The horizon is not so far as we can see, but as far as we can imagine

Month: February 2015 Page 1 of 3

The future

Reasonable accommodations of people’s needs will be made. If they are not, unreasonable ones will be.

Those who cannot understand that will have blood on their hands along with those who decide they have had enough.

Too many have spent too long with generations raised in affluence, scared of losing what they have. They do not understand the lessons of history. And so they will reap what they have sown, though some will be lucky enough to die first.

Their children will see what they have wrought and pay the price of their greed, stupidity and selfishness.

If we will not make an honest attempt at societies which work for all, this future will arise.

Take this as prophecy. And if you are wise, understand that it is prophecy that those who created the social welfare states after WWII were trying to avert.

The Problem with Basic Income

Basic income—just giving everyone a certain amount of money, is an idea with a lot to recommend it.  In any society which isn’t willing to just let people suffer or die because they don’t have money, there is a “social welfare net” with a vast bureaucracy.  Why not just give everyone enough money to live on, and wipe out most of that bureaucracy?  If you’re going to give poor people money anyway, it’s more efficient, and vastly less humiliating.

There’s a great deal of controversy around the idea of technological unemployment (economists sneeringly dismiss the idea on aggregate as the “lump of labor” fallacy), but even if you don’t believe in it en-gross, changing technology does cause specific people, often large numbers of them, to lose their jobs, and many of them never work again, or if they do, work at terrible jobs.  A basic income deals with this issue, at least somewhat, and, again, far more efficiently than welfare and unemployment insurance and so on.  And if you believe that there will be widespread technological improvement as AI and robotics improve, this will mitigate against it.

In a demand based society; a consumer society, where the economy is based on large numbers of people buying things, a basic income makes sense.  People with no (or too little) money, don’t spend it (obviously) and that’s bad for the economy.  Every dollar you give a poor person gets spent; it immediately goes to someone else, and that means that even those who are well off have reason to be for a basic income: most of it is going to wind up in their hands, and if it doesn’t (because you have a basic income which goes to everyone, not just those below a certain income), well, they still get theirs.

One might point out that we’re moving away from a demand based society, however, at least in the West. More than all the productivity gains of the last business cycle in the US, for example, have gone to the top 10% (really the top 3%).  Consumer inflation is flat, and in many countries verging on deflation, while the goods that the rich buy (investment art, Manhattan and London real-estate) are booming.  Moving away from a broad-based demand society, such as we had in the post-war liberal era was mainly done because it benefited the rich, but it also solved another problem—increased demand fed into oil and other commodity prices, and as the 70s  and early 80s showed, that lead to huge inflation and economic dislocation.

So basic income, at any level that would be equivalent to a living wage (aka. letting people live a decent life, not just barely scrape by), can be expected to spike inflation in various commodities, including oil.  This is a problem, but it’s not a huge problem, because we finally have the technology which allows us to move off oil (not completely, but enough to mitigate the effect of demand increases), and because, hey, we’re flirting with deflation anyway.

The real problem with basic income has to do with who controls our economy—with the fact that we are sold what we need, by and large, by oligopolies.  A few large companies control most industries, and effectively price set.  (Broadband profits in the US are almost 100% a year.)

This is known as pricing power. When someone needs what you sell more than you need to sell it to them; when they have little choice but to pay what you ask, you can demand a premium.  If something is scarce, either naturally or artificially, those who control it get more of the share of national income than otherwise.  In a society whose economy is not controlled by oligopolies this is usually a good thing—prices go up, more people enter the industry, prices drop.  That’s the what the economics textbooks tell you happens.  But it doesn’t happen in an oligopolistic economy where the oligopolists control government and where barriers to entry are very high.

So those who are in an oligopolistic situation, whether telecom companies, health insurers, pharmaceutical companies or landlords, are generally able to set prices: you must have medicine, you must have shelter, and in a modern economy, try and get by without a phone and internet.

What this means is that increases in income, especially at the lower end, tend to be simply taken away by those who have what you must have.  Everyone will know what the basic income is, and they will know who is surviving on just that, or just that plus a low-wage job.  And they will raise prices so that money goes to them.

Basic income which does include either oligopoly busting or regulation (or having the government, oh, just provide broadband and/or housing itself) will help many people, to be sure.  But in a not very long time, most of the gains will be eaten by those who have pricing power.

