A political group obituary

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As nobody who hasn’t been living in a Faraday cage on Ellesmere Island for the past four days no longer knows, Dominique Strauss-Kahn, IMF managing director and probable next president of the French Republic, has been charged with attempted rape and has been remanded in custody of the New York police. I’m sure the AFOE Whole Control Inter-Macro Economic Soul Patrol will have some thoughts about the future leadership of the IMF in due course. For mine, I’m tempted to think that rudderless confusion is probably the least harmful condition for this organisation, but I know not every reader will agree.

Anyway. What about French politics? That’s bound to be more fun.

The most important fact here is that DSK was predicted by national polls to beat all the other candidates in the next presidential election. The Socialist leadership has been something between a soap opera and a French movie about self-torturing neurotic dread of action for years, but basically everybody expected that once he decided he was going to run, not only would he win the primary, but he’d also take out the general election. The facts are pretty simple – President Sarkozy has the worst poll rating of any French president ever. The extreme-right leader, Marine Le Pen, is doing better than ever. But DSK was both the top pick out of the Socialists, and also the polls’ pick for the big gig.

In fact, there was widespread speculation that the horrible experience of May, 2002 might be reversed. Rather than the extreme Left splitting the vote and leaving a run-off between the extreme Right and the Gaullist Right, the extreme Right would split the vote and leave a run-off between the extreme Right and the Socialists. This scenario was a little like a nuclear attack on Manchester destroying Old Trafford and Maine Road. A lot of people would think it a terrible disaster. But quite a lot of the people most concerned would have to mourn through gritted teeth to keep from laughing with pure schadenfreude.

Who was DSK? An academic economist and long-time Socialist, from a well-off family, one of those men who always seem to come up lucky. He was an effective minister of Finance, Economics, and Industry in the Jospin government, and he presided over possibly the first time the IMF ever thought wages should go up. I remember him wanting to know why the British let General Electric buy the division of Amersham International plc that at the time made practically all the world’s DNA sequencers. I still haven’t heard anyone answer that.

In French politics, he was very much parallel to his contemporary Peter Mandelson in Britain. Both ran economic ministries with some success, and did likewise as international civil servants. Both were considered dangerously foreign to their own parties for a mixture of reasons to do with ideology and with style – both liked the company of the rich and enjoyed good tailoring and better travel. They were certainly both well to the right of their parties, but it was DSK who was responsible for the 35 hours law in France, and the British Labour Party is now rediscovering how little it likes Conservative government in general. They were also both disliked for appearing clever, visibly enjoying cleverness, and repeatedly winning in micro-political squabbles with the journalists who hated them. As is the way with people who are genuinely clever and effective and look like they enjoy it, they were both hated and indispensable to the leaders of their respective movements.

It is probably worth pointing out that they are both Jewish and – much as everyone involved would deny it – this does look like a role grounded in stereotype.

Mandelson collected a lot of fairly horrible abuse from the cheaper end of the British press because (and again, everyone involved will now whine about this) he’s gay. DSK was regularly written up as a stereotypical French ladies’ man, a Latin lover for whom it was all both indivisible from his personality and from the sheer style of politics.

It seems, in the absence of a coup de theatre to blow the theatre roof off, that only one of these statements was true. Women are already turning up who claim that he raped them years ago – most shamefully, one of them was apparently told by her mother to shut up. Her mother is a relatively important official in the PS’s regional organisation for Paris, DSK’s power base throughout his career, and someone who could perhaps have expected favour if and when he was back in power. This week’s Canard Enchainé is likely to be an explosively sordid document.

It would seem that the whole story is the classic one of an abuser protected by his friends, family, and colleagues. The network would say nothing, and indeed would influence others to say nothing, until the day when he pushed his luck outside its zone of influence. At this point, it is usual for a whole lot of people to have sudden and wholly unexpected fits of principle. I would not be surprised if skeletons tumbled from many other French politicians’ cupboards in the next few weeks. If I sound pissed off, well, how many other people were convinced that he was a decent man?

