tag:blogger.com,1999:blog-87326627697655111632024-02-23T08:44:13.853+01:00TransitionLife is a transition from one transition to anotherD. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.comBlogger119125tag:blogger.com,1999:blog-8732662769765511163.post-52113810283017283152018-10-03T10:09:00.001+02:002018-10-06T17:26:45.070+02:00The Italian Debt/GDP ratio hysteria<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">The
prospect of an Italian budget deficit of 2.4% of GDP has unleashed extraordinarily
strong adverse comment by EU officials and politicians, from Draghi to Juncker,
from Dombrovskys to Mattarella, to former ministers like Moscovici and
Berlusconi (of all people!) who in their days in government have been among the
worst offenders of EU austerity constraints: they actually claimed that the
very existence of the Euro was under threat. They should have remained silent
at least until greater details of the budget were unveiled, in order not to
cause the market upset and rise in the spread between the yield on Italian and
German bonds, that they ostensibly feared but in truth whipped up and welcomed with
great enthusiasm.<span style="mso-spacerun: yes;"> </span>They were aided and
abetted by the media hysteria of Italian and European press and television;
deputy premier Di Maio rightly spoke of “media terrorism”.<o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Concern
was generally expressed about the sustainability of Italian debt, presumed to
be reversing its recent course of slow but steady decline as a proportion of
GDP. Yet the arithmetic of Debt/GDP ratio evolution over time is very simple
and well known, and in no way justifies concerns for a budget deficit of 2.4%,
nowhere near the sustainability limits. The point has been made only by Senator
Alberto Bagnai, president of the 6<sup>th</sup> permanent Commission for
Finances of the Italian Senate, in various posts on his blog </span><span class="MsoHyperlink"><span style="background: white; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;"><a href="http://goofynomics.blogspot.com/">http://goofynomics.blogspot.com/</a></span></span><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">, and is well worth a
reminder.<o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">The
budget balance <i style="mso-bidi-font-style: normal;">f* </i>that stabilizes the
debt/GDP ratio in year t is given by following relationship:<o:p></o:p></span></div>
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<i style="mso-bidi-font-style: normal;"><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">f* = d</span></i><i style="mso-bidi-font-style: normal;"><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 8.0pt; line-height: 107%;">(t-1)*</span></i><i style="mso-bidi-font-style: normal;"><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">g/(1+g)<o:p></o:p></span></i></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">where
<i style="mso-bidi-font-style: normal;">d</i></span><i style="mso-bidi-font-style: normal;"><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 8.0pt; line-height: 107%;">(t-1)</span></i><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;"> is the debt/GDP ratio
at the end of the previous year (t -1), and g is the nominal growth rate of GDP
in period t. A budget balance lower than <i style="mso-bidi-font-style: normal;">f</i>*
will necessarily involve a decline of the Debt/GDP ratio in the course of the same
year t. This is not a controversial theory, nor rocket science or high
mathematics, it is an incontrovertible relationship of simple arithmetic.<o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">To
calculate this critical magnitude of the budget balance that will stabilise the
debt/GDP ratio in 2019, we need two values, both unknown in 2018 (i.e. today):
the value of the debt/GDP ratio at end-year 2018, and the nominal growth rate
in 2019. The IMF estimates that Italy’s Debt/GDP ratio at the end of 2018 will
be 129.7% of GDP, while GDP nominal growth in 2019 would be 2.5%, made up of 1.13%
growth, and about 1.4% inflation (<i style="mso-bidi-font-style: normal;">IMF
World Economic Outlook</i>, April 2018). Subsequent updates lowered real growth
by about one-tenth of a percent. Thus we can assume conservatively a 2019 real
growth of 1% and 1.4% inflation, i.e. a nominal growth rate of 2.4%. <o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">By
the relationship mentioned above, the value of Deficit/GDP ratio <i style="mso-bidi-font-style: normal;">f*</i> sufficient to stabilize the Debt/GDP
ratio is therefore: <o:p></o:p></span></div>
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<i style="mso-bidi-font-style: normal;"><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">f*</span></i><span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;"> = 1.297(0.024/1.024)=3.03%<o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">(more
precisely, 3.0398 i.e. almost 3.04%). The prospect of a 2.4% budget deficit amply
satisfies this constraint, leaving considerable room for contingencies; as it happens, the 2.4% deficit target also happens
to amply satisfy the Maastricht ceiling for the budget deficit (which no one proposed
to violate). Indeed a deficit rise with respect to the level embodied in
earlier growth estimates is bound to raise nominal growth as well above earlier
estimates, something that Ministers Tria and Savona were quick to point out,
but this is a minor additional argument in favour of current policies, with
respect to the powerful implications of 2.4%<<i style="mso-bidi-font-style: normal;">f*</i>.<o:p></o:p></span></div>
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<span style="background: white; color: #1a171b; font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Loose
and reckless talk is unbecoming of respectable officials and reporters. Regardless
of whether it is due to incompetence or malice, it breeds distrust and contempt,
though fortunately it also, in the end, raises popular support for the
government.<o:p></o:p></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com22tag:blogger.com,1999:blog-8732662769765511163.post-62236992608348656102018-05-05T11:44:00.000+02:002018-05-09T15:49:59.202+02:00Happy 200th Birthday, Karl Marx!<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqx8SpbNxk457CwKWt1S_IdeXmO7z3VaYLs9nPyxKVRcsJUwhXVij_DWdx-yi3M2qOnl64ETOxQLIvsbaGlh_NW8LBwsWY6ED1GwpZMwDJAf4HgZNXFj5XvRl64eMysGK-xlgNuKlkkUbK/s1600/karl-marx-statue.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="597" data-original-width="1024" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqx8SpbNxk457CwKWt1S_IdeXmO7z3VaYLs9nPyxKVRcsJUwhXVij_DWdx-yi3M2qOnl64ETOxQLIvsbaGlh_NW8LBwsWY6ED1GwpZMwDJAf4HgZNXFj5XvRl64eMysGK-xlgNuKlkkUbK/s320/karl-marx-statue.jpg" width="320" /></a></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Most Marxists and anti-Marxists alike probably fail to realise that the highest praise for capitalism is to be
found in Marx and Engels, <i>Manifesto of the Communist Party</i> (1848), that
readily recognised that the capitalist system promoted urbanisation,
industrialisation, technical progress, economic growth and prosperity on an
unprecedented scale: <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">“The bourgeoisie, during its rule
of scarce one hundred years, has created more massive and more colossal
productive forces than have all preceding generations together. Subjection of
Nature's forces to man, machinery, application of chemistry to industry and
agriculture, steam-navigation, railways, electric telegraphs, clearing of whole
continents for cultivation, canalisation of rivers, whole populations conjured
out of the ground—what earlier century had even a presentiment (of) such
productive forces . . . The bourgeoisie, by the rapid improvement of all
instruments of production, by the immensely facilitated means of communication,
draws all, even the most barbarian, nations into civilisation.”<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">At the same time Marx viewed
capitalism as a form of systematic labour exploitation. Primitive societies
were not exploitative because they exchanged goods roughly embodying the same
amount of labour. Slavery was less exploitative than it seemed, for slaves’
consumption allowed them to recover some of their own labour that looked
entirely unpaid. Feudalism was openly exploitative, for the amount of work
performed by labourers for themselves and for their feudal masters was clearly
stipulated and visible; whereas capitalism does not look exploitative at all,
since all labour is paid for, but workers perform more work than is embodied in
their means of consumption and a surplus of unpaid labour is appropriated by
capitalists.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Marx neglects altogether
entrepreneurship, uncertainty and risk and their rewards: on that basis a
positive share of profits is sufficient to infer exploitation, without the unnecessary
detour of his labour theory of value.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">The replacement and growth of
fixed capital would be necessary in <i>any</i> mode of production (including
socialism, Pareto 1890): exploitation should be restricted at most to
capitalists’ consumption. But Marx regarded all profits, consumed or
re-invested, as equally exploitative as originating in “primitive accumulation”
ultimately rooted in theft, robbery, war, conquest and other forms of violence.
<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Inequality of wealth and incomes was
recognised as a defining feature of capitalism. Its redeeming feature was the
financing of investment and growth: “Accumulate, accumulate! This is Moses and
the Prophets” (<i>Capital</i>, Vol,I, ch.24). <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Marx modelled intersectoral flows
and equilibrium conditions for a stationary and a growing economy in his
schemes of simple and enlarged reproduction (with two vertically integrated
sectors producing consumption and investment goods respectively). However he
exaggerated the instability of a capitalist system by assuming that profits necessarily
would have to be reinvested in the same sector in which they originated, while in
any capitalist economy re-investment is never subject to such an arbitrary
restriction (Lange 1970 amplified unreasonably this presumed instability of the
system maintaining this undue sectoral restriction in a multi-sector model).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">Marx regarded capitalism as a
totally chaotic and anarchic system, naturally generating unemployed labour and
under-utilisation of other resources, as well as costly fluctuations and
economic crises. However he neglected automatic processes of economic adjustment,
operating imperfectly, often either too fast or too slowly, but typical of the
operation of markets in a capitalist system. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt; line-height: 107%;">These automatic processes are: in
the short-term, for a given level of production, the Walrasian adjustment of
prices to any positive or negative excess demand; in the medium-term, when
production levels can vary, the Marshallian adjustment of enterprise output to
price relatively to its marginal cost; as well as the transmission to other
sectors of the inputs requirements corresponding to their output change
(activating what Goodwin 1949 calls “the multiplier as matrix”). In the longer
term, when productive capacity can vary, there is a gradual adjustment of the actual
capital stock to the level desired by enterprises in consideration of the
demand level they experience - an upwards adjustment via investment in new
capital or downwards through the non-replacement of excess capital. These
adjustment processes are rooted in the maximisation of profit on the part of
enterprises operating in a system of markets, whose owners appropriate profit
to their own advantage. And we need to stress that these adjustment mechanisms
auto-regulate production, prices, intersectoral transactions and productive
capacity but naturally they do not regulate <i style="mso-bidi-font-style: normal;">themselves
as institutions</i> (in a process that would amount to “autopoiesis”); thus
their creation, regulation and guarantee remain fundamental functions of the
state even in a fully de-centralised market economy.<o:p></o:p></span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;"><br /></span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">Goodwin (1947, 1951a and 1953) likens the adjustment mechanisms
operated by markets to homeostatic mechanisms, such as for instance a
thermostat, that records the actual temperature, compares it to a pre-fixed
desired temperature and automatically activates heating or cooling systems in order
to reduce the difference between actual and desired temperatures (see also
Leijonhuvfud 1970).<o:p></o:p></span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">This kind of logic is less cogent and much more controversial in the
case of financial markets. Financial intermediation creates value by modifying
the size, time horizon and riskiness of assets demand and supply, but their
continuous operation is associated to phenomena of both euphoria and panic.
Financial markets contribute to economic growth at the cost of a greater
vulnerability and potential instability. Keynes believed that financial
investment should be indissoluble like marriage (or better, we should say that investment
divorce should be equally costly and traumatic). Derivative products, whose
value depends on the value of underlying assets, which they amplify and
multiply, can contribute to the increase of total risk instead of its
distribution among a large number of agents. This is why Buiter (2009) proposed
to reserve derivatives transactions to agents who could justify them on the
basis of an underlying insurable interest. <o:p></o:p></span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">The alternative to markets seen as automatic thermostats is the manual
regulation of temperature or of equivalent processes; manual control – in
economic terms – corresponds to central planning. The desirability of
self-regulating market mechanisms with respect to central planning depends on
the speed of reaction of the system, on its tendency to reduce or to amplify
the possible divergence between objectives and reality, from the stability or
otherwise of such processes. There can be circumstances in which manual control
(planning) is preferable to the automatic control (markets). My favourite
example, which I used to inflict on my students, is taken from <i>Star Wars</i>:
when Luke Skywalker is trying to strike at the heart of the Empire with a
single shot, he disactivates the automatic aiming mechanism and choses to do it
manually. But he is justified by exceptional circumstances: there is only one
target, which he can either hit or miss without intermediate degrees of
success, and ... the Force is with him. <o:p></o:p></span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">The automatic adjustment processes discussed here, built into a market
system, in spite of their imperfections have made the capitalist system more
flexible, at the same time exposing it to the risk of possible episodes of much
greater unemployment, instability and stagnation than would have been the case
otherwise. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">One of Marx’s main
contributions to political economy is an evolutionary theory (“Darwinist”,
according to Engels in his Speech on Karl Marx’s Tomb) of <i>modes of
production</i>, understood in the modern sense of <i>economic systems, </i><span style="mso-bidi-font-style: italic;">as institutional setups that regulate the
production and exchange of economic goods.</span><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">For Marx labour acting
over nature leads to the development of <i>production forces </i>(natural resources,
accumulation of physical and human capital, the state of technical knowledge).
This development leads to the emergence of contradictions between the
productive potential of society and the prevailing production relations (e.g.
rules about ownership, production organisation, etcetera). Production relations
then are modified as a result, in such a way as to eliminate such
contradictions, realising the “law of the necessary correspondence of
production relations to the character of productive forces” </span><span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">(Lange, 1963, ch. 2). </span><span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;"><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">Further
contradictions arise between the economic basis </span><span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">(or production relations) and </span><span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">the <i>superstructure</i> of society, understood as the social relations
and social consciousness (religion, ideology, culture, etc.; Lange gives the
example of the support to capitalism implicit in the protestant ethic), which contribute
to the legitimation of the existing mode of production. Conflicts and
contradictions between the various elements of the system and their resolution
guide its evolution, according to the “Law of the necessary correspondence of
the superstructure with the economic basis”. Productive forces and production
relations define a mode of production, though at any time a mode of production
coexists with residuals of former modes and embrios of the superstructure of
future societies (Lange, 1963).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">In his original
approach to the evolution of economic systems, in any case, Marx made three
major errors: he believed that: 1) there would be a final point of arrival for
such an evolutionary course, i.e. full communism (with prevailing free goods,
distribution according to needs, no state, and abundance of economic goods)
without classes and therefore non-antagonistic, under which there would no
longer be conflicts and contradictions; 2) there would be a linear progression
of economic systems, from primitive societies to slavery to feudalism to
capitalism (with a possible diversion represented by the Asiatic mode of
production), followed by socialism and full communism; 3) that system evolution
would be dominated by an extreme form of dialectical materialism, or economic
determinism, with an exclusive role for economic factors. On the contrary we
know today that full communism has always remained an objective never realised;
that in the 1990s socialism was re-transformed back into capitalism, and
moreover into an extreme form of hyper-liberal capitalism; and that economic
factors are only a part, though important, of the multiple causes of system
transformations. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">One prediction that Marx
did get right was the progressive relative immiserisation of the proletariat:
while in absolute terms economic progress has raised living standards immensely and reduced poverty beyond the most
optimistic expectations, in relative terms especially in this century the share
of income and wealth of the rich has been increasing at unprecedented rates to
record levels. </span><span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12.0pt;">According to Oxfam<i>
</i>(2016) in 2015 the 62 richest individuals had increased their wealth by 44%
with respect to 2010, matching the same total wealth of the poorest 50% of the
world population, which on the contrary impoverished itself by 41% in the same
period (in 2010 it took the 388 richest individuals to match the wealth of the
poorest <span style="mso-spacerun: yes;"> </span>50%). </span><span lang="IT" style="font-family: "verdana" , sans-serif; font-size: 12.0pt;"><span style="mso-spacerun: yes;"> </span></span><span lang="IT" style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">Since 2008, the
wealth of the richest 1% has been growing at an average of 6% a year – much
faster than the 3% growth in the wealth of the remaining 99% of global
population: should that trend continue, by 2030 the top 1% would hold two/thirds
of world wealth, $305tn – up from $140tn today (<i style="mso-bidi-font-style: normal;">The Guardian</i>, 13/4/2018).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 12.0pt;">Reports of the death
of both Marx and God have been grossly exaggerated. <o:p></o:p></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com10tag:blogger.com,1999:blog-8732662769765511163.post-70601673836877945512018-04-16T10:15:00.000+02:002018-04-16T10:15:02.098+02:00Paul Mason’s PostCapitalism?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="IT" style="font-family: Verdana, sans-serif; font-size: large;">Current assessments of where modern capitalism is going
vary greatly, probably more today than ever before. In the previous post we
considered (and rejected) John Kay’s idea that capitalism has been transformed
so radically by the internet and associated developments that it was tamed and
turned into a non-antagonistic stakeholders’ paradise which we should stop
calling capitalism altogether. A somewhat different conclusion is drawn from similar
premises by John Mason (<i>PostCapitalism - A Guide to Our Future</i>, Allen Lane, London 2015)</span><span style="font-family: Verdana, sans-serif; font-size: large;">, predicting not so much the taming of capitalism
but its collapse, replaced by a world of plentiful free digital goods.</span></div>
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<span style="font-size: large;"><span lang="IT" style="color: black; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">Mason argues that new technologies such as internet and
the rise of the digital economy “are not compatible with capitalism … Once
capitalism can no longer adapt to technological change, PostCapitalism becomes
necessary... in short: ... capitalism is a complex, adaptive system which has
reached the limits of its capacity to adapt” (for a positive review see Donald <a href="http://www.paecon.net/PAEReview/issue73/whole73.pdf" target="_blank">Gillies</a>
2015).</span><span lang="IT" style="color: #222222; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span lang="IT" style="color: black; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">Many consumption goods - all the media, literature,
musical scores and recordings, photographs, films, television programmes,
reproductions of works of art – and production goods such as software, are
digital products, whose equilibrium price cannot exceed their cost of
reproduction which is zero or near-zero. Mason argues that </span><span lang="IT" style="color: #222222; font-family: Arial, sans-serif; line-height: 107%;"> </span><span lang="IT" style="color: #222222; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">“The rise of information goods
challenges marginalism at its very foundations because its basic assumption was
scarcity, and information is abundant. Walras, for example, was categoric:
‘There are no products that can be multiplied without limit. All things which
form part of social wealth … exist only in limited quantities’” (p. 163).</span><span lang="IT" style="color: #222222; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span lang="IT" style="color: black; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">Gillies notes that “these areas of capitalism now
being eroded are precisely the ones in which great capitalist fortunes were
made in the 1980s and 1990s”, by owners of software companies and by media
tycoons. In theory financing the production of digital goods could be achieved
by advertising or by strict enforcement of legal protection of intellectual
property, but both methods have limited effectiveness, the first because of its
limited size and the second because of widespread piracy. Alternatively, the
production of digital goods could be organised “in a decentralized and
collaborative way” like Wikipedia, “utilizing neither the market nor management
hierarchy” (Mason, p. 129).</span><span lang="IT" style="color: #222222; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span lang="IT" style="color: #222222; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">Gillies argues that, if groups of workers are going to
be paid to produce digital goods, they cannot be paid by the private sector and
therefore would have to be paid a wage by the state: PostCapitalism would be a
form of socialism, not a traditional bureaucratic and authoritarian socialism but
a more egalitarian and libertarian, “networked” version. Gillies expects that
the new socialism will be international, and that the same rise of the digital
economy that brought about a decline of capitalism “clearly favours the left in
politics”.</span><span lang="IT" style="color: #222222; mso-ascii-font-family: Calibri; mso-bidi-font-family: Calibri; mso-hansi-font-family: Calibri;"><o:p></o:p></span></span></div>
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<span lang="IT" style="color: #222222; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;"><span style="font-size: large;"><br /></span></span></div>
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<span style="font-size: large;"><span lang="IT" style="color: #222222; font-family: "Verdana",sans-serif; mso-bidi-font-family: Calibri;">But there is a more trivial, brutal solution to the effects
of the digital economy, namely one in which digital goods, constrained by a
zero reproduction cost and price, will only be produced in a much reduced scale
within the bounds of voluntary selfless generosity, limited advertising income
and ineffective protection of intellectual property. A somewhat impoverished
world and a largely unchanged system would be the unattractive but more
probable outcome. The digital economy rests on the continued real production of physical
goods and their exchange, driven by ordinary markets just as much as any “earlier”
capitalist form. Reports of capitalist collapse have been much exaggerated.</span></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com0tag:blogger.com,1999:blog-8732662769765511163.post-1087627737688010892018-03-22T09:50:00.000+01:002018-03-23T18:04:20.719+01:00“Beyond Capitalism?” No, Back To The Future<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">“I wish we would stop using the word Capitalism”, writes John Kay of Oxford University, in a recent post entitled </span><i style="color: black; font-family: Verdana, sans-serif; font-size: 12pt;"><a href="https://www.socialeurope.eu/moving-beyond-capitalism" target="_blank">Moving Beyond “Capitalism”</a></i><span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">. </span><br />
<span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;"><br />Kay reminds us that, in nineteenth century </span><span style="color: black; font-family: "verdana" , sans-serif; font-size: 16px;">British capitalism</span><span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">, enterprises and large companies were in the hands of owners-entrepreneurs; in the twentieth century in England and the United States the role of entrepreneurs was delegated to professional managers, already in family enterprises and especially on behalf of a multitude of shareholders. More recently the role of shareholders was taken over mostly by pension funds, by insurance companies and mutual funds, whose investments are handled by professionals specialized in managing their portfolios.</span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">After the last War firms become international and multinational, manage many plants in different countries and operate in a global economy that frees them of many domestic constraints, giving it access to mobility of capital and labour, of goods and services. The enterprise is "empty" (generating <i>the hollow company),</i> in the sense of transforming itself into a network of relationships, with a fragmented division of labour worldwide governed by intermediaries organized by markets, rather than by hierarchies as in the enterprise model developed by Ronald Coase in 1937. (Coase had asked why production was organised in firms instead of being conducted by self-employed individuals entering market relations, and why was production not organised in a single giant firm. He found the answer in the transaction costs of market relations versus those of centralised direction by an entrepreneur).</span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">The capitalization of a large company depends on the value of these relationships, which is particularly illiquid: the relationships as such or the brand that represents them cannot be transferred to others without losing much if not all of their value. For this reason the shares of these companies tend to end up in the hands of their managers, as well as of their employees. These companies need a stock exchange listing initially to allow the founders to realize the value they added to their capital, and to reassure shareholders on the value and above all the liquidity of their shares, but otherwise are not financed by the capital market but mostly through reinvesting their profits.</span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">A certain fragility derives from this set up, but also a certain resilience, i.e. the ability' to survive a bad management even if their own capital is used inefficiently. According to Kay the enterprise of the twenty-first century - and therefore today's new capitalism - would no longer involve a confrontational relationship between capital and labor, but rather a partnership, an inclusive relationship that merges the interests of managers and employees, of suppliers and customers, while the position of investors is secondary and precarious. A stakeholders’ paradise, we might call it. Kay expects that such inclusive character of enterprises should discourage selfish rent-seeking behavior and maintain cohesion, without endangering the company’s external legitimacy through the misuse of the political process, reaffirming their character as social organizations embedded in communities.</span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">The theory that shareholders are not the owners of their company is an old hobby horse of John Kay, oblivious to considerations that shareholders who disagree with managerial decisions can always vote for the liquidation of the company, sell the shares to anyone with an alternative vision of how make it more profitable, or simply sell the shares in the stock exchange depressing their price thus making it easier for potential bidders to take over the company. </span><span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;"><br /><br />Robin Marris (1964) tried to build a theory of "Managerial" Capitalism, in which professional managers sacrifice part of the shareholders’ value (the maximisation of profit and of capital valuation relatively to capital employed), in favour of higher growth of company turnover, capital and employment, which benefits managers directly and indirectly through their remuneration, social prestige and promotion opportunities. However this profitability reduction is constrained, in Marris’ theory, by the danger that the failure to maximise the stock exchange valuation of the company might induce an investor or an alternative managerial team to attempt a takeover bid, which if successful would bring about the dismissal of managers and the rise of profitability also in the interest of all other shareholders. Paradoxically therefore Marris’ attempt to theorise the alleged specific difference of Managerial Capitalism led him to confirm its traditional textbook behaviour.</span></div>
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<span lang="IT" style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">As for the model of the modern enterprise as a network of relationships mediated by markets instead of a centralised command hierarchy, it is easy to understand its greater fragility but not its alleged more inclusive and less confrontational character. On the contrary, the fragmentation of the productive process and the fierce competition among global workers can only intensify conflicts between capital and labour, as confirmed by the continuous decrease of the labour share in national income worldwide. </span><br />
<span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;"><br />The capitalist evolution outlined by Kay does not alter at all the system’s tendencies towards labour unemployment and unused capacity, economic fluctuations and crises, rising inequality of income and wealth.</span><i style="color: black; font-family: verdana, sans-serif; font-size: 12pt;"> </i><span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;">“Moving Beyond Capitalism?” No, Back To The Future. </span><br />
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<span style="color: black; font-family: "verdana" , sans-serif; font-size: 12pt;"><b>Postscript.</b></span><br />
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On the evolution of corporations in modern capitalism see also John Kenneth
Galbraith’s <i>The New Industrial State</i> (1967) and especially the excellent Foreword by James Galbraith to the 2007 reprint of the book (Princeton
University Press, <a href="https://press.princeton.edu/titles/8389.html">https://press.princeton.edu/titles/8389.html</a>).<o:p></o:p></span></div>
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<span lang="IT" style="color: #292b2c; font-family: "verdana" , sans-serif; font-size: 12pt; letter-spacing: 0.3pt;"><b>References: </b><br />Ronald Coase (1937), <a href="https://www.colorado.edu/ibs/es/alston/econ4504/readings/The%20Nature%20of%20the%20Firm%20by%20Coase.pdf" target="_blank">“The Nature of the Firm”</a>, <i>Economica</i>, 4(16), 386-405</span><br />
<span style="color: #292b2c; font-family: "verdana" , sans-serif; font-size: 12pt; letter-spacing: 0.3pt;">Robin Marris (1964),</span><span style="color: #292b2c; font-family: "verdana" , sans-serif; font-size: 12pt; letter-spacing: 0.3pt;"> </span><i style="color: #292b2c; font-family: Verdana, sans-serif; font-size: 12pt; letter-spacing: 0.3pt;">The Economic Theory of ‘</i><i style="color: #292b2c; font-family: Verdana, sans-serif; font-size: 12pt; letter-spacing: 0.3pt;">Managerial’ Capitalism</i><span style="color: #292b2c; font-family: "verdana" , sans-serif; font-size: 12pt; letter-spacing: 0.3pt;">, London, Macmillan.</span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com10tag:blogger.com,1999:blog-8732662769765511163.post-82158456049082948512018-03-04T09:08:00.000+01:002018-03-13T23:36:37.198+01:00Be Careful What You Wish For<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;"><b>Note</b>: <i>An Italian translation of this post (not revised by the author) has been published by <a href="http://vocidallestero.it/2018/03/10/mario-nuti-state-attenti-a-cio-che-desiderate/" target="_blank">vocidallestero.it</a> , I am grateful to them and to the many readers who twitted and ri-twitted this post, as well as those who expressed their support on Facebook (where I have an account that I do not manage well). All this gave this post an extraordinary diffusion. Thanks also to all those who offered comments: I would rather readers commented directly on the Blog rather than to me via e-mail, in which case I might post their comments under initials or a made-up pseudonym or ask for their permission to enter their name </i></span><i style="font-family: arial, sans-serif; font-size: 16px;">(DMN) </i><i style="font-family: arial, sans-serif; font-size: 12pt;">.</i><br />
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">Indro Montanelli (1909-2001), the prestigious Italian journalist and writer, on many occasions expressed great contempt for Silvio Berlusconi, his character and politics. Yet in 2001 Montanelli declared in an <a href="https://it.wikiquote.org/wiki/Indro_Montanelli." target="_blank">interview</a>: “I want him to win, I make vows and give pledges to the Madonna for him to win, so that Italians will see who this man is. Berlusconi is a disease that is cured only by vaccination, with a good injection of Berlusconi in government [<i>a Palazzo Chigi</i>]; Berlusconi as President of Italy [<i>al Quirinale</i>], Berlusconi wherever he wants to be, Berlusconi at the Vatican. Only afterwards will we be immune. The immunity that is obtained through vaccination” (<i>La Repubblica</i>, 26 March 2001<a href="https://mail.google.com/mail/u/0/?tab=wm#m_4839500363543605695_m_194883858975568305_m_390758989628503788_m_2389227968528158881__ftn1" name="m_4839500363543605695_m_194883858975568305_m_390758989628503788_m_2389227968528158881__ftnref1" style="color: blue;" title=""><span class="m_4839500363543605695m_194883858975568305m_390758989628503788m_2389227968528158881gmail-MsoFootnoteReference" style="vertical-align: super;"><span class="m_4839500363543605695m_194883858975568305m_390758989628503788m_2389227968528158881gmail-MsoFootnoteReference" style="vertical-align: super;"><span style="color: #222222; font-size: 12pt; line-height: 17.12px;">[1]</span></span></span></a>).</span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">In the 13 May 2001 elections the first part of Montanelli’s wishes came true: Berlusconi and his allies obtained an absolute majority in both Houses of Parliament. </span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">Montanelli should have been more careful what he wished for. His verdict on the man was correct: the lower and the appeal courts in Milan in 2012 and 2013 convicted Berlusconi of fiscal fraud. The four year sentence was later reduced to one year and three months, which he never served by virtue of being over 70, but deprived him of political rights for two years until 2019. </span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">"He is the most sincere liar I know, for he is the first to believe in his own lies”, Montanelli had said; he got away with a gigantic conflict of interest (with the complicity of the Left); Marco Travaglio, <i><a href="https://www.ilfattoquotidiano.it/2018/02/28/berlusconi-travaglio-sul-suo-libro-b-come-basta-e-il-piu-grande-populista-e-frodatore-fiscale-della-storia/4193372/" target="_blank">B. come Basta</a>,</i> Paperfirst<i>, </i>2018, recounts how he run the country.</span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">But otherwise Montanelli had been utterly and tragically wrong: the Italian electorate, who had already a short exposure to Berlusconi in 1994-95 and repeated large doses of vaccine with his governments in 2001-05 and 2008-11, still seems inclined to make his coalition the favourite to win the elections of 4 March 2018.</span><span style="font-family: "arial" , sans-serif; font-size: 10.5pt;"></span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">Despite Montanelli's mistaken prognosis and cure, I venture a similar wish, though in different circumstances, with respect to other parties and for different reasons.</span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif; font-size: 12pt;">At present there is a false, self-styled social-democratic<i> </i>Left, justifying itself by pretending to defend the interests of working people while destroying their life chances with their hyper-liberal, austerian and globalist policies, promoting no-border movements of capital and labour, de-regulation, privatisation, the destruction of the welfare state and unprecedented inequality of income and wealth. </span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;"><span class="im" style="color: #500050;">Inevitably a two steps (at least) process is required to get rid of this false Left and open the Left again to being the representative of working people, of fairness, of the admittance of workers' organisations into governance, of preventing falling wages and mass unemployment, of strengthening the welfare state in all its manifestations, from education to decent health and pensions as well as its current, defective, merely safety-net functions.</span></span><br />
