Monday, 26 January 2015

Charybdis and Scylla

Alone among the PIIGS (Portugal, Ireland, Italy, Greece, Spain), Greece was running a massive structural deficit before the crisis. Ireland and Spain in particular were torpedoed by the financial crisis, despite running prudent fiscal surpluses in 2007, which was the only bubble-cooling option available to their governments in the absence of monetary levers. The Irish and Spanish were not partying on Germany's tick, but were instead trying to manage the structural flaws in the Euro. The Greeks on the other hand were using Germany's credit card to pay the settlement of their civil war.


Since the 2008 crisis, the Greek right has, inflicted enormous pain on the population, removing graft and non-jobs which had become a birthright for many, and tried to deal with the widespread tax-evasion (evasion probably isn't strong enough. Many Greeks simply ignored the need to pay much in the way of taxes). Tax rises (for that is what making people accustomed to not paying cough up is) and cutting spending (for that is what dealing with graft and non-jobs is) represents a fundamental re-structuring of the Greek economy, which is now 25% smaller than it was before the crisis. This is beyond depression, and looks more like an economy emerging from a major war.

However, on its own terms, Greece's austerity has worked. The population now has a GDP per capita more appropriate to their actual productivity, and the country is running a primary (ie before debt service) surplus. More taxes are paid, and public sector jobs mostly exist and require their holders to turn up. This is an appropriate time to default as the smoke can clear before the country needs to tap the bond-markets again. The Greek right will take the opprobrium for the pain of the last few years, the left the plaudits for the recovery. Ain't it ever thus?

Germany, for its part, will have to wave goodbye to the money it lent Greece, and muse on the fact that it has the European empire the desire for which has burned in the Teutonic heart since the country was unified under the Hohenzollerns, and that means it must sometimes pay others' bills. Think of it as payback for living under the US security guarantee, which costs American taxpayers 4% of GDP, when Germany spends 1%. With power, comes responsibility.  

Greece should default. Germany should pay. Greece cannot default unilaterally, as they lack the resources to stand behind their banks, so they need Troika co-operation to do so. There's ultimately no need for Greece to leave the Euro, even though this would probably be better in the long-run for everyone; this would allow the Greeks to default, devalue and move on. However there is no political will for this amongst the players that matter (Greece and Germany), however much British anti-EU types yearn for it. Grexit won't happen. The default and devaluation would probably mean another 2 years of economic uncertainty, and Greek society may not be able to cope without descending into violence, and it's probably not worth that risk.

Syriza will not be able to deliver promised spending increases, though the austerity is probably going to be a lot less severe from now on. This is going to leave a lot of people very disappointed. The non-jobs, the state pensions paid for life to siblings, the fictional tax returns Greeks used to enjoy are not coming back. The only certainty is whatever happens, Alexis Tsipras is going to get a very sharp lesson in economic reality and power politics when he sits down in front of Frau Merkel.

Muddling through with a Grumpy German taxpayer picking up the bill for a Battered Greek economy, leaving the fundamental structural flaws of the Euro in place is probably the least bad solution all round.



Friday, 2 January 2015

Politicians with their own views, whatever next?

The normally excellent Tim Worstall (who is a UKIP supporter, see comments) succumbs here to one of his party's central idiocies: That it is the job of the politician to reflect the views of the electorate.

I’m pretty sure, in this democracy thing, that a political leader is supposed to reflect the desires of the electorate, not mold them.
This is, for example why Douglas 'Judas' Carswell voted against gay marriage, despite being personally in favour. I am not accusing UKIP here of hypocrisy, just being wrong.

Running a country is complicated. The control levers available to Government are only loosely connected to the machine of Government. Much of the day to day control is in the hands of a cadre of long-term civil servants, whose job is to implement policy and who act as dampers on any control input. I think of it like a rowing galley, where the tips of the oars are hidden from the captain's view. He's trying to steer the galley by guessing the movement through the soles of his feet. Some of the the galley's rowers can't be bothered, and many of the rest, don't want to go where it's going, and so pull in the direction of where they want to go anyway, and the other half who are pulling in the direction the captain wants to go, aren't much good. Ultimately the captain can barely see what difference his changes to the beat of the drum and nudges to the tiller make (especially as everyone's free to choose their own tom-tom drum, and progress through the water is barely steering-way) until long after he's been ousted by mutiny.

I like this metaphor, because the command economy, where the rowers are chained and incentiveised with whips, go much faster through the water to some direction chosen by the management, but the Captain still can't see to the tips of the oars, and they inevitably hit the rocks.

