What should we choose as the soundtrack for the stunning outcome of the Greek referendum? Patti Smith’s ‘People Have the Power’, perhaps? Or David Bowie singing, ‘We can be heroes, just for one day’? Continue reading “Greece: People power or heroes just for one day?”
There was a rather silly documentary hidden away on BBC4 on night last week all about the crisis facing Europe. Called The Great European Disaster Movie and set in a not too-distant future after the collapse of the EU, it featured an archaeologist (played by Angus Deayton) on a flight to Berlin beset by a menacing storm, explaining to a little girl what the European Union had been. These unconvincing sequences were intercut with case studies of individuals in 2015, in different member states, affected by the present crisis. Continue reading “The eurozone: ‘this machine from hell’”
You have to ask yourself, ‘Are these people bonkers?’ It certainly looks that way; the economists of the EU, European Central Bank and IMF who came up with the idea of relieving savers of up to 10% of their savings in Cypriot banks presumably regard themselves as rational beings. But this plan could have massive implications, politically as well as financially.
Until now it’s been a given that in tackling bank crises the savings of ordinary people should be protected – up to a high threshold of 100,000 euros in the European Union, for example. If there is a bailout, it’s the financial institutions which lent to banks by buying their bonds which should incur losses. What is profoundly shocking about the Cyprus bailout is that it’s ordinary people who will see a portion of their savings snatched from them, without warning and not by a democratically agreed tax. No party or politician would have dared, anyway, to suggest a tax of 10% on pensioners’ life savings.
It’s not just that confidence in European banks will be undermined (especially in Spain or Italy where potential bailouts loom), but that this will intensify what Mary Kaldor of the LSE calls – in a timely article on opendemocracy, ‘the new war in Europe’. Kaldor argues that:
The European Union is a different kind of polity constructed in reaction to the risk of war and now, in reaction, to the risk of economic collapse. Economists argue that the monetary union was a big mistake in the absence of political union. But Beck points out that the point was just the opposite – to create a monetary union that would establish material interest in political union. Without a monetary union there would be no momentum for political union.
So far so good. But there is more to this story. In to-day’s Europe, economic and political logics are pulling in opposite directions. It is true that monetary union dictates the need for political union and everyone understands this at élite levels. But the consequences of monetary union and the neoliberal agenda with which it was associated is, at one and the same time, undermining what is known as the permissive consensus and greatly weakening the legitimacy of European élites and with that the European project.
She argues that the rules of the single market and the euro, along with associated neoliberal policies has led to increased inequality, insecurity and atomisation undermining community and cosmopolitan politics. She concludes:
What Europe faces is a profound political crisis. This was the main conclusion of our report ‘The bubbling up of Subterranean Politics’. The protests and demonstrations, the new political initiatives and the new parties, are not necessarily a reaction to austerity. They were and are about a profound loss of trust in current political élites – a belief that these élites are locked into financial and media interests and unable to act on behalf of the public good, and a sense that representative democracy is no longer about participation, but about reproducing that élite.
The problem is that in the absence of a bottom-up emancipatory cosmopolitanism, a project of European solidarity, that lack of political trust can easily be manipulated by xenophobic, eurosceptic and exclusivist parties of various stripes. Parties like UKIP, the True Finns, the Dutch Freedom party, New Dawn and similar parties are making electoral inroads in nearly every European country. And the mainstream parties, preoccupied by short term electoral considerations, tend to pander to the sentiments expressed by these parties instead of voicing the longer term public interest.
The dangers for the cohesion of the European Union are clear to see in banner held by protesters outside the Cypriot parliament in Nicosia today.
On the Londion Review of Books blog today, James Meek asks:
How is it that when real banks in Cyprus face actual financial collapse as a result of their conduct, it is not the banks themselves that suffer, nor the foolish rich who stashed their money there, but those savers of modest means who were promised their money was sacrosant? Those who thought they were safe with the guarantee are now being hit with a tax of €6.75 for every hundred euros they have in savings, in order to save the banks that screwed them over. […] Neither side, it seems, dare consider asking the big foreign financial institutions foolish enough to lend Cyprus banks €1.7 billion over the years if they would mind taking a loss on that investment.