<span style="font-family: "arial" , sans-serif; font-size: 12pt;"><span class="im" style="color: #500050;"><br /></span>If this analysis is correct, Italian socialists and socialdemocrats should vote for the centre-Right, from Noi con Italia-UDC, to Lega, to Forza Italia. They are going to win anyway this time. It is better that they should win well, preventing any attempt by the state to put the country through the repellent mess Napolitano concocted in 2011 and 2013, that has led to five years of illicit and incompetent governance and to the collapse of a proper Left position and Party.<br /><br />If the Centre-Right governs well then the Left will have breathing space to construct a proper programme, a democratic Party structure, and consolidate its electorate. They must at least step back from the caricature of the Left of Grasso, Boldrini, and old men like Bersani. And get rid of all the contemptible collusion in corruption from Rignano sull’Arno and Laterina. </span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">The Centre-Right might govern well, for many of the programme elements proposed by the current Centre-Right coalition <i>should be</i> in a programme of the Left: lower taxes on earned income; controls on economic immigration into Italy; new relations with the EU; a revision of Eurozone regulation and management; easing of regulation destructive of providing housing; security at home; defence of Italian interests at international level, etc., etc. Indeed it is a shame that these issues are not part of the Left manifesto, or indeed of the so-called Lefts' many manifestos. </span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">A reshuffling of voters characterised by these values should be pursued and implemented, which is very different from an unholy <i>Grosse Koalition</i> of opposite approaches and interests held together exclusively by the pursuit of and for the maintenance of political power against democratic processes.</span></div>
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<span style="font-family: "arial" , sans-serif; font-size: 12pt;">And if the Centre-Right fails to deliver then we return to vote again (which I believe we will) but this time, with the second step, the second consultation of the people, we can hope to have a real Left to vote for. The 'Progressive' class and national traitors can stand on their own platform, and not as the pretend Left that is all that is on offer this time.</span></div>
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<i style="font-family: arial, sans-serif; font-size: 12pt;"><br /></i>
<i style="font-family: arial, sans-serif; font-size: 12pt;">Dixi et salvavi animam meam.</i></div>
<span class="im" style="background-color: white; color: #500050; font-family: "arial" , sans-serif; font-size: 12.8px;"></span></div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com40tag:blogger.com,1999:blog-8732662769765511163.post-61436938705787271632018-02-28T11:44:00.001+01:002018-03-10T23:49:23.817+01:00“A flat tax is for a flat Earth”<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-size: large;"><span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;">This
was my answer to Grzegorz Kolodko, Poland’s Minister of Finance and First
Deputy Premier for the Economy (1994-97 and 2002-03), when in the mid-‘90s he
asked me – his adviser sponsored by the European Commission – for an opinion on
the feasibility and desirability of introducing a flat tax.</span><span style="color: #222222; font-family: "arial" , sans-serif;"> </span><span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;">I recommended instead a reduction of indirect
taxation and the introduction of a tax on capital gains. To his credit Grzegorz
listened to me on the flat tax, he reduced the number and level of marginal tax
rates but at the same time he raised public expenditure on investment and on re-distribution,
introduced an industrial policy that did not seek to pick winners but promoted
high value added and export activities, and his package worked well.</span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The
introduction of a flat tax has become a major issue in the policy discussions
on the eve of Italian elections, as it is being vigorously propounded by Silvio
Berlusconi and the leaders of his right-wing coalition. My views on the flat
tax have not changed at all in the the intervening years.<o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">There
are two main arguments in favour of a flat tax:<o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">1)
the presumed existence of a Laffer curve, whereby government tax revenue is
supposed to rise with the increase of the tax rate up to a maximum, beyond
which a higher tax rate would actually reduce tax revenue, and <o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">2)
lower taxation would encourage the emergence of activities that at present
evade taxation, and therefore raise additional government revenue in that way.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">According
to established legend (Wanniski 1978) in 1974 Arthur Laffer, then a professor
at Chicago University, drew the curve named after him, depicting tax revenue as
a function of the tax rate, on a napkin at a dinner in a Washington restaurant to
illustrate the effects of President Ford’s tax cuts. Except that he did not
draw it on the basis of empirical evidence, but simply noting that for a zero
tax rate tax revenue would obviously be zero, and assuming that for a 100% tax
rate there would be a zero revenue because nobody would work or invest for a
zero after-tax return. He also presumed that there would be a continuous parabolic
shaped curve in between those two points and drew a maximum around a 50% tax
rate. Thus you could obtain the same tax revenue with a low tax rate on a large
tax basis or with a high tax rate on a smaller basis. <o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Laffer
(2004) acknowledged that already in the 14th century the Tunisian philosopher Ibn
Khaldun had noticed this possibility, which had also been asserted by many
other thinkers including Keynes: “… taxation may be so high … that … a
reduction of taxation will run a better chance than an increase of balancing
the budget” (quoted by Laffer).<o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;"><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The
trouble is that actual empirical estimates of revenue-maximizing tax rates have
varied widely, with a mid-range of around 70% (Fullerton 2008, which fits with the
“so high rate” stipulated by Keynes), while current tax rates in OECD countries
average about half that rate. So much so that the IMF <i style="mso-bidi-font-style: normal;">Fiscal Monitor</i> of October 2017 actually recommends raising tax
rates in a progressive fashion in order to reduce current excessive inequality of
income and wealth, for “There is little evidence that increased progressivity
reduces growth”. <o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">More
importantly, a 100% flat tax rate is plainly silly, for a progressive tax can
reach fairly high marginal rates, historically even 90% and higher, without
ever yielding a zero tax revenue. Indeed it has been argued that the Laffer
curve might well be increasing monotonically, and in any case even a flat tax
of 100% might yield substantial revenue in special circumstances like wartime
or even in normal times depending on behavioural assumptions. <o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">As
for the second argument in favour of a flat tax, there is absolutely no
evidence that a low tax rate – flat or not – encourages the payment of taxes
otherwise evaded at higher rates. And why should it, as Schumpeter put it there
is no good reason for anybody not reaping a benefit just because it is small. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="background: white; color: #222222; font-family: "arial" , sans-serif;">Critics
of a flat tax lament its lack of progressiveness.<span style="mso-spacerun: yes;"> </span>Supporters – such as Berlusconi – are quick
to point out that in most OECD countries, including Italy, there already is a
flat tax on capital incomes, at a constant rate lower than the higher
progressive rates on earned incomes, so that a uniform flat tax levied at an
intermediate rate would be more progressive than the current system. And anyway
the presence of a tax-exempt threshold maintains a degree of progressiveness,
as required for instance by the Italian Constitution, art. 53; “The tax system
shall be progressive”.</span><span style="font-family: "times new roman" , serif;"><o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">These answers to critics of the flat tax lack of progressiveness are not
good enough, because the first comma of art. 53 states also that “<span style="background: white;">Every person shall contribute to public expenditure in
accordance with their capability”. <span style="mso-spacerun: yes;"> </span>The </span>progressiveness
of a flat tax is minimal, depending exclusively on the size of the tax-free
initial threshold, and may be regarded rightly as constitutionally inadequate: the
average tax rate rises slowly approaching gradually from below the flat fixed rate
on taxable income, and significant progressiveness would only be achieved for extremely
large tax-free thresholds, counterproductive for tax revenue. The corresponding
reduction in the current progressive tax on earned income would not benefit
ordinary workers but only overpaid managers, making after-tax distribution of
earned incomes more unequal. While the reduction of current excessively high
levels of public debt, as well as the reduction of excessive degrees of
inequality of income and wealth, are best served by a genuinely more
progressive tax system of the kind recommended by the IMF (2017).<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">On 24 January last the <i style="mso-bidi-font-style: normal;">Washington
Post</i> reported that Mike Hughes, a 61-year limo driver from California and a
flat-Earth strong believer, has been planning to launch a self-built rocket to
propel himself 52 miles into space in order to be able to see for himself that
the Earth is flat, for “in many months of research I’ve not been able to prove
otherwise” – he said. The trouble is that the project would cost 2 million
dollars to finance the building and fuelling of the rocket, a space-suit and a
hot-air balloon (Mike Hughes is a bit vague about his logistics), and he was
only able to raise $8,000 from GoFundMe. As he now has a fellow flat-Earther in
billionaire Silvio Berlusconi, it would be best for Silvio to fund the project
in exchange for a lift in the same rocket, and all will end well both in
California and in Italy, in the best of all possible worlds.<span style="mso-spacerun: yes;"> </span></span></span><br />
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: large;"><br /></span>
<span style="color: #222222; font-family: "arial" , sans-serif; font-size: large;"><b>Addendum 1</b></span><br />
<span style="color: #141414; font-family: "arial" , sans-serif; font-size: large;">Trabandt and Uhlig (2019) estimate the Laffer curves for labour taxation and capital income taxation for the US, the EU-14 and individual European countries for 1995-2007. They find that the US can increase tax revenues by 30% by raising labour taxes and 6% by raising capital income taxes. For the EU-14 they obtain 8% and 1% respectively. Germany could raise 10% more tax revenues by raising labour taxes but only 2% by raising capital taxes. The same numbers for France are 5% and 0%, for Italy 4% and 0% and for Spain 13% and 2%. Only Denmark and Sweden are on the “wrong” side of the Laffer curve for capital income taxation.</span><br />
<span style="color: #141414; font-family: "arial" , sans-serif; font-size: large;"><b><br /></b></span>
<span style="color: #141414; font-family: "arial" , sans-serif; font-size: large;"><b>Addendum 2 </b></span><br />
<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">In the latest Italian elections the Lega proposed a Flat Tax at 15% over the €7,000 tax-free threshold
(plus minor further exemptions on households), while Berlusconi proposed its
introduction at 23%. According to the Lega their flat tax would create an
initial shortfall of €63bn (i.e. €103bn tax revenue from households and €18bn
from companies instead of the combined current tax revenue of €184bn from IRPEF-IRES). </span></span><br />
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They propose to cover this shortfall first of all from 25 expenditure cuts and
additional taxes (including €5bn savings on centralised public procurement,
€2,5bn on military expenditure, €5bn tax increase on gas prospection, €900mn
from abolition of interest charges deduction by banks and insurance companies,
€800mn for official cars abolition for hospitals, €700mn cuts in "golden
pensions" (of dubious constitutionality). The bulk of the coverage would
come, however, from the emergence of the black economy, reduced tax evasion,
additional VAT and income tax on additional transactions and incomes expected
from the tax reduction. Pie in the sky.</span><span style="font-size: 9.5pt;"><o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">REFERENCES<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="background: white; color: #222222; font-family: "arial" , sans-serif;">Fullerton Don (2008). "Laffer curve", In
Durlauf Steven N., Lawrence E. Blume, <i style="mso-bidi-font-style: normal;">The
New Palgrave Dictionary of Economics</i> (2nd ed.), </span><a href="https://doi.org/10.1057%2F9780230226203.0922"><span style="background: white; font-family: "arial" , sans-serif;">https://doi.org/10.1057%2F9780230226203.0922</span></a><span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<br /></div>
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">International Monetary Fund IMF (2017), <i style="mso-bidi-font-style: normal;">Fiscal Monitor: Tackling Inequality</i>,
October.<o:p></o:p></span></span></div>
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<br /></div>
<div class="MsoNormal" style="background: white; line-height: normal; margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Laffer Arthur B. (2004), “The Laffer Curve: Past,
Present, and Future”, 1 June, Backgrounder #1765, </span></span><span style="font-size: large;"><i><span style="color: #222222; font-family: "arial" , sans-serif;">The
Heritage Foundation</span></i><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #222222; font-family: "arial" , sans-serif; font-size: medium;">, </span><a href="https://web.archive.org/web/20071201225944/http:/www.heritage.org/Research/Taxes/bg1765.cfm"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: "arial" , sans-serif;">https://web.archive.org/web/20071201225944/http://www.heritage.org/Research/Taxes/bg1765.cfm</span></a><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #222222; font-family: "arial" , sans-serif; font-size: medium;"> </span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "arial" , sans-serif;">Selk Avi and Amy B. Wang (2018), “Can this flat-Earther’s long-delayed
rocket launch be saved? We may soon find out.” <i style="mso-bidi-font-style: normal;">The Washington Post</i>, 24 January, </span><span style="font-family: "arial" , sans-serif;"><a href="https://www.washingtonpost.com/news/speaking-of-science/wp/2018/01/24/can-this-flat-earthers-long-delayed-rocket-launch-be-saved-we-may-soon-find-out/?utm_term=.5a9d7e82d352">https://www.washingtonpost.com/news/speaking-of-science/wp/2018/01/24/can-this-flat-earthers-long-delayed-rocket-launch-be-saved-we-may-soon-find-out/?utm_term=.5a9d7e82d352</a></span></span><span style="color: #222222; font-family: "arial" , sans-serif; font-size: 9.5pt;"><o:p></o:p></span><br />
<span style="font-size: large;"><br /></span>
<span style="font-size: large;"><span style="color: #141414; font-family: "arial" , sans-serif;">Trabandt Mathias and Harald Uhlig (2010), “How far are we from the slippery slope? The laffer curve re-visited”,</span><span style="color: #141414; font-family: "arial" , sans-serif;"> </span><i style="color: #141414; font-family: Arial, sans-serif;">ECB Working Paper Series</i><span style="color: #141414; font-family: "arial" , sans-serif;"> </span><span style="color: #141414; font-family: "arial" , sans-serif;">No. 1174, April, Frankfurt,</span><span style="color: #141414; font-family: "arial" , sans-serif;"> </span><a data-saferedirecturl="https://www.google.com/url?hl=en-GB&q=https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1174.pdf?344d6e77a58718332bd900b10e4d85b2&source=gmail&ust=1520012832678000&usg=AFQjCNHaFFrPz42-vQKvrxfSrQAYGPPliA" href="https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1174.pdf?344d6e77a58718332bd900b10e4d85b2" style="color: blue; font-family: Arial, sans-serif;" target="_blank">https://www.ecb.europa.eu/pub/<wbr></wbr>pdf/scpwps/ecbwp1174.pdf?344d6<wbr></wbr>e77a58718332bd900b10e4d85b2</a></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com10tag:blogger.com,1999:blog-8732662769765511163.post-66912941221562632542018-02-22T22:49:00.001+01:002018-02-22T22:54:48.489+01:00Piketty: “Why have democratic regimes failed to reduce inequality?”<div dir="ltr" style="text-align: left;" trbidi="on">
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<i><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: "verdana" , sans-serif;"><span style="font-size: large;">This is the question asked by Thomas Piketty in a
recent <a href="http://piketty.pse.ens.fr/files/Piketty2018PoliticalConflict.pdf" target="_blank">presentation</a>
on “Brahmin Left vs Merchant Right: Rising Inequality and the Changing
Structure of Political Conflict - Evidence from France, Britain & the US,
1948-2017 (February 2018). His answer, which is documented by very extensive
and useful data, is fairly complex but it could, in a nutshell, be summarised
thus: in the '50s and ‘60s the Democratic Party in the US and social democratic
parties in Europe were supported by a variety of voters characterised by low
education and low income. Globalization (by raising the issue of internal and
external inequality) and the expansion of education (creating educational
inequalities next to wealth inequalities) have created new multi-dimensional
conflicts about inequality and redistribution.</span></span></i></div>
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<span style="font-size: large;"><i style="mso-bidi-font-style: normal;"><span style="background: white; color: black; font-family: "verdana" , sans-serif;">Democratic regimes – answers Piketty – have
failed to reduce inequality because "without a strong egalitarian and
internationalist platform, it is unlikely that voters by low education and low
income will all vote for the same party. The division between racism and
nativism is a powerful force that divides the poor in the absence of a strong
unifying platform. Politics has never been a simple conflict between the rich
and the poor; we need to look more carefully at the content of political c<span style="mso-bidi-font-style: italic;">leavages</span>." Piketty argues
that since the '70s and' 80s a political system has evolved that pits two
transversal coalitions against each other: the intellectual elite of left wing Brahmins
against the business elite/merchant right, both sharing the divided support of a
working class whose interests are radically different and are not reflected in
the parties.</span></i></span></div>
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<i><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: "verdana" , sans-serif;"><span style="font-size: large;">A similar argument, without the massive
documentation provided by Piketty but perhaps more fully argued, has been
provided by Jan Rovny on the <a href="http://blogs.lse.ac.uk/europpblog/2018/02/20/what-happened-to-europes-left/" target="_blank">LSE Europpblog</a> on 20 February: “What happened to
Europe’s Left?” I confess that being a
left-wing economist I found the argument rather appealing, so I circulated both
Piketty’s presentation and Rovny’s paper to a circle of colleagues and friends
who I knew would be interested. However one of them, a political scientist
whose views on the subject I had specifically solicited, was provoked by those
arguments to provide a long critical comment, which I thought deserved to be
aired more widely. Therefore I am very glad to post such a Comment below, with
the author’s permission on condition of anonymity. DMN</span><o:p></o:p></span></i></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Piketty's
enthusiasm for his discovery of political science is heart-warming. You asked
me for a view:<br />
<br />
i) to adopt a brush as broad as does Piketty is to empty much of his
argument to rest upon historical and particularly statistical data available.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">ii)
comparative politics can be useful but arbitrary lumping-together of very
different political systems and cultures because of accessibility of chosen
data sources leads to incoherence not to affirmation of a thesis.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">iii) the same
goes for taking very long data series and arbitrarily cutting them off within
his time terms of reference. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">So what has he
achieved? He has produced a hypothesis, reflecting journalistic
speculation, that the voting behaviours of electorates formerly possible to
analyse in economic and class terms have altered across groups; this is causing
the collapse of parties of the Left which he views as rooted in common economic
and class interests. Electorates are no longer voting for donkeys wearing
a red rosette. Electors in positions of authority are no longer voting in
their economic self-interest.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Neither of these
theses are correct; nor does the statistical, behavioural, historical evidence
demonstrate that there is any past time in which they were. Piketty picks
and chooses his way through his data to show that they were but the clear association
of change brought about by revolution, war, or some socio-economic or other
catastrophe, is telling.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">iv)
identifying a Piketty-esque Europe as Europe leads to warping of supporting
evidence for his thesis; so does using United States data (size, lack of common
history, slavery, just for starters; I could go on - that there is no 1945
break for the US as there is for Europe, that the living standards of the US
and those of Europe are too far apart for long periods even within Piketty's
dates...). For Piketty Europe is the European Union, and mostly France at
that. Even within this narrowing of the study where is the data on
Germany, Italy, the low countries, the East, the far North? He should
drop the US and start considering real Europe, not the EU. There is a
European community of culture, experience, economy and development, although
that Europe tends to exclude the second of his data sources, the United
Kingdom.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">v) Data
series for the UK go back much further than for continental Europe; those on
which Piketty relies can be produced from at least the beginning of the
eighteenth century and many from the seventeenth and even earlier, both for
electoral behaviour and for collections of data on conditions of life,
state-organised welfare systems, educational records, health systems, social
and work-related housing - the panoply of the modern welfare state is present
and recorded. Its roots make the electoral results of July 1945 the
product of victory in war not the poverty of defeat as experienced by
continental states, including France despite their pretences. And as soon
as the war economy had served to complete the installation of the
redistribution that had been taking place for centuries in the UK, even if
overshadowed by the Depression in the ‘20s and ‘30s where it had been fully
used and available, nevertheless, the 1951 general election swept
the Labour government away. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The UK returned to
something very similar to the redistributions that had been taking place for a
long time, shedding the role of the state always associated with authoritarian
regimes of Left or Right. The redistributive role of an extensive welfare
state was fully accepted by all political groupings, there was no post-War
watershed as there was in continental Europe (where populations were widely
illiterate, still working the land and often as share-croppers, and
urbanisation and modern industrialisation was still to come despite the best
efforts of Left and Right). Labour never recovered, and Margaret Thatcher
moved every aspect of the state's role in government on to other ground that
socialism or capitalism choices, as Blair's electoral success confirmed.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">So, in many ways
Piketty's use of UK data is as inappropriate as his use of that of the
US. He wants to tie together some kind of factual
link between 'want, disease, ignorance, squalor, and idleness' and
voting Right: what the UK data show is not that. The Five have been
tackled and defeated and the people vote Right for aspiration, self-fulfilment,
the barring of the Five's reintroduction into their countries via third-world
immigration, and a continued growth in their living standards and capacities to
learn and achieve.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Yes the decline in
voting for Piketty's Left is terminal for electorates have moved on as he and his
Left have not. Political parties are re-grouping, that is very clear, but
they regrouping to defend the people and their life-styles against out-dated
ideologies of deprivation in all its forms.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Tony Judt spoke of 'ideological over-commitment' (although in another
context, that of Israel, much of his work on France and the French Left
embodies this critique); Piketty would benefit greatly from reading (or
re-reading) Tony Judt. Another book he might add to his to read list is: Robert
Trelford McKenzie and Allan Silver, <i style="mso-bidi-font-style: normal;">Angels
in marble; working class Conservatives in urban England</i>, 1968.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Rovny is ponced-up
Piketty. There is a flat refusal to accept the role of Conservative
working people in the construction of organisations, in institutions, in
governance that has been present always (i.e. since records in the Piketty
form) have been available. It is the securing of decent wages, the
legitimising of trades unions, the achievement of access to health care, the
educating of every child to competent literacy and numeracy, the universal
suffrage, pension support in old age, insurance, ... all the stuff the Left
claims - it is all the product of skilled working people and the arrangements
and agreements they have set in place over the centuries yes, centuries in the
case of the UK.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The ideological
Left cannot cope with the truth of this. Their function has been to
create revolutionary, i.e. war-like shocks that disrupt so much there must be
destruction and then a settlement. If the Left cannot produce a
revolution then the Conservative working class can manage much better without
them. And often better than with them frankly. There has to be
technical backwardness, widespread illiteracy, gross deprivation of democratic
governance, low life expectancy, and the general presence of the Five before
revolution and the Left is required. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Europe has been
revolutionised and warred into what the UK did with working class conservatism
(admittedly after the 17th century revolutions as a start-up shock, but that is
a very long time ago) since capitalist industrialisation and
urbanisation. Even the localist organisations listed by Rovny are the
result of municipal conservatism – why do you think it's modern Labour that
individualises the social consumption of social provision, or closes pools,
libraries, parks, evening classes etc. etc?<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The Left is ineffective and very ugly. Unless there's a revolution
or a war to be raged.</span><span style="font-size: 12pt;"><o:p></o:p></span></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com7tag:blogger.com,1999:blog-8732662769765511163.post-28611500434517783112017-10-31T12:56:00.000+01:002017-11-01T09:49:25.346+01:00Ths Rise and Fall of Socialism<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "verdana" , sans-serif; font-size: 18pt;">The DOC (Dialogue </span><span style="font-family: "verdana" , sans-serif; font-size: 18pt;">Of Civilisations) Research Institute,
Berlin, has funded a research project led by Vladimir Popov on “Inequality:
Economic Models and Russian October 1917 Revolution in Historical Perspective”.
The project (an earlier full draft of which is </span><a href="https://pages.nes.ru/vpopov/documents/SOCIALIM%20IS%20DEAD-WP.pdf"><i><span style="color: #0070c0; font-family: "verdana" , sans-serif; font-size: 18.0pt;">here</span></i></a><span style="font-family: "verdana" , sans-serif; font-size: 18pt;">) seeks to examine why capitalism was successful
for several centuries, why it failed in the XX century and was replaced by
socialism in about one third of the world, and why socialist societies did not
succeed and eventually made a transition back to capitalism.</span><span style="font-family: "times new roman" , serif; font-size: 13.5pt;"><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 18pt;">The project’s key hypothesis is that
the income inequalities associated with capitalism initially raised savings and
investment promoting economic growth, but later their negative implications
dominated. Soviet-type socialism failed, but rising inequalities of
capitalism today are bound to generate rising social tensions eventually
becoming unbearable and leading to a costly social revolution. A better
alternative is the successful establishment of a “new socialism” “that will not
necessarily mean a total elimination of markets and private property, but is
likely to limit both substantially for the sake of achieving lower income
inequality” - with the pursuit of redistributive policies, more regulation and
taxation, more public property. The introduction of such “new” socialism in a
few countries in a capitalist world would make them more competitive and drive
their less enlightened competitors “out of business”. Thus Popov stands
“socialism in one country” on its head, turning it from a handicap into a
competitive advantage.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 18pt;">Vladimir </span><a href="https://pages.nes.ru/vpopov/"><span style="color: #0070c0; font-family: "verdana" , sans-serif; font-size: 18.0pt;">Popov</span></a><span style="font-family: "verdana" , sans-serif; font-size: 18pt;">, </span><span style="font-family: "verdana" , sans-serif; font-size: 18.0pt;">a distinguished Russian economist known to this Blog’s readers from several guest posts
already published, was brave enough to assign to me a paper on “The rise and
fall of socialism”, and I was unwise enough to take on such a daunting task for
presentation at the Berlin </span><a href="https://doc-research.org/wp-content/uploads/2017/08/Schedule-_Conference_Inequalities.pdf"><span style="color: #0070c0; font-family: "verdana" , sans-serif; font-size: 18.0pt;">conference</span></a><span style="font-family: "verdana" , sans-serif; font-size: 18pt;">
of 23-24 October. </span><span style="font-family: "times new roman" , serif; font-size: 13.5pt;"><o:p></o:p></span><br />
<span style="font-family: "verdana" , sans-serif; font-size: 18pt;"><br /></span>
<span style="font-family: "verdana" , sans-serif; font-size: 18pt;">My Berlin Conference PPT Presentation is available <a href="https://drive.google.com/file/d/0B4C7eK01Z6a4cEZsMllCbUFnVkk/view?usp=sharing" target="_blank"><span style="color: blue;">HERE</span></a>. Comments welcome. </span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com0tag:blogger.com,1999:blog-8732662769765511163.post-20632746204151905182017-06-09T18:23:00.003+02:002017-06-09T18:23:31.827+02:00Michael Ellman on the UK Elections<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><i><span style="font-size: large;"><br />Professor Michael Ellman, of Amsterdam University and an old colleague, co-author and friend, appears to have become our resident phsephologist. He promptly sent me his valuable comments on the UK elections, authorising me to publish them as a Guest Post on this Blog, which I am delighted to do at once. Here is Michael's assessment on the day after (DMN).<br /></span></i></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br />(1) Theresa May took a gamble and lost. She was misled by opinion polls that showed a huge lead for her party before the election was called and also by the fact that a majority of Labour MPs had no confidence in Corbyn.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(2) Nevertheless, the Conservatives can form a new government and carry on. The Conservatives will be the biggest party in the new House of Commons and have almost half the total number of MPs. Together with one of the Northern Ireland parties (the Democratic Unionists) the Conservatives will have a (small) majority and will be able to push their legislation through Parliament (provided that their own party remains united).<br /><br /></span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;">(3) May's own personal position has been seriously undermined and she will not be able to last five years as Prime Minister. Some other senior figures in the Conservative party (such as Boris Johnson) will seek to take over. Even for her to last 12 months will be very difficult.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(4) The Conservatives got 42% of the vote. That shows that there is a solid block of the population (private sector, professionals, business people, the elderly) who back them.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(5) The Labour party got 40% of the vote. Thuis shows that there is a solid block of the population (students, public sector employees such as teachers and nurses, tenants facing high rents, low-income groups, minority ethnic groups) that opposes austerity and cuts to the public sector. Allowing for the 3% gained by the SNP (Scotttish National Party) which has a similar economic outlook to the Labour party, this shows that slightly more people voted againt austerity than supported it.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(6) Jeremy Corbyn ran a very successful campaign. That shows that in the UK and USA a candidate to the Left of orthodox opinion, such as Bernie Sanders or Jeremy Corbyn can enthuse a large part of the population, especially the young. (Turnout rose a couple of percent compared with the last election.)</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(7) The decline of the SNP in Scotland and the improved showing there of Unionist parties, notably the Conservatives, make the break-up of the UK less likely.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />(8) As far as Brexit is concerned, about half the population (supporters of Labour, SNP and the Liberal Democrats) voted for parties that would prefer a so-called soft Brexit (e.g. membership of the European Economic Area à la Norway) to the complete break that Theresa May seems heading for.</span></span><span style="background-color: white; color: #222222; font-family: arial, sans-serif; font-weight: normal;"><span style="font-size: large;"><br /><br />We live in interesting times.</span></span></div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com8tag:blogger.com,1999:blog-8732662769765511163.post-16551970898351108632017-06-04T09:06:00.001+02:002017-06-04T09:06:49.455+02:00Michael Ellman: An Update on Dutch Elections<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><i><span style="font-size: large;">I received the following Update on Dutch elections from Professor Michael Ellman (Amsterdam University) and I am delighted to publish it as a guest post:</span></i></span><br />
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;"><br /></span></span>
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Dutch politics have vanished from the headlines after the party of Wilders failed to become the biggest in the lower house of Parliament. However, up till now it has proved impossible to form a new coalition government. </span></span><br />
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;"><br /></span></span>
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">After some weeks of negotiating, the first attempt to do so has collapsed on the issue of migration. The right wing parties (Rutte & his Christian Democratic friends) wanted strict control over non-EU migration. The Green-Left party (which did well in the recent elections) was against this. However, I expect that one way or another a coalition will be cobbled together (the public does not want new elections and regards it as the obligation of the politicians to overcome the difficulties). </span></span><br />
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;"><br /></span></span>
<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Even if it proves impossible to form a coalition with a majority in Parliament, it is always possible to form a government with a large number of seats but still a minority (considering the divisions among the opposition parties) but this is generally considered undesirable since it makes it very difficult to pursue coherent and consistent policies (if the opposition parties unite they can defeat any government proposal they do not like). A coalition with a majority is obviously much more desirable and has a reasonable chance of being realised after further inter-party negotiations. </span></span><br />
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<span style="background-color: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">Prolonged inter-party negotiations after elections are normal in the Netherlands. They result from a proportional representation system without a threshold (such as 5%) and which therefore enables any party with more than 0.67% of the votes to get a member into the 150 seat lower house. This has the advantage that it enables all shades of opinion to be represented (for example, there is an animal rights party, and two Calvinist parties, amongst others in the lower house) but makes forming a majority government difficult. The strong position of the Wilders party and the Socialist party (both regarded as unacceptable coalition partners by the mainstream) obviously makes coalition-forming more difficult than usual.</span></span></div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com0tag:blogger.com,1999:blog-8732662769765511163.post-82463342314273212222017-03-16T22:18:00.002+01:002017-03-17T22:30:57.971+01:00Michael Ellman on the Dutch Elections<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">The Dutch elections of 15 March have been widely interpreted
as a “resounding defeat” for populism. This is very hard to reconcile with the
government coalition losing 37 (8 out of 41 Rutte’s VVD, in spite of having
moved towards Wilders’ agenda – “Be normal or Begone” - and 29 out of 38 Labour
Party PvdA) i.e. almost half of its former 79 seats. Rutte will need new allies
to form a government. Geert Wilders’ Party instead gained 5 seats and rose by
one third to become the second party of the Netherlands. "Everyone is
entitled to his own opinion, but not to his own facts" (Daniel Patrick Moynihan).
