Thoughts on Greece

Yes To Grexit
Yes To Grexit by Jan Wellmann, on Flickr.
I love the European Union — it has achieved so much for normal European citizens: Peace, the freedom to travel and (in many cases) prosperity. I also love the idea of a common European currency — although it was terribly exciting as a kid to get exotic notes and coins when travelling, it also made it hard to compare prices and salaries across borders. Indeed, back in the year 2000, I was very active on the Yes side when Denmark held a referendum about joining the Euro (it was narrowly defeated).

However, the EU I liked the best was Jacques Delors’s Commission-run project. Since then, the European Council (where the heads of state get together in private) has taken the lead, and idealism and democracy has suffered.

The EU has disappointed me in at least three regards recently:

Firstly, Barroso and several other European politicians took part in Project Fear’s scaremongering in order to persuade us to remain within the United Kingdom. Given that almost everybody on the pro-independence side supported continued membership of the EU, whereas many people on the No side were already discussing how and when to leave the European Union, that struck me as being rather foolish, short-sighted and undemocratic.

Secondly, the Mediterranean refugee crisis has revealed a huge lack of European solidarity. It’s clear the numbers that arrive in Italy are far too high for one country, but spread across the EU they would be very manageable, and yet lots of countries refuse to do their bit.

Thirdly, the way Greece has been treated has been an unmitigated disaster, not just for Greece but for all of Europe.

The EU has to work in the interest of normal Europeans citizens, and that’s simply not happening in Greece. Normal people are suffering, to a large extent because their former governments borrowed a lot of money and gave it to their rich friends (such as international bankers).

I completely understand that other European countries are worried about moral hazard. Of course you don’t want a situation where a country can simply borrow money and then refuse to pay it back without any negative consequences. However, punishing ordinary Greeks for a century is a rather extreme way to avoid moral hazard, I would have thought.

At the moment, what benefit does Greece actually derive from being part of the Euro? As Frances Coppola put it recently
in Forbes:

Any country can use the Euro as its currency, whether or not it is a member of the Euro. And some do: Montenegro, for example, and Kosovo are both Euro users though they are very far from being accepted into the EU, let alone becoming Euro members. So what distinguishes a Euro member from a Euro user?

Normally, the distinction between a sovereign currency issuer and the (foreign) user of a currency is that the sovereign currency issuer has complete control of the money supply, whereas the user must earn, borrow or buy its currency from external sources. But Greece cannot be considered a sovereign currency issuer. Its central bank can only issue the amount of Euros that the ECB allows it to. That amount has just been frozen by the ECB. Greece must now borrow, buy or earn additional Euros from external sources. That is what currency users have to do, not currency issuers. So Greece has no control of its money supply. It is as if it were using a foreign currency as its domestic currency.

Bloomberg reports that Bulgaria, which is not a Euro member but backs its currency with Euro reserves, has just been allowed to borrow from the ECB at the same rate as Euro members, thus enabling it to firewall its banks from Greek contagion. This is a privilege normally only accorded to Euro members – and it has been WITHDRAWN from Greece. If this is true, then Bulgaria (non-Euro member) can obtain Euros from the ECB while Greece (Euro member) cannot. It is hard to see what benefit Greece’s Euro membership confers, apart from redistribution of seigniorage receipts.

I’m not saying that the best solution would necessarily involve giving a lot of money to the Greek state. Perhaps it’d be better if the Greek banks were to be taken over by the EU, for instance. Or perhaps Greek pensions could be paid by the EU instead. It might be worth looking at what the US would do if a state went bust, or what Germany before 1999 would have done if one of its Länder had done so.

However, some kind of debt foregiveness must surely play a part when a country cannot realistically pay back its debts ever. And Germany of all countries shouldn’t be vetoing it. As the French economist, Thomas Piketty, said to Die Zeit:

When I now hear the Germans say that they deal with debt in a very moral way and firmly believe that debts must be repaid, then I think: What a big joke! Germany is the prime example of a country that has never paid its debts. It can teach other countries no lessons. [Wenn ich die Deutschen heute sagen höre, dass sie einen sehr moralischen Umgang mit Schulden pflegen und fest daran glauben, dass Schulden zurückgezahlt werden müssen, dann denke ich: Das ist doch ein großer Witz! Deutschland ist das Land, das nie seine Schulden bezahlt hat. Es kann darin anderen Ländern keine Lektionen erteilen.]