This, by the way, is far from a “socialist” theory. This comes out of bog-standard neo-classical economics.  Non-competitive markets tend towards concentration of wealth, and those who have pricing power use it (they act in their own self-interest, precisely as economics says they will.)  Markets are wonderful things. They are extremely efficient at allocating money.  And they will do exactly what they are set up to do.  In an oligopoly situation, with capture of government, they will allocate that money very quickly to the oligopolists.

So if you want basic income to work, you must also make capitalism work. You must create actual competitive markets, you must-trust bust, you must regulate and you must move, as government, to ensure that the important things people will spend that basic income on are not scarce—either naturally or artificially.

This extends far beyond basic income.  A market economy; a capitalist economy, works to the benefit of the majority only when it is competitive and when scarcities are actively managed, ideally to remove them, and when they can’t be removed, to ensure that those who provide scare necessities, do not reap outsize profits which allow them to buy up the rest of the system, including government and civic society.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Do Tsipras and Syriza want to resist Austerity?

By Mark From Ireland (Elevated from the comments)

(In response to my article on whether Syriza got owned, Mark writes):

Did Syriza get owned?

Yes and No. Syriza is a coalition between a variety of factions ranging from PASOK lookalikes to people with genuinely socialist principles. I’ll be interested to see how Alekos Flambouraris for example will react, will he help “sell” this within the Syriza coalition?

If the currently dominant faction (who have always wanted to work within the Euro framework and are very pro-EU) are to succeed in getting Syriza to accept this capitulation they’re going to have to override internal resistance. From whom? My guess would be that the resistance will centre around Panagiotis Lafazanis and the “Left Current/Left platform” grouping. The “Left Current/Left platform” are, I believe, fairly well organised and they do have a consistent critique not only the current state of affairs but also of capitalism per se. Lafazanis and his comrades can truthfully say that in attacking the capitulation to the troika that they are merely defending the platform upon which Syriza stood and that anybody who wants to vary or overturn that platform has to provide cogent and compelling reasons as to why. But the problem that Lafazanis and his comrades face is both one of policy and of internal organisational strenght. Principles are all very well but if you don’t control the party structure you’re going to lose every time. I said above that they’re “fairly well organised” but are they as well organised as Tsipras and his supporters?

Tsipras’ opponents to the left face a very real problem and one which reminds me in a way of the problem faced by the British Labour left when confronted with Tony Blair. Like Blair Tsipras has a substantial personal mandate and like Blair he’s got a record of going over the heads of his critics to party congress (he’s already successfully done this over candidate lists) and also like Blair he’s got a record of successfully campaigning alone – of very pointedly not campaigning alongside the left-wingers. Just like Blair he can say that Syriza’s victory is a personal victory brought about by him. (He’s also tried Blair’s strategy of giving difficult posts to left-wingers* how that will work out is something that will tell us a lot. Blair successfully marginalised his internal opposition using it whether Tsipras can do the same I just don’t know as the Blair/Tsipras analogy can only go so far).

So the question in a way isn’t so much one of whether or not Syriza got owned as one of whether Syriza is a coherent and viable movement without Tsipras and his followers. I have my doubts.

I hope that Greece manages to resist but I doubt they’ll resist if Tsipras remains at the helm as he never wanted to resist in the first place.

*What for purposes of shorthand I’ll call the Bennite and Militant tendencies

Did Syriza get owned?

The details of the Syriza request to the Troika are here, for those who want to read the actual list. The public statement is here.

The best analysis I’ve read of the deal, as compared to Syriza promises, is by Stathis Kouvelakis, in the Jacobin Magazine.

Kouvelakis makes the case, convincingly to me, that Syriza caved, and got virtually nothing of what it wanted.  Here is a summary of what Syriza wanted:

Not consenting to any supervisory or assessment procedures, it requested a four-month transitional “bridge program,” without austerity measures, to secure liquidity and implement at least part of its program within balanced budgets. It also asked that lenders recognize the non-viability of the debt and the need for an immediate new round of across-the-board negotiations.

But the final agreement amounts to a point-by-point rejection of all these demands.


In the Eurogroup’s Friday statement, the existing program is referred to as an “arrangement,” but this changes absolutely nothing essential. The “extension” that the Greek side is now requesting (under the “Master Financial Assistance Facility Agreement”) is to be enacted “in the framework of the existing arrangement” and aims at “successful completion of the review on the basis of the conditions in the current arrangement.”

Kouvelakis goes through the agreement point by point, and backs up his argument.  You should read the entire piece.  More important than proving the obvious (that Syriza got virtually nothing) is why.