So I asked Professor Michael J. Ellman, of Amsterdam University, for his
assessment of the results. Here is his reply, which I found particularly
enlightening, and which I have his permission to reproduce as a Guest Post on
this Blog, with many thanks.<o:p></o:p></span></span></div>
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<b><span style="background: white; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">From
Michael Ellman (16 March 2017): <o:p></o:p></span></span></b></div>
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<span style="font-size: large;"><span style="background: white; color: #222222; font-family: "arial" , sans-serif;">It seems to me as follows, subject to the fact that currently
we only have preliminary results and the final results may differ somewhat.</span><o:p></o:p></span></div>
<span style="background: white; color: #222222; font-family: "arial" , sans-serif; line-height: 107%;"><span style="font-size: large;"><br /></span></span>
<span style="font-size: large;"><span style="background: white; color: #222222; font-family: "arial" , sans-serif; line-height: 107%;">(1) The turnout rose significantly. This indicates that in addition to
the people who normally vote, there were some additional people who strongly
wanted to express their disapproval of the policies of the ruling coalition and
others who strongly wanted to express their fears about Wilders.</span><span style="color: #222222; font-family: "arial" , sans-serif; line-height: 107%;"><br />
<span style="background: white;"><br />
(2) The coalition which has ruled since the last elections
(in 2012) has done badly. They have gone down from a majority (79 in a 150 seat
Parliament) to a minority of only 42. This indicates that the majority of the
population rejects the policies of the last four years (fiscal
orthodoxy/austerity).</span><br />
<span style="background: white;"><br />
(3) The main loser is the traditional Social Democratic
party, the Labour Party or from its Dutch initials PvdA. This party has
played a major role in Dutch politics since 1945 but fared dismally in these
elections. I think the main reason is that it was the junior partner in the
coalition and went along with fiscal orthodoxy/austerity which hit many of its
traditional voters who turned elsewhere to express their dissatisfaction. For
many years now it has been a 'New Labour' type of party and not a home for
victims of globalisation. This has not pleased many of its traditional voters.
It is also a culturally liberal party which also did not go down well with many
of its traditional voters.</span><br />
<span style="background: white;"><br />
(4) Prime Minister Rutte can feel pleased with himself.
Although the coalition which he led did very badly, his own party did not do
too badly, losing only 1/5 of its voters and becoming by far the biggest party
(at the last election it was only just ahead of the Social Democratic party).
In addition, many of the votes he lost went to the Christian Democrats who are
ideologically close to his party. Furthermore, Rutte's party did substantially
better than the party of Wilders. As a result, Rutte's party will play a
dominant part in the negotiations to form a new coalition.</span><br />
<span style="background: white;"><br />
(5) The mainstream parties won 2/3 (102) of the seats. This
indicates that Dutch politics and society are quite stable. The coalition
negotiations may well take some time (this is quite normal) but the resulting
government will be a mainstream one.</span><br />
<span style="background: white;"><br />
(6) The election was largely fought on cultural/identity
issues. Traditional economic issues played a lesser role. Dutch national
identity, the role in the Netherlands of ethnic minorities, migration, and the
role of the Netherlands in the EU were the main topics. (Of course migration
also has an economic aspect.) The resulting Government will be very sceptical
about plans to increase EU integration or expand its membership (in 2 referenda
in the past, on the proposed EU constitution and on the Ukrainian trade
agreement, majorities rejected the EU-preferred policy.) This means, inter
alia, that the Netherlands will be hostile to plans for an EMU bank union or a
transfer union. One of the 6 founder members of the EU is now opposed to deeper
integration.</span><br />
<span style="background: white;"><br />
(7) In order to win and beat Wilders, Rutte took over some of
his main themes. The need for immigrants and their descendants, if they want to
be welcome, to assimilate, abandon some of their customs and accept Dutch ones,
was strongly emphasised by Rutte. Also the stand he took against Turkish
ministers holding open-air election rallies in the Netherlands was popular and
probably won him votes.</span><br />
<span style="background: white;"><br />
(8) Although Wilders can be pleased that some of his themes
have entered the mainstream and are repeated by the Prime Minister, he must be
dissatisfied with the result. It is true that his number of seats has increased
by a third. However, whereas at one time it was thought that his party might emerge
as the largest one, it remains a long way (20 to 33) behind Rutte's party.
Hence Wilders has not the slightest chance of entering the Government and
becoming a minister.</span><br />
<span style="background: white;"><br />
(9) The other populist party (which gets less publicity
outside the Netherlands) is the Socialist Party. This is a traditional leftist
party in favour of more public expenditures, higher wages, lower rents, higher
taxes on the rich and on companies etc. It seems that it will fall from 15
seats to 14.</span><br />
<span style="background: white;"><br />
(10) The result of the relatively poor showing of the 2
anti-system parties is that politics as normal, subject to a cultural/nationalist
shift to the right, has won. For 'Brussels' that might be reassuring, but
the lack of support for further EU integration and expansion, and the general
acceptance of a more nationalist stance will not seem so positive.</span><br />
<span style="background: white;"><br />
(11) What policies the new coalition will agree on is highly
uncertain at the moment (in the Netherlands the parties forming a coalition
have to agree on policies, set out in a detailed written Coalition Agreement,
before the new Government is formed and takes office - in the meantime the old
ministers remain in office but are expected not to take any radical measures).
To what extent the popular rejection of austerity and concern for national
identity will influence future policy remains to be seen.</span></span></span></div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com12tag:blogger.com,1999:blog-8732662769765511163.post-77532490725243358722017-02-04T00:33:00.000+01:002017-02-04T00:56:48.814+01:00Vladimir Popov: EU – Nationalism and Inequalities<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222; font-family: "verdana" , sans-serif; font-size: 14pt;">I am grateful to Vladimir Popov of TsEMI, the Central Economics and Mathematics Institute of the Russian Academy of
Sciences, Moscow, for contributing this guest post to our Blog as an extended
comment on my previous post on </span><i style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt;">Seismic
Faults in the European Union</i><span style="color: #222222; font-family: "verdana" , sans-serif; font-size: 14pt;">.</span></div>
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<i><span style="color: #222222; font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Vladimir Popov on: EU – Nationalism and Inequalities<o:p></o:p></span></i></div>
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<i style="background-color: transparent;"><span lang="EN-US" style="color: #333333; font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"> “Imagine there's no countries ... And the world will be one.</span></i></div>
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<span style="background-color: transparent; color: #333333; font-family: "verdana" , sans-serif; font-size: 14pt; text-indent: 35.4pt;"> It may happen, if the current rise in inequalities is reversed.</span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Mario Nuti predicts new difficulties for the EU and
believes Lenin was right, when stated that United States of Europe are either
impossible or reactionary (post of January 8, 2017). He may well be right, as he has been so many
times, but I wish he wasn’t. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">In the EU for the first time in history member
countries voluntarily decided to eliminate borders – a dream of many since
ancient times. It was by the way also one of the staples of the communist
ideology – nations eventually, after the full victory of communism, will merge,
borders will disappear, a brotherhood of men will share the whole world. As the best poet of Soviet era Vladimir <a href="http://samlib.ru/a/alec_v/mayakovsky.shtml">Mayakovsky</a> put it, <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">“For we want this world to be a common earth<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Without Latvias and without Russias”.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Many of those born and raised in the USSR cherish this
dream and admire the EU that seemed to have been able to achieve this goal
without coercion and violence. It would be most regretful, if EU project will
not succeed. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">This is the moral argument in favor of the EU that
does not prove, of course, that Mario is wrong. Many inevitable trends may be
undesirable for large groups of people. Below, however, are some “hard core,
material” arguments, why current centrifugal forces in the EU and the world may
be only a temporary phenomenon. <o:p></o:p></span></div>
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<i><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Nationalism
and inequalities <o:p></o:p></span></i></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Conservative </span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">politicians all over the world have recently spoken against
globalization. As former French Prime Minister Dominique De Villepin put it recently,
”<a href="file:///C:/Users/dmarionuti/Documents/2016/news.sina.com.cn/w/zx/2016-07-16/doc-ifxuapvs8591856.shtml">globalization,
on the one hand, promotes cooperation, on the other hand, brought new mutual
exclusion, isolation and radicalization</a>”. And Donald Trump wants “<a href="http://www.realclearpolitics.com/video/2016/07/21/trump_nominated_we_will_honor_the_american_people_with_the_truth_and_nothing_else.html">Americanism,
not globalism</a>”.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">It would be wrong, however, to blame globalization for
all the disasters and misfortunes, from non-growing real incomes to the rise of
nationalism. History does not repeat itself, but it rhymes. Those who blame
globalization today for economic and social misfortunes are similar to the
luddites of the XIX century that believed that the use of machines leads to the
rising unemployment and falling wages. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">There are cases when globalization works leading to
rising incomes of the masses. Theoretically greater international flows of
goods, ideas and technology, capital and labor should increase productivity,
but in reality this happens only if these flows are carefully managed (Popov,
2014, Chapter 5).. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Why in some countries greater economic interaction
with the world was accompanied in recent several decades by rising income and
its relatively even distribution (China and other East Asian countries),
whereas in other countries modest growth of income coupled with rising
inequalities left large masses of
population worse off (many Western countries, including the US, Eastern
Europe and former Soviet Union)? The answer is that policy matters a great deal
and many good policies that allow gaining from globalization are often
non-orthodox and counterintuitive (Polterovich, Popov, 2005). If globalization
is accompanied by the increase in income and wealth inequalities within
countries, so that gains from globalization are appropriated by the few better
off, whereas the masses get nothing or very little, it is only too easy for the
interested political forces to blame globalization for the negative
developments. <o:p></o:p></span></div>
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<i><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">The
central argument of this post is that the reversal of the previous trend
towards the decline in income inequalities in the last three decades in most
countries created favorable grounds for the rise of nationalist and
anti-globalization feelings (Popov, 2016). </span></i><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Lindert and Williamson (2016) claim that income
inequalities breed populism and attribute the rise of inequalities to
globalization (especially in the two periods of American history – Gilded Age
of the late 1800 and recent three decades since the 1980s). My argument is that
income inequalities indeed contribute to the rise of populism and nationalism,
but that globalization does not necessarily lead to the rise in inequalities.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Trends in nationalism are explained, among other factors,
by both between the countries and within the countries inequalities. If the
gains from globalization are distributed evenly, the public is willing to
embrace it, but if the gains are appropriated by few, it is easy for
nationalist political forces to turn the public against globalization. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Hence, there are several globalization models,
depending on the trend in inter and intra- country inequalities in recent three
decades:<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; font-size: 14.0pt; line-height: 115%;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"> Great gains from globalization for the country
as a whole and relatively small rise in within the country inequalities (Japan,
China, SEA, Scandinavian countries, the Netherlands);<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; font-size: 14.0pt; line-height: 115%;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Small
gains from globalization for the country as a whole, but decline in domestic
inequalities (some LA countries, including Brazil);<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; font-size: 14.0pt; line-height: 115%;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Large
gains from globalization for the country as a whole, but increase in domestic
inequalities (Britain and some continental European countries);<o:p></o:p></span></div>
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<!--[if !supportLists]--><span lang="EN-US" style="font-family: "symbol"; font-size: 14.0pt; line-height: 115%;">·<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Small
gains from globalization for the country as a whole and increase in domestic
inequalities (US, Russia in the 1990s).<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">The worst conditions for the rise of nationalism would
be in the first group of countries, the best – in the last, fourth group, with
the 2<sup>nd</sup> and 3<sup>rd</sup> group falling in between.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">The rise of nationalism in recent decades in the EU and many other
countries seems to be associated with the increase in within the country income
inequalities. In some countries income inequalities did not increase and
nationalist and anti-globalist feelings are more related to the slowdown of
growth and other reasons, but in most countries there was an increase in income
and wealth inequalities since the 1980s – a reversal of the trend of over 50
years that created a fertile ground for rise of nationalism (Popov, 2016). <o:p></o:p></span></div>
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<b><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Recent
trends in income inequalities in EU<o:p></o:p></span></b></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">The fall of the Berlin Wall, collapse of the USSR and the conversion of
Eastern Europe and former Soviet republics to capitalism, added additional push
to the growing income inequalities trend due to both – the disappearance of
“socialist counterbalance” for the Western capitalism and the rise in
inequalities in the transition countries of Eastern Europe and former Soviet
Union themselves (Jomo, Popov, 2016). <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">In most European countries income inequalities
increased since the beginning of the 1980s – the reversal of the trend that
predominated since early 20<sup>th</sup> century (fig. 1). This increase in
inequalities may be the single most important reason for the rise of
nationalism. In Eastern Europe there was a transformational recession of the
1990s associated with the transition to the market economy – output fell by
20-50% in the course of 2-5 years (Popov, 2000), which certainly contributed to
the rise of nationalism. But in Western Europe there was no major recession
(except for Greece). Even though economic growth was not very strong, it
was rather stable, recessions of 1993
(per capita GDP fell by 0.4%), 2009 (-4,7%) and 2012-13 (-0.4%) were overcome
and average incomes, unlike in the US,
by 2016 were way higher than in the 1980s. However, the progressing
unevenness in income distribution undermined real incomes and social status of
large groups of European population making them an easy target for the
nationalist politicians. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Britain may be the case in point. The rise in
nationalism is often explained by unfairness and humiliation experienced by the
whole nation (for instance, Germany after the First World War or developing
countries where costs of globalization are often higher than benefits). In Britain, however, the recent rise of
nationalism did coincide with the relatively successful economic development
and with the improvement of its economic positions versus the major
competitors. Britain was falling behind continental Western Europe in terms of
its per capita income and this trend was reversed only a decade after Britain
entered the EU (fig. 2).<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">However. only a minority of the population benefited
from the acceleration of economic growth since the early 1980s – income
inequalities increased (fig. 1) and so did wealth inequalities (fig. 3). <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">From the point of view of economic efficiency and
future growth, Brexit is bad for the EU and especially bad for Britain. </span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">But the majority of
British voters apparently blamed economic difficulties not on policies that
allowed inequalities to increase, but on the European integration and
globalization.</span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;"><i>Future</i><b><o:p></o:p></b></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">There may be at least two
scenarios for the EU and the world. First, if the rise of income inequalities
would continue, social tensions in some countries will become unbearable and
will produce a social turmoil and anti-globalisation, nationalist sentiments.
And the rise of nationalism may lead to conflicts, if not wars, between
countries, with the collapse of the international trade and capital flows, like
in the 1930s. Then the world may once again get into the familiar 20<sup>th</sup>
century historical track and there may be a pause in or even the reversal of
globalization, like during the Great Depression, when the outburst of
protectionism led to the decline of the international trade and capital movements.
This is the worst scenario: the world degrading into social and national
conflicts.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Second, countries that
carry out successful policies of limiting inequalities would become more
competitive, driving other countries “out of anti-globalisation business”. Even
small countries, if they are successful, may create a counterbalance through
the demonstration effect to the tendency of unconstrained capitalism to cut
welfare programs and increase inequalities. These countries may regulate the
functioning of the market mechanisms through direct interventions and high
progressive taxation to reduce bubbles and windfall profits. Besides, the
crucial way of lowering inequalities is public and collective property, so it
could be expected that state enterprises, non-profit institutions, labour
managed enterprises and coops, operating not for profits, but for public good
would become more common. Such a more optimistic scenario implies that social
upheavals within countries and national conflicts between countries could be
largely avoided. EU in this case would have a bright future.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;"><i>References</i><b><o:p></o:p></b></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Facundo Alvaredo, Anthony B
Atkinson, and Salvatore Morelli (2016). Top wealth shares in the UK over more
than a century, Working Papers Department of Economics Ca’ Foscari University of
Venice No. 01 /WP/20. </span><b><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"><o:p></o:p></span></b></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Alvaredo, Facundo,
Anthony B. Atkinson, Thomas Piketty and Emmanuel Saez (2012). ‘The World Top
Incomes Database’, <a href="http://www.wid.world/#Introduction">http://www.wid.world/#Introduction</a><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Jomo, K.S., V. Popov (2016). Income Inequalities in
Perspective. <i>Develoipment</i>, No. 2,
2016. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 115%; margin-left: 34.0pt; text-align: justify; text-indent: -34.0pt;">
<span lang="EN-US" style="background: white; font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">Lindert, P. and Jeffrey Williamson (2016). Unequal Gains: American
Growth and Inequality since 1700. Princeton University Press, 2016.<u><o:p></o:p></u></span></div>
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<td style="padding: 0cm 0cm 0cm 0cm;"><div class="MsoNormal" style="line-height: 115%; text-align: justify;">
<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Maddison
project (2013). </span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">http://www.ggdc.net/maddison/maddison-project/home.htm,
2013 version.<o:p></o:p></span></div>
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</tr>
</tbody></table>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Polterovich, V.,
Popov, V. (2005). <a href="file://ccsnas01/EuropeRussianStudies$/Faculty/Users/VladimirPopov/CHINA/Appropriate%20Economic%20Policies%20at%20Different%20Stages%20of%20Development.%20NES,%202005%20-%20http:/www.nes.ru/english/research/pdf/2005/PopovPolterovich.pdf.">Appropriate
Economic Policies at Different Stages of Development. <span lang="FR">NES, 2005 -</span><span lang="FR"> </span><span lang="FR">http://www.nes.ru/english/research/pdf/2005/PopovPolterovich.pdf.</span></a><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Popov, V. (2000). Shock Therapy versus
Gradualism: The End of the Debate (Explaining the Magnitude of the
Transformational Recession) – <i>Comparative
Economic Studies,</i> Vol. 42, No. 1, Spring 2000, pp. 1-57 (<a href="http://www.nes.ru/~vpopov/documents/TR-REC-full.pdf">http://www.nes.ru/%7Evpopov/documents/TR-REC-full.pdf</a>);
<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Popov, V. (2014). </span><span lang="RU" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"><a href="http://ukcatalogue.oup.com/product/9780198703631.do"><span lang="EN-US" style="color: windowtext; mso-ansi-language: EN-US; text-decoration: none; text-underline: none;">Mixed Fortunes: </span></a><a href="http://ukcatalogue.oup.com/product/9780198703631.do"><span lang="EN-US" style="color: windowtext; mso-ansi-language: EN-US; text-decoration: none; text-underline: none;">An Economic History of China, Russia and the West. Oxford
University Press, April 2014.</span></a></span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Popov, V. (2016). </span><span lang="RU" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"><a href="http://pages.nes.ru/vpopov/documents/Nationalism%20and%20Globalisation%20=MPRA_paper_73094=August%202016.pdf"><span lang="EN-US" style="background: #CCFFFF; mso-ansi-language: EN-US;">Is Globalisation
Coming to an End Due to Increase of Income Inequalities? - MPRA paper
№73094 , August 2016.</span></a></span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">World Wealth
and Income Database. <a href="http://www.wid.world/#Database">http://www.wid.world/#Database</a>:<o:p></o:p></span></div>
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<b><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">Mario Nuti’s reply:<o:p></o:p></span></b></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">I agree with Vladimir that a world without borders
would be very attractive, as a realisation of both human freedom and economic
efficiency. However it is no accident that it was part of communist utopia only
after the expected universal diffusion of communism. For a world without
borders involves - as I pointed out in my previous post - global communism in
access to national social capital (however defined, whether as physical infrastructure,
social cohesion and trust, or welfare state institutions and provisions). This
is neither feasible nor desirable nor sustainable in a world where private
ownership is globally prevailing and fully protected. I take it that Vladimir
would not support unrestricted full communism – in the sense of abolition of
both private and national social property – on a global scale or even in a
single country or just in the European Union. I regard Vladimir’s
unconditional endorsement of the Schengen Area abolition of internal borders (and
neglect of external ones) not as a cogent argument in favour of a world
without borders but merely as evidence of his generous nature.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">I particularly like Vladimir’s characterisation of the
relationship between globalisation and inequality, with his four country cases:
(a) large gains, small rise of inequality; (b) small gains, inequality decline;
(c) large gains, [significant] rise of inequality; (d) small gains, inequality
increase. The first case would make people approve of globalisation; the last
case would be associated with strongly nationalistic, anti-globalisation
feelings and policies; while the two intermediate cases also would
be somewhat nationalistic and anti-globalist but to a lesser extent. And at the
global level, I would add even more positively and forcefully than Vladimir,
globalisation has halved the incidence of poverty in the last twenty years –
lifting hundreds of millions of Chinese from starvation to obesity – and achieved
the reduction of inequality among the citizens of the world. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">However, globalisation, including migrations, does not
lead to “</span><span lang="EN-US" style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">gains … appropriated by the few better off, whereas
the masses get nothing or very little </span><span style="font-family: "verdana" , sans-serif; font-size: 14pt; line-height: 115%;">benefit”, as Vladimir conjectures. It does yield net
benefits, as I readily recognised, but <i>it actually makes</i> <i>a
non-negligible number of</i> <i>people worse off. </i>In theory we can imagine a redistribution of gross gains to gross losers so as to make everybody better off - which is how Vladimir would be able to achieve a win-win situation. But such Paretian redistribution is not possible, because it would have to be international and/or regressive. International redistribution is presently impossible for lack of political globalisation, i.e. global governance by institutions capable of global taxation and expenditure. Regressive redistribution from gainers who tend to be poorer to losers who tend to be richer would be undesirable, as I trust Vladimir would agree. </span><span style="background-color: white; color: #222222; font-family: "arial" , sans-serif; font-size: 16px;"> </span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">And even if everybody gained from globalisation,
inequality in the distribution of gains would legitimise some opposition to unrestricted, raw globalisation. Vladimir’s comparison with the Luddites
is very apt, but with opposite implications with respect to the one he draws:
technical progress in the early 19<sup>th</sup> century (and today’s
automation) also yields net benefits but makes some people worse off, just like
globalisation and migrations, therefore justifying – unless there was compensatory income
redistribution from gainers to losers – resistance and even forceful
opposition by the losers.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14.0pt; line-height: 115%;">The dividing line between populism and democracy is
very thin. It is no accident that today we talk of right wing and left wing
populism. "The accusation of populism can easily become an instrument to
maintain and extend the power of oligarchies, and their influence on public
life and decisions, reducing any protest attempt from below to irrationality or
intellectual or moral laziness. Anti-populism therefore can become a
weapon in the hands of the élite, a weapon that jeopardizes the essence of
democratic coexistence. While populism, if properly articulated, may be useful
to democracy" (my translation from Lorenzo Del Savio e Matteo Mameli,
"<i>Il populismo è democratico: Machiavelli e gli appetiti delle élite</i>"
2014), whose conclusions are based on a recent debate on Machiavelli's theses
in his <i>Discorsi sopra la prima deca di Tito Livio</i>. <a href="http://ilrasoiodioccam-micromega.blogautore.espresso.repubblica.it/files/2014/02/machiavelli-populismo.pdf" target="_blank">http://ilrasoiodioccam-micromega.blogautore.espresso.repubblica.it/files/2014/02/machiavelli-populismo.pdf</a>.
Though growing support for populist parties is also due to non-economic
factors, such as the feeling of marginalisation, of a falling standing in
society, of having lost control over one’s condition, determined by the
establishment élite; there are also cultural, ethnic and religious diversities
coming into play. When these factors determine electoral choice there is no
reason to dismiss the results as expression of populism instead of an integral
part and parcel of a democratic system.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: 14pt;">Vladimir offers two alternative visions of the future.
A pessimistic scenario involves rising inequalities and anti-globalist
policies, the rise of nationalisms with possible commercial or even hot
conflicts, a pause or even reversal of globalisation. An optimistic vision,
favoured by Vladimir, involves the containment of inequality, the restoration
of the welfare state funded by progressive taxation, the build-up of public and
collective enterprises (including self-managed non-profit cooperatives). “The
EU in this case would have a bright future” – he writes. Unfortunately there
are other fault lines in the EU today, which I tried to spell out in my post
and are left unscathed by Vladimir’s reflections, which do not alter my
fundamental pessimism. </span><span style="color: #222222; font-family: "arial" , sans-serif;"> </span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com2tag:blogger.com,1999:blog-8732662769765511163.post-65508500935239904652017-01-08T22:41:00.000+01:002017-01-17T18:07:07.985+01:00Seismic Faults in the European Union<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">On
2-3 December the Sapienza University of Rome organised a Conference on “Present
and Future of the EU and EMU”, in honour of Francesco Forte. Speakers at the
conference illustrated Forte’s scientific and professional merits. This post
discusses Forte’s statement that </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">“I governanti europei sono
cretini”,<i> arguing that this is only part
of the problem: those who govern Europe have a different agenda, and European
institutions and policies can be likened to seismic faults, with an earthquake
probability gradually approaching near certainty over time. Forte also is on
record stating that “nothing is irreversible in economics”, facts prevail on
rules written on paper – an important lesson for those who are reconsidering
the terms of EU Treaties.</i></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Introduction</span></i><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">. </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Brexit
is widely viewed as a tendency towards EU disintegration, with the risk of
contagion spreading to its weaker member states. In truth the crisis is much
more serious: the EU has many fault lines, institutions and policies sliding
over one another and colliding like tectonic plates. There are also external
pressures similar to continental drift. With the passing of time the
probability of a catastrophic institutional earthquake approximates near
certainty.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Crisis management is not a way to, and does not promote
greater integration. At best it is ineffective, causing delays and inertia in
multiple crises; at worst it is used as a political tool to justify “mission
creep” and to avoid democratic monitoring of EU élites political,
non-transparent agendas and behaviour. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Fault Lines. </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">There
are a dozen fault lines in the EU:<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="font-family: "verdana" , sans-serif; line-height: 106%;">1 <i>Brexit</i>. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Cameron
promised a Referendum to defuse UKIP challenge, hoping to replicate the success
of the referendum on Scottish independence, in destroying the Scottish Labour
Party while denying independence from the UK. He destroyed UK Labour, alright,
but in the whole of the UK a 52% majority on a large turnout secured
independence, i.e. to LEAVE the EU; he had to resign. His successor Theresa May
confirms “Brexit means Brexit”. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Brexit will be punitive: migrations control and EU
migrants’ lower access to welfare provisions, no ECJ jurisdiction, and the
rest, mean reduced UK access to the single market, in spite of significant
mutual losses, in order to discourage other exits or <i>a’ la carte </i>membership.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="font-family: "verdana" , sans-serif; line-height: 106%;">2 <i>Trade policy.</i> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">There
is a clear democratic deficit: <i>either </i>representatives
of 3.5mn Wallonians can block a Treaty affecting 545mn; <i>or</i> after 7 years
of secret negotiations with Canada, the Treaty on CETA (Comprehensive Economic
and Trade Agreement, like Transatlantic TIP and TransPacificPA, now unlikely to
be signed under Trump, who also intends to denounce NAFTA as “the worst trade
deal ever”) was unduly favourable to international investors, enjoying an <i>ad
hoc </i>ISDS (Investor-State Dispute Settlement) mechanism, protection of
profits from regulatory legislation, excessive protection of patents. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">There is a pro-multinational corporate bias also in EU
“Gold Plated Revolving Doors” recruitment policy of high officials (Monti,
Draghi, Issing, Barroso, Bangemann, etc.).<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">The role of the nation state is that of protecting its
citizens from multinational corporations (Judt 2010): self-evidently this role
cannot be entrusted to the European Union.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">3 Migrations</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">In 2014-16 there was an acceleration of
migrant inflows into the EU from the Middle East, the Balkans, South-East Asia
and Africa. Refugees escaping war and persecution are entitled to asylum (art.
13, Universal Declaration of Human Rights) but most migrants are economically
motivated and, unlike refugees, their right to migrate is unmatched by a
corresponding obligation under international law, to receive them. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Migrations yield a net welfare gain. In a world <i>without
borders </i>this would range between 143.3% (Hamilton <i>et al. </i>1984) and
7% of global GDP (Docquier <i>et al. </i>2012). <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Gross losses are also involved (of workers in host
countries, especially if unskilled, and employers in countries of origin) which
cannot be overcompensated by gross benefits (accruing to migrants, workers who
remained at home, employers in the host country; consumers all round benefiting
from greater competition) so as to make everybody better off, because transfers
from gainers to losers would have to be international (impractical) and/or from
the poor to the rich (undesirable). Trickle-down cannot be taken for granted,
trickle-up is just as likely.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Migrations also involve the dilution of social capital
(whether viewed as physical infrastructure, or as welfare state benefits, or
trust and cohesion) freely appropriated by migrants while private capital is
fully protected globally. An unsustainable contradiction. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Moreover, any benefits of cultural enrichment can be
matched by losses from cultural impoverishment.
Here the seismic fault is an East-West divide, that caused Schengen area
collapse, the building of walls and the spreading of populism. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Populism must include cross-party and inter-class protest
against the reintroduction of poverty, mass unemployment, poor services in
stable societies, and above all against all losses from globalisation. Such
protest is an integral part of democracy and no longer deserves contempt and
demonization. A re-definition of populism is required also by the diffusion of
Information Technology and the fast inter-connectivity of people in everyday
life (e-mail, social media, blogging, mass access to leaked official documents
and to expertise, etcetera.)<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="font-family: "verdana" , sans-serif; line-height: 106%;">4<i> Austerity</i>. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Maastricht
rules on budget deficit and public debt ceilings, and the tougher GSP and the
Fiscal Compact, have condemned member states to pro-cyclical fiscal policies,
protracted recession and mass unemployment, creating a North-South divide. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Early claims of a possible “expansionary fiscal
consolidation” were disproved by the IMF Research Department and now have been
abandoned. The IMF and other international organisations had under-estimated
fiscal multipliers in EU and OECD countries throughout 1970-2009, at an average
0.5 now recalculated upwards to be as much as 1.7 (Blanchard & Leigh,
2012). <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">This revision is due to the ineffectiveness of monetary
expansion close to a zero interest rate, lack of opportunities for exchange
rate devaluation, a large gap between potential and actual income and
simultaneous consolidation across countries. Also, fiscal multiplier for
expenditure cuts turns out to be up to ten times higher than for tax rises. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Fiscal consolidation is much more expensive in terms of
output loss than previously believed. Worse, it can be proven that, starting
from a hypothetical fiscal balance, a fiscal consolidation (tax increases
plus government expenditure cuts) will always necessarily result in an <i>increase
instead of a decrease of the Public Debt/GDP ratio</i>, with respect to what
that ratio would have been otherwise, <i>as long as the fiscal multiplier is
greater than the country’s GDP/Public Debt ratio </i></span></span><span style="font-family: "verdana" , sans-serif; font-size: large;">(See Nuti 2013).</span><i style="font-family: Verdana, sans-serif; font-size: x-large;"> </i></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Thus fiscal consolidation works only in countries with a
low Public Debt/GDP ratio, that do not need a consolidation. Renzi promised to
make Europe “change direction ” but run perversely large primary surpluses and
slowed down debt growth.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">5 Tax competition</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Taxation
across the EU is not sufficiently harmonised. In order to attract foreign
investment a <i>beggar-my-neighbour</i> tax competition destroys national and
EU collective tax revenue potential, making fiscal discipline more difficult. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">As Luxembourg Premier, in 2002-2010 Jean-Claude Juncker
made “sweetheart deals” with at least 340 multinational corporations, reducing
their tax liabilities by billions of dollars. A poacher turned gamekeeper, he
now enforces austerity in countries which he robbed of their tax revenue.<br />
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Ireland, levying a 0.005% (sic!) tax on Apple European
revenues, is the most spectacular instance. It was fined €13bn but tax recovery
is doubtful and is not going to benefit the EU members damaged by its policy.
See also Fiat’s move to the Netherlands, <i>etcetera. <o:p></o:p></i></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">6 The tiny EU budget (about 1% of EU GDP).</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">The USA have a federal budget of over
20% of US GDP, which can support the issue and service of federal debt.