What’s happening in Cyprus is not, at its heart, about a government failing to pay its way, but about banks failing to pay their way, and having to be rescued by government. If there is a government failing it is not that it spent beyond its means but that it allowed the banking sector to swell to grotesque, unsustainable proportions, like some obscure organ of the body that has bloated up until it can’t be removed without destroying the host, and all the resources of the body are consumed by the need to carry it. In Cyprus, the less well-off face a deposit tax to pay for the rescue of their banks by Europe and the IMF; in Britain, we continue to endure spending cuts, higher VAT and the hidden tax of a weakened currency as a consequence of a bank rescue carried out from our own resources. We rescue our banks; who will rescue us?
- Cyprus bailout: big implications in a small-scale rescue: Larry Elliott in today’s Guardian
- Cyprus: has the eurozone run out of road? Today on New Statesman blog
Towards the end of The Four-Gated City, the final volume in Doris Lessing’s Children of Violence sequence, Martha Quest starts to collect newspaper cuttings that reveal what, to her, are signs of an impending apocalypse:
local catastrophic occurrences – the poisoning of a country, or of an area; the death of part of the world; the contamination of an area for a certain period of time. These events will be the development of what is already happening…. All kinds of denials, evasions are made. It can be taken as an axiom that all governments everywhere lie.
In these days, too, stories in the news seem to carry the same portentous inference: catastrophe and contamination, denials and evasions.
- Item: ‘As the US suffers the worst drought in more than 50 years, analysts are warning that rising food prices could hit the world’s poorest countries, leading to shortages and social upheaval’. (Guardian)
- Item: ‘The worst drought in a generation is hitting farmers across America’s corn belt far harder than government projections and forcing them to a heart-breaking decision: harvest what’s left of their shrivelled acres or abandon their entire crop’. (Guardian)
- Item: ‘If average temperatures increase, so will temperature extremes. As temperatures increase, so will evaporation. As evaporation increases, so will precipitation. As tropical seas get warmer, so will the increased hazard of cyclone, hurricane or typhoon. Nine of the 10 warmest years on record have occurred in this century. Last year was the second rainiest year on record worldwide; the winner of this dubious derby was 2010, which, with 2005, was also the warmest on record. … Some of the most catastrophic floods and lethal heatwaves ever observed have claimed many thousands of lives in the last decade, and the increasing probability of such extremes has been predicted again and again: by the World Meteorological Organisation; by the Intergovernmental Panel on Climate Change; by the UN’s inter-agency secretariat for disaster reduction; and by researchers at the Potsdam Institute for Climate Impact Research in Germany who have listed the 19 hottest, wettest or stormiest ever events, all in the last decade. There are other, less direct indicators. The northern hemisphere growing season has expanded by 12 days since 1988. Sea levels are rising. Higher sea levels make storm surges – and consequent catastrophic floods in estuaries, flood plains and coastal cities – more likely, more costly and more deadly. The signals are clear enough. Climate is changing, and local weather patterns are responding. Conditions that seem bad now may be regarded as relatively benign in decades to come…. Weakened by successive disasters and a mix of ugly reasons that include corruption, civil war and endemic poverty, governments are less able to respond. The long-term forecast is not promising’. (Guardian editorial)
- Item: ‘[The Arctic] is home to a quarter of the planet’s oil and natural gas reserves, yet humans have hardly touched these resources in the far north. But in a few days that could change dramatically if Shell receives approval to drill for oil in the Arctic. … Exploiting the Arctic’s vast oil reserves is just one cause of environmental unease, however. The far north is melting and far faster than predicted. Global temperatures have risen 0.7C since 1951. In Greenland, the average temperature has gone up by 1.5C. Its ice cap is losing an estimated 200bn tonnes a year as a result. And further rises are now deemed inevitable, causing the region’s ice to disappear long before the century’s end’. (Observer)
- Item: ‘The former head of the UN Office on Drugs and Crime, Antonio Maria Costa, posited that four pillars of the international banking system are: drug-money laundering, sanctions busting, tax evasion and arms trafficking. The response of politicians is to cower from any serious legal assault on this reality, for the simple reasons that the money is too big (plus consultancies to be had after leaving office). Herein … lies the problem. We don’t think of those banking barons as the financial services wing of the Sinaloa [Mexican drug] cartel. The stark truth is that the cartels’ best friends are those people in pin-stripes who, after a rap on the knuckles, return to their golf in Connecticut and drinks parties in Holland Park. The notion of any dichotomy between the global criminal economy and the “legal” one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent – one and the same’. (Ed Vulliamy, The Observer)
