t expect the truth, you might as well practice cynicism like you practice an instrument, as a skill or even an art.
In a sense, social trust is an ideology. We choose to believe that our neighbours are basically decent people in a civilised society, or that of course they’re all the same and all crooked, but wouldn’t you be if you had the chance, and so you better look after number one. And if it is an ideology, it is part of the political sphere and it can be changed. Now there’s something for you – hope. But I fucking hate hope and hope-mongers, so…ah.
One way of looking at Francois Hollande’s campaign for the “moralisation of politics” is an effort to do just that, to keep France from becoming even more of a low-trust society than it already is. Of course, whether France is a Latin country (stereotypes: Catholics, inflation, tourists, Picasso, bureaucracy, conspiracy politics) or a northern one (stereotypes: Vikings, Gothic buildings, electrical engineering, the Republic, international modernism, ENA) is a cliche up there with whether Britain is facing Europe or the high seas or whether Russia is in Europe. But perhaps there’s some truth to it. Is it…spreading?
Low-trust societies, I think, emerge when the norms imposed by the elite are both compulsory and also impossible, and especially when the elite doesn’t seem to practice them itself. You could put it another way: it’s Berlusconi’s Europe, and we’re just living in it.
Daddy, what did you do at the University?
From the department of cross-European otherness: some German politicians never finished their university degrees. Apparently, this is shocking. To the point where some of them worry about explaining it to their sons, and Green leader Claudia Roth gets hate mail for it.
That said, more than one confesses to having their staff regularly edit their Wikipedia entry to eliminate the stain. Now, that is shocking.
Start Making Sense
“You may find yourself living in a shotgun shack
You may find yourself in another part of the world
You may find yourself behind the wheel of a large automobile
You may find yourself in a beautiful house with a beautiful wife
You may ask yourself, well, how did I get here?” — From Once in a Lifetime by Talking Heads
Kenneth Rogoff and Carmen Reinhart (RR) in the latest exchange of fire with Paul Krugman — Continue reading
The Real Experiment That Is Being Carried Out In Japan
The future never resembles the past – as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act. – John Maynard Keynes
Discussions of the population problem have always had the capacity to stir up public sentiment much more than most other problems.
– Gunnar Myrdal
Last Thursday the yen broke through the psychological threshold of 100 to the US dollar. On Friday the slide continued (see chart), even dropping very close to 102 to the USD at one point before strengthening slightly on the run in to the G7 finance ministers meeting. Continue reading