I can’t help thinking that a lot of the differences between the approach taken to Greece comes down to national bankruptcy laws. In Denmark (and Germany, I believe), if you go bankrupt, you will never be entirely free of your debt. I know of people who did something silly in their twenties, got landed with a huge debt, and a result they’ll never be able to buy a house ever — bankruptcy laws are mainly concerned with ensuring that you’re allowed to keep enough money every month to survive. In English-speaking countries, on the other hand, a bankruptcy actually cancels most of your debt, and you’ll be able to start from scratch with a blank slate.

Apart from cancelling debts, the threats have to stop. In a federal state (and that’s more or less what the Eurozone is today), you cannot expect similar political parties to be in power in all parliaments all the time. (In fact the past twenty years have probably been rather exceptional in that regard, because of the way the Social Democratic and Conservative parties became so similar after the collapse of Communism.) The various treaties and constitutions have to be designed in such a way that things don’t collapse in a heap simply because some neo-Marxists get into power in Greece. That said, even inside the UK most politicians seem to be struggling with finding the right response to the rise of the SNP, so it’s not simply a European problem.

The way the majority of EU countries are acting at the moment, I wouldn’t be surprised if Greece eventually decided it’d be better to leave the EU completely, and that would be really dangerous for the rest of us, given the instability of the geopolitical situation at the moment. Europe really needs to get its act together!

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The Single Transferable Vote is the worst option for the SNP

Sådan kan en stemmeseddel se ud. #FV15 #magentalove #aarhus
Danish ballot paper. (Sådan kan en stemmeseddel se ud. #FV15 #magentalove #aarhus by Karen Melchior, on Flickr.)
Although the SNP benefitted hugely from First Past The Post (FPTP) in May (gaining almost all the Scottish seats on 50% of the votes), I remain committed to proportional representation — I believe FPTP is poison for popular engagement, at least in a multi-party system, because so many people feel their vote doesn’t count.

Proportional representation comes in many varieties, however (and some are more proportional than others). We’re already using three different systems in Scotland: (1) The Additional Member System (AMS), which we use for electing the Scottish Parliament; (2) the Single Transferrable Vote (STV), which we use for electing the councils; and (3) d’Hondt, which we use in elections for the European Parliament.

The SNP opted for STV in their recent Westminster manifesto. I can understand why — STV is a decent system in many contexts, especially when the candidates aren’t organised into parties (for instance, it’s a great system for electing members for a committee in an political party). However, it has some shortcomings which makes it less than ideal for Westminster elections.

Firstly, STV benefits those parties who are good at predicting their support. For instance, if May’s election had been held using this system, Labour and the Liberal Democrats would probably not have predicted the scale of their losses, so they would have put forward too many candidates, which could have exaggerated their losses; in the same way, the SNP might not have been bold enough, which again would have harmed them. (This problem can be alleviated by forcing the voters to prioritise all the candidates and not just one or two, but we don’t tend to do that in Scotland.)

Secondly, STV doesn’t help parties with varying levels of support in different areas. In particular, whereas the SNP’s 50% support resulted in nearly 56 out of 59 seats under FPTP, it would probably only have resulted in around 30 seats in Scotland under STV; the fact that the SNP also had supporters in England wouldn’t have led to any additional seats.

The Danish electoral system would be much better for the SNP. Denmark uses a variant of d’Hondt (Sainte-Laguë to be precise) in multi-member constituencies, but crucially all the votes get added up nationally afterwards, and additional seats are allocated in order to ensure that every vote counts. In other words, if the SNP got 50% of the votes in Scotland and about 5% in the rest of the UK so that the UK-wide support was exactly 10%, the SNP would have received 10% of the seats, which would actually be even better than the current 56 seats.

Some years ago I made a simulation of the 2005 Westminster election using the Danish electoral system. I didn’t at that time assume the SNP would have received any votes outwith Scotland, but Nicola Sturgeon would definitely have appealed to many voters down south after her phenomenal performance in the TV debates.

My guess is the SNP chose STV for their manifesto in order to tempt the Lib Dems, and that’s of course a completely valid reason to opt for this, but the Danish system would be much better for the SNP.

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Cheap student halls like in Denmark

Udflugt til Århus
Udflugt til Århus by Michael Budde, on Flickr.
During the second half of my studies in linguistics and computer science at Aarhus University I stayed at the on-campus student halls called Parkkollegierne. I had a small room (about 12 sq m) and shared the kitchen and bathroom with 14 other students. The monthly rent was approximately £150 at the time, including heating and electricity. (Towards the end of my stay there we got broadband and a phone line in each room, but the price was added to the rent.)