So far, the party and specifically the Ile de France regional federation seems to be…well, check out the list. It is to be expected that a lot of the people named will rapidly forget that the whole thing is a plot against them because Sofitel is a French company. (Surely, had he stayed at the Hilton, that would have been even more suspicious?) I hear that this tone of denial is quite widespread among people who certainly ought to know better.

Upshot? It seems unlikely anyone will be more satisfied with Sarkozy as a result. In fact, only a revolution of opinion would be enough to help much. And Sarkozy’s personal style – all yachts and executive jets and watches and models – is rather like DSK’s. It will probably give Marine Le Pen a little more.

Inside the PS, expect yet more neurosis. DSK’s supporters skew to the right of the party, and he has a particular beef with Laurent Fabius (who in any case isn’t going to win). In the absence of other factors, they’d probably be spread roughly equally between Ségoléne Royal, François Hollande, and Martine Aubry. But there are other factors. Royal and Aubry have defined geographical power bases, Royal from being president of Poitou-Charentes, Aubry from being mayor of Lille. If you had to pick, you’d probably take the second for an intra-party fight. DSK’s support is localised in Paris – it was the only PS federation not to vote for Royal as candidate last time out. Hollande’s base is in the party organisation, from his years as first secretary and therefore chief organiser. It’s fair to say that a lot of his people are also based in the capital, so he might claim more of a bonus than anyone else. He has recently been enjoying an upward trend in the polls.

It is possible that this is an end of an era, or at least a significant moment in moral history. As I said above, I wouldn’t be at all surprised if there were more disgraces in short order, and that the general tolerance-level will have been reduced to a more defensible value.

Also, the style of French politics is changing. Mitterand is dead, Jacques Chirac is gone. Sarkozy is the least popular president on record. DSK, Laurent Fabius, Charles Pasqua, Simone Veil, Edith Cresson, Rachida Dati, a whole series of enormous and often enormously flawed personalities have left the scene in one way or another. Dominique de Villepin and Alain Juppé hang around, but will either make any impact?

The new style is understated and in fact quite dull. On the Right, there are people like François Fillon and Christine Lagarde – a gang of grey managers. On the Left, people like Hollande and Aubry – solid town hall politicians. Marine Le Pen’s unique selling point is that she makes fascism boring. Her party’s thuggish stewards have been ordered by party headquarters to dispense with their shiny boots and paramilitary trappings, and are said to be exploring British football-casual style for the future. So much the better for the Italian textile sector, so much the worse for Leicester. But perhaps dull is good. It’s worth remembering that dull is great news in the long term of European history. They said Clement Attlee was dull.

And now, for the IMF…

Greece: Last Exit To Nowhere?

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“Some economists, myself included, look at Europe’s woes and have the feeling that we’ve seen this movie before, a decade ago on another continent — specifically, in Argentina” – Paul Krugman: Can Europe Be Saved

“Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I’m sure it has no intention of doing that. But at this point it’s all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday — and at that point the logic of hanging on to the common currency come hell or high water becomes a lot less compelling.”
Paul Krugman – How Reversible Is The Euro?

Krugman is certainly right. Looking over towards Athens right now, you can’t help having that horrible feeling of deja vu. Adding to the uncomfortable feeling of travelling backwards rather than forwards in time (oh, I know, I know, when history repeats itself it only piles one tragedy onto another) is the uncomfortable presence of Charles Calomiris, a US economist of Greek origins. I can still remember reading, back then in the autumn of 2001, an article by the then Argentine Economy Minister Domingo Cavallo published in the Spanish newspaper El Pais which proudly proclaimed that everything was going well, and that the country’s reforms were being generally well received with the regretable exception of “a small number of neurotic US economists who continue to insist that we will default and break the peg”. He was, of course, referring to Calomiris, and at the time we were only a matter of weeks away from the dramatic moment when Adolfo Rodríguez Saá (the man who was President for a mere 8 days) would enter both history and the Argentine parliamentary chamber to utter the now immortal phrase “vamos a coger el torro por los cuernos” (we are going to take the bull by the horns). A phrase which was obviously belonged to the class of so called Austinian performatives, since at one and the same time as uttering it he effectively ended the peg. Well today Calomiris is again with us, and he is still hard at work going through the numbers, only this time round he is using his special insights to scrutinise his family homeland, for which he is prophesying not only eventual default, but also the generation of sufficient contagion to bring the whole Euro project itself to an untimely end. In an article in Foreign Affairs entitled “The End Of The Euro”, he tells us:

Europe is living in denial. Even after the economic crisis exposed the eurozone’s troubled future, its leaders are struggling to sustain the status quo. At this point, several European countries will likely be forced to abandon the euro within the next year or two….The only way out of this conundrum is for countries with insurmountable debt burdens to default on their euro-denominated debts and exit the eurozone so that they can finance their continuing fiscal deficits by printing their own currency. Here’s a hint for Europe’s politicians: If the math says one thing and the law says something different, it will be the law that ends up changing

Really, I don’t think of Calomiris as a prophet (or even as a Cassandra), I don’t even think of him as an especially insightful economist when it comes to the macro problems of the real economy, but I do think he has one exceptionally strong merit: he can do the math, and as he says, if it gets down to a battle between legal details and arithmetic, arithmetic will always win. Continue reading →

It’s Azerbaijan

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Winning Eurovision 2011. Apparently the AFOE crew was too sober to liveblog the festivities. In any event, one member of the collective has already observed, “That’ll put off any war over Nagorno-Karabakh for at least a year.”

Eurovision previously at the Fistful:

2009 Slightly depressing follow-up relevant to this year’s winners.
2008
2007 Bonus 2007
2006
2005
2004

Thoughts? Or is Eurovision simply beyond thought?

The Great Greek And Spanish GDP Mystery – One Hypothesis

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Many an economic eyebrow must have been raised last Friday when Europe’s first quarter GDP data was released, and people discovered that the Greek economy had suddenly surged forward, rising by 0.8% over the level it had attained in the last three months of 2010 (or at a 3.2% annual rate, or faster than the US). Since almost everyone with knowledge of the situation is forecasting a further contraction in the economy this year, the result may have been thought to be a surprising one. Continue reading →

Oh My

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Removed from a Paris-bound plane.

Dominique Strauss-Kahn, the head of the International Monetary Fund, was removed from a Paris-bound flight on Saturday afternoon minutes before takeoff after a New York City hotel housekeeper accused him of sexual assault, the police said. …

Strauss-Kahn was being questioned after a 32-year-old chambermaid complained that a naked Strauss-Kahn sexually attacked her in his Manhattan hotel room, the police said. The maid, who said she broke free, suffered minor injuries, police said.

The NYPD expects to bring formal charges Sunday morning, New York time.

On being partisan, while unsure of your own party

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The all-you-can-eat reasons buffet is open at the Telegraph. Charles Moore says that tuition fees are unfair on students in general:

The poll tax went wrong because it came in, for many, at punitively high rates, with more losers than gainers. You got the bill long before you got the benefit of better-run councils. Tuition fees may incur the same problem. The loss is certain, the gain uncertain. From the autumn of 2012, the fees will almost triple to £9,000 per year, a sum that less than 10 per cent of the population (and virtually no students) could pay out of post-tax income. So most students will incur debts amounting to more than £30,000.

While also being unfair to those students who happen to have wealthy parents:

If you are a citizen of Bahrain or Brunei or Brazil, you can get your child into a pretty decent British university without his or her grades getting more than a cursory glance, because you will be paying the full fees, for which that university is desperate. That option is not open to British students – an anomaly which Mr Willetts was trying to address with his “gaffe” this week.

In conclusion, a one-two combo of special pleading and mincing:

The Conservative part of the Coalition has made a point of not sucking up to those who Mrs Thatcher used to call “our people”. That may be acceptable as part of the “we’re all in this together” theme of recession. But once “our people” start to feel positively persecuted, they will take their electoral revenge. You cannot build the Big Society – let alone a Tory election victory – by disrespecting the leading 15 per cent of its citizens.

A third of whom can’t afford the £9,000 p.a. tuition fees out of their post-tax income. You also have to ask: what’s the mechanism of this ‘electoral revenge’, exactly? Voting Lib Dem? Voting for UKIP? Labour? Is he still the editor?