Individual member states can issue their own bonds involving a default risk
without threatening the dollar or the US financial system. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">The tiny EU budget, combined with the rule that it should
always be balanced <i>ex-post</i> (by a variable income tax on member states)
rules out the possibility of issuing and servicing EU debt. It also rules out
financing major Europe-wide investment in infrastructure, or counter-cyclical
policies: the Juncker Investment Plan (€2bn EU funds expected to mobilise
€315bn private investment through impossible multiplier effects) has remained a
dead letter.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">7 Divergence of welfare policies.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Until the early 2000s the European
Social Model, a desirable target though not part of membership obligations,
relied on institutions as well as markets, providing employment protection and
a generous welfare state. The Model was
diluted and debased by EU enlargement to the East (2004-06), globalisation of
labour and austerity.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">The Bertelsmann Stiftung computes a Social Justice Index
for all 28 EU states, summarising: poverty prevention, equitable education,
labour market access, social cohesion and non-discrimination, health, as well
as intergenerational justice. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In the vast majority of EU countries the <a href="http://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/Studie_NW_Social-Justice-Index_2016.pdf">Index</a>,
after years of decline, reached the lowest point in 2012-14 but is still
noticeably worse than before the crisis. There are significant country
differences, impacting on the relative attraction of migrations. (Graph 4, p.
17, plotting the SJI 2016 against the PPP GDP per capita 2015 illustrates well
the dispersion of both income per head and the SJI throughout the EU: the
rejection of a financial Transfer Union has involved a <i>de facto </i>Labour
Transfer Union.)<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">8 Tolerance of Illiberal Regimes.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">The original European design was
committed to shared values, listed by Angela Merkel in her message to President
Trump as “democracy, freedom, …respect for the rule of law and the dignity of
the individual, regardless of their origin, skin colour, creed, gender, sexual
orientation or political views.” <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Such commitment has been neglected by EU acquiescence in
member states’ illiberal regimes.
Hungary and Poland have restricted freedom of speech, media pluralism
and the protection of minorities. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In Hungary since 2010 the Fidesz government of Viktor
Orbán changed the election system, redesigned electoral districts, eliminated
checks and balances within governance built over the past two decades, reshaped
the juridical system and gained nearly full control over the media and all
state institutions.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Transparency International describes Hungary as a “state
captured by private interest groups”. Viktor Orbán in 2014 announced his desire
to create an “illiberal state” modelled on China and Russia. Recently he
declared the end of the era of “<i>liberal blah blah</i>”, predicting that
Europe would come around to his “Christian and national” vision of politics. On
2 October 2016 an overwhelming majority of Hungarian voters rejected the EU's
migrant quotas, though turnout was marginally too low to make the poll valid.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In Poland, since October 2015 Kaczyński’s PiS party
“attacked the country’s Constitutional Court, politicized the judiciary and the
civil service, and launched an assault on media pluralism.” (Müller 2016). The
EU treated it as a Rule of Law violation but took no further action for the
moment.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Accession state Turkey’s Erdoğan, emphasizing traditional
Islamic morality, claims to be a “conservative democrat.” Turkey’s authoritarian
involution accelerated after the failed coup of 16 July, when over 100,000
people were purged. In November the European Parliament condemned
"disproportionate repressive measures" and called for a freeze on EU
accession, but MEPs have no formal role in accession talks. Turkey will still
receive €6bn to take back migrants who failed to obtain asylum in Greece. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Robert Fico’s government in Slovakia has pursued a
similar brand of what has been dubbed “raw majoritarianism” (Sierakowski 2016).
Renzi’s constitutional reform (rejected by the 4 December Referendum) was also
a move towards power concentration beyond democratic control. A fault line is
dividing liberal and illiberal Europe.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">9 The Euro: premature, handicapped, divergent</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">The common currency was supposed to
“crown” European integration, after political, fiscal and banking integration,
and a common foreign and defence policy, but was introduced prematurely, an
exemplar of the “crises create opportunity for integration” myth. It was also handicapped
by the ECB limited powers: unlike the Fed, the BoE and BoJ the ECB cannot
finance the EU budget or that of member states purchasing government bonds in
primary markets. The Euro also suffered from increasing divergence of member
state fundamentals. Nevertheless, the Euro gave us ten years of low inflation,
low and converging interest rates, trade and investment integration; its crisis
was due to contagion from the US credit crisis, and worsening public debt due
to bank rescues, feeding back onto banks’ balance sheets. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">On 12 July 2012 ECB President Mario Draghi announced that
the ECB was “ready to do whatever it takes” to preserve the Euro. He tried Long
Term Refinancing Operations, Outright Monetary Transactions and Quantitative
Easing, against German opposition, but on a scale much lower than in the US.
Monetary expansion on its own, without fiscal expansion and with debatable
“structural reforms”, soon loses effectiveness.
QE comes to a natural end for lack of eligible bonds. Negative interest
rates were introduced, to induce commercial banks to expand credit, but failed
to re-launch economic growth. “Negative interest rates are stupid. They
only shrink a bank’s capital, hinder the sale of credit and weaken the economy”
(Stiglitz 2016). Helicopter money might work, but then traditional fiscal
expansion seems preferable.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">10 The recapitalization of commercial banks.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">The fragility of European banks is due
to the long deep recession worsened by austerity, uncontrolled expansion of
derivatives transactions, local credit concentration and bank governance
failures. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Large scale bail-out (Germany €241bn) is no longer
available since the EU bail-in directive came into force on 1-1-2016. Deposit
insurance is still the responsibility of national Treasuries. Bank resolution
rules will come into force in 2018. Bank supervision (stress tests, etc.) is
feeble.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">German commercial banks are still in jeopardy because of
the persistent derivatives crisis (Deutsche Bank); liabilities to US fines for
selling toxic bonds (Deutsche and Commerz Bank) as well as the precarious state
of German Landesbanks. Basel III rules should make banks safer, but their
introduction in a recession slows down lending.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">11 Foreign Policy.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">After
1992 the EU was complicit in NATO enlargement to the East, in violation of the
1990 confirmed deal between Gorbachev and George H.W. Bush whereby NATO would
expand not “one inch to the east,” (James Baker, see Zuesse 2015). A needlessly
aggressive policy became a missed opportunity for <i>détente</i> with Russia
(Romani 2014). <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In 1991, after the dissolution of the SFRY, Germany’s
hasty recognition of Slovenia and Croatia put the EU in front of a <i>fait
accompli </i>and was followed by civil war (Bosnia 1992-95) and NATO
intervention (1999). <br />
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In Ukraine the EU helped initiate and supported the
Euromaidan movement that in February 2014 ousted pro-Russian President Viktor
Yanoukovich, elected in 2010. This was followed by Russian annexation of
Crimea, a “present” from Khrushchev to Ukraine in Soviet times (1954) but
ethnically Russian and militarily essential for access to warm-water ports. The
EU joined sanctions against Russia which damaged member states asymmetrically
(Germany continued to import oil and gas from Russia.)<br />
<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">After the US Presidential election Juncker declared that
Trump “did not know the world and his first two years would be wasted while he
travelled and learned”; his campaign had been “disgusting” – not exactly a
sober, diplomatic reaction. Merkel’s Social Democratic coalition partner,
Deputy Chancellor Sigmar Gabriel, imitated Juncker and greeted Trump as
“the trailblazer of a new authoritarian and chauvinist movement.” <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Member states are committed to CFSP – a Common Foreign
and Security Policy, aimed at Conflict Prevention and Crisis Management.
Acronyms (EUGS, HRVP, EDA, EEAS, EDP, CDA, INTCEN, EUMS INT …) and paperwork
abound. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">12 Defence.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Every
EU member state controls its own army but under the Common Security and Defence
Policy more than 30 civilian and military operations have been launched since
2003, in Europe as well as Asia and Africa. France, Germany Belgium, Spain and
Luxembourg also created Eurocorps, a military body for rapid deployment to
hotspots. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">The lack of a democratic, political route to
decision-taking in military and paramilitary action at EU level is a further
source of gross instability. The EU
was divided over the Iraq War. Unilateral military initiatives were taken
against Gaddafi’s Libya by Cameron and Sarkozy, with Italian acquiescence. The
fight against Daesh is handicapped by divisions over the Assad regime, Turkey’s
dominant anti-Kurd stance, Saudi Arabia’s involvement and differences in policy
towards Iran. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">A Franco-German Plan for closer EU defence cooperation
was discussed at the Bratislava summit last September; British Defence
Minister Michael Fallon declared that the UK would veto the creation of EU
military capabilities so long as it remained an EU member. President Trump’s
plan to require European states pay up for NATO’s costs contributes to sources
of dissension.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Other Potential Fault Lines.</span></i><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">There are other potential
fault lines: <i>energy policy </i>– energy saving, alternatives to fossil fuels
and the nuclear option being still nation-based – or <i>environmental policy </i>-
the Paris agreement was ratified by the EU but relies on national
implementation policies; and the VW emission scandal uncovered by the US and
compensation denied to European customers.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">External pressures.
</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Trump’s
election to the US presidency might worsen the EU crisis. The likely rise in
interest rates, following his plans for $1,000bn infrastructure investment, is
bad for the European South and bad for banks which should have sold government
bonds much earlier but did not; the Euro will probably fall, generating a
greater German export surplus which <i>ceteris paribus</i> will force the South
to run larger budget deficits. Trump’s plans are reminiscent of Reagan’s
policies which led to defaults in Latin America.<i><o:p></o:p></i></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Interconnections.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Many of the EU faults are
inter-connected: immigration was encouraged by the divergence of welfare
policies; its problems were aggravated by austerity; it was precipitated by EU
foreign policy and war involvement; has contributed to Brexit. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Difficulties with CETA are bound to hinder any
after-Brexit EU-UK Treaty. Tax competition clashes badly with austerity. ECB
negative interest rates contribute to the crisis of commercial banks and raise
their recapitalisation requirements, and so on.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Local earthquakes feed back onto the Union as a whole:
e.g. the failure of Union attempts at stopping the authoritarian involution of
Hungary and Poland, and of enforcing national quotas for refugees relocation,
has damaged further EU credibility.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Remedies. </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">In
principle, the virtual tectonic plates that make up the EU could be controlled
by European governance. The remedies to secure the EU entire system are
available, in many cases even without amending the Treaties. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Thus Brexit might be softened by revamping UK membership
of the EEA (Yarrow 2016) or the creation of a European Continental Partnership
(Pisani-Ferry <i>et al</i>. 2016). The
migration crisis might be reduced by a common asylum acceptance regime; a
stronger common external border; re-location of refugees across countries under
penalty of losing structural funds; stopping the Dublin Treaty placing an
unfair burden on EU frontier countries; deducting the financial burden of
migrants from the permitted fiscal deficit.<br />
<br />
Migrants welfare entitlements might be restricted to what their states of
origin would offer the recipient country’s nationals, on plausible grounds of
reciprocity. Entitlements might be restricted during an initial period (the
current UK proposal), or made conditional on residence requirements.
Re-patriation of economic migrants often is problematic, but ought to be
considered with greater determination. During his campaign Trump has caused a
sensation by announcing plans to repatriate 11 million undocumented immigrants,
scaled down to 2 million after the election. But during his tenure in 2009-2016
President Obama re-patriated 2.5 million immigrants, often in debatable
circumstances – more than the previous 19 Presidents combined. Pakistan
re-patriated 800,000 Afghans; last year Sweden announced the re-patriation of
80,000 immigrants. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Austerity might be loosened by excluding from the
permitted deficit public investment, which does not involve an
inter-generational transfer, or the payment of government arrears towards
suppliers, which involve a change of creditors and not an increase in debt.
Potential output, relatively to which the permitted deficit is calculated,
might be estimated according to a more permissive methodology like that of the
OECD. The maximum trade surplus permitted, currently of 6% of GDP, should be
reduced to 4% in line with the maximum trade deficit permitted; surplus
countries exceeding that ceiling (like Germany at 8.5%, or Holland) could be
forced to run a parallel budget deficit in order to facilitate other members’
fiscal discipline. ECB seigniorage could be mobilised to fund the issue of
bonds to reduce national public debts in proportion to ECB shares, as proposed
by Wyplosz and Pâris 2014 in their PADRE scheme (Politically Acceptable Debt
Restructuring in the Eurozone) and by Nuti 2014. This would avoid a Transfer
Union. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">The adverse distributive effects of globalisation are
harder to handle: short of a global Exchequer taxing gainers and
over-compensating losers, the transfers involved have to take place within
nation states or Unions, compensating domestic losers from additional revenue
raised by taxing domestic taxpayers regardless of whether they are gainers from
globalisation, or out of savings in domestic expenditure. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Clashes. </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">These
effective remedies are in line with the original European design. Unfortunately
they clash with the hyper-liberal design that has gradually perverted European
policies, as well as with conflicts of interest between states, ideologies,
welfare regimes, classes, bureaucracies, memories and expectations.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In Germany the Ordo-liberal tradition of Walter Eucken in
the 1930s, based on competition and monetary stability as the pillars of
society, is still a heavy inheritance. In German and Dutch the same word <i>Schuld</i>,
means both Debt and Guilt. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="font-family: "verdana" , sans-serif; line-height: 106%;">German memories are long about interwar hyper-inflation,
wrongly believed to have caused Hitler’s ascent to power, generated instead by
the deflation and austerity of Chancellor </span><span lang="HU" style="font-family: "verdana" , sans-serif; line-height: 106%;">Brüning</span><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> in 1929-32. But Germans have a short
memory about their own <i>Wirtschaftswunder, </i>the result of a redistributive
currency reform, cancellation of public debt of over 300% of GDP and Marshall
Aid – all measures which they denied to Greece. “Thomas Mann dreamed of a
European Germany. His wish has turned into its opposite. Today we have a German
Europe.” (Lafontaine, 2015). <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Lenin (1915) was prophetic: “… a United statesof Europe,
under capitalism, is either impossible or reactionary”. Conversely, Hayek
(1939) strongly supported interstate federalism as essential to his liberal
project: international mobility of goods and factors would constrain national
state policy, and heterogeneity of interests would constrain federal policy.
Hence Thatcher’s support for UK membership (Parijs 2016).<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">The New European </span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">recently
stated that “Brexit is not an earthquake. It is the aftershock of the death of
European Social Democracy”. This is only partially correct: Brexit and other
forms of the EU crisis, and Trump’s triumph, are not an aftershock but a
foreshock, part of a seismic swarm which may or may not be followed by “the big
one”. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">And it is the agony – not quite the death yet – of a
particular, perverted form of Social Democracy: hyper-liberal, globalist,
austerian, pro-multinationals, unequal, politically correct, pre-Keynesian
after Keynes and pre-Minskyan after Minsky, relying on alleged but unreliable
mechanisms of self-regulation and self-balancing of markets, through
international mobility of labour (Schengen, Pope Francis, Hillary Clinton) and
capital (Maastricht).<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Exitaly/ExIT/Italeave.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 106%;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 106%;">Citizens are reluctant both to move from
locations of high seismic risk, and to face the cost of implementing
anti-seismic measures to secure their homes and public buildings and
infrastructure. EU countries are reluctant to abandon Europe and the Euro,
despite the proven impossibility of securing sustainable European institutions. </span></span><span style="font-family: "verdana" , sans-serif; font-size: large;"> </span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Therefore the idea that "there is no salvation
outside Europe", and that "we need <i>more </i>European integration
rather than less" - instead of a <i>different </i>Europe – is just as
senseless and fearful as the refusal of actual and potential earthquake victims
to move elsewhere, and the purblind commitment of the Italian government to
"rebuild everything as it was, where it was.“<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">In any case, it is absolutely necessary to imagine,
investigate and assess the likely consequences of an exit from the Euro and
Europe, on the part of Italy and other countries that have suffered the
consequences of European multiple crises. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">First, Italy might be required to leave. Imagine a
balance of payments crisis, a burst of capital flight, restrictions on capital
movements and bank withdrawals, a panic run on the banks. European assistance
might be provided, subject to draconian conditions. This is where Greece got to
before it capitulated. But Italy is much larger, it might be offered assistance
in insufficient quantity, or the government might be unwilling or simply unable
to meet the required conditions before the imposed deadline. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Then the ECB would no longer be able to provide emergency
liquidity assistance, and the only choice left would be between a barter
economy or the introduction of a national currency. The trouble is that this
would require long and secret preparations, which are difficult to imagine in
Italy. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Second, the cost of Exitaly would be enormous, but
perhaps not as large as it is often suggested. It should not be taken for
granted that the large cost of leaving Europe would be necessarily greater over
time, in terms of present value, than the large cost of remaining in Europe
without the necessary, possible but unlikely improvements.<o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Finally, reflections and discussions about the mutual
costs of Eurozone disintegration would strengthen the negotiating position of
those seeking to reduce the risks from catastrophic shifts and collapse. <o:p></o:p></span></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">A LONGER VERSION OF THIS POST IS AVAILABLE </span></span><a href="https://1drv.ms/u/s!AvJLj9Zdu3xmck80yJ1n5qQUkSM"><span style="font-family: Verdana, sans-serif; font-size: large;">HERE</span></a><br />
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<o:p></o:p></div>
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span>
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">References:<o:p></o:p></span></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Bertelsmann Stiftung (2016), “<a href="http://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/Studie_NW_Social-Justice-Index_2016.pdf">Social
Justice Index 2016</a>”, Gütersloh.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Blanchard Olivier J. and Daniel Leigh (2012), “Box 1.1.
Are We<i><o:p></o:p></i></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Underestimating Short-Term Fiscal Multipliers?” in
International Monetary Fund (2012), <i>World Economic Outlook – Coping with
High Debt and Sluggish Growth, </i>Chapter, “Global prospects and policies”,
pp. 41-43, October, Washington.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Docquier F., J. Machado and K. Sekkat (2012), “Efficiency
gains from liberalizing labor mobility”, <a href="http://sites.uclouvain.be/econ/DP/IRES/2012023.pdf">Discussion
Paper 23</a>, IRES Louvain and UCL.
<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br />
Fayola Anthony (2016), “Angela Merkel congratulates Donald Trump – kind of”, <a href="https://www.washingtonpost.com/news/worldviews/wp/2016/11/09/angela-merkel-congratulates-donald-trump-kind-of/?utm_term=.9e5eb0d53b4e">The
Washington Post</a>, 9 November.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Hamilton B. and J. Whalley (1984), “Efficiency and
distributional implications of global restrictions on labour mobility”, <i>Journal of Development Economics</i>, Vol.
14, No. 1, pp. 61–75.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Judt Tony (2010), <i>Ill
fares the land</i>, Allen Lane, London.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Lafontaine, Oskar (2015), “Let’s develop a Plan B for
Europe”, <i><a href="http://links.org.au/node/4573">LINKS</a>-International Journal of
Socialist Renewal</i>, 23 September.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Lenin Vladimir Ilich (1915), “On the Slogan for a United
States of Europe”, <i>Sotsial-Demokrat</i> No. 44, August 23,
1915. <a href="https://www.marxists.org/archive/lenin/works/cw/index.htm#volume21" target="_blank"><i>Lenin Collected Works</i></a>, Progress Publishers, <a href="https://www.marxists.org/archive/lenin/works/cw/v21pp74h.txt" target="_blank">[1974]</a>, Moscow, <a href="https://www.marxists.org/archive/lenin/works/cw/volume21.htm#1915-aug-23" target="_blank">Volume 21</a>, pages 339-343.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Müller Jan-Werner (2016), “<a href="http://www.nybooks.com/daily/2016/02/11/kaczynski-eu-problem-with-poland/">The problem
with Poland</a>”, <i>New York Review
of Books</i>, 11 February.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Nuti D. Mario (2013), <a href="https://files.acrobat.com/a/preview/27a856d0-aeb8-4869-a952-7f5793b4738d" target="_blank">"Austerity versus Development"</a>,
"International Conference on Management and Economic Policy for
Development", Kozminski University, Warsaw, 10-11 October.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span lang="IT" style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Nuti D. Mario (2014), “<a href="https://dmarionuti.blogspot.it/2014/04/padre.html">PADRE</a>”,
Blog “Transition”, 4 April.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-size: large;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Pâris Pierre and Charles Wyplosz (2014). <i>PADRE – Politically Acceptable Debt
Reduction in the Eurozone</i>, Geneva Reports on the World Economy, Special <a href="http://graduateinstitute.ch/files/live/sites/iheid/files/sites/international_economics/shared/international_economics/prof_websites/wyplosz/Geneva%20Reports/Geneva%20Special%20Report%203.pdf">Report 3</a>, ICMBS
and CEPR, January. <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Pisani-Ferry Jean, Norbert Rottgen, Andre’ Sapir, Paul
Tucker and Guntram B. Wolfe (2016) “<a href="http://bruegel.org/2016/08/europe-after-brexit-a-proposal-for-a-continental-partnership/">Europe
After Brexit</a>: A Proposal for A Continental Partnership”, Bruegel
Institute, 29 August.</span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"> <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="IT" style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Romani Sergio (2015), <i>In Lode della Guerra Fredda – Una
Controstoria</i>, Longanesi, Milano.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="IT" style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Sierakowski Sławomir (2016), “<a href="https://www.project-syndicate.org/commentary/poland-illiberalism-threat-to-europe-by-slawomir-sierakowski-2016-01?barrier=true">The Polish
Threat to Europe</a>”, Project Syndicate, 19 January.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Stiglitz Joseph (2016), “<a href="file:///C:/Users/dmarionuti/Documents/2016/,%20https:/www.project-syndicate.org/commentary/globalization-new-discontents-by-joseph-e--stiglitz-2016-08">Globalisation
and its new discontents</a>”, 5 August, Project Syndicate.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">van Parijs Philippe (2016), “<a href="https://www.socialeurope.eu/2016/11/thatchers-plot-defeat/">Thatcher’s
Plot</a> — And How To Defeat It”, Social Europe, 29 November.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">von Hayek Friederich A. (1939), <i>The Economic conditions of interstate federalism</i>, in <a href="https://mises.org/sites/default/files/Individualism%20and%20Economic%20Order_4.pdf">Individualism
and Economic Order</a>, Chicago University, 1948.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Yarrow George (2016), <i><a href="http://www.rpieurope.org/Publications/Yarrow_Brexit_and_the_single_market.pdf">Brexit and
the Single Market</a></i>, Essays in Regulation, Regulatory Policy
Institute, Oxford, July.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-family: "verdana" , sans-serif; line-height: 106%;"><span style="font-size: large;">Zuesse Eric (2015), “<a href="http://www.strategic-culture.org/news/2015/09/10/how-america-double-crossed-russia-and-shamed-west.html">How America
double-crossed Russia and Shamed West</a>”, The Washington Culture
Foundation.<o:p></o:p></span></span></div>
<br />
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</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com7tag:blogger.com,1999:blog-8732662769765511163.post-76822392796539360462016-10-20T18:58:00.000+02:002016-10-21T08:58:19.748+02:004 December: NO to RENZI’S P2 Constitutional Reform<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222; font-family: "verdana" , sans-serif;"><span style="font-size: large;">On 4
December 2016 Italian electors will be called to vote on a Referendum on
Constitutional reform and a new electoral law. The question posed to electors
is: “Do you approve the text of the constitutional law concerning ‘norms for
overcoming perfect bicameralism, the reduction in the number of parliamentarians,
the containment of the costs of institutions, the abolition of CNEL [the
advisory National Council for Economy and Labour] and the revision of Title V
of Part II of the Constitution’ approved by the Italian Parliament and
published in the Official Gazette n. 88 of 15 April 2016?" YES/NO. Being a
confirmation and not an abrogation Referendum no quorum is required for its
validity.</span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">Such a
question is tendentious. The constitutional law in question does not abolish the
Senate, it simply transforms perfect bicameralism into asymmetric (and less
directly democratic) bicameralism, turning the Senate into a Chamber elected by
a <i>selectorate</i> of mayors and regional
councillors among themselves, instead of being elected directly by “the people”
as art. 1 of the 1948 Constitution provides. What the new law abolishes is the
Senate’s power to bring down the government in a confidence vote, while retaining
for the proposed Senate dual legislative powers on a broad range of questions,
from local issues to European directives. The number of senators is reduced
from 395 to 100 (21 mayors, 74 regional councillors and 5 nominated by the
President) but there is almost no reduction in cost; far from the €500mn
boasted of by Renzi, it is officially estimated at €50mn a year – equivalent to
one day of Italian military expenditure, or a fraction of the tax that FIAT avoids
by moving its headquarters to the Netherlands. And even that tiny cost
reduction in keeping the Senate at all is matched by the only part time
involvement (two days per month) of the new senators most of whose time
naturally is taken up by their local administrative duties. The 630 members of
the lower Chamber with their generous salaries, golden pensions and handshakes,
bonuses, allowances and expenses entitlements, remain untouched. </span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><span style="color: #222222; font-family: "verdana" , sans-serif;">Il Fatto Quotidiano</span></i><span style="color: #222222; font-family: "verdana" , sans-serif;"> (11 October) proposes spelling out and unbundling the long mixed
question drafted by the government asking specifically whether electors
approve:</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #222222; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the abolition of elections for the Senate, which will be made up of
mayors and regional councillors nominated by regional Councils i.e. by parties,
not elected by the electorate, and empowered to legislate in the face of
popular sovereignty;</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #222222; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the concession of parliamentary immunity (from surveillance, arrest and prosecution)
to mayors and regional councillors nominated as senators without ever having
been elected as legislators and therefore not entitled to that privilege;</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #222222; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the complication of methods for law approval, passing from 2 to 10, or
to 7, 9 or 13 according to the interpretation given to the incomprehensible
text of the reform;</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #222222; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the trebling, from 50,000 to 150,000, of the number of signatures needed
to introduce a law by popular initiative;</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #222222; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the survival of a Senate that will be able to or be compelled to –
according to the subject matter – re-vote and modify all the laws approved by
the Chamber of Deputies, replicating and complicating the bicameralism (even in
its reformed asymmetry rather than current parity) that is alleged to be
abrogated;</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<!--[if !supportLists]--><span style="font-size: large;"><span style="color: #444444; font-family: "symbol";">·<span style="font-family: "times new roman"; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "verdana" , sans-serif;">the expropriation of the powers of Regions to protect their populations,
territories, security and environment from useless large-scale, costly and polluting
public works (such as the Turin-Lyon TAV, the Third Crossing [<i>Valico</i>], the bridge on the Messina
Strait, oil drilling on land and at sea, regasification plants, etc.) which
will be decided by the Prime Minister in Rome alone and in command.</span><span style="color: #444444; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">In order to raise YES support falling
behind in the South and on the Right Matteo Renzi has just resurrected the
multibillion euro project of the longest suspension bridge in the world connecting
Sicily with the mainland, associated with Silvio Berlusconi’s premiership, and which
Renzi had fiercely opposed in 2012. The project was abandoned in 2013 because
of its high costs and dubious benefits, it being a long-term mafia objective,
and the strait’s vulnerability to earthquakes. There are more pressing needs
and better growth-promoting projects in anti-seismic investment, rail and road
transport improvements, and environmental protection and reclamation. </span><a href="https://www.ft.com/content/5430f982-8a28-11e6-8cb7-e7ada1d123b1" target="_blank"><span style="font-family: "verdana" , sans-serif;">Tony Barber</span></a><span style="color: #222222; font-family: "verdana" , sans-serif;"> in
the Financial Times spoke of Renzi’s reforms as the “constitutional bridge to
nowhere” – nicely put were it not for the fact that opening to the mafia does
not lead to nowhere but to the further criminalisation of the Italian state. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">On 16 October Andrea Camilleri,
Gustavo Zagrebelsky, Nadia Urbinati, Paolo Flores d’Arcais and Tomaso
Montanari, </span><a href="http://temi.repubblica.it/micromega-online/ancora-cinquanta-giorni-di-lotta-per-dire-no-ai-nemici-della-costituzione-piu-bella-del-mondo/#.WAHc-Gyx19w.facebook" target="_blank"><span style="font-family: "verdana" , sans-serif;">Why we vote NO</span></a><span style="color: #222222; font-family: "verdana" , sans-serif;">, posed the
question that is really being asked in the referendum:</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">“Do you want to count less, to have
less democracy, to give a free hand?”.</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: "verdana" , sans-serif;"><span style="font-size: large;">“We will answer NO,” they write, “…
We do not want to give a free hand to this or to any other government. An inept
and often corrupt political class tries to convince us that the Constitution is
at fault, but this is not true. To those who tell us that to make Italy work it
is necessary to change the rules we answer: we, instead, want to change the
players”. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">(See also
PELLECCHIA </span><span style="color: #222222; font-family: "arial" , sans-serif;"><a href="http://temi.repubblica.it/micromega-online/intellettuali-del-belpaese-dove-il-si-suona/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Intellettuali del bel paese dove il sì suona</span></a></span><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, MARTELLI </span><span style="color: #222222; font-family: "arial" , sans-serif;"><a href="http://temi.repubblica.it/micromega-online/se-renzi-e-un-oligarca/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Se Renzi è un oligarca</span></a></span><b><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, </span></b><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">SOMMA </span><a href="http://temi.repubblica.it/micromega-online/benigni-la-costituzione-e-la-brexit/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Benigni, la Costituzione e la
Brexit</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, DE LUCA </span><span style="color: #222222; font-family: "arial" , sans-serif;"><a href="http://temi.repubblica.it/micromega-online/referendum-erri-de-luca-%e2%80%9cpolitici-corrotti-giu-le-mani-dalla-carta%e2%80%9d/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Politici corrotti, giù le mani dalla Carta</span></a></span><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, FORGES DAVANZATI </span><span style="color: #222222; font-family: "arial" , sans-serif;"><a href="http://temi.repubblica.it/micromega-online/la-finanza-internazionale-e-la-controriforma-costituzionale/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">La finanza e la controriforma costituzionale</span></a></span><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">. See also </span><a href="http://st.ilfattoquotidiano.it/wp-content/uploads/2016/09/vettoriale-pag-1-4-min.pdf" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Noi votiamo NO</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">; Zagrebelsky and Pallante, </span><a href="http://www.laterza.it/index.php?option=com_laterza&Itemid=97&task=schedalibro&isbn=9788858125168" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Loro Diranno, Noi Diremo</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, Travaglio and Truzzi, </span><a href="http://www.ilfattoquotidiano.it/premium/articoli/il-libro-che-spiega-perche-no-al-senato-dei-nominati-immuni/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">Perche’ NO</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, La Valle </span><a href="http://temi.repubblica.it/micromega-online/la-verita-sul-referendum/#.V-zNyu2F0t8.email" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">La Verita’ sul Referendum</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">, a set of replies </span><a href="https://fattodavoi.ilfattoquotidiano.it/2016/09/21/per-dire-no/11289/" target="_blank"><span lang="IT" style="font-family: "verdana" , sans-serif;">NoFattoDaVoi</span></a><span lang="IT" style="color: #222222; font-family: "verdana" , sans-serif;">).</span><span lang="IT" style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">The present Parliament was elected on
the strength of electoral law 270 of 21 December 2005, named after its Lega
proponent, Roberto Calderoli, and better known as the <i>Porcellum</i> from the name </span><span style="font-family: "verdana" , sans-serif;">(<i>una porcata</i>, a
pig’s breakfast) <span style="color: #222222;">attached to it by the proponent himself, which in January 2014 was declared unconstitutional by the Constitutional
Court (Sentence 1/2014). Continuity of state power required that Parliament
should continue to be legitimate in its functioning, but it is highly
questionable whether the current Parliament should have done anything other
than at most pass a new electoral law before being dissolved by the President, who
was himself elected by the current unconstitutional Parliament, moreover for a
second mandate not envisaged (although not specifically forbidden) by the
Constitution. Instead of which the unconstitutional Parliament with Napolitano’s
prodding launched itself at a major constitutional reform changing one third of
our Constitution.</span></span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">Moreover, since its unconstitutional
election in February 2013 the Italian Parliament has achieved the unenviable
record of containing 246 turncoats (<i>voltagabbana</i> in Italian)
Members of Parliament changing sides, many of them more than once reaching a
total of 325 crossings of the floor, equivalent to about one third of the
combined membership of the Lower Chamber and the Senate (and rising weekly).
