Between this London Banker post and this one of Felix Salmon’s, or more specifically the comments, surely one of the biggest economic questions must be “what did happen in the autumn of 2008?”
Now we know that between them, the British and French air forces have flown 2,500 sorties over Libya, compared to 2,000 for the US, can we perhaps have a little less of this stuff? As the Dougs say:
I haven’t seen a single one saying “France is short of precision munitions because they switched contractors last year, and the new guys are having production line issues.” Or “France decided to dramatically cut procurement of these systems because it didn’t fit their five-year strategic vision plan for 2010-15, which didn’t envision this kind of campaign.” Or “France has enough precision munitions, but honestly? Libya’s not actually that high a priority right now — the bombing is kinda half-hearted, because France thinks Qaddafi is going to cave soon anyway.” Or even “France has plenty of precision munitions, but they’re all with forces that got deployed to French Guyana last year as part of a diplomatic-strategic initiative to play carrot-and-stick with Hugo Chavez; they’re on a boat now and will arrive next week.”
No, it’s France lacks precision munitions because /they spend too much money on day care/.
The Guardian’s count up also tells us something about how the war has changed in the last few weeks. It’s also criticised by David Cenciotti on some details. The most interesting point is that the focus has moved to Misrata in a big way – almost as many air missions have been flown against targets around it as have been around Tripoli, and far more than between Benghazi and Sirte.
One of the consequences of this is laid out in this classic report from C.J. Chivers – since the mines were swept up from the port of Misrata, the siege has effectively been lifted and the rebels can use the sea. So can NATO – British and French ships have been firing on shore targets in support of the rebels around the port area, trying to keep it open and gradually expand the rebel zone. (Jean-Dominique Merchet’s blog reports that French observers were on the ground, adjusting the fire.) The latest news is the deployment of attack helicopters aboard the ships Ocean and Tonnerre.
The real problem, though, is that all this is tactics, or at the very best, operational art. It’s still very far from clear what happens if and when the rebels get to Tripoli, or if Gadhafi eventually gives up, or indeed if none of these look like happening within more months.
NATO is quite capable of providing a operational-level response to a military problem. Like the EU, it has a wider sense in which it is possible to use the infrastructure, operating procedures, and habits of cooperation without formally activating all the committees. (Gadhafi declared “Committees Everywhere!” as a principle in his Green Book. Surely no institution can have followed him more faithfully…) That worked, too. In comparison, the EU seems to be struggling to come up with more than day by day tactical responses to its economic problem. Of course, playing for time can help.
But neither of them have anything you could call a strategy. One of the things not having a strategy helps you avoid is thinking about the structural consequences of your tactics. Whatever the next plan-of-the-nanosecond to come out of the ECB, ECOFIN, the Eurogroup, or whatever will be, it’s fair to say that it will be deflationary and it will suit the interests of major exporters in the eurozone. Whatever NATO’s next move in Libya will be, it’s fair to say it will be violent, and it will probably also suit the interests of major exporters in the eurozone. Among others. After all, it appears we’re still training the Saudi National Guard, a force which exists only to repress the internal enemies of the House of Saud, although these days they lend it out.
Sonia Le Gouriellec at Alliance GÃ©ostrategique quotes Bernard Badie on the Ivory Coast and the fact that democracy is a lot more than just elections.
Prenons-la [la dÃ©mocratie] comme un idÃ©al, câ€™est-Ã -dire faisons-en une valeur partagÃ©e par tous, câ€™est-Ã -dire reconstruite par ceux-lÃ mÃªme auxquels elle est censÃ©e sâ€™adresser. Sa faiblesse se trouve dans sa dÃ©rive procÃ©durale, dans son universalisme naÃ¯f, dans son formalisme, dans la volontÃ© de plaquer et dâ€™imposer de lâ€™extÃ©rieur des modÃ¨les tout faits auxquels on ne cherche mÃªme pas Ã faire adhÃ©rer ceux auxquels on veut lâ€™adresser. Peut-Ãªtre que le fond du problÃ¨me est lÃ ; nous avons oubliÃ© chez nous que la dÃ©mocratie Ã©tait un idÃ©al, nous nâ€™en retenons plus que lâ€™aspect facile de technique de gouvernement : on lâ€™exporte telle quelle et on veut en faire en plus une technique dâ€™action diplomatique ; on a alors tout faux.