Is There Really Such A Thing As A Eurozone Credit Cycle?

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America, we know, has a currency union that works, and we know why it works: because it coincides with a nation — a nation with a big central government, a common language and a shared culture. Europe has none of these things, which from the beginning made the prospects of a single currency dubious.
Paul Krugman – Can Europe Be Saved?

All theory depends on assumptions which are not quite true. That is what makes it theory. The art of successful theorizing is to make the inevitable simplifying assumptions in such a way that the final results are not very sensitive.’ A “crucial” assumption is one on which the conclusions do depend sensitively, and it is important that crucial assumptions be reasonably realistic. When the results of a theory seem to flow specifically from a special crucial assumption, then if the assumption is dubious, the results are suspect.
Robert Solow, A Contribution To the Theory of Economic Growth, 1956

One of the key premises underpinning the establishment of the Euro as a common currency to be shared by a number of individual national states rather than one single nation was the central idea that the several economies of the participating countries would eventually converge to one common typology. That is to say, even if the individual nations would not be dissolved into one single superstate, then the idea was that the difficulty this could obviously create would be overcome by the generation of a number of different, but to all-important-economic-effects identical economies, each one a replica (in minature or “a lo grande”) of the other. Absent this, it is hard to see how people could have convinced themselves that having a single currency and a single monetary policy could possibly work in the longer term. Continue reading →

Premature Evaluation: Yalta by S.M. Plokhy

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Did FDR give away too much at Yalta? Was Churchill sketching out percentages of influence in Eastern and Southeastern Europe with Stalin? How far did Stalin’s plans for annexations run? And was the Cold War inevitable?

In Yalta: The Price of Peace, S.M. Plokhy goes to the literature and the archives with these questions, and so far (I’m not quite halfway through) comes back with good arguments and answers. His most helpful point, to my mind, is to relocate Yalta as a wartime conference. He accompanies the negotiations and their background with details of which armies were where at what times. While victory in Europe looked certain for the Allies if they held together, it was by no means certain whose forces would reach key areas first, and it was even possible that the Grand Alliance would break before war’s end. It certainly would not have been the first time in European history that a coalition had foundered on the shores of victory.

Two quotations that bear on the overall argument:

Stalin’s words [in a discussion about creating the United Nations] were a reminder that the peace being negotiated at Yalta was not one between the Allies and the Axis but between the victors themselves. (p. 126)

On January 16, 1943, Moscow informed the Polish government in exile that it had decided to revoke a provision of their treaty recognizing the Polish citizenship of ethnic Poles who found themselves on Soviet territory after September 1939 [i.e., after the USSR had invaded the eastern parts of interwar Poland, in accordance with the secret protocols of the Molotov-Ribbentrop pact]. From now on they would be treated as Soviet citizens. (p. 159)

British leaders, having gone to war against Germany over Poland found it difficult to leave that country in Stalin’s sphere of influence without protest. Stalin, having seen Russia and the USSR invaded twice via Polish territory saw a friendly Polish government (for Stalinist values of “friendly”) as a necessity. Besides, the Red Army was in Warsaw, and the London Poles were in, well, London.

I’ll be interested to find out how much post-war conflict Plokhy sees as inevitable, given such deep divisions among the Allies on matters of both principle and practice. On the other hand, both East and West made compromises at Yalta, so maybe he will argue in favor of more contingency than is usually credited.

The research is solid, the prose is brisk, the details colorful and the argument clear. Good stuff.

Japan’s Economy Struggles For Air

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With the arrival of the first real Japanese data since the Tsunami struck the immensity of the tragedy which Japan is passing through is only now gradually becoming apparent. Exports were down by a seasonally adjusted 7.7% in March over February, while imports were only fell by a much more modest 1.4%, with the inevitable consequence that the trade surplus which forms the lifeline for Japan’s fragile economy shrank sharply. In particular car production was badly hit, with output at Toyota plunging 62.7% during the month, while Nissan reported a drop of 52.4% and Honda put the shrinkage in its Japanese domestic production at 62.9% adding that output would be at 50 percent of its former projections until at least the end of June. Continue reading →