- Item: ‘This week evidence emerged that HSBC abetted massive money laundering by Iran, terrorist organisations, drug cartels and organised criminals. By this point, should this surprise us? Selling defective mortgage securities during the housing bubble; creating and selling securities to bet on their failure; bringing the world to the brink of collapse; colluding to manipulate interest rates; hyping your failing company while secretly selling your own stock; cooking the books; assisting Bernard Madoff. For many people in banking, it would seem, securities fraud, accounting fraud, perjury and conspiracy are just another day at the office’. (Charles Ferguson, director of the best documentary in this decade, Inside Job, in The Guardian)
- Item: ‘A global super-rich elite has exploited gaps in cross-border tax rules to hide an extraordinary £13 trillion ($21tn) of wealth offshore – as much as the American and Japanese GDPs put together – according to research commissioned by the campaign group Tax Justice Network’. (Observer)
- Item: ‘Interest rates on Spain’s 10-year borrowing rose to the highest since the euro was created … following fresh bad news about the financial health of the country’s regions. … What began as a Spanish banking bailout looks to be moving rather quickly towards a possible sovereign bailout. Overlay that with increasingly negative news on Greece and you get a fairly negative mix. …The cost of bailing out Spain would dwarf the packages already agreed for the three smaller eurozone countries – Greece, Ireland and Portugal – and would heap pressure on monetary union’s third biggest economy Italy’. (Guardian)
John Gray the philosopher (who once wrote, in Straw Dogs, ‘humans … cannot destroy the Earth, but they can easily wreck the environment that sustains them.’) gave an provocative response to the question ‘what would Maynard Keynes do in the current situation?’ in his BBC Radio 4 Point of View essay last week:
We do not find ourselves today struggling with the aftermath of a catastrophic world war. Yet the situation in Europe poses risks that may be as great as they were in 1919. A deepening slump there would increase the risk of a hard landing in China – on whose growth the world has come to depend. In Europe itself, a downward spiral would energise toxic political movements – such as the neo-Nazi Golden Dawn, which won seats in parliament in the last election in Greece. Facing these dangers, Keynes’s disciples insist that the only way forward is through governments stimulating the economy and returning it to growth.
It’s hard to imagine Keynes sharing such a simple-minded view. As he would surely recognise, the problem isn’t just a deepening recession, however serious. We face a conjunction of three large events – the implosion of the debt-based finance-capitalism that developed over the past twenty years or so, a fracturing of the euro resulting from fatal faults in its design, and the ongoing shift of economic power from the west to the fast-developing countries of the east and south.
Interacting with each other, these crises have created a global crisis that old-fashioned Keynesian policies cannot deal with. Yet it’s still Keynes from whom we have most to learn. Not Keynes the economic engineer, who is invoked by his disciples today. But Keynes the sceptic, who understood that markets are as prone to fits of madness as any other human institution and who tried to envisage a more intelligent variety of capitalism.
Keynes condemned Britain’s return in 1925 to the gold standard, which famously he described as a barbarous relic. Would he not also condemn the determination of European governments to save the euro? Might he not think they would be better advised to begin a planned dismantlement of this primitive relic of 20th Century utopian thinking?
I suspect Keynes would be just as sceptical about the prospect of returning to growth. With our ageing populations and overhang of debt, there’s little prospect of developed societies keeping up with the rapid expansion that is going on in emerging countries. Wouldn’t we be better off thinking about how we can enjoy a good life in conditions of low growth?
Keeping Quiet by Pablo Neruda
And now we will count to twelve
and we will all keep still.
For once on the face of the earth
let’s not speak in any language,
let’s stop for one second,
and not move our arms so much.
It would be an exotic moment
without rush, without engines,
we would all be together
in a sudden strangeness.
Fisherman in the cold sea
would not harm whales
and the man gathering salt
would not look at his hurt hands.
Those who prepare green wars,
wars with gas, wars with fire,
victory with no survivors,
would put on clean clothes
and walk about with their brothers
in the shade, doing nothing.
What I want should not be confused
with total inactivity.
Life is what it is about,
I want no truck with death.
If we were not so single-minded
about keeping our lives moving,
and for once could do nothing,
perhaps a huge silence
might interrupt this sadness
of never understanding ourselves
and of threatening ourselves with death.
Perhaps the earth can teach us
as when everything seems dead
and later proves to be alive.
Now I’ll count up to twelve,
and you keep quiet and I will go.
In the closing words of The Four-Gated City, Martha Quest struggles to come to terms with our predicament on this planet:
Now the voices and the sound of movement were gone, and the stream could be heard running quietly under its banks. The air was full of the scent of water and of flowers. She walked, quiet… She walked beside the river… She thought, with the dove’s voices of her solitude: Where? But where. How? Who? No, but where, where …Then silence and the birth of a repetition. Where? Here. Here?