This is, arguably, something the EU got right but the UN usually doesn’t. It’s never enough to put on an election, as you put on a play. In fact, it’s often the worst thing that could happen.
But at least it’s not the newly invigorated and enlarged Gulf Cooperation Council. Marc Lynch (he’s a serious these days so we can’t call him Abu Aardvark any more) covers this in some detail. Basically, what is emerging is a new reactionary international institution – a sort of NATO for dictators. In fact, it’s something like all the most radical criticisms of NATO, if they were all true, rolled into one. It doesn’t have nukes but it does want a nuclear industry.
Instead, it seems to be evolving into a club for Sunni Arab monarchs — the institutional home of the counter-revolution, directed against not only Iran but also against the forces for change in the region. Where the United States fits in that new conception remains distinctly unclear.
You bet, as they say. As it seems to be evolving into a police-military alliance, perhaps the closest parallel would be one of the reactionary alliances Europe tried out in the 19th century.
This Transitions Online piece is fascinating – as south-eastern Europe has changed, the location of “Europe” or “the West” has swung around all over the place. Once upon a time, Bulgarians and Romanians looked at Yugoslavia as the future, a better version of their own society, and both a reasonable substitute for Germany or Italy and a transit route on the way there. People watched Yugoslav TV illegally. Then, the earthquake, the nightmare. Nobody wanted to be anything like it. People in what had been Yugoslavia looked east, both because there was peace, because that was where the smuggled fuel came from, and also for political support.
Meanwhile, people in the rest of the Balkans looked north at Hungary or south at Greece. Of course, that was because the European Union came to them. Now, well, not so much. If there was ever a time to be eurosceptic, this is the moment. Greeks are quite possibly looking north and wishing they weren’t in the eurozone.
I remember that in the mid-1990s, I was quite sceptical about the single currency for the usual reasons from the left – basically, Keynesian concerns. Having grown up in a succession of recessions, the prospect of joining the Stability & Growth Pact and signing up to the monetarist second pillar of what wasn’t then the ECB didn’t seem great. However, I was (still am) very pro-European on all other issues and eventually I came round to it for not much of a better reason than that it offended the right people. Also, this was the early 2000s and economic policy based on rules seemed to be a pretty good idea. As it happened, of course, when a dose of stimulus was wanted this didn’t keep anyone’s hands out of the medicine chest. Neither did the austerity hold back anyone who was determined to have a monster property boom.
The other big concern was the optimal currency-area problem – could the interest rate be right for the whole eurozone? This is about the most conventional critique of the euro there is. In the UK, it used to be quite a commonplace that the country itself wasn’t an optimal currency area, with the corollary that it therefore didn’t matter so much about the euro. I never quite grasped the logic here, although I admit I may have used the argument. Perhaps the underlying thinking was that there is really no such thing as an optimal currency area – a currency system that was sufficiently decentralised to offer an optimal credit environment in its whole territory would have such high transactions costs it wouldn’t be worthwhile, and therefore we would always have to tolerate some inefficiency due to this effect.
So I was very pro-euro and pro-European while it was a live issue in the UK (about 2003, IIRC – I wonder what happened then?).
What I don’t remember anyone discussing much was the Eurosystem as opposed to the Euro or the ECB – the transactional, flow-of-funds financial workings between the member central banks and the ECB. Nor do I remember anyone talking very much about the fact that the ECB doesn’t have an explicit lender-of-last-resort function. And even discussing whether member states should do anything to manage their trade balances with one another – that was so far out of fashion, of course, that even I didn’t give it any thought.
Of course, this was the bit that bit us.
To put it another way, we argued enormously about the fiscal aspects of the Euro, which turned out to be absurdly easy to fudge when it became necessary to do so. We argued quite a bit about interest rate policy. We hardly even mentioned banking or the issue of money. This is quite a cock-up when you remember we were talking about setting up a new central bank. No wonder west is north and east south.
Is this just my fault? Was there serious discussion of how the Eurosystem might work or not in a financial crisis back in the 90s? Working on my own private black swan theory – apparently unlikely events are both predictable and usually predicted, but they tend to be ones it was unrespectable to predict – somebody must have been.