Given that Denmark is generally quite a bit dearer than Scotland, and given that Danish students get generous grants from the state for studying (about £400 per month), I had expected student housing would be cheaper in Scotland than in Denmark, so I was quite surprised when I realised that students often pay a small fortune here, whether they live in a student hall or in private accommodation. My stepson is going to Edinburgh to study law in September, and he’s been given a room in a student hall costing more than £500 per month (and that seems to be the average price, for a room that’s not on campus and smaller than the one I had in Århus)!

I simply don’t understand why it’s so dear. There must be legal reasons for it, or some clever property developers would have made some private student halls at half the price and made a fortune. I know there were many problems with overcrowded and unhygienic student accommodation in the 1980s, but if the legislation is now preventing people from offering reasonable accommodation at a fair price, then that’s a huge problem and must be resolved.

Not every student has the option to study while staying with their parents, and we want students to be able to study what they’re good at and interested in, even if it’s far from home, but student halls are simply prohibitively expensive — it will either cost the parents a fortune or increase student debt dramatically.

The Scottish Government should as a matter of priority go on a fact-finding mission to similar countries to find out how they manage to provide affordable student accommodation.

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The Unionist tuition fees

Demo Lition 10.11.10
Demo Lition 10.11.10 by Andrew Moss, on Flickr.
It’s a well-known fact that Scottish Labour MPs played a crucial part in imposing tuition fees on English students, feeling safe in the knowledge that their own constituents wouldn’t be affected directly.

Many voters did notice, however, and it surely played a part in the downfall of Scottish Labour.

So I was a bit surprised when I read the following in a long article in The Guardian called “The Clegg Catastrophe“:

Many senior figures […] warned that supporting a rise in tuition fees would be disastrous. […] Danny Alexander, who had taken over from Laws as chief secretary to the Treasury, insisted the party should go along with the rise in tuition fees. Alexander, who participated – alongside Clegg, Cameron, and Osborne – in the “quad” meetings where coalition policy was hammered out, was less interested in the politics of the issue than the economic impact; he believed it was a necessary step to reduce the deficit. Far from being abolished over six years, as the Lib Dem manifesto had promised, fees were to treble over two years. […]

In December, on the eve of the Commons vote to raise fees, Martin Shapland, the chairman of Liberal Youth, went to see the chief whip Alistair Carmichael to make a final attempt to persuade the party to change course. “I told him the damage was going to be permanent and he disagreed,” Shapland said.

It would appear the Scottish Lib Dems repeated the errors made a few years earlier by Labour: They assumed they were safe because Scottish students wouldn’t have to pay to attend university (thanks to the SNP), and so they were much keener to toe the party line and treble the fees than their English colleagues.

Were they really too naïve to understand that the consequent lack of trust in the Liberal Democrats would affect them, too?

It’s odd how Unionist politicians often are much worse at understanding the dynamics of post-devolution politics than the Nationalists.

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Och, Denmark! ☹

A poster by the Danish Conservatives.
A poster by the Danish Conservatives.
Ever since moving to Scotland from Denmark a few months after the 2001 election (which put Anders Fogh Rasmussen into power — imagine a Tory government supported by UKIP), I’ve been increasingly unhappy about the way Denmark is developing.

While Scotland has found its own voice during the independence referendum and is now speaking loudly in favour of tolerance, solidarity and equality, Denmark seems to running away from these values.

The two modern Danish lodestars appear to be xenophobia and neoliberalism. Let’s look at both in turn.

Xenophobia has been on the rise for more than twenty years, and I was already starting to find the tone of the debate uncomfortable in the 1990s. Dansk Folkeparti (the Danish equivalent of UKIP) was always at the centre of this development — I described it like this a while ago:

The typical pattern has been like this: Dansk Folkeparti make a suggestion (e.g., to limit the number of immigrants, or to put some restrictions on Denmark’s EU membership); the other parties at first dismiss it, but the media give it plenty of coverage (because it’s always a good story from a journalistic point of view), and some dissenters within the other parties are quickly found that agree with it, and eventually the other parties implement at least 50% of the original proposal. As soon as this has happened, Dansk Folkeparti start demanding even more, and the whole process starts again, with the result that after 10-20 years, the mainstream parties have adopted policies that are more extreme than those originally advocated by Dansk Folkeparti.