Berlusconi, a pioneer in establishing a market for parliamentarians, purchased
support that was decisive in toppling the Prodi government. With this kind of
tradition there is no way even the majority premium envisaged by the new Constitution
can guarantee a stable majority.</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: "verdana" , sans-serif;">So the new Constitution dice are
loaded in favour of an authoritarian regime, where the leader of the party
enjoying a guaranteed 55% majority in the Lower Chamber, who will be mostly his
own nominees under the party list electoral system, in addition to his and his
party’s new-Constitution Senate nominees, can play an exceptionally powerful
role in appointing: the Head of State, the members of the Constitutional Court,
the members of the Higher Council of Magistrates (CSM), the leading Authorities
responsible for sectoral functions, the RAI Board of Directors etc.; as well as
legislating and exercising executive power without having to face any real
opposition. And, as the UK has found, the collapse of the Labour Party and its
subsequent failure to realise a real opposition has adverse consequences for the
country, and for Europe. </span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="color: #444444; font-family: "verdana" , sans-serif;"><span style="font-size: large;">Gustavo Zagrebelsky, the former
President of the Constitutional Court, states that the combination of the new
electoral law (the so called <i>Italicum</i>, whereby 2/3 of deputies will
be nominated by party leaders), and the reforms linked to it by a YES in the
Referendum would remove the checks and balances so judiciously introduced in the
post-Fascist 1948 Constitution to prevent any return of authoritarianism of any
kind, and create the conditions for “a shift from democracy to oligarchy”. Indeed,
under <i>Italicum</i> a party commanding
only 20%-25% of the votes in the first ballot might access a second ballot and
beat the only other remaining competitor, thus gaining the winner’s premium to
end up with a statutory 55% majority. <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #444444; font-family: "verdana" , sans-serif;">The concept of oligarchy must not be
confused with that of minority. Government is always necessarily exercised
by a minority, but whether or not this is an oligarchy depends on whether power
is exercised for the benefit of that ruling minority and its goals, or for the
collective benefit of society, in which case it is not an oligarchy but a
representative democracy – as the historian Emilio Gentile observed in his rebuttal
of Eugenio Scalfari, the <i>Repubblica</i>
editorialist’s crass claim that oligarchy is the only possible form of
democracy. Moreover – as Gentile pointed out – any democracy is intensely
vulnerable to the oligarchic globalisation of economic and financial powers
interfering with national policy-making, a major constituent of the “</span><a href="http://www.fabians.org.uk/wp-content/uploads/2012/07/Post-Democracy.pdf" target="_blank"><span style="font-family: "verdana" , sans-serif;">post-democracy</span></a><span style="color: #444444; font-family: "verdana" , sans-serif;">”
theorised by Colin Crouch. The risk is of a democracy in which the people are only
<i>comparse </i>(extras) acting an insignificant part on the political stage at
the time of the election leaving the exercise of power to party and government
oligarchies, demagogic leaders, a corrupt political class, a degraded political
culture and the method of populist slogans and announcements.</span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #444444; font-family: "verdana" , sans-serif;">Renzi is simply the current
mouthpiece and tool for the implementation of the </span><a href="http://www.ilfattoquotidiano.it/wp-content/uploads/2010/07/Il-Piano-di-rinascita-democratica-della-P2-commentato-da-Marco-Travaglio.pdf" target="_blank"><span style="font-family: "verdana" , sans-serif;">Piano di Rinascita Democratica</span></a><span style="color: #444444; font-family: "verdana" , sans-serif;"> (Plan for Democracy Reborn), an authoritarian project initiated in
Italy by Licio Gelli of the P2 secret Masonic Lodge (drafted around 1976,
published in 1982), and pursued by Craxi, Cossiga, Berlusconi, Napolitano, with
the blessing of international financial circles such as </span><a href="https://culturaliberta.files.wordpress.com/2013/06/jpm-the-euro-area-adjustment-about-halfway-there.pdf" target="_blank"><span style="font-family: "verdana" , sans-serif;">JP Morgan</span></a><span style="color: #444444; font-family: "verdana" , sans-serif;"> (2013),
not to mention the support obtained through undue interference by the </span><a href="http://www.ilfattoquotidiano.it/2016/09/13/referendum-costituzionale-lambasciatore-usa-se-vincesse-il-no-sarebbe-un-passo-indietro-e-addio-investimenti/3029325/" target="_blank"><span style="font-family: "verdana" , sans-serif;">US Ambassador</span></a><span style="color: #444444; font-family: "verdana" , sans-serif;"> and </span><a href="http://www.ansa.it/english/news/politics/2016/10/18/obama-endorses-yes-renzi-referendum_74bb791c-1f11-43a1-b713-3ce656ecc4f8.html" target="_blank"><span style="font-family: "verdana" , sans-serif;">Barack Obama</span></a><span style="color: #444444; font-family: "verdana" , sans-serif;"> in his
role as the President of the US. </span><span style="color: #222222; font-family: "arial" , sans-serif;"><o:p></o:p></span></span></div>
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<span style="color: #444444; font-family: "verdana" , sans-serif;"><span style="font-size: large;">JP Morgan claimed that in Europe
“Constitutions tend to show a strong socialist influence, reflecting the
political strength that left wing parties gained after the defeat of fascism.
Political systems around the periphery typically display several of the
following features: weak executives; weak central states relative to regions;
constitutional protection of labor rights; consensus building systems which
foster political clientalism [sic]; and the right to protest if unwelcome
changes are made to the political status quo. The shortcomings of this
political legacy have been revealed by the crisis.” The Renzi regime’s
attempted scrapping of the Italian 1948 Constitution is custom-tailored to JP
Morgan’s specifications. </span></span></div>
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<span style="color: #444444; font-family: "verdana" , sans-serif;"><span style="font-size: large;"><br /></span></span></div>
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<span style="color: #444444; font-family: "verdana" , sans-serif;"><span style="font-size: large;">For my part, I will vote a convinced
NO, and encourage all my readers who have a vote to do the same on 4 December
next.</span></span></div>
</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com48tag:blogger.com,1999:blog-8732662769765511163.post-35391364136442832812016-10-01T23:08:00.001+02:002016-10-05T23:57:10.823+02:00Unpacking CETA<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: "verdana" , sans-serif; font-size: large;"><br /><i><br />This Guest Post on CETA - the Canada-EU Trade Agreement scheduled to be signed at the end of October - was contributed by Peter Rossman, Director of Campaigns and Communication for IUF (the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations). After thorough reading he wrote this contribution, which originally appeared in the <a href="http://www.global-labour-university.org/fileadmin/GLU_Column/papers/no_250_Rossmann.pdf">Global Labour Column</a> edited by CSID (Corporate Strategy and Industrial Development, University of the Witwatersrand, Johannesburg). We are grateful for his permission to reproduce it here. An earlier extended paper on “<a href="http://www.iuf.org/w/sites/default/files/TradeDealsThatThreatenDemocracy-e_0.pdf">Trade Deals That Threaten Democracy</a>” is also available. (DMN)</i></span><br />
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><br /> ‘The Parties hereby establish a free trade area…’ <i>CETA Article 1.4.</i></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><i><br /></i> ‘Trade, like Religion, is what every Body talks of, but few understand: the very Term is dubious, and in its ordinary Acceptation, not sufficiently explain’d.’ Daniel Defoe, A Plan of the English Commerce (1728).</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">The Canada-EU Comprehensive Economic and Trade Agreement (CETA), like other looming mega-treaties, is a comprehensive vehicle for expanding the scope of transnational investment by rolling back the capacity of governments to regulate in the public interest. The attack on democratic governance is not restricted to the notorious Investor-State Dispute Settlement (ISDS) mechanism, which privileges transnational capital by creating a parallel legal system exclusive to transnational investors. The invasive claims of transnational investors permeate the entire treaty. </span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><b>'Free Trade' and the expanding investor universe. </b></span><span style="font-family: "verdana" , sans-serif; font-size: large;">Canada and the EU are already among the world’s most open economies. Tariffs are at a historic all-time low. CETA’s primary mission is to eliminate ‘non-tariff barriers’ – namely the laws and regulations constructed over decades of struggle to limit corporate power and support the services and policies needed to defend workers, citizens and the environment. CETA is an investment treaty embedded in a comprehensive deregulatory project.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><br /> The treaty leaves existing regulations and policies in Canada and the EU vulnerable to investor challenges – directly through ISDS, or indirectly through corporate-driven state-to-state dispute mechanisms. It also forecloses the use of essential policy tools which progressive governments will need to reverse the social destruction which is feeding an authoritarian, nationalist and xenophobic right.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">The treaty builds on an expansive definition of investment which broadens its scope beyond existing treaties between Canada and the EU. It is virtually identical to the leaked draft investment chapter in the Transatlantic Trade and Investment Partnership (TTIP).</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">The ‘legally scrubbed’ official CETA text states, tautologically: ‘Investment means every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment.’ (CETA, 2014: 39). Characteristics of an investment include ‘the expectation of gain or profit.’ In addition to direct investment in an enterprise, ‘investment’ includes stocks, shares, bonds and other debt instruments; concessions, ‘including to search for, cultivate, extract or exploit natural resources’; intellectual property rights and ‘other moveable property, tangible or intangible, or immovable property and related rights’, and ‘claims to money or claims to performance under a contract’ (CETA 2014: 39ff) A corporation need only demonstrate a ‘legitimate expectation’ of profit to challenge regulatory obstacles to realising that expectation.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">The market access and national treatment provisions set out in the investment chapter apply to governments at every level, erasing all restrictions in the name of ‘non-discrimination’. The treaty prohibits governments from managing foreign investment for distinct objectives, and prohibits any restrictions on profit repatriation.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><b>‘Indirect expropriation’.</b> The investment chapter ‘reaffirms’ governments’ rights to regulate in the public interest, but investors are guaranteed expanded ‘fair and equitable treatment’ and protection against ‘indirect expropriation’ of anticipated profits through the adoption of new laws and regulations. The dispute settlement body will determine whether indirect expropriation has occurred through a ‘fact-based inquiry that takes into consideration, among other factors: the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations’ (CETA, 2014: 331; emphasis added). Indirect or ‘regulatory expropriation’ has enabled a growing number of successful investor challenges to public interest laws, regulations and court decisions through investor-to-state lawsuits.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">Public services are exempted from market access, national treatment and performance requirements and the most-favoured-nation provisions of the investment chapter only to the extent that they are ‘carried out neither on a commercial basis nor in competition with one or more economic operators’. This is the phantom public sector carve-out established in the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS) agreement. As there are pockets of private business in most public services, few meet these criteria. Parties must explicitly reserve the services they wish to exclude – the negative list approach – based on the United Nations’ 1991 Central Product Classification, whose thousands of entries blur the distinction between public and private and manufacturing and services. Standstill and ratchet clauses freeze current levels of privatisation, making it difficult, and costly, for governments to take privatised services back into public hands.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">CETA’s Domestic Regulation chapter is not restricted to services. Governments must ensure that any regulatory restrictions they maintain or adopt ‘do not unduly complicate or delay the supply of a service, or the pursuit of any other economic activity’ (CETA, 2014: 91; emphasis added). Article 2 of the chapter on Technical Barriers to Trade reinforces limits on regulation by stipulating that technical regulations must ‘not be more trade-restrictive than necessary to fulfill a legitimate objective’[1].</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"> <br /> The chapter on Government Procurement widens corporate penetration into governments at every level by generalising ‘national treatment’ and prohibiting ‘offsets’, defined as ‘any condition or undertaking that encourages local development’.<br /> <br /> The Financial Services chapter allows for loosely-defined ‘prudential measures’ but weakens the potential to restrict the size or market share of financial institutions even where such measures are ‘non-discriminatory’ with respect to foreign and national investors. Governments seeking to restrict the introduction of new financial ‘products’, or limit the size of financial corporations, will find that financial corporations have, through CETA, insured themselves against regulatory risk.<br /> <br /> The chapter on Regulatory Cooperation commits signatories to ‘remove unnecessary barriers to trade and investment’ and ‘enhance competitiveness’ through an unaccountable Regulatory Cooperation Forum, which institutionalises corporate lobbying. The Forum is tasked with reducing compliance costs, exploring ‘alternatives’ to regulation, and promoting the ‘recognition of equivalence and convergence’ – a blunt instrument for levelling protection. Governments will share ‘non-public information’ with their Forum counterparts before the information is shared with lawmakers or the public – all ‘without limiting the ability of each Party to carry out its regulatory, legislative and policy activities’!<br /> <br /> Regulatory approaches are to be ‘technology-neutral’ – a requirement at odds with the vague promise in the chapter on Trade and the Environment in which the parties ‘commit to cooperate in means to promote energy efficiency and the development and deployment of low-carbon and other climate-friendly technologies’.<br /> <br /> How important is investment (and its proxy ‘trade in services’) compared with trade in goods in CETA? The treaty provisions cease to apply 180 days after notice of intention to terminate. However Chapter 8 (Investment) remains in force for a full twenty years (CETA 2014: Article 30.9).<br /> <br /><b> Labour’s agenda?</b> After the Brexit vote, the European Commission announced that CETA – scheduled to be signed at the EU-Canada summit in late October – would be treated as a ‘mixed agreement’, requiring approval by the national parliaments of EU member states as well as by the main EU institutions. But the Commission proposes that the treaty enter immediately into ‘provisional’ force following approval by the European Council and European Parliament, meaning that its investment provisions would apply for some years before full ratification, and even if one or more member state voted to sink the deal.<br /> <br /> Unions and our civil society allies are unanimous in calling for the removal of ISDS from the treaty. The European Commission’s rebranding of ISDS as an investment court fails to eliminate its fundamental toxicity (See for example Eberhart, 2016) and should be rejected on similar grounds.<br /> <br /> But ISDS is only one element, albeit a major one, in CETA’s comprehensive corporate power grab. Transnational investors can press their claims through state-to-state dispute mechanisms, as the WTO’s Dispute Settlement Body demonstrates. The expansive claims of transnational investors are systematically built into the treaty; corporate confiscation of democratic governance links the chapters. ISDS cannot be surgically excised, leaving a text which then somehow serves as a vehicle for a progressive trade agenda. Nor can a sweeping charter of investor claims be ‘balanced’ by inserting stronger provisions to defend labour rights or protect the environment. CETA is fundamentally hostile to democracy and the labour movement; it has to be scrapped, not ‘improved’.<br /> <br /> Behind CETA, or course, lurks the Transatlantic Trade and Investment Partnership (TTIP). Should TTIP fail, many of its ambitions can be realised through CETA. The majority of US transnationals have Canadian subsidiaries with activities and ‘expectations of profit or gain’ in the EU. They can use ISDS and other provisions to feed their growing appetites. EU corporations can sue the government of Canada, but also use Canadian subsidiaries to attack European regulations they find inconvenient, reinforcing the EU’s current retreat from regulation.<br /> <br /> For long decades, labour has been fighting purely defensive battles against the neo-liberal trade and investment agenda; we lack an agenda of our own. Lost ground will not be reclaimed on what is fundamentally hostile territory. Crisis, stagnation and the longest investor strike in recent history will not be reversed through stronger doses of neo-liberalism. Substantial programs of public investment are needed to address mass unemployment, inequality, disintegrating public services and climate change. CETA and its flanking treaties effectively preclude them.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;">[1] The leaked TTIP draft chapter on Technical Barriers to Trade makes creative use of most-favoured-nation to establish that ‘Each Party shall allow persons of the other Party to participate in the development of standards, technical regulations, and conformity assessment procedures,’ and ‘Each Party shall permit persons of the other Party to participate in the development of these measures on terms no less favorable than those it accords to its own persons.’ <br /><b><br /></b></span></div>
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<b><span style="font-family: "verdana" , sans-serif; font-size: large;">References</span></b></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><a href="http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf">CETA (Comprehensive Economic and Trade Agreement)</a> 2014.<br /><br /> Eberhart, P. (2016) <a href="https://corporateeurope.org/sites/default/files/attachments/the_zombie_isds_0.pdf">The Zombie ISDS</a>, Brussels: Corporate Europe Observatory.</span><br />
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<span style="font-size: large;"><span style="color: #222222; font-family: "arial" , sans-serif;">Our Italian readers
will find useful these links on the subject:<br />
</span><a href="http://nuke.carloclericetti.it/CetailcavallodiTroia/tabid/473/Default.aspx" target="_blank"><span style="color: #1155cc; font-family: "arial" , sans-serif;">http://nuke.carloclericetti.it/CetailcavallodiTroia/tabid/473/Default.aspx</span></a><span style="color: #222222; font-family: "arial" , sans-serif;"> on the Trojan
horse nature of CETA<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial;"> in the event of TTIP not
going through, and </span></span><a href="http://clericetti.blogautore.repubblica.it/2016/07/06/il-ceta-passera-dai-parlamenti/"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: "arial" , sans-serif;">http://clericetti.blogautore.repubblica.it/2016/07/06/il-ceta-passera-dai-parlamenti/</span></a><span class="MsoHyperlink"><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: "arial" , sans-serif;"> </span></span><span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #222222; font-family: "arial" , sans-serif;">on the European Commission decision, last July, to
treat CETA as a “mixed” issue, thus requiring the necessary unanimous approval
by all 36 European Parliaments (some member states have more than one). The
decision was taken under pressure from Austria, Germany and France, whereas
Italy had originally supported treating CETA as a “European only” issue
requiring only qualified majority of heads of state and government, and
subsequent ratification by the European Parliament without possibility to
introduce changes. However, as Peter argues in his guest post above, CETA will
be provisionally implemented from approval by the European Parliament.<o:p></o:p></span></span></div>
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<span style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: #222222; font-family: "arial" , sans-serif;"><span style="font-size: large;">For an earlier discussion of CETA ìn Italian see also </span></span><span style="color: #222222; font-family: "arial" , sans-serif;"><a href="http://goofynomics.blogspot.it/2016/07/ceta-ue-e-brexit-oculos-habent.html" target="_blank"><span style="color: #1155cc;"><span style="font-size: large;">http://goofynomics.blogspot.<wbr></wbr>it/2016/07/ceta-ue-e-brexit-<wbr></wbr>oculos-habent.html</span></span></a><o:p></o:p></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com5tag:blogger.com,1999:blog-8732662769765511163.post-19675936924054293702016-09-19T17:12:00.000+02:002016-10-05T18:40:16.500+02:00Marcello de Cecco (1939-2016)<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222;"><span style="font-family: "verdana" , sans-serif; font-size: large;">The
Department of Economics and Statistics of Siena University held a day-long <a href="http://www.unisi.it/sites/default/files/de_cecco6.jpg" target="_blank"><span style="color: #1155cc;">conference</span></a><span class="apple-converted-space"> </span>in
memory of Marcello de Cecco on 17 September, which would have been his 77<sup>th</sup>birthday.</span></span><span style="font-family: "verdana" , sans-serif; font-size: large;"> </span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><span style="color: #222222;">I first met Marcello in October 1963 in Cambridge. Our dear common
friend the late Bruno Miconi, a fellow research student in economics, introduced
him to me. I already knew and appreciated Marcello from his contributions to
Mario Pannunzio’s</span><span class="apple-converted-space" style="color: #222222;"> </span><i style="color: #222222;">Il Mondo</i><span style="color: #222222;">,
but I found him even more impressive in person. Flamboyant, brilliant, learned,
ironical and witty, yet approachable, friendly, generous. We got on well
immediately. I have been fortunate in having him as a friend and colleague not
only in our Cambridge years but also at Siena University, at the European
University Institute in Florence, and at the Sapienza University in Rome – in almost
daily contact for a total of over 25 years out of the over 50 years of our
association.</span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><span style="color: #222222;">Marcello was an alert and insatiable observer of current
economic, political and social affairs, never satisfied with simple
explanations but searching for deeper causes, enquiring “come va il fatto”. I
remember his surprise when the daily<span class="apple-converted-space"> </span><i>Il
Fatto Quotidiano</i><span class="apple-converted-space"> that follows </span>a
similar inquisitive approach</span><span class="apple-converted-space"><span style="background-image: initial; background-position: initial; background-repeat: initial;"> </span>was published. </span>Bruno Miconi used to say that Marcello should have been a film scriptwriter.</span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><span style="color: #222222;">A Pembroke man, Marcello was held in great esteem by his
supervisor Michael Posner; given his interests in international finance he was
also in touch with Kingsman Richard Kahn, who however suspected him (injustly)
of monetarist inclinations, because of his contacts with Chicago and Milton
Friedman. Marcello had created a considerable intellectual niche for himself
through his work on Eurodollars – dollar-denominated deposits held outside the
US, mostly in Europe, thus escaping regulation by the Federal Reserve Board
including reserve requirements. </span>In this area at the time he knew
more than his teachers and his expertise was appreciatively recognised and
utilised in seminars and discussions. We both were invited to become members of
the Monday Group, a seminar in Economics held regularly if reservedly in
King’s. We shared an interest in the history of economic thought, indeed in a
little known Russian pioneer of mathematical economics, Vladimir K. Dmitriev;
Marcello edited the Italian version of his<span class="apple-converted-space"> </span><i>Economic
Essays on Value, Competition and Utility</i>, I edited the English version.
When it became apparent that we were working on the same thing Marcello simply
said that nobody had a monopoly on that author. At a Faculty seminar we
presented a joint criticism of the Modigliani-La Malfa model of the interaction
of monetary and real aspects of the Italian balance of payments. Later we
co-operated in other research projects, especially in Florence.<o:p></o:p></span></div>
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<span style="color: #222222;"><span style="font-family: "verdana" , sans-serif; font-size: large;">Marcello was unique – among Italian students in Cambridge – in
that he had come with his Mother, not wanting to leave signora Antonietta on
her own back in his home town of Lanciano (pronounced as if written Langiano).
They looked after each other well. Somehow, in spite of linguistic obstacles
compounded by the regional variety of food nomenclature, his mother always
succeeded in securing from the butcher her desired cuts of meat. Marcello gave
the delightful account of his mother meeting Piero Sraffa in Cambridge Market
Square, when she greeted Mr Sraffa with: “I am delighted to meet you, Professor;
my son has spoken very highly of you …”. Marcello theorised the optimality of
driving only second hand cars, but he chose only beautiful comfortable large
ones, including a memorable Jaguar. When a lectureship was advertised at the
University of East Anglia, I encouraged Marcello to apply and supported his
candidature strongly. His appointment was a great success, and there, too, he
met Julia Bamford – the other great woman behind the great man – so that I
could boast of involvement in his taking both a job and a wife.</span></span></div>
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<span style="font-family: "verdana" , sans-serif; font-size: large;"><span style="background-image: initial; background-position: initial; background-repeat: initial; color: #222222;">When the prospect of Italy joining the Euro began to be widely
discussed, in 1992 on the eve of the French referendum on the subject Marcello gave
enthusiastic endorsement of Italian membership. He wrote an article for<span class="apple-converted-space"> </span><i>Repubblica – Affari e Finanza</i>,
entitled<span class="apple-converted-space"> </span><i><a href="http://ricerca.repubblica.it/repubblica/archivio/repubblica/1992/09/18/disgregati-del-2003.html">I
disgregati del 2003<span style="font-style: normal;">,</span></a></i> which
marked the beginning of his long collaboration to Repubblica (18/09/1992, reprinted
in</span><span style="background-image: initial; background-position: initial; background-repeat: initial; color: #222222;"> <i>L'economia di Lucignolo</i></span><span style="background-image: initial; background-position: initial; background-repeat: initial; color: #222222;">, Donzelli, see Marcello’s<span class="apple-converted-space"> </span></span><a data-saferedirecturl="https://www.google.com/url?hl=en-GB&q=http://nuke.carloclericetti.it/DeCecco/tabid/444/Default.aspx&source=gmail&ust=1474374381563000&usg=AFQjCNEUQ0ofh-6NeFV_ZMBMxIh8doleSw" href="http://nuke.carloclericetti.it/DeCecco/tabid/444/Default.aspx" target="_blank"><span style="color: #1155cc;"><span style="background-image: initial; background-position: initial; background-repeat: initial;">obituary</span></span></a><span class="apple-converted-space" style="color: #222222;"><span style="background-image: initial; background-position: initial; background-repeat: initial;"> </span>by Carlo Clericetti). In that
article Marcello described an apocalyptic picture of Italy as a member
of a Latin Union (with France, Spain, Portugal and Greece) ten years
later: backward, underdeveloped, impoverished, authoritarian, repressive, bigoted
and male-dominated; the article ends with a decrepit professor, who dares
teaching politically incorrect views about the evolution of the international
monetary system, being arrested and taken away by police. By contrast the
member states of the Mittel-European Union thrive and prosper even more than
the Anglo-American Federation, and hire the young unemployed migrants from
Italy, who send food parcels to their parents at home in spite of this being officially
frowned-upon.</span></span></div>
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<span style="color: #222222;"><span style="font-family: "verdana" , sans-serif; font-size: large;">Marcello’s enthusiastic endorsement of the euro was tempered, when it
actually happened, only by his disapproval of Berlusconi’s failure to contain price </span></span><span style="color: #222222; font-family: "verdana" , sans-serif; font-size: large;">increases in the changeover from lira to euro, something experienced only
by Greece and there to a much smaller degree. Marcello’s enthusiasm was right:
the euro brought about significantly lower interest rates; that the fiscal
space was not used to reduce public debt and on the contrary encouraged greater
indebtedness is another matter. The euro also brought about a rate of inflation
lower than that achieved in Germany by the Bundesbank itself, and greater
European and global integration of trade and Foreign Direct Investment. It did
not bring about economic growth, but this was due to poor economic policies and
various factors both on the demand (e.g. increasing inequality) and supply
sides (productivity slowdown, etc.).</span></div>
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<span style="color: #222222;"><span style="font-family: "verdana" , sans-serif; font-size: large;">Ten years after, there was a lot to justify Marcello’s evolving
position as a Eurocritic. Austerity policies enshrined in the Treaties under
German hegemony were self-defeating and suicidal, Marcello was a Keynesian
dyed-in-the-wool and knew it well. The German trade surplus, which Marcello
attributed primarily to the post-Transition integration of Germany with Eastern
Europe regardless of the weakness or strength of the euro, contravened EU rules
but was unduly tolerated, and pushed trade deficit countries to run public
budget deficits. Improvements could have been made, even without renegotiating
the Treaties. Failure to make progress not only towards a Federal Europe
design, but even towards piece-meal improvements, justify Marcello’s latest
position as Eurosceptic, especially considering that he never indulged in
advocating Exitaly, the Italian exit from the Euro that many advocated and
still advocate lightly and unthinkingly. On the Euro, Marcello was always right.<o:p></o:p></span></span></div>
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<span style="color: #222222;"><span style="font-family: "verdana" , sans-serif; font-size: large;">For Marcello, the current crisis of the Euro was triggered by the
Deauville Summit of 19 October 2010 at which Angela Merkel and Nicholas Sarkozy
announced that at least part of any default on public debt would be born by
bondholders. At the time I disagreed strongly with Marcello: why should
investors who had benefited from large interest differentials, knowingly taking
the associated risk, not have to bear the entire cost of default? If worried by
that risk they could always have covered themselves as much as they wished by
buying Credit Default Swaps. Yet, with the benefit of hindsight, now I am
inclined to agree with Marcello. It was the prospect of bail-in that created
the spread and effectively split the euro area.</span></span></div>
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<span style="background: white; color: #222222;"><span style="background-image: initial; background-position: initial; background-repeat: initial;"><span style="font-family: "verdana" , sans-serif; font-size: large;">By displaying the richness and depth of Marcello’s contributions
of a lifetime, the Siena Conference stressed how dependent on his wisdom many
of us had become. Today I find myself often wondering what Marcello would have
said about current problems. Many Conference participants asked themselves what
he would have said about Brexit: the consensus was that his natural diffidence
towards Britain as a free rider of European integration, and the various
exemptions repeatedly negotiated by the British (no Schengen, no common
currency, the British rebate), would have led him to conclude that European
integration might have progressed and improved without Britain. But we have no
hard evidence that he would have taken that line. And we have no clue on what
view he would have taken about the European migration crisis or the Islamic
threat or the US elections with their problematic </span></span></span><span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;">presidential candidates. It is
at difficult times like these that we miss him most.</span><br />
<span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;"><br /></span>
<span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;">P.S. On the Siena Conference see also contributions by <a href="http://www.emilianobrancaccio.it/2016/09/19/seminario-de-cecco-e-leuro/" target="_blank">Emiliano Brancaccio</a>, </span><br />
<span style="font-family: "verdana" , sans-serif; font-size: large;"><a href="http://www.eticaeconomia.it/marcello-de-cecco-un-ricordo-personale/">Paolo
Paesani</a>, </span><span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;"> <a href="http://ricerca.repubblica.it/repubblica/archivio/repubblica/2016/09/17/ricordando-de-cecco-economista-con-humour56.html?ref=search" target="_blank">Salvatore Settis</a> and <a href="http://clericetti.blogautore.repubblica.it/2016/09/18/de-cecco-e-il-suo-sguardo-sul-mondo/" target="_blank">Carlo Clericetti</a></span><span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;">.</span><span style="background-color: white; color: #222222; font-family: "verdana" , sans-serif; font-size: large;"></span><br />
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com13tag:blogger.com,1999:blog-8732662769765511163.post-36712530309693983372016-09-04T22:09:00.000+02:002016-09-04T22:09:26.804+02:00Earthquake<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Since the night of 24
August a swarm of earthquakes of an intensity up to 6.8 degrees on the Mercalli
scale have repeatedly struck an area of the Appennines in Central Italy, at
Amatrice, Accumoli, Arquata, Pescara del Tronto, and some other locations in the
regions of Lazio, Marche, Umbria and Abruzzo. The effects have been
catastrophic: 295 dead, over 800 injured, over 4000 homeless, disrupted
communications, entire towns razed to the ground. Two weeks later the earth
there is still subject to frequent movements.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">These events have brought out
the best of Italy, with the fast, selfless and effective response of public
personnel and volunteers, and the generous support of the general public.