Also, has anyone else in Britain changed their mind, or is it only me?
A quick look over the fall-out in French politics from DSK. Le Monde has a fascinating article on government surveillance of public figures’ sex lives. The most trivial point is that Strauss-Kahn had been allegedly caught frequenting prostitutes, but far more interestingly, this information had been swept up the police food-chain and delivered privately to the president’s desk and also to Nicolas Sarkozy’s presidential campaign, which leaked it to the press.
However, nobody thought it particularly newsworthy. Also, the surveillance continued, and various officials in the president’s office were in the habit of boasting about their access to intelligence on DSK’s sex life to journalists. But again, nobody seems to have found that newsworthy – and you do wonder what, exactly, they were sitting on. In a sense, this is another version of the conspiracy of silence. The people involved, a circle of police, spooks, and political operatives from the old days of the Balladur campaign, are exactly the same names who came up in the Woerth-Bettencourt affair. The point is made both that Nicolas Sarkozy made very sure to get the right people into key posts in the police-intelligence network and also that this is not new – the last three presidents have all been interior ministers.
(It may also be worth knowing that the poly/swinger scene is extensively monitored by the police, and various people are in the habit of passing lists of guests to the internal secret service.)
There’s more here, but you’d be a fool to assume that the damage will be confined to any one political party. For example, enter Georges Tron. Although he’s surely no DSK he is on the right, and his case also involves a complex score-settling with the FN over a real-estate scandal. (It’s not a proper scandal without property developers.) He’s gone, the fifth government minister to quit in 12 months.
So, what’s the upshot of all this at the macro level? Nouvel Observateur has a complex survey, laid out to illustrate the full set of cross-breaks. The upshot is that Sarkozy’s polls are still in the toilet – depending on who runs against him, he’s polling between 22 and 24.5%. The vote for the extreme Left has evaporated, while Marine Le Pen is running steadily a few points behind Sarkozy.
On the PS side, the volcanic eruption has had surprisingly little effect. The race is developing into a head-to-head between Hollande and Aubry, with Hollande holding the lead and also holding the best numbers in the head-to-heads with the other candidates. Either would beat Sarkozy, but Hollande would take the first round by 9 points and the second by twice that.
If all this doesn’t shift the polls, what will? Sarkozy might not stand for re-election. He’s suggested it before, but how willing to give up power is he really? Like a lot of politicians who enjoy being around entrepreneurs, he’s actually devoted his entire career to politics. That would have serious consequences – there is no obvious candidate and hardly even a plausible candidate, especially if Christine Lagarde moves to the IMF. And that now looks like the original racing certainty.
Looking through the latest round of EU GDP data, one thing is becoming increasingly obvious: when it comes to future monetary policy decisions at the ECB, and to exactly how many more interest rate hikes we are going to see, then the performance of the Italian economy is going to be critical. The growth pattern now is clear enough: Germany and France move forward at a lively pace, while the so called “peripheral” economies (Portugal, Ireland, Greece, and Spain) either remain in or continually flirt with recession. They are constrained bythe combined burden of their lack of international competitiveness, their over-indebtedness and the contractionary impact of their austerity programmes. Continue reading
Now that Strauss-Kahn has resigned, the IMF needs a new director. Traditionally, the job has gone to a European, but since quota weights were realigned last year, it’s possible that the new boss may come from outside Europe.
I will go ahead and take a flyer no Kemal Dervis, on account of being both European and non-European, and well regarded for his work in Turkey and the international arena. Other ideas?
UPDATE: Well, heck. He say’s he’s not in the running.
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 EnchainÃ© 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 SÃ©golÃ©ne Royal, FranÃ§ois 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 JuppÃ© 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 FranÃ§ois 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…
“Some economists, myself included, look at Europeâ€™s woes and have the feeling that weâ€™ve seen this movie before, a decade ago on another continent â€” 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 â€” and Iâ€™m sure it has no intention of doing that. But at this point itâ€™s all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday â€” 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 RodrÃguez SaÃ¡ (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
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:
Thoughts? Or is Eurovision simply beyond thought?