This is making it increasingly uncomfortable to live in Denmark if you’re not 100% Danish. Theresa Nguyen, a Danish journalist of Vietnamese origin, described it well a couple of days ago:

[I’d like to] talk about the feelings that are awakened within me when a candidate for prime minister says that “Denmark is in danger of becoming multicultural” with pride in their voice. Dear Helle Thorning-Schmidt and Lars Løkke Rasmussen, your rhetoric makes me so angry and sad — yes, almost depressed — that more than anything I just want to leave that awful Denmark that I am barely able to recognise any more. […] The Denmark that I see now is quite unrecognisable. I don’t have the words to describe the missing link between the Denmark of my memories and the Denmark I, as an adult Dane from an ethnic minority background, must now contribute to and be a part of. Your debate last Sunday was a disgrace to the generous and bountiful country of my childhood. Your views on people and our global responsibilities frightened me and filled me with shame. […] Your divisive rhetoric is giving a lot of people the desire to leave the country. But those who can and probably will leave are people like me; the educated and resourceful citizens that Denmark strongly needs to stay and pull our weight. The rest, those who have been less lucky to get an education, do not have the ability to leave Denmark. They are forced to stay behind and listen to your words.

([Jeg vil gerne] tale om de følelser, der bliver vækket i mig, når en statsministerkandidat med stolthed i stemmen siger, »at Danmark er i fare for at blive multikulturelt«. Kære Helle og Løkke, jeres retorik gør mig så vred og trist – ja, nærmest deprimeret – at jeg mest af alt bare har lyst til at forlade det forfærdelige Danmark, jeg snart ikke kan genkende længere. […] Det Danmark, der møder mig, er mildest talt uigenkendeligt. Jeg mangler ord til at beskrive den manglende kobling mellem det Danmark, jeg husker, og det Danmark, jeg som en voksen dansker med anden etnisk baggrund nu skal bidrage til og være en del af. Jeres duel på ord i søndags var en skændsel for det generøse og overskudsfyldte land, jeg var barn af. Jeres syn på mennesker og vores globale ansvar skræmte mig og fyldte mig med skam. […] Med jeres splittelsesretorik giver I rigtig mange lyst til at forlade landet. Men dem, der kan og formentlig vil gøre det, er dem, der er som mig; de veluddannede og ressourcestærke borgere, som Danmark har så såre brug for bliver og tager vores tørn. Resten, dem, der har været mindre heldige til at tage en uddannelse, har slet ikke muligheden for at forlade Danmark. De er tvunget til at blive tilbage og lytte til jeres ord.)

I’m so much happier living in a country where Ruth Wishart could say her famous words: “A Scot is someone born here, and anyone who has paid us the compliment of settling here.”

The other Danish malaise is neoliberalism. Although the Danish welfare state is working well and is quite affordable for the state, Danes keep demanding lower taxes and most people have grown up with so much job security that they honestly believe unemployment can never happen to them. For a while it was possible to cut costs without great consequences, but it’s now getting to the point where it’s becoming visible in international comparisons. To take but one example, in 2001 Danish unemployment benefits on average gave workers 66% of their previous salary, which was the highest in the EU; by 2012 this had fallen to 40%, which placed Denmark as number 10 out of 14 countries (less than Spain but marginally more than the UK).

When I tell Danes they’ll soon start seeing real poverty if they continue this development, they don’t believe me. Again I really enjoy living in a country that has already learnt the lesson of the Thatcher years — looking at Denmark from Scotland feels a bit like observing a train crash in slow motion from a distance.

Of course not all Danes agree with the xenophobia and the neoliberalism. In the same way as many people in England are still voting Labour because of what it used to be like, many Danes are still supporting the Social Democrats without realising that they’re increasingly a part of the problem. And of course there are several parties that do what they can to change things for the better.

Danes get disenfranchised two years after leaving the country, so I haven’t had a vote for over a decade. However, if I was able vote in the general election on Thursday, I’d probably support Enhedslisten (or possibly Alternativet). I used to be a member of the Social Liberal Party, but although they’re still strongly against xenophobia, they seem to have forgotten their social conscience and are increasingly becoming a neoliberal party (or perhaps more accurately, one of the parties of Necessity), so I wouldn’t really consider voting for them any more.

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Varoufaki’s aporia: The ptocho-trapezocracy

Arrivals
Arrivals by EU Council Eurozone, on Flickr.

After putting it off for a while, I finally got round to reading The Global Minotaur by Yanis Varoufakis (Γιάνης Βαρουφάκης), the Greek finance minister.

If you’re not put off by a healthy dose of Latino-Greek loan words and grammatical constructions that sound rather academic and/or foreign, it’s a wonderful book. Here’s a typical sentence: “Our current aporia is a variant of the puzzlement engendered by the simultaneous progression of commodification, financialization, and the crises these processes inevitably occasion.”

The book isn’t really about Greece, or even Europe. It’s about the global financial system that was created by the United States after World War II, how it developed over time, and how it got fatally wounded in the financial crash.