Emergency services have worked; 368 persons were extracted alive from the
debris; €10 million were collected for earthquake victim assistance in the
first week. At the same time, the earthquake revealed the worst face of Italy.<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: Arial, sans-serif;">It is </span><span lang="IT"><a href="http://www.ilfattoquotidiano.it/2016/08/31/terremoto-finanziate-le-migliorie-e-non-gli-adeguamenti-sismici-con-le-regole-post-umbria-la-politica-preparo-il-disastro/3003617/"><span lang="EN-GB" style="font-family: Arial, sans-serif;">reported</span></a></span><span style="color: #222222; font-family: Arial, sans-serif;"> that the decision to undertake
the repair and reinstatement of public buildings and churches damaged in the
1997 earthquake, without having to implement anti-seismic regulations, was a
political decision taken by no lesser person than the former President of Italy
Giorgio Napolitano – a </span><span lang="IT"><a href="https://dmarionuti.blogspot.it/2013/04/il-vecchio-glorioso-comunista.html"><span lang="EN-GB" style="font-family: Arial, sans-serif;">controversial politician</span></a></span><span style="color: #222222; font-family: Arial, sans-serif;"> though still in some
circles widely respected as a statesman while being equally widely reviled in
others for his chequered political allegiances in the past – in the form of
ordnance n. 2741 issued on 30 January 1998 by him while Minister of the
Interior in the Prodi government. Not a statesmanlike enlightened
decision, then, but rather an irresponsible, vulgar austerity measure that
contributed to the catastrophic nature of the latest earthquake: the buildings
exempted from seismic upgrading by the Napolitano ordnance included, for
instance, the church and the Carabinieri barracks of Accumuli, for which the
responsible authorities can still claim that “all procedures had been
followed”, <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Furthermore bureaucratic hastles
prevented the implementation of anti-seismic measures already decided and funded
(e.g. for the Amatrice hospital). Corrupt officials had authorised the
diversion of funds earmarked for the strengthening of vulnerable public
buildings to other uses (e.g. from the bell tower of an Amatrice church to the
priest’s residence). Corrupt builders, often with mafia connections, had used too
much sand and too little cement, polystyrene in place of reinforced concrete
and mosquito mesh in place of robust metallic welded sheeting (one of several
well documented actual instances). Corrupt technicians and certification
officers had ratified as good patently unsatisfactory works on their
completion. The Mayor of Amatrice expressed the general opinion when
calling for those responsible for any of these actions to be tried and imprisoned
with the key thrown away, just as are the thieves trying to steal valuables
from collapsed homes, or the impostors collecting funds through Internet
allegedly on behalf of earthquake victims but keeping them for their personal
use (again actual instances – though the Mayor is now under investigation).<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: Arial, sans-serif;">Even the work of a number
of volunteers has been called into question, with many of them turning out to
have been under-paid workers precariously employed and exploited by the
so-called no-profit organisations that have taken the place of public welfare
institutions now privatised (see </span><span lang="IT"><a href="http://nuke.carloclericetti.it/VolontarienemicidelloStato/tabid/475/Default.aspx" target="_blank"><span lang="EN-GB" style="color: #1155cc; font-family: Arial, sans-serif;">http://nuke.carloclericetti.it/VolontarienemicidelloStato/tabid/475/Default.aspx</span></a></span><span style="color: #222222; font-family: Arial, sans-serif;">).<o:p></o:p></span></span></div>
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<span style="font-size: large;"><span style="color: #222222; font-family: Arial, sans-serif;">In that their occurrence cannot
be accurately predicted earthquakes are widely regarded as acts of god –
though Italy’s peculiarities in this respect include the </span><span lang="IT"><a href="http://www.ilfattoquotidiano.it/2012/10/22/terremoto-dellaquila-processo-grandi-rischi-tutti-imputati-condannati-a-6-anni/389935/"><span lang="EN-GB" style="font-family: Arial, sans-serif;">successful prosecution</span></a></span><span style="color: #222222; font-family: Arial, sans-serif;"> of six scientists and a
former government official for failing to predict the Aquila earthquake of
2009. Actually they had tried to reassure the population saying that an
earthquake was unlikely 6 days before it happened. They were found guilty of
involuntary manslaughter of 29 persons and injuries of 4 persons, all were condemned
to 6 years in prison and provisional damages of €7.8mn in favour of 56 victims. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">There is, of course, a
highly respected geological service monitoring and investigating Italy’s
physical structure and there are long-kept careful records of past earthquakes,
and fairly accurate assessments of seismic risk in the Italian regions,
certainly accurate enough to guide building counter-measures, insurance cover,
and migrations to safer areas. Italy’s Protezione Civile's seismic map of Italy
is updated to 2015.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">It is, nevertheless, quite
understandable that people living in high risk regions might be reluctant to
voluntarily invest in anti-seismic improvements to old buildings which are not
subject to the stricter regulations applying to new buildings. A cost, estimated
to average about €800 per square metre, all the hastle, the paperwork, the
applications for permits, the time and expenses involved, the possible appeals,
not to mention the bribes that might have to be paid, deter action. And the
contradictory norms: the Belle Arti department, responsible for aesthetics, is
unlikely to allow a structural improvement that is not simply “conservative”
but involves architectural change, while the Genio Civile responsible for safety
is unlikely to allow a simple anti-seismic improvement that is judged to be
inadequate. So even with the best of intentions one might decide to do nothing
and hope to be unscathed by an uncertain though likely event.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">It is also understandable
that people living in high risk regions might be reluctant to insure themselves
and their homes and possessions against earthquake risks. Insurance can be
unavailable in high risk regions, except perhaps at prohibitive premiums that
are simply unaffordable by most people. Were insurance to be made compulsory the
possibility for insurers taking undue advantage of the position arises.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">However, to a very great
extent location is a matter of choice. Over time and in the ordinary
course of life, opportunities arise for changing location, not necessarily
abroad (though in such a case migrants should be, though at present are not,
granted the status of refugees), but moving to a different part of the same
country, which presents much lower costs in terms of language, customs,
currency changes and other obstacles to international migration. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Those who live in areas
characterised by high seismic risk can be likened to, say, heavy smokers
vulnerable to cancer or obese and sedentary persons vulnerable to
cardiovascular diseases, or economic migrants crossing a dangerous sea. All of
them are entitled to life-saving emergency assistance and are certainly
entitled to any assistance that might be voluntarily provided by the generosity
of the rest of the world. Otherwise seismic victims, like everybody else
knowingly and deliberately adopting a particularly risky lifestyle, should bear
ultimate responsibility for the consequences of their exposure to risk. Any
claim on the public purse, i.e. ultimately on all taxpayers, is a politically
determined policy choice, not a statutory right.<o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">To the extent that a
government might decide to provide more than temporary emergency assistance to
earthquake victims, this is best provided in the form of a cash payment,
whether a capital lump sum or a recurring subsidy, which earthquake victims are
able to spend where and how they wish. The notion that towns razed to the
ground by earthquake should be re-constructed “where they were, as they were”,
while emotionally responsive to great loss is, in truth, populist fantasy. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Italian Premier Matteo
Renzi has produced out of thin air a “Piano Casa Italia”, including the
anti-seismic upgrading of all public buildings, of productive establishments
and the entire housing stock of the country. After a four-hour consultation
with him Renzo Piano – life senator and architect/planner extraordinaire – bluntly
and soberly warned that such an undertaking would take at least 50 years and
two generations. No wonder the responsibility for the Plan was given to
somebody else. <o:p></o:p></span></span></div>
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<span style="color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Renzi proposes, further, to
finance such a Plan outside the fiscal constraints of the EU; European
authorities have sympathy for such treatment for only short-term and
relatively small emergency interventions. The “Piano Casa Italia” so far is
only a meaningless label, without dates or details or finance attached to it.
Just another of the many empty announcements to which Renzi has got us used.<o:p></o:p></span></span></div>
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<span style="background: white; color: #222222; font-family: Arial, sans-serif;"><span style="font-size: large;">Meanwhile earthquake victims – of the latest like those of earlier
earthquakes – will be left ultimately to fend for themselves, resigned to their
destiny because they know well, in the depth of their souls, that maybe before
the ground shook under their feet they should have moved elsewhere.</span></span><o:p></o:p></div>
</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com10tag:blogger.com,1999:blog-8732662769765511163.post-88782555789019911372016-06-13T18:52:00.001+02:002016-06-13T18:52:43.299+02:00BREXIT<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif; font-size: large;"><span style="color: #333333;">If I had a vote in the Referendum on whether
or not the UK should remain in the EU or leave, I would certainly vote Leave. This
neo-liberal Germanic Union of ours, with its unnecessary and perverse
austerity, its false pretence to promote investment and growth, its failure to
protect both external borders and desperate refugees, its Potemkin façade, insistence
in destructive so-called “structural” reforms, is no use for anything or
anyone, including the Germans. There is no prospect of conceivable change for
the better except under the duress of actual or threatened disintegration. One
of my favourite comedians, John Cleese</span><span style="color: #333333;">, has
also </span><a href="http://click.mail.theguardian.com/?qs=1cea7401f8cc37f680392c9c7bb2946e9a5a8cb503548822b1245839814de45a" target="_blank"><span style="color: #005689;">declared himself</span></a><span style="color: #333333;"> for Brexit, for the same reasons: “If I thought there was any
chance of major reform in the EU, I’d vote to stay in. But there isn’t. Sad.”
And he added: “</span><span lang="EN" style="color: #333333;">I feel terrible
about being lined up with thugs like Murdoch and Dacre and Brooks, but I do
think Stiglitz and Owen have got it right...” (@JohnCleese, June 12, 2016). After
all, Basil Fawlty of Fawlty Towers has always known how to deal with the
Germans. A strong case for Brexit is also made </span><a href="https://independentbritain.wordpress.com/about/"><span lang="EN">here</span></a><span lang="EN" style="color: #333333;">.<o:p></o:p></span></span></div>
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<span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Having said this, that option is undoubtedly
costly, uncertain in its implications both positive and negative, habit
breaking and very uncomfortable. I simply do not believe the polls predicting a
substantial lead for Brexit (52% over 33% in the Daily Express latest poll), in
spite of the significant contribution given to the LEAVE faction by Tony Blair
and Gordon Brown with their kiss of death endorsement of the REMAIN option. I
believe that on 23 June the third of the voters still undecided will decide
otherwise and tip the scales to REMAIN. <o:p></o:p></span></span></div>
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<span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">And if voters did choose to LEAVE
overwhelmingly, it is no good pretending that the UK is a small Swiss canton
voting in a mandatory referendum, for there is no such a thing in British
constitutional documents or constitutional practice. David Cameron, having set
up the Referendum to protect himself from Ukip’s threat, will be under great
pressure to comply with the result and apply to leave under art. 50 of the
Lisbon Treaty, but would not be in a hurry to make such a move. After all, he
already said he will not serve another term, but he is still on course to serve
until 2020, can rely on a solid cross-party pro-EU majority in Parliament, and
might be able to obtain additional concessions from the EU on the strength of
the vote, on top of the token ones he recently negotiated, sufficient to
re-open the whole question.<o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: large;"><span lang="EN" style="color: #333333;">But if Britain did leave, I would watch with <i>Schadenfreude </i>the impact of the vote on
the further disintegration of the Union and the collapse of the German ruling
parties. There is a group of distinguished academics, calling themselves EREP Economists
for Rational Economic Policies, who have issued a “</span><a href="https://gallery.mailchimp.com/5269bb92e1e07acaa53c7be16/files/EREP_EU_Remain_for_Change_final_2_June_draft.pdf"><span lang="EN">Remain for Change” Report</span></a><span lang="EN" style="color: #333333;">, “Building European solidarity for a democratic
economic alternative”, a generous but misguided approach. On 23 June, Vote, as
the Irish saying goes, vote well, vote often.<o:p></o:p></span></span></div>
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<span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Family loyalties, however, seem to be divided.
My wife – a UK citizen who acquired double Italian citizenship through marriage – tells me that if she had a vote in the UK (which was removed under the
Blair administration at the beginning of this century) she would vote REMAIN:<o:p></o:p></span></span></div>
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<span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">“<i>I would
vote REMAIN because I live in Italy, a country that benefits enormously from EU
membership as one of the original Treaty of Rome signers for, and by whom, the Project was designed, (one
of the defeated Axis powers seeking to remedy losing) and which benefits currently and most specifically from the UK's
membership. <o:p></o:p></i></span></span></div>
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<i><span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Italy is a transit country for incoming migrants that it fishes out of
the Mediterranean, and the closing of the borders of one of the main countries
of migrant settlement (as opposed to migrant transit) in the EU would have
adverse effects on the transfer of migrants northwards and generate serious
conflicts with any attempting to stop here rather than transit to Germany,
Sweden, France and the UK. <o:p></o:p></span></span></i></div>
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<i><span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Italy exports also over a million Italian nationals to the UK for
settlement and draws strongly upon welfare payments available there to all EU
citizens. Losing a settlement of choice
venue for a million Italian workers would be intensely disruptive in Italy
itself. <o:p></o:p></span></span></i></div>
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<i><span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">High-quality employment in UK services, academia, culture, and local and international administration
for Italians (and other EU citizens) as well as educational opportunity at low
cost from primary to post-graduate levels
in the UK are also at stake with BREXIT.
UK means-tested and universally applied welfare benefits to Italian
workers at all levels both in the UK and (as is the case with many children
returned to Italy) at home are very valuable and not to be lost.<o:p></o:p></span></span></i></div>
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<i><span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Italy may be a net contributor to the EU budget, but its contribution
must be set against the direct beneficial transfers and subsidies drawn directly
from the UK even though the UK is not a member of the Eurozone and pretends to
its electorate that there is an 'opt-out' from such transfers.<o:p></o:p></span></span></i></div>
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<i><span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">Of course, if I were settled in England I would have a different view of
the whole matter - a looking glass view it might be called. But as an Italian citizen and resident the
last thing I want to see is a goose leaving with its golden eggs”.<o:p></o:p></span></span></i></div>
<br />
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<span lang="EN" style="color: #333333;"><span style="font-family: Verdana, sans-serif; font-size: large;">In conclusion, it is not at all a matter of
divided loyalties, nor of indecision, but a conflict of interests between two
different, alternative capacities. If you live in the UK, vote to LEAVE.</span><span style="font-family: Georgia, serif; font-size: 12pt;"><o:p></o:p></span></span></div>
</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com46tag:blogger.com,1999:blog-8732662769765511163.post-5378939475769626682016-04-06T18:16:00.001+02:002016-04-06T20:58:31.486+02:00R.E.Rowthorn on "Schengen and the European Migration Crisis"<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="line-height: 21.4667px;"><span style="font-family: "verdana" , sans-serif;"><i>Robert E. Rowthorn, Emeritus Professor of Economics in the University of Cambridge (England) has written an extensive comment on my previous post, which clarifies, strengthens and develops my argument. He has kindly agreed to publish it as a follow-up guest post on my Blog, which I am delighted and grateful to do</i>: </span></span></div>
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<span lang="EN-US" style="line-height: 21.4667px;"><span style="font-family: "verdana" , sans-serif;">In his stimulating post, Mario Nuti considers Schengen area migration policy under three headings:</span></span></div>
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<div style="background-color: white; color: #222222;">
<span style="font-family: "verdana" , sans-serif;"><span lang="EN-US" style="line-height: 21.4667px;">1.<span style="font-stretch: normal; line-height: normal;"> </span></span><span lang="EN-US" style="line-height: 21.4667px;">Free internal travel requires strong external controls,</span></span></div>
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<span style="font-family: "verdana" , sans-serif;"><span lang="EN-US" style="line-height: 21.4667px;">2.<span style="font-stretch: normal; line-height: normal;"> </span></span><span lang="EN-US" style="line-height: 21.4667px;">Free internal travel requires convergence of living standards within the area (including welfare provisions),</span></span></div>
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<span style="font-family: "verdana" , sans-serif;"><span lang="EN-US" style="line-height: 21.4667px;">3.<span style="font-stretch: normal; line-height: normal;"> </span></span><span lang="EN-US" style="line-height: 21.4667px;">Any attempt at a fair redistribution of immigrants among countries requires the re-establishment of national borders.</span></span><br />
<span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"><br /></span>
<span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">He points out that the fair redistribution of immigrants, as demanded by Germany and the Pope, is inconsistent with free travel as laid down by the Schengen agreement. This may not be such an important issue, since the Schengen agreement may be on the verge of collapse. </span><span lang="EN" style="color: #414141; font-family: "verdana" , sans-serif; line-height: 21.4667px;"> According to a new survey by French pollster IFOP, 72% of French, 66% of Germans and 60% of Italians are now in favour of repealing the Schengen agreement and reintroducing border checks at least temporarily (<i>Süddeutsche Zeitung</i>, 5 April 2016). Even if the agreement is not formally repealed, it may become a dead letter as more states unilaterally re-introduce border controls.</span><br />
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<span lang="EN" style="color: #414141; font-family: "verdana" , sans-serif; line-height: 21.4667px;">Nuti</span><span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"> also makes the point that effective control of EU external borders requires the cooperation of neighbouring countries, such as Turkey. Where this cooperation is not forthcoming effective control may be impossible within normal moral and legal constraints. This is most evident in the case of Libya, where the state is too weak to prevent the departure of migrants to Italy and the country is too unsafe to permit the return of rejected immigrants. In my own country, the UK, the control of immigration relies heavily on support from nearby countries. The reason we do not get flotillas of migrant boats heading for our shores is not because the UK is hard to reach by sea – it is only 33km from France = but because nearby countries prevent their departure. The future ability of the EU to control immigration from poorer countries will depend on the ability of the Union to gain and retain the cooperation of its neighbours in North Africa and the Middle East.</span><br />
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<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">Immigration controls, like all forms of legal constraint, involve either compulsion or the threat of compulsion. Immigrants who have no legal right to remain must be either persuaded to leave or forcibly deported. Failure to remove them will only encourage others. This is why amnesties are counter-productive. The need for removals is inversely related to the difficulty of illegal entry. The easier it is to gain physical entry, the greater must be reliance on removals. This is not a message which liberal-minded people want to hear. As Nuti points out, rejection and forced repatriation are unpleasant and sometimes brutal. But they are a logical consequence of excluding people who have a strong desire to live in Europe. </span><br />
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<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">The feasibility of repatriation depends on the ability to identify the country of origin of a prospective deportee. It also depends on cooperation of the country of origin. Legally speaking, a country is supposed to accept its nationals who are deported from another country, but this may not always be the case in practice. Thus, it will be important in the future to gain the cooperation of the countries to which migrants are to be repatriated,</span><br />
<span style="font-family: "verdana" , sans-serif;"><span style="line-height: 21.4667px;"><br /></span></span>
<span style="font-family: "verdana" , sans-serif;"><span style="line-height: 21.4667px;">The recent agreement with Turkey involves the compulsory return of all migrants entering Greece from Turkey, who are not applying for asylum or whose application is judged to be unfounded or inadmissible. </span><span style="line-height: 115%;">This policy may be illegal under international
law but the EU is powerful enough to disregard this provided its own internal
courts acquiesce.</span><span style="line-height: 115%;"> </span></span><span style="font-family: "verdana" , sans-serif;"><span style="line-height: 21.4667px;">If it works, the agreement with Turkey may act as a template for future agreements regarding the control of migrant flows and repatriation.</span></span><br />
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<span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">Nuti cites an interesting analysis<span style="color: #333333;"> by Branko Milanovic </span>in </span><span lang="EN-US" style="font-family: "verdana" , sans-serif;"><a href="https://www.blogger.com/null"><i><span style="color: windowtext; line-height: 21.4667px;">Social Europe</span></i></a></span><span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"> (</span><span lang="EN-US" style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">May 2015). This analysis indicates the difficulty of coming up with a workable policy towards migration from poor to rich countries. Milanovic calls for a coordinated quota system for allocating would-be migrants between emitting and receiving countries. He concedes that such a system would not be able to deal with random events such as the war in Syria, but he argues that it should be able to deal with economic migration: “With an orderly quota system, a person from Mali who is considering migrating to France may prefer to wait several years and get an official permission to settle there rather than to pay a people smuggler for an uncertain entry to France”. </span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"><br /></span>
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">Although at first sight plausible, this proposal does not address the central issue, which is the potential scale of migration under such a scheme. If a quota scheme is to deter illegal migration, the expectation of getting a permit must be high and the expected waiting time must be relatively short. This means that the number of permits given out must be roughly commensurate with the number of people wishing to migrate. The suggested scheme might deter illegal migration but it would be unlikely to reduce the total number of migrants. Indeed, the scheme might actually encourage migration by eliminating the need to rely on dangerous and costly modes of travel.</span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"><br /></span>
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">To implement even a slimmed down version of the scheme proposed by Milanovic it would be necessary to change public opinion. Even before the refugee crisis, there was widespread concern in Europe about large scale immigration. According to an international poll taken in the period 2012-14 some 52% of Europeans thought that immigration should be reduced. Only 8% thought it should be increased (</span><i style="font-family: verdana, sans-serif; line-height: 21.4667px;">How the world views migration, </i><span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">IOM 2015). The British Social Attitudes Survey reports that immigration has been consistently amongst the five most important topics of concern. In 2013 of those questioned 56% thought that immigration should be reduced a lot and a further 21% thought it should be reduced by a little. Such concerns have been around for a long time, but have been ignored by politicians. However, politicians are now being forced to respond to public disquiet by the rise of anti-immigration parties.</span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;"><br /></span>
<span style="font-family: "verdana" , sans-serif; line-height: 21.4667px;">Public disquiet about immigration is intensified by the perception that immigration is out of control. It is not simply a belief that the present level of immigration is too high that motivates this disquiet, but also a fear that the government has no means of cutting back on immigration should the need arise. In countries like Australia, where the government has a firm grip on migrant flows and can raise or lower them as the need arises, the public is willing to accept a high level of immigration. If Milanovic’s quota scheme is to be politically acceptable, it will have to be accompanied by effective enforcement. Even then, it will be an uphill task to persuade Europeans to accept immigration on the implied scale.</span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com4tag:blogger.com,1999:blog-8732662769765511163.post-20964435389047796682016-03-07T18:56:00.000+01:002016-04-04T09:28:50.513+02:00Schengen and the European Migration Crisis <div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="line-height: 115%;"><span style="font-family: "verdana" , sans-serif; line-height: 115%;">The
Schengen Area</span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">.
The Agreement signed on 14 June 1985 on a boat on the Moselle near the small
town of Schengen (Luxembourg), by five of the ten states that formed the
European Community at that time, effectively abolished passport controls and
any other border control among the signatories thus treating the area as a
single country. The Agreement was supplemented by the Schengen Convention of
1990, establishing a common visa policy. Initially the Schengen Area was
separate from EU structures, as at that time the initiative lacked general
consensus, but its rules and procedures were incorporated into European Union
law by the Amsterdam Treaty of 1997, coming into effect in 1999. The five
initial signatories (the three Benelux countries, France and Germany), were
gradually followed by another 17, thus encompassing all EU member states except
Ireland and the UK that opted out, and four others – Bulgaria, Croatia, Cyprus
and Romania – who wish to join and are obliged to join eventually but are not
yet deemed to be ready. All four EFTA member states – Iceland, Liechtenstein,
Norway and Switzerland – are also associated members of the Schengen Area although
they are not members of the EU. In addition, three European microstates –
Monaco, San Marino and the Vatican City – are considered <i>de facto</i> participants. Today the Schengen Area has a population of
over 400 million people.</span></div>
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<b style="line-height: 115%;"><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Net
gains</span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">. The creation of the Schengen Area was - in principle –
an excellent decision. The effective elimination of internal borders within the
Area generated considerable savings in terms of travel time and convenience for
passengers, expenditure on custom officials and equipment, higher speed and
lower cost of commodity transport. A recent <a href="http://www.reuters.com/article/us-europe-economy-schengen-idUSKCN0VV0QG">study</a><a href="https://www.blogger.com/null" name="_Hlt444357413"></a><a href="https://www.blogger.com/null" name="_Hlt444357414"></a> by Germany's
Bertelsmann Foundation estimates the cost of the possible breakdown of the
Schengen area at between €470bn and €1.4 trillion over the next decade,
(roughly 10% of the 28-members EU bloc GDP) due to an increase in import prices
of between 1% and 3%. Germany would lose between €77bn and €235bn and France
between €85.5bn and €244bn under the two scenarios. The breakdown of the Schengen
Area would also inflict a heavy burden on other countries, with a combined loss
for the United States and China over the next decade estimated by the same
study at between €91bn and €280bn. The European Commission estimated that the
permanent reintroduction of border controls would cost between €5bn and €18bn a
year because of lower tourism and transport delays. These estimates perhaps may
be slightly exaggerated, but there can be no doubt that in the current, long
and severe depression of the European economy, the impact of a Schengen
breakdown, even if partial, would worsen significantly the growth prospects of
the Union, with global reverberations.</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><b>Migrations. </b></span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">In the half-century 1960-2010 the ratio of the population working in countries different from that of their birth over the world population (corrected for the displacements which occurred at the end of World War II in 1945) was relatively stable around 3%, though with a clear tendency to accelerate that was much more marked for South-North migrations (see the figure below, where the value of that ratio in 1960 is taken as equal to 1). </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> </span></div>
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<div style="background-color: white; line-height: 115%;">
<span style="background-color: transparent; color: #343434; font-family: "verdana" , sans-serif; line-height: 115%;">Source: Docquier, Frédéric and Joel Machado (2015), “Revenu, Population
et Flux Migratoires au 21ème siècle: Un défi sociétal pour l’Europe” in</span><i style="background-color: transparent; color: #343434; font-family: verdana, sans-serif; line-height: 115%;">
Studia Oeconomica Posnaniensia, </i><span style="background-color: transparent; color: #343434; font-family: "verdana" , sans-serif; line-height: 115%;">October 2014.</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">In subsequent
years the acceleration continued. In 2015 migrants entering Europe mostly from
the Middle East and Africa turned into a veritable flood – the largest flows to
take place since 1945 – that put the Schengen arrangements to a most severe
test: EU states received 1.3 million asylum applications, especially from
Syria. On 24 August 2015 Angela Merkel announced that all Syrian asylum-seekers
were welcome to remain in Germany regardless of which EU country they had first
entered. She adopted this “open door” policy unilaterally, without EU
agreement, after consultation solely with the Austrian Chancellor Werner
Faymann; subsequently there were signs of intended policy reversal but
tightening up was only slight (for instance preventing relatives joining
migrants for at least a year) thus provoking an intensification of the inflow because
of the migrants’ expectation of harder times; a recent poll found that 81% of
the German population thought that the government had lost control over
migration policy. The Bertelsmann Stiftung estimates that by mid-February 2016
an even larger number of Syrians alone had found their way into Jordan
(640,000), Lebanon (over 1 million) and Turkey (2.6 million); Pakistan and Iran
have taken several hundred thousand migrants from Afghanistan and Iraq
respectively. In 2015 migrants crossing the sea from Turkey to Greece increased
20 times with respect to 2014. Last November the EU granted €3bn to Turkey as
an inducement to hold migrants there at least temporarily, but three months
later 2,000 migrants still cross daily into Europe: in order to take back
non-Syrians the Turks are negotiating for more aid and other benefits such as
visa-free travel to Europe, which in turn would generate a significant inflow
of Turkish Kurd asylum seekers into Europe. Arrivals in Italy decreased
slightly in the same period, from 170,000 to 154,000, which still represent a very
large intake. For an up to date survey see <a href="http://bruegel.org/2016/02/eu-migration-crisis-facts-figures-and-disappointments/">Breugel</a>,
12 February, and <i>The Economist</i>, <a href="http://www.economist.com/blogs/graphicdetail/2016/02/daily-chart-5">interactive
graphics</a>, 6 February. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">In
May 2015 Branko Milanovic wrote a post in <a href="file:///C:/Users/dmarionuti/Documents/2016/%E2%80%9Chttps:/www.socialeurope.eu/2015/06/five-reasons-why-migration-into-europe-is-a-problem-with-no-solution/">Social
Europe</a>, “Five reasons why migration into Europe is a problem with no
solution”: 1) deep-seated and permanent factors such as political chaos in the
Middle East and extraordinarily huge and increasing income gaps between Europe
and Africa, with sub-Saharan population poised to increase </span><span style="font-family: "verdana" , sans-serif; line-height: 23px;">almost</span><span style="font-family: "verdana" , sans-serif; line-height: 23px;"> </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">by six times by 2100; 2)
lack of an immigration tradition in Europe; 3) European political blunders due
to a combination of incompetence and arrogance, such as overthrowing Gaddafi,
the ultimatum to the previous Ukrainian government, and the handling of the
Greek crisis; 4) the increasing influence of right-wing, populist
anti-immigration parties in several European countries, even when they are not
in government; 5) the total lack of strategies, policies and ideas at the
European level, while the crisis calls for a multilateral solution involving
co-ordination among member-states and with African countries and the European
recognition that an influx from Africa is dictated by demographic and economic
gaps: “Unfortunately, neither of these two conditions is close to being
satisfied. So the problem, among permanent political improvisation, will
continue to worsen” – he wrote prophetically. (In a post in the same series
last January Branko stressed the economic </span><a href="https://www.socialeurope.eu/2016/01/migrations-economic-positives-and-negatives/" style="font-family: verdana, sans-serif; line-height: 115%;">positives
and negatives</a><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> of migrations; see also his forthcoming book </span><i style="font-family: verdana, sans-serif; line-height: 115%;">Global Inequality - A New Approach for the
Age of Globalization</i><span style="font-family: "verdana" , sans-serif; line-height: 115%;">, Belknap Press).</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The Schengen Area rules
include provisions for temporary border controls to be re-established in case
of urgency, for up to 2 and 6 months, and for outright suspension for up to 2
years in the case of threats to public order. Since the 2015 summer temporary
measures have been already implemented unilaterally by several countries.
Hungary closed its borders with Serbia, Romania and Croatia, allowing its army
to use rubber bullets, tear gas and barbed wire against migrants. In November
Slovenia started building its own fence along the Croatian border; its
Parliament recently approved the deployment of the country’s army to manage the
migrants’ flow at its borders. An increasing numbers of migrants have been
cutting through these barriers to enter the EU.<o:p></o:p></span><br />
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<span style="font-size: x-small;"><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Warren Richardson, <i>Hope for a New Life</i>. A man slides a child under barbed wire at the
border between Serbia and Hungary at Röszke, Hungary, 28 August 2015. </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">(</span><a href="http://www.worldpressphoto.org/collection/photo/2016" style="line-height: 115%;"><span style="color: #0889a7; font-family: "verdana" , sans-serif; line-height: 115%; text-decoration: none;">World Press Photo</span></a><span style="font-family: "verdana" , sans-serif; line-height: 115%;">)</span></span></div>
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<span style="font-size: x-small;"><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Sergey
Ponomarev, Russia, The New York Times, <i>The European migration crisis: </i>Refugees
arrive by boat near the village of Skala on the Lesbos Island, Greece, 16 November
2015 (</span><a href="http://www.worldpressphoto.org/collection/photo/2016" style="line-height: 115%;"><span style="color: #0889a7; font-family: "verdana" , sans-serif; line-height: 115%; text-decoration: none;">World Press Photo</span></a><span style="font-family: "verdana" , sans-serif; line-height: 115%;">)</span></span></div>
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<o:p></o:p></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The closing of Schengen internal borders has
<a href="http://www.citylab.com/politics/2016/02/european-union-open-border-belgium-checks-syrian-refugee-isis/470733/??ftcamp=crm/email//nbe/FirstFTEurope/product">accelerated</a><!--[if !supportNestedAnchors]--><a href="https://www.blogger.com/null" name="_Hlt444357293"></a><a href="https://www.blogger.com/null" name="_Hlt444357294"></a><!--[endif]--> since the
beginning of 2016. In Denmark the government extended passport checks on the
German border for the third time, with Sweden keeping similar checks for
travellers arriving from Denmark. France is in the process of closing down the
so-called “Jungle” migrant camp at Calais, whose estimated 5,500 residents were
waiting to smuggle themselves to the UK on ferries, or through the Chunnel in trucks,
trains or even on foot; the closure was violently resisted. Belgium
reintroduced border controls on its frontier with France, hiring 290
extra-police officers to try and stop the Calais migrants from moving to its
coastline. Austria has built a wall at its frontier with Slovenia; in under two
months in 2016 it received 101,000 migrants compared with 4,000 in the same
period last year, and has introduced a cap of 80 asylum applications per
day. Borders have been tightened between
the Republic of Macedonia and Greece, allowing Syrians and Iraqis through but
barring Afghans, who then were banned also by Croatia. Towards the end of
February over 22,000 migrants were stranded in Greece and were expected by the
Greek Migration Minister and Vice-premier to treble by the end of March; the UN
estimates their number to be increasing even faster, at the rate of 3,600 per
day. The Greek border with Macedonia has been nearly sealed off, threatening to
turn Greece into a giant refugee camp – a “warehouse of souls” (Tsipras). </span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><br /></span>
<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The
EU is planning to provide Greece with €700mn over 3 years (of which 300mn in
2016 for emergency assistance to migrants); reasonable proposals to trade off
migrant assistance for Greek debt cancellation have been rejected as a moral
hazard risk. On 24 February in Vienna ten eastern European countries – with the
much resented exclusion of Germany, Greece and Italy – agreed on tightening up
their own border controls with a view to stop the Western Balkan route into
Europe, which of course will shift the flow back to the Mediterranean route
into Italy. On 29 February at the Macedonian-Greek border “crowds of migrants
were beaten back from storming a fence with a salvo of tear gas” (FT, 1 March).