The question that emerges, of course, is how we landed in this quandary. How is it possible that, only a few weeks after the historic result of January 25, we have this countermanding of the popular mandate for the overthrow of the memorandum?

The answer is simple: what collapsed in the last two weeks is a specific strategic option that has underlaid the entire approach of SYRIZA, particularly after 2012: the strategy that excluded “unilateral moves” such as suspension of payments…

Kouvelakis calls part of this the “good euro” strategy—the supposition that anyone in power in the Euro area wanted Syriza and Greece to get real debt relief and exist austerity.  This, as I have argued in the past, is delusion:

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.

Unilateral is the key word.  Greece cannot depend on any other nation in Europe to look after its interests, let alone Germany (the very idea that the German government cares one whit how much Greeks suffer is so laughable as to move beyond fantasy into insanity).

Greece must do what it can it unilaterally.  This doesn’t mean no negotiation, but that negotiation will not be with Europe or Germany or the ECB, it will be with other countries who need what Greece has to offer enough to make a deal.

Read the Jacobin article.  And understand what just happened, because as Kouvelakis notes the only thing worse than defeat is pretending it was victory.

None of this means that victory is not still possible.  But it is only possible if Syriza spends the next few months planning moves which do not require Europe’s approval.

I genuinely hope they do.  The sooner they do, the sooner Greeks will be better off (though yes, the transition will be painful), and the sooner the current European and World system, which is causing so much unnecessary suffering, will end.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Ukraine and the perils of lack of commitment

The Ukrainian government has essentially admitted that their military is defeated.  The separatists (with Russian backing) are in the ascendent.  NATO countries are being mealy-mouthed about whether or not to send arms.  For now, Putin and Russia appear to have won, and any deal will have to be on their terms.

The protests which caused the crisis by engendering a coup were heavily backed by America, and to a lesser extent by the Europeans (much lesser, Europe was aware of the potential for disaster.)

America spent decades trying to get the Ukraine into the Western, NATO orbit, as a way of making sure that Russia could never rise as a European power again.

Then, having finally gotten a government which would do what it wanted, they blinked (or one hopes they have.)

Why?  Because the Ukraine is far more important to Russia than it is to the West.  They were right: Russia can’t afford to have Ukraine fall into Western hands, let alone join NATO.  Leaving aside the “empire” issue, it would put troops far too close to Moscow.

So Russia gave the separatists the necessary aid to win and America did not give the government the aid it needed.

Hung out to dry.

The game is not over, however.  In particular the results of the coming presidential election in America will matter a great deal.  Hilary Clinton is even more of a hawk than Obama, and has repeatedly insulted Putin.  She is much older than Obama and she grew up in the Cold War.  She seems to genuinely fear the rebirth of a modern version of the USSR or the Russian Empire, and she’s been playing a hawk for so long that I believe she now really is one.

Many of the potential Republican candidates are little better.

I don’t regard this is as necessarily a good thing, both because Russia is unlikely to blink, and because the antagonists are nuclear armed.

But there is a window to make a deal: Ukraine not in NATO, and federalized, with some sort of economic arrangement which acknowledges its dependence on Russia.  Ukraine’s window for this is closing not just because of the possibility of American intervention (which might be in the interests of the government, but is unlikely to be good for the actual population: war on your own soil rarely is), but because Russia is moving to reduce its dependence on pipelines thru the Ukraine to Europe.  Once they no longer need Ukrainian pass-through, they can simply shut the pipelines off.

Ukrainian winters are very cold.  Very.  And much of their industry needs those hydrocarbons.  Getting them from anyone but Russia will be much more expensive, and will come at the cost of massive IMF austerity and foreign buyouts of everything the Ukraine has worth owning.

Let us hope a deal is made, for everyone’s sake.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.


Syriza and Greece Seem to Have Been Owned

So, the Greeks have an understanding for an extension of the loan agreement.  On Monday they have to present the “reforms” they will be undertaking in exchange for it.

I don’t know what those reforms will be, but I know that the agreement still gives the Troika (now called “institutions”) veto power over Greek policy.  The key text in the mealy-mouthed statement is this one:

The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

The Greeks also promised to pay back everything.

Yeah, Tsipras may be attempting to portray this as a victory, but it’s not.

The bottom line here is that Syriza weren’t really willing to default or Grexit.  One can note that they campaigned on ending austerity, but staying in the Euro.

That was always problematic: yes, that’s what many Greeks want, so it was a political winner, but if they were serious (and it appears they were) it left them without the ability to actually negotiate a better deal.