His discussion of the 1929 crash and its aftermath is good, but things get interesting when he starts discussing Bretton Woods. For instance, the following was new to me:

During the debate on what that new syustem should look like, John Maynard Keynes made the most audacious proposal that has ever reached the bargaining table of a major international conference: to create an International Currency Union (ICU), a single currency (which he even named — the bancor) for the whole capitalist world, with its own international central bank and matching institutions. Keynes’ proposal was not as impudent as it seemed. In fact, it has withstood the test of time quite well. In a recent BBC interview, Dominique Strauss-Kahn, the IMF’s then managing director, called for a return to Keynes’ original idea as the only solution to the troubles of the post-2008 world economy.

Of course, this never happened. Instead, the US came up with what Varoufakis calls the Global Plan, “according to which the dollar would effectively become the world currency and the United States would export goods and capital to Europe and Japan in return for direct investment and political patronage”.

The book then discusses why the US chose to make Germany and Japan the regional pillars of this system, rather than some of the WWII victors (and as an aside, how this damaged the UK’s economy hugely).

What Varoufakis calls the Global Minotaur is the system that arose when the Global Plan collapsed after 1970, and the world economy instead started to depend on US deficits: “America began importing as if there were no tomorrow, and its government splurged out, unimpeded by the fear of increasing deficits. So long as foreign investors sent billions of dollars every day to Wall Street, quite voluntarily and for reasons completely related to their bottom line, the United States’ twin deficits were financed and the world kept revolving haphazardly on its axis.”

The book then describes how the financial crash fatally wounded the Minotaur, and how nothing has stepped in to replace it.

A lot of the book is concerned with surplus recycling mechanisms, and the point here is that there needs to be some mechanisms that allow surplus capital to be put to good use elsewhere in the world, so if the US can’t or won’t do this any more, the world economy won’t fully recover until some other way has been found to achieve this.

This is of course also the problem in the Eurozone: Germany and other Northern European countries are generating surpluses but tend to hoard the cash. Ideally they should either invest the cash elsewhere (in Greece, Portugal and so on), just like the US did as part of the Global Plan, or they should start to run massive deficits and in this way create a market for Greek and Portuguese products, like the US did during the reign of the Global Minotaur.

Finally, the book discusses how the bankrupt banks managed to dictate solutions to governments, in the process creating what Varoufakis calls a bankruptocracy or a ptocho-trapezocracy. (Although the book doesn’t discuss it, it’s interesting to compare this with what Iceland did instead.)

I must say the book was quite depressing to read. Varoufakis sees things a bit too clearly for comfort (this is what he calls an aporia), and to realise you’re living in a ptocho-trapezocracy is not a cheery thought.

However, if you can face it, I thoroughly recommend this book.

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Cameron wants the UK to leave the EU

PM attends European Council
PM attends European Council by Number 10, on Flickr.
David Cameron has said in the past that he intends to campaign to remain in the EU provided that he achieves a satisfactory deal before the referendum. I’ve just realised he must be bluffing.

The reason for this is Number 10’s announcement that EU citizens won’t be able to vote in the referendum. They didn’t have to announce this yet, so they’re clearly trying to shut down debate on this topic quickly — which again means they must be desperate to achieve this. It would have been much easier simply to let everybody discuss the pros and cons of different franchises, but then the outcome might not have been what they wanted.

And let’s face it: There can be only one reason to be desperate to prevent EU citizens from voting in the referendum, and that’s to achieve a vote in favour of Brexit, given that they’re the only group of people living here who would be almost guaranteed to vote in favour of continued EU membership. It’s worth noting in this connexion that the Tories have also ruled out giving 16- and 17-year-olds the vote — another group that are likely to be more positive towards the EU than the average UK voter — while being perfectly happy to let Commonwealth citizens vote, although they’re likely to more lukewarm towards EU membership.

If David Cameron really thought he would be likely to campaign in favour of remaining in the EU, it would be nonsensical to move fast to ensure the EU’s biggest fans are disenfranchised.

My guess is he’s already expecting his negotiations will fail (if for no other reason because he’s asking for things that any EU expert will tell him the other countries won’t give him), and he’ll then go out and say something along these lines: “I really wanted to remain in a reformed EU, but the other countries have turned their backs on us, so I will with a heavy heart have to recommend that this great nation leaves the EU.”

Why is Cameron doing this? My guess is it’s to save the Conservative party. If he came out in favour of leaving the EU already, some pro-business Tories would break out, and if he campaigned in favour of EU membership, a very large number of MPs would rebel. By pretending to negotiate in good faith, he keeps the pro-EU Tories happy, and by setting the negotiations up to fail, he ensures the Eurosceptics will eventually be happy.

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Scottish Independence with a Scandinavian Slant