Sometimes the people on the watch-tower (think-tankers, philosophers, policy analysts, economists) see a looming shape in the fog off the prow of the galley. They shout to the captain who's only just in earshot. If he's lucky, the captain can, with almighty heaves of the tiller and a bit of cajoling of the rowers down below (those who can be persuaded to agree with him anyway) avoid the rocks (Thatcher) Sometimes not (Blair).

This metaphor can be extended indefinitely.

Politicians are the people to whom we outsource political economy. This is every bit as sophisticated, with arcane knowledge as being a Gas engineer or Lawyer. And when a Gas Engineer starts looking at political economy, he's staring at a fog of unknown-unknowns at least as complete as were Ed Miliband to have a go at servicing his own boiler. The difference is Ed Miliband KNOWS he doesn't know what he's doing. But EVERYONE thinks they've got the political answers. Everyone thinks their politics are "common sense".  But if you don't know what's been tried, you're going to come up with some 'common sense' which is already proven wrong. Rent control, for example which is the great, unflushable turd of political ideas, or Free Parking.

There is a particularly UKIPish line of thinking which runs thus:

  1. I am reasonable
  2. Therefore my views are shared by reasonable people
  3. Everyone I know thinks [x]
  4. Therefore everyone who doesn't think [x] is by definition, not reasonable
  5. A not reasonable belief can only be held for malign reasons
  6. Therefore the Government fails to agree with me because of conspiracy or incompetence.
Go on. Go to a pub in London, and ask the punters whether rents should be controlled or whether parking should be free. Then go and find an economist who agrees. 

Of course 
  1. Everyone think's they're reasonable, but not everyone's got the same information to be reasonable about. Even twins disagree on stuff.
  2. People seek out like-minded souls and avoid controversial subjects such as politics with people who's views you don't already know. Tories particularly sociable around the "sound".
  3. This is called selection bias.
  4. This is an incorrect but common logical inference (the mistake, if you will in this chain of reasoning)
  5. Attribution of motive is pure projection, and particularly common on amongst the stupid, particularly by Labourites, who cannot grasp the more subtle cause and effect of  'right wing' economics, and by UKIPpers who cannot grasp the right end of a shit-stick, let alone a political argument.
  6. This is the crowning idiocy of UKIP the sheer lack of belief that a reasonable person might not be in a frothing frenzy about EU fish quotas or the Bulgarian who moved in next door. The belief that policy is run for "their mates in big business" or the despicable EU cabal.
But there is no British Political Elite. It's true the sons of politicians find it easier through name-recognition and nepotism to get a foot in the door, but they also have the benefits of experience gained through osmosis in how the controls to the galley work. This is why people from all walks of life often end up doing what their parents did. But if you really, really want to be Prime Minister, you need the talent, luck, charm, skill and so forth, and you go for it. No-one will stop you. It's easier for sure, if you read PPE at Oxford, but there are plenty of MPs who didn't.

If there was a British Political establishment, you'd expect to see it represented at the top.

David Cameron's dad wasn't an MP he was a stockbroker. Neither was Gordon Brown's who was a minister of religion. Nor, for that matter Tony Blair's who cavorted in fire with little horns on his head, a black cape and goat's feet (Leo Blair was an actor - but he may have been cuckolded by Belezebub). Or John Major's who was also on the stage. Margaret Thatcher's dad was a Grantham shop-keeper. Jim Callaghan's dad, also Called Jim, was a Chief Petty Officer in the Royal Navy. All of these people entered politics, not because they wanted to join a self-serving elite (anyone think someone like Cameron would settle for a measly £142,500 a year in any other job?) but because they thought they could do it, it interested them, they got the skills and qualifications and they took their chances. They sought a safe-seat. Then they waited for an opportunity, building a reputation, getting to know the means to climb the greasy pole, until there was a leadership election in their party. Then they went for it. Then we voted for them by the million.

That's not to say everything's perfect. I even agree with your average UKIPper on many individual issues. But the job of the Politician is to apply his judgement, experience and knowledge of his electorate, to try to be a man FOR them in the job, even if he doesn't always do what a simple majority of the noisiest ones want. Representative democracy isn't a tribal headcount, and it is not majoritarian tyranny. It's at least as much about what the majority can't do to a minority as it is reflecting 50%+1's views. 

Worse: there was no local referendum that say Carswell vote against equal marriage rights for homosexuals, but rather by his own admission, a look the contents of his letter bag, from a collection of angry, poorly educated bigots living in his god-forsaken, depressing retirement home at the end of the line, and who've now gone over to UKIP with him. The people who write letters are not the cheerful, sound fellows you sometimes meet down the pub, but the sour and bitter old bags who complain about the noise. 

Is that who you want running your country, or do you want to have people who've at least tried to work out cause and effect before they pull on that tiller?



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