The current migration assault is even more serious than the Euro crisis, as
Angela Merkel recently acknowledged. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Last November Jean
Asselborn, Luxembourg’s Foreign Minister, declared that Europeans
had <i>“<a href="http://www.euractiv.com/section/justice-home-affairs/news/asselborn-only-months-to-save-schengen/">only
a few months</a>”</i> to save the Schengen system. On 21 February Thomas de
Maizière, Germany's Interior Minister, stated that EU member states must agree
a common approach to tackle migrations <i>“</i><a href="http://www.thelocal.de/20160222/dont-dump-asylum-seekers-on-us-germany-tells-austria"><i>within two weeks</i></a><!--[if !supportNestedAnchors]--><a href="https://www.blogger.com/null" name="_Hlt444357993"></a><a href="https://www.blogger.com/null" name="_Hlt444357994"></a><a href="https://www.blogger.com/null" name="_Hlt444357995"></a><a href="https://www.blogger.com/null" name="_Hlt444357996"></a><!--[endif]--><i>”</i>
if they wanted to avoid the system’s complete collapse. On 4 March the European
Commission unveiled a plan, <a href="http://ec.europa.eu/news/2016/03/20160304_en.htm">Back to Schengen</a>, “to
lift all remaining border controls by December 2016, so as to return to a
normally functioning Schengen Area before the end of the year”. The options
considered involve sharing out asylum seekers across the EU on a quota basis
regardless of where they first arrived, either as a general procedure or only if
a country is overwhelmed by a sudden influx. The IX Report on European Security
reveals that a poll conducted in early 2016 among 1000 respondents each in Italy,
Spain, France and Germany gives a majority of over 75% in favour of the
reintroduction of border controls either unconditionally (56% in Italy) or in
special circumstances (<i>Repubblica</i>, 7
March).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The
Schengen crisis should not take anybody by surprise. The writing has been on the
wall for a long time. The introduction of the Euro as a common currency had
equally been an excellent idea, which however failed because it was premature<i> </i>before political, fiscal and banking
integration; incomplete<i> </i>due to the
ECB lacking powers as Lender of Last Resort to the EU and the member states;
and because the Eurozone was subject to increasing divergence<i> </i>in the member states’ fundamentals. The
Euro crisis was also made worse by austerity policies perversely enforced by
the German-led European authorities. Precisely the same kind of criticisms
apply to free internal travel within the Schengen Area: premature, incomplete
and made worse by country divergence and recessionary austerity. On the impact
of austerity on migrations and convergence see </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Michelle Baddeley, "Convergence, Divergence and Migration in an
Age of Austerity", Seminar paper, Cambridge 2016:</span><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><br />
“…(T)</span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">he ability for host societies and economies to
adapt will be constrained by limits on government spending. Infrastructure
investment is needed in the very short</span><span style="font-family: "cambria math" , serif; line-height: 115%;">‐</span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">term, including emergency infrastructure to
support the immediate consequences of migration e.g. within refugee and migrant
camps. Infrastructure investment will also be essential in the medium to long
term to ensure that growing migrant populations have proper access to social
infrastructure including housing, schools, hospitals and other medical
services. Without this investment, the prospects for growing inequality, deprivation
and socio-political unrest are likely to be severe – exacerbating divergences
at many levels: between the global South and North, between Northern and
Southern parts of the EU, and within countries depending on how different
regions’ populations are affected by migration and/or how much access they have
to public finance for infrastructure investment.</span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">”<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Three
considerations are in order: <o:p></o:p></span></div>
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<b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">1.Free
internal travel requires strong external controls. </span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Just
like a Free Trade Area requires a common external tariff barrier, free internal
travel obviously requires a common external border, with a common Coast Guard,
border guards and if necessary a common Army, all provided and paid for
centrally. The Schengen external borders, on the contrary, are delegated to national,
fragmented, uneven and inadequate controls (in spite of the rudimentary Frontex
agency and the recent intervention of NATO ships patrolling the Aegean Sea).
Moreover existing controls do not include brutal repression, and this
humanitarian restraint is more labour-intensive. Shooting trespassers on sight,
as East German guards protecting GDR borders used to do with attempted exits, is
not yet reached but arrest and imprisonment in Hungary (and the extra-Schengen
UK) have been, as well as the use of tear gas and rubber bullets elsewhere. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Schengen external borders
are a sieve that allows through indiscriminately legitimate refugees, escaping
directly from persecution and war, and economic migrants, i.e. those refugees
who had already reached a safe country, or other migrants who are simply
seeking to improve their standard of living. The difference between refugees
and economic migrants (both classed here as migrants) is elusive, as even
refugees will tend to move towards countries with higher employment
opportunities and/or income, thus abandoning their “first safe country” status.
This difference is fundamental: refugees are protected by UN regulation on
reaching their first safe haven, the others are still subject to national
endorsement and control. And even if a policy of completely open doors was
adopted towards economic migrants, the <i>speed
</i>of the migratory inflow would still have to be subject to national control.
In fact the capacity to absorb immigrants into any given territory is limited
at any time by short term available resources, by the country’s capacity to
integrate immigrants and, as well, by their own willingness and preparedness to
be integrated.<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Whether or not immigration
brings net benefits to the host country is a controversial matter. On balance
it probably does in the long term, but the case of very fast, concentrated mass
migration should be considered in its own terms. The possibility cannot be
neglected of a mixed distributional impact on workers and firms through greater
competition in labour markets, both in the short and long term; of significant
additional investment cost in new infrastructures, and - at least in the short
term - welfare costs, making immigration a public investment competing with alternative
forms of public expenditure. Immigration brings possible cultural enrichment
but also possible cultural impoverishment, as well as potential cultural,
political, ethnic and religious conflict – even leaving aside the possibility,
not entirely implausible, of migration being a vehicle of health contagion and
terrorist infiltration. These drawbacks have to be set against the benefit of
rejuvenation of an ageing host population, which is associated with mass
immigration. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Whatever the true net costs
and benefits of immigration, the increasing electoral success of right-wing, populist,
anti-immigration parties in most of the developed world signals unambiguously
the widespread perception – right or wrong – that the current level and/or rate
of immigration are excessive: from Matteo Salvini’s Lega to Nigel Farage’s UKIP,
from Jimmie Åkesson’s Swedish Democrats to Geert Wilders’ Party for Freedom, from
the German Alternative </span><span lang="EN" style="font-family: "verdana" , sans-serif; line-height: 115%;">für </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Deutschland to Viktor Orbán’s Fidesz or Jaroslaw
Kaczynski’s PiS, Heinz-Christian Strache’s FPO, Milos Freeman’s Civil Rights
Party, Marine Le Pen’s Front National, the Finnish and Norwegian anti-immigration
parties, as well as shifts in more standard political parties (see the anti-immigration
stance of Boris Johnson, mayor of London and David Cameron’s probable
successor). In the US the latest polls show that immigration is fourth or lower on public concerns: the anti-immigration vote is overwhelmed by the
economy, anti-Elite feelings and security issues, although Donald Trump’s large-scale
wall-building and deportation plans may have something to do with his unexpectedly
strong bid for the US Presidency. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">When existing external
borders are not in a position to identify and register all migrants, to
distinguish between refugees reaching their first safe haven (which the 1990 Dublin
Convention rules, stricter than the UN rules, regard as the first EU country)
and all other migrants, it is unavoidable that each Schengen member state will
need to reintroduce effective border controls, including visas and passport
checks. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The identification of
immigrants has been likened to the marking of prisoners in Nazi concentration
camps, but the comparison is improper, even if identification required the use
of force. Identification is essential to verify both the right to residence and
entitlement to benefits. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The almost 4,000 migrants
that drowned trying to cross the Mediterranean Sea, the high monetary cost (steeply
rising with the spreading of border controls and obstacles) and exposure to
violence and other personal risks of migration make the desperate predicament
of economic migrants – running away from famine, destitution, drought, environmental
and cultural disasters – very close to that of refugees running away from
persecution and war. But the difference is still there: refugees have a
sacrosanct right to asylum sanctioned by the United Nations, while all others
by migrating place themselves at the mercy of their countries of arrival: economic
migrants can be refused entry or be repatriated. <o:p></o:p></span></div>
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<i><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Both
rejection and forced repatriation are unpleasant and brutal, but an
indiscriminate open doors policy would amount to the pretense that the world in
which we live, dominated by private property and territory-based democracy,
is instead a non-existing utopia of global democracy and universal communism,
though limited to the collectivization of social capital. No wonder such a
contradictory utopia was never proposed or theorized by anyone. In the world as
we know it international solidarity is necessarily a discretionary concession
by those who can afford generosity, which can only be exercised collectively if
backed by a majority; it is not an automatic right of those who need international
solidarity.</span></i><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Moreover a policy of
indiscriminate open doors to all immigrants, while reducing international
inequality across countries will increase internal inequality within
countries because of the greater competition in
the labour market in the host countries and the impoverishment of the emitting countries, thus leading to a possible and perhaps probable greater
global inequality. (The case for repatriation is developed conclusively by
Alberto Chilosi, “On the economics and politics of unrestricted immigration”, <i><a href="http://www.chilosi.it/unrestricted%20immigration.pdf" target="_blank">The Political Quarterly</a></i></span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">, 73-4, pp. 431–435, October 2002).</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">All immigrants, whether or
not they can be classed as refugees, should be protected from the risks of
their journey, in spite of such risks being to some extent the result of their
own actions, just as cancer patients are entitled to treatment even if they are
smokers (though some may disagree). Preferably the cost of protecting them
should be a charge on all Schengen countries, as it is now for the EU Frontex
operations, but even if such cost was born by a single country’s taxpayers as
in the case of Italy’s Mare Nostrum scheme it would still be desirable. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The trouble is that repatriation
is costly, and should be financed by the Schengen countries as it is part of
the cost of abolishing internal borders; it requires the agreement of the
country of origin or of the first safe country reached, which may be unknown or
might no longer exist or might not honour such an agreement (e.g. Pakistan). Moreover
it is doubtful whether “pushbacks”, whereby asylum seekers are returned to a
country without their application having had a fair hearing, are consistent
with both the Geneva Conventions and the EU asylum code. But the fact that repatriation
will not always be possible is no reason for not attempting it at least in some
cases, if nothing else <i>pour encourager
les autres. </i>Refugees are in a
different position because with the settlement of conflict in their own
countries they should return home.<i><o:p></o:p></i></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">On 27 January Sweden – that
last year received 163,000 asylum applications, the highest number per capita
in Europe – announced a plan to repatriate 80,000 migrants (subsequently
reduced to 60,000 then left undetermined) <i>“over many years”</i>, using aircraft chartered for
the purpose, but the plan is still on paper. In the same week 308 economic
migrants were sent back by bus from Greece to Turkey; however Turkey will not
accept more unless Europe takes more Syrians off their hands – a vicious circle.
Rejection looks like a more viable option: in his current visit of the Western
Balkans ahead of the EU-Turkey summit Donald Tusk, on 2 March in Zagreb, said
that “Member states should refuse entry to third-country nationals who do not
meet the necessary conditions or who, although they were able to do so earlier,
did not apply for asylum.” (European Council communique’ 3 March). However, the
concentration of rejected economic migrants in border camps is bound to create
other problems, while the prospect of future rejections can only speed up
current migration flows. <o:p></o:p></span></div>
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<b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">2.Free
internal travel requires the convergence of living standards within the area (including
welfare provisions). </span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Not unnaturally foot-lose migrants who do not
have stronger ties (of language, religion, relatives, friends) to a particular
country will tend to choose their ultimate destination on the basis of their
perception of maximum improvement in their living standard resulting from migration.
Employment prospects are likely to be paramount, indeed traditional migration
theory (exemplified by the Harris-Todaro model, AER 1970, 60-1) relates the
incentive to migrate to wage differences between the home and destination
countries weighed by their respective probability of employment (taken as 1 <i>minus</i> the unemployment rate), to which of
course one should add the net improvement in welfare benefits. Potential
immigrants may well tend to overestimate their perceived income improvement
prospects, as they seem to imagine themselves and their children gainfully
employed at top salaries; this is one of the factors encouraging migrations
beyond reason. When expected income gains diverge across potential
destinations, the more attractive countries naturally will tend to be
disproportionately vulnerable to migratory inflows. Hence the incentive for
destination countries to raise national barriers, and/or discriminate in welfare
benefits against immigrants, or dismantle the welfare state <i>tout court</i> for both nationals and
immigrants. Even James Meade – a liberal and enlightened economist who proposed
a generous generalised basic income – in order to prevent opportunistic immigration
recommended that immigrants should be treated by the principle of reciprocity,
i.e. enjoy the same benefits, if any, that our nationals might be granted in
the migrants’ country of origin. (It has been objected that such a rule might
be applied to countries of the same level of development, such as North-North
and perhaps South-South, but not to South-North migrations).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The UK is a case in point.
Relatively generous benefits granted to immigrants from other EU countries,
including social housing, national health entitlements and payments to
relatives resident abroad, have led to Cameron attempting to negotiate
“emergency brakes” with the EU, subjecting benefits to time restrictions
(excluding immigrants for the first four years residence), or to resident
family members (possibly restricting family re-joining). Cameron succeeded in
negotiating with the EU these kinds of restrictions only for future and not for
existing immigrants, which therefore strengthened the conservative government
resolve to reduce welfare benefits all round. Meanwhile non-European immigrants
to the UK are subjected to a minimum income to be reached within the first 5
years of residence (which has just been raised from £21,000 to £35,000 from
next April), under penalty of expulsion after one additional year. New rules will
make UK landlords responsible for checking the documents of their tenants,
making it harder to find accommodation not only for unauthorized immigrants but
also for the 60% UK citizens who do not possess a passport.<o:p></o:p></span></div>
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<b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">3.Any
attempt at a fair re-distribution of immigrants among countries requires the
re-establishment of national borders</span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">. Last July EU Interior
Ministers - </span><span style="font-family: "verdana" , sans-serif; line-height: 27.6px;">outvoting Romania, Hungary, the Czech and Slovak republics strongly opposed to the scheme</span><span style="font-family: "verdana" , sans-serif; line-height: 27.6px;"> - </span><span style="font-family: "verdana" , sans-serif; line-height: 115%;">imposed a plan to relocate 40,000 migrants (24,000 from Italy and 16,000 from Greece) across
the EU. In September an additional 120,000 relocations (16,600 from Italy, 54,400 from Greece and 54,000 from Hungary) were added, raising the
total to 160,000 in two years, of which 54,000 were postponed to the following year (FT, 25 September 2015). Viktor Orbán, Hungary’s prime minister,
announced a </span><a href="https://next.ft.com/content/06d7c59e-dafb-11e5-98fd-06d75973fe09" style="font-family: verdana, sans-serif; line-height: 115%;">referendum</a><span style="font-family: "verdana" , sans-serif; line-height: 115%;">
on whether the country should be forced to resettle refugees, on the ground
that “Introducing resettlement quotas for migrants without the support of the
people is an abuse of power”; he is unlikely to lose that referendum. On 28
February Pope Francis advocated “an equitable re-distribution of the burden of
migrants” (thus accepting that immigration is a burden). However, such kind of a re-location is
futile, not to say idiotic, for under Schengen completely free and unrestricted
internal travel any immigrant re-located to a country other than his/her
preferred destination can at any time, and eventually will, just go there.
Indeed we could argue that even the relocation of migrants within a given
country might have to be subjected, in order to be done efficiently, to the
introduction of </span><i style="font-family: verdana, sans-serif; line-height: 115%;">internal passports and
controls </i><span style="font-family: "verdana" , sans-serif; line-height: 115%;">of the kind prevailing in the Soviet Union until 1991, in order to
stop immigrants from settling in the capital city and in other metropolitan
areas that are already overcrowded and congested and to divert them instead to
less developed areas with an abundance of cheap underutilised housing and land.</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">On 29 February Angela Merkel
said it loud and clear: “Migrants may not pick and choose where they are to be
settled” (Daily Telegraph, 1 March). She referred to their choice of country,
but Germany is indeed unusual in imposing constraints on where migrants can
live, both in order to prevent the formation of ghettos in big cities and to
direct immigrant flows to the underpopulated regions of the former GDR where
there is plentiful social housing and a shortage of young workers. Such a
policy had been introduced in the 1990s at the time of a large influx of ethnic
Germans from the former Soviet Union and Romania. Immigrants have their welfare
benefits cut if they move away from their assigned locations. In the UK
immigrants who claim social housing and some other benefits are offered it only
in the northern rust belt towns. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">This kind of restrictions
seem necessary to the smoother absorption of immigrants, but paradoxically the
European Court of Justice, ruling on a complaint by two Syrians about their German
residence requirements, at the end of February 2016 decided that EU rules “preclude”
them even if they are aimed at “achieving an appropriate distribution of the
burden connected with the benefits”, though it also said that people granted
subsidiary protection could be subject to a residence condition “for the
purpose of promoting their integration”. Nevertheless German ministers are
preparing a law which would expand the existing residence restrictions to
refugees whose asylum requests have been approved, in spite of objections from
refugee associations <a href="https://next.ft.com/content/624a729a-df98-11e5-b67f-a61732c1d025?ftcamp=crm/email//nbe/EuropeMorningHeadlines/product">(FT,
1 March)</a>.<o:p></o:p></span></div>
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<b><span style="font-family: "verdana" , sans-serif; line-height: 115%;">Disintegration?
</span></b><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> At present the EU is being subjected to four
centrifugal forces (see <a href="https://next.ft.com/content/f9c8bb52-dcac-11e5-8541-00fb33bdf038">Munchau</a>,
FT 28 February. and Javier Lopez, <a href="file:///C:/Users/dmarionuti/Documents/2016/On%2029%20February%20Angela%20Merkel%20said%20it%20loud%20and%20clear:%20%E2%80%9CMigrants%20may%20not%20pick%20and%20choose%20where%20they%20are%20to%20be%20settled%E2%80%9D%20(Daily%20Telegraph,%201%20March).%20She%20referred%20to%20their%20choice%20of%20country,%20but%20Germany%20is%20indeed%20unusual%20in%20imposing%20constraints%20on%20where%20migrants%20can%20live,%20both%20in%20order%20to%20prevent%20the%20formation%20of%20ghettos%20in%20big%20cities%20and%20to%20direct%20immigrant%20flows%20to%20the%20underpopulated%20regions%20of%20the%20former%20GDR%20where%20there%20is%20plentiful%20social%20housing%20and%20a%20shortage%20of%20young%20workers.%20Such%20a%20policy%20had%20been%20introduced%20in%20the%201990s%20at%20the%20time%20of%20a%20large%20influx%20of%20ethnic%20Germans%20from%20the%20former%20Soviet%20Union%20and%20Romania.%20Immigrants%20have%20their%20welfare%20benefits%20cut%20if%20they%20move%20away%20from%20their%20assigned%20locations.%20In%20the%20UK%20immigrants%20who%20claim%20social%20housing%20and%20some%20other%20benefits%20are%20offered%20it%20only%20in%20the%20northern%20rust%20belt%20towns.">“Europe
in Multiple Organ Failure”</a>): a North-South divide over border controls;
another North-South divide about austerity and the Euro; an East-West divide
over migrant re-location; and the uncertain implications of Brexit with
possible contagion effects on other member states. <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">It is difficult to disagree
with Oxford political scientist Jan Zielonka (<i>Is the EU doomed? Global Futures,</i> Polity Press, London, 2014) when
he argues that “Sadly… at present the EU does not facilitate integration, but
impedes it”… “The European Union was widely regarded as the most successful
modern integration project, but it has turned into an embarrassment”… “No
wonder so many citizens lost trust in the EU, and that the process of
disintegration is gathering pace.” But Zielonka’s expectation that “A weakening
of the EU and its member states will strengthen other political actors such as
cities, regions and non-governmental organizations (NGOs)” is utterly
unconvincing: the solution or even the alleviation of both the Euro crisis and
the migration crisis cannot rely on a network of de-centralised power centres
but will require a deep degree of centralised initiative and commitment to
greater integration. See “A Plan for Europe’s Refugees”, <a href="http://www.economist.com/news/leaders/21690028-european-problem-demands-common-coherent-eu-policy-let-refugees-regulate">The
Economist</a> 6 February:<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">“Creating a
well-regulated system requires three steps. The first is to curb the “push
factors” that encourage people to risk the crossing, by beefing up aid to
refugees, particularly to the victims of the civil wars in Syria and Iraq,
including the huge number who have fled to neighbouring countries such as
Turkey, Jordan and Lebanon. The second is to review asylum claims while
refugees are still in centres in the Middle East or in the “hotspots” (mainly
in Greece and Italy), where they go when they first arrive in the EU. The third
element is to insist that asylum-seekers stay put until their applications are
processed, rather than jumping on a train to Germany.” Unfortunately, “All
these steps are fraught with difficulty.” <o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">Prospects might become
clearer soon, after the next EU-Turkey summit (7-8 March), the German regional
elections (13 March) regarded as a test of Merkel’s immigration policies, and
the EU Summit on migration (18-19 March).<o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">There seems to be, however,
a constitutional conflict between European and international rules about
treaties, revealed by the recent agreement reached by the UK and all the other
member states about the special terms negotiated by Cameron for the UK. That
Agreement is said to have been deposited within the UN and is therefore subject
to the jurisdiction of the International Court of Justice, which operates on rules
different from those of the European Court of Justice competent to enforce the
European Treaties. Downing Street has claimed that the EU-UK agreement is
legally binding and enforceable, but it is not clear whether any country who
did not like it might seek to challenge it in the International Court of
Justice. A constitutional crisis of this kind is the last thing that Europe
needs today.</span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><br /></span>
<i style="font-family: verdana, sans-serif; line-height: 115%;">Note:</i><span style="font-family: "verdana" , sans-serif; line-height: 115%;"> I thank Carmen de la Camara, Marilena Giannetti, Tonino Lettieri, Ruggero Paladini and Fabio Sdogati for useful comments on an earlier draft of this post. However they should not be held responsible for any errors or omissions, nor deemed necessarily to agree with any of the propositions put forward here.</span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><br /></span>
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><b>UPDATE</b><o:p></o:p></span></div>
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<span style="font-family: "verdana" , sans-serif; line-height: 115%;">The EU-Turkey summit of 7-8
March led to a draft deal whereby Turkey would take back immigrants coming from
Greece unless they successfully applied for asylum there, while the EU would take in one
Syrian refugee for every immigrant sent back. In exchange Turkey would receive
€6bn aid instead of the €3bn already committed but not yet disbursed, accelerate its
progress towards EU accession and obtain visa-free travel to the Schengen Area
for its 75mn citizens.</span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><br /></span>
<br />
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<o:p></o:p></div>
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><span style="line-height: 115%;">In the three German regional elections of 13 March Ms Merkel’s
CDU Party retained the possibility of forming coalition governments but lost
ground heavily, while her PSD coalition Party that had backed her immigration
policies performed even worse. The xenophobic right-wing AfD gained record
support.</span></span><br />
<span style="font-family: "verdana" , sans-serif; line-height: 115%;"><span style="line-height: 115%;"><br /></span></span>
<br />
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<o:p></o:p></div>
<span style="color: #333333; font-family: "verdana" , sans-serif; line-height: normal;">On 18 March after ten days
negotiations the EU and Turkey reached a compromise deal that commanded
unanimous support, effective from 20 March. Greece obtained 4000 new personnel to process asylum
applications. There would be no collective pushbacks, but starting on 4 April Turkey (that received 2.7 million migrants to date) would take back
applicants who did not qualify for asylum in Greece, while the EU would take
from Turkey </span><span style="font-family: "verdana" , sans-serif; line-height: normal;">“one for one” as many Syrians up to a ceiling of 72,000. In exchange Turkey would
receive €6bn instead of the anticipated €3bn, of which 3bn up front and 3bn at
the end of the year; the process of EU accession would be tentatively reopened
and EU visa-free travel for Turkish citizens would be granted from next June.</span><br />
<span style="font-family: "verdana" , sans-serif; line-height: normal;"><br /></span>
<span style="line-height: normal;"><span style="color: #333333; font-family: "verdana" , sans-serif;">The Greek government’s migration spokesman Giorgos Kyritsis declared that implementation of the deal would require more than 24 hours; Turkey will not take back migrants before 4 April anyway. The 4,000 officials, translators, judges and security guards promised by the EU still have to arrive; eight ships with a capacity of 300-400 passengers each need to be provided by Frontex, together with 30 buses. Thousands of migrants (mostly Syrian, but also Iraqis and Afghans) have continued to arrive in Greece in spite of the agreement. </span><span style="font-family: "verdana" , sans-serif;">Greece is still relocating migrants from its islands to temporary refugee camps on the mainland.</span><span style="font-family: Verdana, sans-serif;"> </span></span><span style="line-height: 115%;"><span style="font-family: Verdana, sans-serif;">From 4 April a number of failed asylum-seekers (750 in
the first week, mostly North Africans, Afghans and Pakistanis) from Greek
detention centres will board a vessel chartered by Frontex and be taken to
Turkey. In return Germany will take an equivalent number from Turkish refugee camps.
These deportations might be illegal and have sparked violent protests but will
accelerate in April.</span></span><br />
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<span style="font-family: Verdana, sans-serif;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: "verdana" , sans-serif;"><br /></span>
<span style="color: #333333; font-family: "verdana" , sans-serif;">T</span><span style="color: #333333; font-family: "verdana" , sans-serif;">here were still strong objections from humanitarian groups,
on the ground that the deal violated international law on the treatment of
refugees; Turkey is expected to conform its regulations to international
standards, but refused to accept a formal commitment to that effect. </span><span style="color: #333333; font-family: "verdana" , sans-serif;">European reaction has ranged from welcoming “closed borders” to condemning the “shameful deal”. </span><span style="color: #333333; font-family: "verdana" , sans-serif;"><a href="https://next.ft.com/content/ff442fb6-ecfc-11e5-bb79-2303682345c8?ftcamp=crm/email//nbe/EuropeMorningHeadlines/product" target="_blank">Wolfgang Munchau</a>, FT 21 March: “The deal with Turkey is as sordid as anything I have seen in modern European politics… The EU not only sold its soul that day, it actually negotiated a pretty lousy deal.”</span><span style="color: #333333; font-family: "verdana" , sans-serif;"> </span><span style="font-family: "verdana" , sans-serif;">On 22 March the UN refugee agency announced the suspension
of its involvement at all closed centres on the Greek islands, on the ground
that so-called “hotspots” for the reception and registration of migrants had turned
into “detention facilities” in violation of UN regulations. </span><span style="font-family: "verdana" , sans-serif;">On 23 March Médecins Sans Frontières and the International Rescue Committee also scaled back their activities in the Greek
centres. </span><span style="font-family: "verdana" , sans-serif;">Following terrorist attacks in Brussels Poland now declared
that it can now no longer honour the previous government’s commitment to take a
quota of 7,000 refugees out of the 120.000 to be resettled across the EU. In the week following the EU-Turkey deal migration inflows to Greece were reduced drastically, though this might be due to adverse whether conditions in the Aegean.</span><br />
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<o:p></o:p></div>
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<o:p></o:p></div>
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<span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<span style="color: #333333; font-family: "verdana" , sans-serif;"><br /></span>
<br />
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<o:p></o:p></div>
<span style="color: #333333; font-family: "verdana" , sans-serif;">In the last seven months, Hungary’s courts have held 2,189
trials for border crimes (including on 18 March a blind woman and a man
confined to a wheelchair accused of interfering with Hungarian borders last
November, <a href="https://next.ft.com/content/c05c54f8-ed25-11e5-bb79-2303682345c8#axzz43ZBGNE5p">FT
22 March</a>) leading to an exceptionally high rate of convictions of 99 per
cent. Hungarian judges have chosen expulsions and long entry bans from Schengen
countries over prison sentences. On 22 March Frontex was reported saying that
it was trying to recruit 150 policemen and 50 officials to be deployed on Greek
borders, i.e. it had not succeeded yet.</span><br />
<span style="color: #333333; font-family: "verdana" , sans-serif;"><br /></span>
<span style="color: #333333; font-family: "verdana" , sans-serif;">The
Greek-Macedonian border will remain closed, blocking the Balkan route to
Northern Europe, leaving tens of thousands migrants stranded in Greece for some
time, including Syrians who thought they had been invited by Angela Merkel to
come and stay in Germany. It is not clear how the 72,000 asylum seekers would
be distributed among member states; once that ceiling is reached the
arrangement will be "reviewed", though Central-Eastern EU members are
committed to stop at that ceiling. </span><br />
<span style="color: #333333; font-family: "verdana" , sans-serif;"><br /></span>
<span style="color: #333333; font-family: "verdana" , sans-serif;">The closure of the Balkan route will induce desperate migrants and their smugglers to switch to different and more dangerous routes to Europe, via the Black Sea through Ukraine, via Albania and the Adriatic to Italy, via the South Mediterranean to Italy and Spain (the last two routes having continued to be used especially from Lybia; in the first three months of 2016 immigrants arriving in Italy from the Mediterranean route have doubled). France, Switzerland and Slovenia would then be bound to reintroduce border controls, thus cutting off Italy and possibly Spain from the Schengen area; Austria is already closing the Italian border at Brennero. </span><span style="color: #333333; font-family: "verdana" , sans-serif;">Liberalisation of travel for Turks would lead to an additional inflow of Turkish Kurds. </span><span style="color: #333333; font-family: "verdana" , sans-serif;">According to a German think-tank refugee flows this year will
amount to an estimated range of 1.8m-6.4m (the higher figure being a worst-case
scenario including large numbers from Northern Africa).</span><br />
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<br /></div>
<span style="color: #333333; font-family: "verdana" , sans-serif;">
</span><br />
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<span style="color: #333333; font-family: "verdana" , sans-serif;">Incidentally, on the costs and benefits of mass immigration with special reference to the UK, see R.E. Rowthorn’s excellent </span><a href="http://www.civitas.org.uk/publications/largescaleimmigration/" style="font-family: verdana, sans-serif;" target="_blank"><span style="color: #999999; text-decoration: none;">Report</span></a><span style="color: #333333; font-family: "verdana" , sans-serif;">, 2015.</span></div>
</div>
</div>
<h3>
<o:p></o:p></h3>
</div>
</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com36tag:blogger.com,1999:blog-8732662769765511163.post-33206021633562509862015-09-27T23:25:00.002+02:002015-09-27T23:25:40.965+02:00Can Economic Policy Be Changed?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">On 16 September 2015, at the Chamber of Deputies in Rome, there was a
seminar on “Greece, the Euro, Alternatives for Italy”. After papers by Giulio
Marcon, Mario Pianta and Marica Frangakis there were two sessions on “</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Can Economic Policy be Changed?” and “Can Politics be Changed?”. In the
first session I took the view that E</span><i><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana;">uropean economic policy </span></i><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">can<i> </i></span><i><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana;">be changed, without
necessarily having to change the treaties, and presented seven specific proposals
and a general proposition. The real problem is whether political forces would support
such economic policy changes.</span></i><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> </span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">We could (and should): </span></div>
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<i style="text-indent: 0cm;"><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana;"><br /></span></i></div>
<div class="MsoNormal">
<i style="text-indent: 0cm;"><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana;">1. Remove public
investment from government deficit computation.</span></i><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"> Any constraint on the fiscal deficit, <i>averaged
</i>over a number of years and not applied to its <i>current </i>level, should exclude debt-financed <i>public investments</i>
because they do not entail an intergenerational transfer. This is widely and
authoritatively recognized: ”The current fiscal stance should not be confused
with the capital account… Computing the maximum deficit/GDP ratio as the <i>sum
</i>of the current and capital accounts is misleading.” (J. H. Drèze-A. Durré,
Louvain 2014). At present only the national co-financing of the so-called Juncker
Investment Plan is formally excluded; the principle should be extended to <i>all</i> public investment.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">2. </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Remove from
the computation of government deficit any borrowing incurred to finance the
payment of government arrears owed to enterprises, taxpayers, as well as the particularly
scandalous arrears owed to pensioners.</i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"> Such borrowing does not result in
additional debt but only in a change of creditors: the loans incurred to
liquidate arrears cancel out with the liquidated arrears.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Thus it should be recognized that public debt is actually
higher than it looks, for it should include not just the cumulated excess of
actual payments over receipts but also the accumulation of payment arrears
towards enterprises, taxpayers and pensioners. But since the payment of arrears
leaves unchanged the amount of total public debt, it should not be included in
the government deficit which by definition should be equal to the increase in
government debt.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">3. <i>Revise the
calculation of a country’s structural deficit by the European Commission, which
determines the maximum fiscal deficit that a government is allowed.</i> At
present this is following a particularly restrictive methodology and should be
converted to standard OECD procedures, which would allow a modest but
significant broadening of fiscal space.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">4. <i>Tighten the
existing rule that a EU member country should not exceed a trade surplus of 6%
of GDP, restricting it to 4% in line with the limit set to a country’s maximum
trade deficit, and actually enforcing it</i>, for instance imposing an
equivalent minimum fiscal deficit on the trade surplus country, in place of a
token fine. This would stop the surplus country (e.g. Germany at 7% of GDP)
forcing its Southern partners to incur higher deficits.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">5. </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Convert the
pension system, recently reformed from a PAYE system (Pay As You Earn, i.e.