Here, where else, you fool, you poor fool, where else has it been, ever?
- Looting the lot of us
- Bankers are the dictators of the West: Robert Fisk
- Inside Job: beware apoplexy
Boxing Day and we join the confederacy of dog walkers, joggers and Christmas sofa escapees on Crosby waterfront. The plan when we left home was a bracing stroll along the beach, meandering between Anthony Gormley’s iron men.
It was not to be – the tide was in, and the wind, which in the city had been no more than breezy, was a here an ear-deafening, body-battering roar. The waves pounded the promenade, sending spray far into the dunes beyond.
Skeins of geese headed south, hugging the estuary coastline, working hard to hold their course as the wind buffeted them towards the land. In the distance the cranes of Seaforth docks and the towers of the city glinted silver in the sunlight.
It was a fine morning; away from the wind the day was mild, and has been so for several days – a stark contrast with the icy temperatures this time last year. The air was clear and the views across the estuary towards the Wirral and the Welsh hills were sharp as a knife.
Looking at these photos now I think: this could be somewhere remote – the Scottish islands, perhaps – rather than a place barely ten miles from a city centre. Only the turning blades of the wind turbines out on the horizon hint at something different.
It’s not often that we’ve seen it like this at Crosby. We always seem to arrive when the tide is out and the iron men of Gormley’s Another Place stand erect along the sands – go compare.
Returning to the city and the other reality of the newspapers is a reminder of what else might be blowing in the wind as we edge towards 2012. Assessing the crisis in the eurozone, Aditya Chakrabortty writes in The Guardian that something pretty scary lies in wait on 1 February:
It is almost certain that 2012 is going to be worst year yet for the eurozone. Easily the worst financially, terrible economically and increasingly grim politically.
A good rule of thumb in this crisis is that when a European state pays more to borrow than an ordinary taxpayer shells out for a bank loan, the government eventually has to call in the rescue brigade. For much of November, Italy was borrowing at a rate of 7% – and probably the only thing that has kept interest rates from going higher still is that the European Central Bank (ECB) has been buying Rome’s IOUs.
In other words, the markets trust the Italian state – with its own tax-raising powers – less than it does a couple in Kettering who’d quite like a new kitchen. Which, given that Italy plans to roll over more than €360bn (£310bn) of debt next year, is hardly sustainable for the new prime minister Mario Monti. Indeed, on 1 February, Rome will have to either repay or renew €28bn of loans. Even now, no one has the faintest idea how it will do that.
Over the next couple of months, Italy’s crisis can go one of three ways: either the ECB keeps on buying its bonds, with the blessing of northern-European voters and markets; or ECB head Mario Draghi pledges to fund financially distressed eurozone governments; or Rome gives in and calls for a bail-out. If the last even looks likely, financiers will almost certainly panic that Italy is about to default on its debt. With about a third of the country’s bonds held abroad, this could wreak chaos in world markets – including in Britain, which is by far the biggest foreign owner of BTPs. That’s the sort of event Barack Obama has in mind when he remarks that Europe’s crisis is “scaring the world”.
In the same paper, David Lammy, MP for Tottenham, offers a precis of his book on the summer riots, Out of the Ashes, in which he, too, has a grim prediction for 2012:
In the inner-cities, lighting does strike twice – ask Brixton, Toxteth and Tottenham. Last summer’s riots have been swept under a very big, eurozone-shaped carpet. All the while, the fundamentals of the disorder remain unchanged. Hopelessness still permeates the estates of concentrated poverty and worklessness. People who have no stake in society are the least likely to have respect for it. And those with the least to lose are invariably the first to throw the brick. There is a very real chance the riots will repeat themselves in 2012.
In a nutshell his argument is that the riots were the consequence of ‘two revolutions’, one social and cultural the second economic:
The riots signposted the failure of successive governments to deal with two liberal revolutions: a 1960s social revolution and a 1980s economic revolution. Together they made Britain a wealthier and more tolerant place. But these two revolutions, built around notions of personal freedom, sell Britain short unless they are moderated by other forces. The riots were a reminder that, whether we like it or not, we are heavily dependent on one another. A good life depends on the strength of our relationships with family, friends, neighbours, colleagues and strangers.
Lammy’s conclusion is that ‘we cannot live in a society in which banks are too big to fail but whole communities are allowed to sink without trace’.