Much has been made of the fact that Greek Finance Minister Varoufkis is an academic specialist in game theory.  In the the early days he seemed serious about being willing to default.  It appears he wasn’t, it was a bluff.

I’m not an expert on game theory, but I do know something about it, and about negotiation and I’ll tell you this, for threats to work they must be credible, and to be credible you must be willing to actually go through with them.  Faking is never as good as sincerity.  Having campaigned on “have your cake and eat it too”, Syriza was in a bad position to negotiate with Europe.

I had hoped they were negotiating to show the Greeks that no good deal was possible, then would be willing to say to Greeks “only default and Grexit is viable.”  So far, it appears not.

It’s worth noting that reports are that Southern politicians in places like Portugal, Spain and Italy were pushing for no debt forgiveness.  For their own political futures, they need to be able to say “there was no alternative”.  But, of course, debt forgiveness would be good for all of those countries, meaning politicians pushing against it for Greece (setting a precedent allowing it for them) are acting  against the best interests of their own countries.  There is a word for such people, and it starts with “T”.

The Greek Communist party refused to join with Syriza in a coalition government because they expected this to happen, they have been proved correct.  If Syriza does not get a very good deal, or spend the next few months making the case to Greeks for default; in other words, if they don’t turn this around, then they will have their one term and the Greeks will turn to someone else.  Golden Dawn, the fascist party, came in third, but Syriza voters, being left-wing, might prefer the Communist party.  We will see.  Syriza, after all, is not very left wing at all.

It should be noted that we don’t know what threats were made behind closed doors. My guess is that they were very harsh: Greece cannot feed itself, it cannot fuel itself, it has very little to offer in exchange for the foreign currency it requires to buy what it needs.  A default and a Grexit where the Troika and other European countries were not trying to punish it could be managed.  But one where they did seek to punish it would be difficult.  Syriza may not have properly gamed out how to survive in that scenario, and may have been surprised by how punitive the Troika intended to be in the case of default and Grexit.

If so, that is political incompetence (and game theory incompetence).  One should always know what one’s best alternative to a negotiated settlement is.

I’ve written in the past how Greece could handle such a scenario.  (Here and here.)  It’s not an insoluble problem, but it does require being willing to backhand Europe as hard as they have backhanded Greece and then to get even nastier.  Greece has a lot to offer Russia, for example, and Russia can take care of Greece’s fuel needs easily in exchange for Greek bases and so on, which essentially cost Greece nothing.

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.  Until they are willing to take the losses that Grexit and default will impose, things will continue to get worse.  (Being genuinely willing to take those losses is also the only way they might be avoided.)

I note also that sheer idiotic incompetence of Syriza in not putting in place currency controls to prevent capital flight during the negotiation period.  This is virtually an own-goal it is so stupid, and should bring into question just how smart Varoufkis is (or Tsipras, if he over-ruled Varoufkis.)

I wish the Greeks the best. But as with all those who have been horribly damaged by neo-liberalism and austerity, they need to get through their heads that those in charge of the policy have no fellow feeling for them; that people like Merkel, Shauble and the Germans who support them are enemies, not friends, let alone family members in some big European family which cares about all Europeans.

This is economic war, with the casualties that implies.  The Germans and the ECB are treating it as such; the collaborators in Italy, Portugal and Spain are treating it as such. Until ordinary people, and the representatives they put their faith in start treating it as such, they will continue to lose.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Why We Should Want the Return of a Two World System

Before the collapse of the Soviet Union, there was a two-world system. If you didn’t like the deal that US was offering you, you could go the USSR.  If you didn’t like the deal Russia was offering you could go to the US.

While the US probably offered a better deal, especially in later years, you could have a pretty decent life as a client state to the Soviets.  Cuba under Castro had a higher standard of living in practically every way than it did pre-Castro, when it was an American client state.

Equally, you could play the two off against each other, looking for the best deal.  This made it harder for them to screw you over.

As the USSR weakened, the deals became worse.  The USSR of the 80s could not offer what the USSR of 50s could.  Still, the ability to tell the superpower of your choice, who feared and hated the other superpower, that they had to treat you at least slightly right had benefits.

I certainly don’t want to romanticize the cold-war period.  There were ugly coups, torture regimes and wars.  There was famine.  But while we have less of that today, we don’t have less of it because of the end of the cold war.  Indeed, we have more failed states than we did during the cold war, because it is in no one’s particular interest to pick them up.

So one of the events that I have been tracking since the early 2000’s (as has Stirling) is when a viable second bloc would emerge.

To be viable, a bloc must be able to:

  • Provide relatively high technology;
  • Provide development: power, roads, railways, etc;
  • Provide the consumer goods people want;
  • Provide credit;
  • Feed countries which need food;
  • Provide energy (which still means oil and other hydrocarbons, though that’s changing);
  • Provide some sort of credible military aid or umbrella.

Yesterday I wrote about Russia creating its own bank payments system to compete with the West’s SWIFT. This is important, because since the fall of the USSR, the West (or more accurately, America) has increasingly used this to punish those nations it does not like.  Piss off Washington and they will shut down your ability engage with global credit markets, and even the ability of your citizens to use credit cards.  Pretty soon you can’t buy what you want, even if you have the money, or you pay a huge premium.

So the creation of a Russian SWIFT, while woefully inadequate by itself, was a first step towards meeting one of the needs of a new bloc with rivals the West.

The linchpin nation in any new bloc would be China.  China can credibly provide development, credit and consumer goods (they make much of them anyway.)  But China will also need countries which can supply oil and raw materials: Russia, Venezuela, Iran,  Argentina, and so on.  Much of South America would rather sell food and raw materials to China (or Russia, or whoever) than to the US, because they remember, well, not being treated very well by America during and after the Cold War.

Russia’s military technology, while not as good as America’s, is good enough for most purposes, and China, as is usually the case, has vast amounts of shipbuilding capacity for those who want a navy.  America’s space program is charging forward (mostly privately) but Russia still has plenty of lift capacity for satellites, and China is working hard on its space program.

The BRICS have created their own development bank, as well, so combined with an expansion of the new SWIFT, credit which can be used to buy almost anything you want, or need, will be available.

This, my friends, is the configuration in which the unipolar moment (which has lasted two and a half decades so far) ends.

It was always going to end, for all things do, the question was how soon.  American actions have accelerated what should have taken a couple decades more, significantly, by marginalizing too many countries.  Marginalizing or destroying the occasional country was acceptable, but the number marginalized is just too high, and they have too many resources.  Combined with a great manufacturing nation, they have essentially everything they need: they don’t need the West.

And they may be wondering why they are paying intellectual property taxes (that’s what they are) and interest fees to the West, when the West clearly isn’t acting in their interest.  Why have America and Britain gain all this, when they can reap the money themselves.

Oh, there are still some areas where the West is clearly ahead, from turbines to aerospace.  But they tighten by the year, and they aren’t anything necessary any more. Virtually everything you want, save a few luxury items, you can get without America or Europe being involved.

The question now, then, is the timing and the exact events.  But the broad outline is visible and will accelerate, because it is in too many countries self-interest.

The Great Game, the Great Game never ends.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Russia Creates Its Own Payment System

This is important:

Almost 91 domestic credit institutions have been incorporated into the new Russian financial system, the analogous of SWIFT, an international banking network.

The new service, will allow Russian banks to communicate seamlessly through the Central Bank of Russia. It should be noted that Russia’s Central Bank initiated the development of the country’s own messaging system in response to repeated threats voiced by Moscow’s Western partners to disconnect Russia from SWIFT.

Much of the West’s power comes from our financial hegemony. Our ability to cut people off from loans, payments and so on.  Since this new system is Russian only, it isn’t, right now, that big a deal.

But start connecting other countries to it, say China, Iran, India and so on, and it becomes a way of breaking financial blockades.  Include some calculable financial law (less of a challenge than it used to be as New York and London courts make increasingly punitive decisions), and start lending in Yuan (with which one can buy much of what one needs in the world, since the Chinese make so much of it), and you have a fully credible financial system.

The key is to get one major manufacturing country in.  Most of the nations the West is punishing these days, financially, are oilarchies ( Venezuela, Iran, Argentina).  They need the ability to buy manufactured goods.  The obvious country is China.  If China agrees to go in, Western financial hegemony is broken.  Japan could work; India could almost work, and Japan or India have a lot more to gain from it than it might seem (as we watch the Japanese economy implode.)

Even before then there are deals which can be cut.  Say Greece wants to buy Russian oil.  Russia can lend them Rubles, the use those rubles to buy Russian oil, in exchange Russia gets use of Greek ships and ports and access to the EU.

This is, then, in one sense, not a big deal.  As long as its only Russia, it’s a defensive move of somewhat limited utility.

But if it expands beyond Russia, well then, it’s earth-shaking.

Get out the popcorn and watch it develop.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Page 1 of 3

Powered by WordPress & Theme by Anders Norén