re-distributive, defined benefits) to a fully funded system (capitalized,
defined contributions), wholly or partly back to PAYE.</i></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Both systems are potentially viable and capable to
deal with population ageing (the capitalized system promotes financial markets
but is more vulnerable to economic crises), but the </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">transition </i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">from PAYE
to a fully funded system makes a pension debt, which is conveniently hidden and
buried, unnecessarily surface, equivalent to the present value of current
employees’ contributions no longer available to finance current pension
payments. (A country’s PAYE pension debt should only include the present value
of that part of pensions – if any – which exceeds what can be financed out of
pension contributions).</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">The reversal of such policy, as exemplified in the
recent experience of Poland and Hungary, restores a country’s fiscal space to
the full extent of the emerged pension debt.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">6. </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Insure member
countries against the risk of growth under-performance with respect to the
average</i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">. </span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"> </span><br /><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">J. H. Drèze and A. Durré (Louvain, 2014) suggest an
ingenious scheme whereby a European Agency like the ECB could costlessly
provide such an insurance. Eurozone governments would issue bonds indexed to the
growth rate of their country’s GDP. The ECB would purchase a balanced stock of
such bonds, thus earning a total rate of return equal by definition to Eurozone
average growth. Thus the ECB could compensate below-average growth countries
for their under-performance, out of the extra-interest earned from countries
that record growth faster-than-average. No cross-subsidization among member
countries (Transfer Union) would be involved. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">(<i>Warning</i>: this scheme would work on condition
that no member country defaults on such bonds).</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">7. <i>Mobilize the
present value of the ECB Seigniorage – estimated by Willem Buiter to be of the
order of €3,400 bn (sic!) – to gradually withdraw government bonds issued by ECB
shareholder countries in proportion to their shares, thus avoiding a transfer
Union.</i> Again, no Transfer Union would be involved. </span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">See P. Paris and C. Wyplosz (2013 and 2014), on their P.A.D.R.E.
(Politically Acceptable Debt Reduction for the Eurozone) scheme: the ECB would
use seigniorage to pay interest on perpetual bonds issued to replace and retire
outstanding Eurozone debt. </span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">I proposed a similar scheme (on my blog <u>Transition</u>),
envisaging Eurozone bonds retirement directly financed by the ECB by securitizing future seigniorage. </span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span lang="EN-US" style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; font-weight: normal;">8. <i>A
general proposition.</i> <i>Finally, and
more generally, economic policy changes require the recovery of quantitative
instruments of economic policy, in place of dubious, possibly
counterproductive, so-called structural reforms (a euphemism for the
destruction of the Welfare State). We need to recover</i></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- monetary policy, which first was delegated
to an independent national central banker, then transferred to the ECB in
Frankfurt; </span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- fiscal policy, i.e. the level and
structure of taxation and public expenditure, now constrained by the recessionary
straightjacket of EU fiscal austerity rules (Maastricht, the Growth and
Stability Pact, the Fiscal Compact);</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- the price and investment policy of
state enterprises, now largely privatized or in the process of privatization;
and</span><span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"> </span><span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">even</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- direct controls, now abandoned in
favour of market forces.</span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span></div>
<div style="margin-left: 0cm; text-indent: 0cm;">
<span style="color: #222222; font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">The instruments are there and we know
how best to use them. The problem is the lack of political will.</span></div>
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</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com0tag:blogger.com,1999:blog-8732662769765511163.post-83001768696144735562015-06-22T10:11:00.000+02:002015-07-01T19:38:39.104+02:00Institutions and Policies<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="margin-left: 0cm; text-align: left; text-indent: 0cm;">
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><i><span lang="EN-GB" style="font-size: 14pt;"><br /></span></i></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><i><span lang="EN-GB" style="font-size: 14pt;">“</span></i><i><span lang="EN-GB" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-GB; mso-bidi-font-family: Verdana; mso-bidi-font-weight: bold;">If Institutions are so important, why do we
talk so much about economic policies?"</span></i><span lang="EN-GB" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-GB; mso-bidi-font-family: Verdana; mso-bidi-font-weight: bold;"> This excellent
question was the subject of a Round Table of the </span><a href="http://editorialexpress.com/conference/WCCE2015/program/WCCE2015.html"><span lang="EN-US" style="color: black; font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: black;">First World Congress of Comparative Economics</span></a><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Verdana;">, held at the
University of Rome Tre, on 25-27 June 2015, with the participation of </span><span lang="EN-GB" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-GB; mso-bidi-font-family: Verdana;">Josef C. BRADA (Arizona
State), Michael KEREN (Jerusalem), D. Mario NUTI (Rome Sapienza), Chaired by
Marcello SIGNORELLI (Perugia). The Round Table took place on 26 June,
2.15-4pm, at the Department of Economics, Aula Magna, V</span><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;">ia S. D'Amico 77, 00145 Rome.</span></span><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;">Immediately afterwards (4.30-6.15pm) at the Congress there was a
session on my own contributions to Comparative Economics, organised by my
friends Renzo Daviddi (EU) and Milica Uvalic (Perugia). Renzo focused on
Utopias, Milica on Participation, other friends: Saul Estrin
(LSE) on Socialism, Jan Svejnar (Columbia) on Transition, and Bozidar Cerovic
(Belgrade) on Integration (chaired by Saul Estrin). Most of my publications can
be viewed and downloaded freely from my </span><span lang="EN-US" style="color: black; font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-style-textfill-fill-alpha: 100.0%; mso-style-textfill-fill-color: black;"><a href="https://sites.google.com/site/dmarionuti/cv-and-publications/publications">website</a>, where the respective PPT presentations will be available shortly</span></span><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;"><span style="font-weight: normal;">.</span></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast;"><span style="font-weight: normal;"><br /></span></span></span></div>
<div style="margin-left: 0cm; text-align: left; text-indent: 0cm;">
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">My views on </span><i style="font-family: Verdana, sans-serif; text-indent: 0cm;"><span lang="EN-GB" style="font-size: 14pt;">“</span></i><i style="font-family: Verdana, sans-serif; text-indent: 0cm;"><span lang="EN-GB" style="font-size: 14pt;">If Institutions are so important, why do we
talk so much about economic policies?" </span></i><span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">are summarised here</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">.</span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;"><br /></span></span><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;">In any modern capitalist economy the State – i.e. the
set of government, other political institutions and the Public Administration -
has at its disposal a wide range of instruments of economic policy. A classic textbook by Ian Tinbergen, </span><i><span lang="EN-US" style="color: #252525; font-size: 14pt;">Economic
policy: Principles and Design</span></i><span lang="EN-US" style="color: #252525; font-size: 14pt;">. Amsterdam, 1956, 1978</span><span lang="EN-US" style="font-size: 14pt;">, distinguished between qualitative and
quantitative policy instruments.</span></span></span><br />
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Within the context of our Panel, I regard qualitative instruments as the creation and
manipulation of economic institutions: from bankruptcy legislation to corporate
governance, from competition policy to health insurance, from unemployment
insurance to anti-corruption laws. They include </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">automatic stabilizers </i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">(which
in truth are only </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">dampeners </i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">of economic fluctuations).</span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">Quantitative instruments were classified by Tinbergen
under four headings:</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">1) Direct controls of economic activity;</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">2) Fiscal policy: the level, composition and balance
of government direct and indirect taxation and other revenues and expenditures
(including subsidies);</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">3) Monetary policy: the quantity of money, the
associated level and structure of interest rates, credit policy, the exchange
rate regime and trends; with the management of government debt necessarily
linking monetary and fiscal policy;</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">4) The price and investment policies of (wholly or
partly) state owned enterprises.</span><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">For Tinbergen the structure of the economy could be
summarized by a macroeconomic model quantifying the relationships between
economic magnitudes, such as consumption, investment, employment, trade
balances, the price level, the rate of inflation and so on - simultaneously
with the values assigned by the government to quantitative policy instruments.
Through the choice of appropriate instruments the government could determine
consistent, feasible values of policy targets, while accepting the
corresponding values of “indifferent” variables. Tinbergen was a pioneer of
such an approach to model-building and economic policy.</span><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">Note: Policy targets are often labelled “priorities”,
but this is incorrect, because they cannot be ranked in absolute but only
relatively to the trade-off between targets preferred by the government.</span></span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">For about thirty years from the end of the Second
World War this framework can be used to characterize public policy in advanced
countries. Thanks to Keynesian policies sustaining demand, employment and growth,
we experienced a golden age of unprecedented prosperity: reconstruction,
industrialisation and growth, accompanied by re-distribution policies to
protect the weaker strata of the population: the unemployed, the aged, the
sick, the poor, children.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><o:p> </o:p></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">That approach was less successful in keeping under control inflation and/or public debt, primarily because of inconsistency between, on the one hand, high and stable employment and economic growth and, on the other hand, low inflation and/or public debt. </span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">The 1980s and 1990s, however, saw the demise of
Keynesianism and the victory of neo- or hyper-liberalism, exemplified by Reaganite
or Thatcherite economic policies. This was due to three major developments:</span></span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">1)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Margaret Thatcher was elected as conservative Prime Minister of the UK
from 1979-1990, and Ronald Reagan was elected as Republican President of the
USA (1981-1989, and was influential even earlier as Governor of the State of California); </span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">2)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">the extension of the neo/hyper-liberal model to the countries of the
post-socialist transition in the early 1990s, encouraged by foreign advisers,
the EU and the international organisations (World Bank, IMF, OECD etc.), and</span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">3)<span style="font-size: 7pt; font-stretch: normal;">
</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">the passive, mis-timed adoption of neo/hyper-liberalism by several
social-democratic governments in the 1990s, such as the Third Way of Tony
Blair, Bill Clinton and most European Union governments in the late 1990s.</span><br />
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">“Reaganomics" was characterized by supply-side
economics, tax reductions expected to promote economic growth, restrictive
monetary policies to control inflation, economic de-regulation, reduction of
public expenditure, anti-Trades Unions policy, hostility and re-armament
against communist countries (the Evil Empire), support for anti-communist
movements (Grenada’s invasion). Although
Reagan negotiated with Gorbachev the first Treaty for reduction of nuclear
weapons (INF Intermediate-range Nuclear Forces Treaty, 1987).</span><br />
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Other features of the neo/hyper-liberal approach,
extended to the post-socialist world include:</span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;"><br /></span></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;">- Immediate unilateral opening of foreign trade,
frequently revoked and therefore premature;</span></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;"><br /></span></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;">- Exceptionally rapid liberalization of capital flows,
in contrast to the experience of other European economies after World War Two;</span></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">- Large scale privatisation, especially (with a few exceptions for instance in
Hungary) unprecedented mass privatization through the distribution to the
population of free or symbolically priced vouchers, convertible into state
assets or shares in state enterprises – a macroscopic experiment in social
engineering of debatable effectiveness;</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;">- The demotion of the role of the state, leading to
delays or gaps in market regulation, especially in financial markets (see the
diffusion of banking pyramids), shareholders protection and corporate
governance;</span></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;"><br /></span></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-GB" style="font-size: 14pt;">- The dismantling of the welfare state, formerly
provided by state firms;</span></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">- A costly reform of the pension system from a Pay As
You Go, defined benefits, distribution system (whereby pensioners are funded by
the contributions of current employees), to a capitalization, defined
contributions or funded system (with pensions paid out of the revenue earned on
accumulated past contributions);</span><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">- A low and uniform rate of direct taxation (flat
tax), therefore at best only mildly progressive, on households and companies,
mostly without taxation of capital gains but with higher indirect taxation;</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;"><br /></span></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;">- </span><span lang="EN-GB" style="font-size: 14pt;">Lack of consultation and concertation between social partners and with
the government;</span></span><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">- A very flexible labour market, with weak trade
unions and a low incidence of collective bargaining; the principle of market
sovereignty was not applied to the labour market, frequently subjected to
widespread wage ceilings enforced through punitive taxes;</span></span><br />
<span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span>
<span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- A central bank not only independent but exceptionally independent and free
from any controls, without coordination with fiscal policy, pursuing a strict
policy of inflationary containment and high interest rates, with the pursuit of positive real rates even in the
presence of currency appreciation (therefore attracting foreign capital but
making the sterilization of the ensuing monetary expansion very costly);</span><span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"> </span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">- In general, a dominant weight of markets as against other institutions.</span><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p><br /></o:p></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p>The Third Way was characterised by</o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p><br /></o:p></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;">- The acceptance of the primacy and desirability of markets, both domestic and global;</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;">- Rejection of public ownership and public enterprise, supporting private entrepreneurship and continued privatisation; and, above all,</span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;">- Affordability, i.e. fiscal discipline and monetary restraint, rejecting inflation and public deficit and debt. </span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-size: 18.6666660308838px;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">In many ways the Third Way approach went too far, in
neglecting the increasing inequality involved in market allocation and the
dangers of de-regulations (two major causes of the 2007 crisis), privatising on
a vast scale (more assets per year in France under Lionel Jospin, in under 2
years 1997-98, than by Thatcher), and in endorsing the EU ruinous policies of
fiscal austerity, not to speak of war-mongering and the dereliction of civil
liberties.</span><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">In other ways the Third Way did not go far enough, as
in pursuing the reduction of the working week for an unchanged wage, resisting
the increase in pensionable age in the face of rising longevity, or failing to
promote environmental protection and reclamation. And the whole project had an
authoritarian bias.</span><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-GB" style="font-size: 14pt; font-weight: normal;">Such excesses and deficits of the Third Way are at the
root of the subsequent current crisis of the Left especially in Europe.</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Today the traditional quantitative instruments of
economic policy discussed by Tinbergen in 1956 and 1978 have been disabled:</span><span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span lang="EN-GB" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Direct controls have
completely given way to market-determined processes;</span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;">
<br />
- Monetary policy has been delegated by governments to independent central
bankers, and completely disconnected from fiscal policy; exchange rates have
been left largely floating, while membership of the Eurozone has eliminated
that instrument completely for member states; </span></span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">- Fiscal policy has been constrained by the straight-jacket of balanced budget
over the cycle, indeed of budget surplus “in normal times” (UK Chancellor
George Osborne, 10 June 2015; “There is no economic reason for Osborne’s
surplus plan. It’s time Labour stopped playing catch up… Osborne is using the
budget as an excuse to reduce the size of the state. Labour must not follow his
lead”, Simon Wren-Lewis, </span><a href="http://www.newstatesman.com/politics/2015/06/there-no-economic-reason-osborne-s-surplus-plan-it-s-time-labour-stopped-playing" style="font-family: Verdana, sans-serif; text-indent: 0cm;"><i><span lang="EN-US" style="color: black; font-size: 14pt;">NewStatesman</span></i></a><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">, 18 June 2015); with
heavy penalties and costly automatic provisions for rapidly reducing debt (the
Fiscal Compact);</span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-weight: normal;"><span lang="EN-US" style="font-size: 14pt;">
<br />
- State-owned enterprises have been privatised or are scheduled for further
reduction under pressure from EU and international institutions.</span></span><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><o:p> </o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;"><br /></span></span>
<span style="font-family: Verdana, sans-serif;"><span lang="EN-US" style="font-size: 14pt; font-weight: normal;">Qualitative instruments, on the other hand, today are restricted
to the sole adoption of neo/hyper-liberal institutions, under the euphemistic
label of “economic reforms”.</span></span><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">A reform should be, by definition, a change for the
better, but there is no consensus on desirable reforms: I might regard income
re-distribution to the poor as a desirable reform, others might regard the
ending of such re-distribution as desirable. In post-Stalinist Soviet-type
economies – as Yanis Varoufakis recently noted - there was frequent talk of
“reform” to indicate projects of economic and political de-centralization.
Today, on the contrary, reforms are an authoritarian design to dismantle the
welfare state, reduce pensions, eliminate collective bargaining and labour
employment protection, and to privatise state assets at any price regardless of
opportunity costs.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">Official EU and IMF documents recognise that both
austerity and most of these “structural” reforms are at best ineffective (in
particular labour market liberalisation, unlike product market liberalisation
especially in services) or at worst positively counterproductive (see Amartya
Sen, </span><a href="http://www.newstatesman.com/politics/2015/06/amartya-sen-economic-consequences-austerity" style="font-family: Verdana, sans-serif; text-indent: 0cm;"><span lang="EN-US" style="color: black; font-size: 14pt;">The economic consequences of austerity</span></a><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">, <i>NewStatesman</i>, 4 June 2015), but unelected officials perversely
persist in forcing their implementation as a condition of their statutory
support. And if and when “reforms” might be effective they only operate in the
medium-long term, often with adverse short term effects that turn them into
investments that are not necessarily attractive. Amartya Sen likens the unholy
and unnecessary combination of austerity and reforms to a mixture of rat poison
and antibiotics given to a sick person.</span><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;"><br /></span><br />
<span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">The Great Recession that began in 2007 and is still
on-going is concomitant with the general crisis in public economic policy. We
must re-think and re-found the theory and practice of economic policy,
restoring both traditional quantitative instruments and broadening the range of
eligible qualitative instruments, either within the constraints of
globalisation or shifting away from some of those constraints; we need more and
different instruments of economic policy, quantitative and qualitative, i.e. a
much wider range of policies </span><i style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">and </i><span style="font-family: Verdana, sans-serif; font-size: 14pt; text-indent: 0cm;">institutions.
Otherwise we remain passive victims of chaotic and costly global processes,
aided and abetted by rulers who are undemocratic and ultimately destructive.</span></div>
</div>
D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com4tag:blogger.com,1999:blog-8732662769765511163.post-77524284700455268592015-04-24T09:08:00.001+02:002015-05-13T10:51:33.323+02:00Greece: Enough is Enough<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">In Alexis Tsipras’ shoes I would apply immediately for Greece to leave the EU, as envisaged by Art. 50 of the </span><a href="http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0013:0045:en:PDF" style="color: #1155cc;" target="_blank"><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">TEU</span></a><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"> (Consolidated Version of the Treaty on European Union, <i>Official Journal of the European Union</i>, C 115/15, 9/5/2008).</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Since Greece’s 2010 crisis the Troika (sorry, the “international institutions”) have sunk about €245bn into its rescue, i.e. more than would have been sufficient at that time to pay off the entire Greek debt. It is well known that these funds did not benefit the Greeks but went almost entirely to save French, Swiss and German banks from their exposure to Greek government bonds. And in the FT or 21 April </span><a href="http://www.ft.com/cms/s/0/0308e296-e77b-11e4-8ebb-00144feab7de.html#ixzz3Y7gBUDo7" style="color: #1155cc;" target="_blank"><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Martin Wolf</span></a><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"> debunks Greek “mythology” including the myth that “</span><i><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Greece has done nothing</span></i><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">”:</span><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"> </span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"><br /></span><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">“Greece has undergone a huge adjustment of its fiscal and external positions. Between 2009 and 2014, the primary fiscal balance (before interest) tightened by 12 per cent of gross domestic product, the structural fiscal deficit by 20 per cent of GDP and the current account balance by 12 per cent of GDP.”</span><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"></span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">“Between the first quarter of 2008 and the last of 2013, real spending in the Greek economy fell by 35 per cent and GDP by 27 per cent, while unemployment peaked at 28 per cent of the labour force. These are huge adjustments. Indeed, one of the tragedies of the impasse over the conditions for support is that the adjustment has happened. Greece does not need additional resources.”</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">The cost of such adjustments to the Greek people were immense. Unemployment reached 28% (48% for youth unemployment), the dismantling of collective bargaining lowered real hourly wages by 25% by 2014. The minimum wage fell to its level of the 1970s. The minimum pension fell below the poverty threshold. As many as 35.7% of the population and 44.1% of children aged 11 to 15 are now at risk of poverty or social exclusion. And </span><a href="http://www.boeckler.de/pdf/p_imk_pb_1_2015.pdf" style="color: #1155cc;" target="_blank"><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Gechert and Rannenberg</span></a><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"> (of the German Hans Böckler Foundation) show that without austerity the Greek economy would only have stagnated, avoiding the deep recession, while tax increases without spending cuts would have been much more effective in lowering the Debt/GDP ratio.</span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 14pt;">Another myth debunked by Martin Wolf is that Greece will pay its debt in full. As a a result of fiscal consolidation and the bailout its debt has gone from about 120% of GDP in 2010 to over 177% today. Thus Greece needs either further debt relief or, in order to continue to service the debt, it needs the €7.2bn bail-out funds due last year that were not disbursed on the ground of alleged delays in Greek implementation of “structural reforms” agreed in the Memorandum of Understanding negotiated by the previous right-wing government with the “institutions”.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">After the 25 January elections the new government, democratically elected on a specific anti-austerity campaign, and reported by post-election polls to consistently command the support of 80% of the population, an agreement with the “institutions” was reached in principle on 20 February for the release of the €7.2bn on condition of somewhat different but yet unspecified structural reforms. However there have been continuous wrangles about whether or not the Greek reform proposals were or were not sufficient to warrant the release of the residual bail-out funds.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Up to now Greece has paid punctually interest and debt instalments as they became due, such as $450mn owed the IMF on 9 April and a batch of Treasury Bonds that also fell due. But the IMF is still owed €203mn on 1 May and €770mn on 12 May, plus €1.6bn in June, while some of the debt with the ECB is also due for repayment. The Greek government has scraped the bottom of the barrel by requisitioning the liquid balances of state enterprises and local authorities. It has announced that it is not in a position to make these payments, unless it stops payment of pensions and public sector wages and salaries. Without access to these €7.2bn Greece is likely to default on its payments to the IMF and the ECB.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"><br />On 15 April the FT reported that Greek officials had approached the IMF informally proposing to delay the repayment of loans due in May but were told that no rescheduling was possible; indeed they were persuaded not to make that request officially, presumably to avoid an open refusal.<br /><br />At the same time Germany’s finance minister Wolfgang Schäuble was reported in an interview to have virtually ruled out that at the Eurogroup meeting in Riga on 24 April a deal might release bailout funds to Athens. "You can't pour hundreds of billions... into a bottomless pit."<br /><br />However <i>Die Zeit </i>reported that Ms Merkel now might support emergency measures that would give Greece continued access to ECB Emergency Financial Assistance even in case of default. The possibility of a Greek default not being followed by Grexit is being discussed more and more widely (see for instance Wolfgang Munchau and Martin Wolf in the FT). It might be possible, perhaps, but would still be very messy, and if there is sufficient goodwill to make it possible it would be much more effective to disburse the wretched €7.2bn.<a href="https://www.blogger.com/null" name="14ce79d9cb1ffdeb_c1821432443258421377" style="color: #1155cc;"></a></span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">The Financial Times on line of 18 April (Breaking News, 6.57 pm) reports that ECB president Mario Draghi told the IMF spring meeting the euro area was better equipped than it had been in the past (in 2010, 2011 and 2012) to deal with a new Greek crisis but warned of “uncharted waters” if the situation were to deteriorate badly.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">On 21 April </span><a href="http://www.bloomberg.com/news/articles/2015-04-21/ecb-said-to-study-curbs-on-greek-bank-support-as-unease-grows-i8qy1abe" style="color: #1155cc;" target="_blank"><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt;">BloombergBusiness</span></a><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;"> reported that “The European Central Bank is studying measures to rein in Emergency Liquidity Assistance to Greek banks, as resistance to further aiding the country’s stricken lenders grows in the Governing Council”. The writing is on the wall.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Grexit costs would be very serious not only for Greece but for the entire Eurozone and beyond, but unilateral withdrawal from the whole of the European Union rather than simply the Eurozone would make more sense. An application to withdraw would </span><span style="font-family: Verdana, sans-serif; font-size: 18.6666660308838px;">only</span><span style="font-family: Verdana, sans-serif; font-size: 18.6666660308838px;"> </span><span style="font-family: Verdana, sans-serif; font-size: 14pt;">take effect two years later, leaving ample time for a possible change of mind and for re-negotiations, but might be an effective and quick way of sobering up Mr Schäuble and the other Troika hawks that have been bullying Greece, pushing it towards default regardless of consequences. Greece might as well take back the initiative, not least to avoid an internal government crisis.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">What is particularly deplorable is the IMF duplicity and bad faith: in Greece and everywhere else on a global scale they have been calling relentlessly for fiscal consolidation and structural reforms (a euphemism for enterprise freedom to dismiss employees and for the systematic destruction of the welfare state) but at the same time they have played a leading role in discrediting consolidation and "reforms" as policy instruments to fight a recession.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">The IMF World Economic Outlook of October 2012 (Box 3.1 untypically signed by Chief Economist Olivier J. Blanchard and Senior Economist David Leigh, presumably to suggest that their views are personal and not official) raised previous estimates of fiscal multipliers for several reasons. First, the ineffectiveness of countervailing monetary expansion close to the zero floor of the interest rate'; second, lack of opportunities for exchange rate devaluation especially in the Euroarea; third, the existence of a large gap between potential and actual income (for fiscal multipliers are higher in a downturn than in a boom) and finally, the simultaneous consolidation across many countries. Such revision of estimated multipliers implied an upwards revision of the costs of consolidation, to the point of theorizing that tax increases and especially expenditure cuts would actually raise, instead of lowering, the ratio between Debt and GDP, thus setting up a vicious circle. This of course is what happened punctually in Greece and in other highly indebted economies – like Italy – as a result of fiscal consolidations.</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Further the IMF <i>World Economic Outlook 2015</i> (Ch. 3, Box 3.5 on <i>The Effects of Structural Reforms on Total Factor Productivity</i>, pp.104-107) issued on 14 April candidly recognizes, on the basis of available econometric evidence, that total factor productivity can be increased by using more skilled labour and ICT, by investing more in research and development and by lowering the level of regulation in product markets. In contrast, the IMF does not find any statistically significant effects on total factor productivity that result from lowering labour market regulation (See also Ronald Janssen </span><a href="http://www.socialeurope.eu/2015/04/labour-market-deregulation-productivity-imf-finds-no-link/" style="color: #1155cc;" target="_blank"><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Social Europe</span></a><span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">).</span></div>
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<span lang="EN-US" style="background-image: initial; background-repeat: initial; font-family: Verdana, sans-serif; font-size: 14pt;">Such schizophrenic duplicity on the part of the IMF has not even incompetence as a conceivable justification. A Greek unilateral withdrawal from the European Union would sober up lots of people in Washington as well as in Brussels, Frankfurt and Berlin. Go for it Alexis and Yanis on behalf of all of us, not just on behalf of Greece. </span><br />
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">UPDATE (13 May)<o:p></o:p></span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Last Monday (11 May) Greece paid the
$750mn owed to the IMF, one day before the deadline, ending days of uncertainty
over funds availability and whether payment might be withheld in order to put pressure
on creditors. </span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Where did the money come from? The
FT reminds us that “The Greek government ordered hundreds of state entities —
among them hospitals, universities and local authorities — to deposit their
cash reserves<span class="apple-converted-space"> </span></span><span style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%;"><a href="http://www.ft.com/cms/s/0/c2a32b4e-f1a2-11e4-88b0-00144feab7de.html" title="Athens mayor guards city’s cash from government - FT.com"><span lang="EN-US" style="color: #2e6e9e; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; text-decoration: none; text-underline: none;">with the central bank</span></a></span><span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">.
But many such entities, including an overwhelming majority of municipalities,
have declined to comply”. <o:p></o:p></span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; color: black; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">An unmissable piece of news, which
appears to have gone largely unreported in the financial press: <a href="https://hat4uk.wordpress.com/2015/05/10/greece-exclusive-tsipras-fires-bank-of-greece-boss-for-undermining-syriza-position/">TSIPRAS
TO FIRE [FIRED] BANK OF GREECE BOSS FOR UNDERMINING SYRIZA POSITION</a>: </span><span lang="EN-US" style="color: #1d7b74; font-family: "Verdana","sans-serif"; font-size: 14.0pt; letter-spacing: -.4pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT; mso-font-kerning: 18.0pt;">“</span><span lang="EN-US" style="color: black; font-family: "Verdana","sans-serif"; font-size: 14.0pt; letter-spacing: -.4pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">Bank
of Greece Governor Yannis Stournaras will be quitting his post today (last Sunday).
Alexis Tsipras will ask for his resignation in the light of documentary proof
that the former New Democracy Finance Minister personally gave specific briefs
to a top journalist about “putting the most negative spin possible on the news”
about Greek finances.<o:p></o:p></span></div>
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</span><br />
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<span lang="EN-US" style="color: black; font-family: "Verdana","sans-serif"; font-size: 14.0pt; letter-spacing: -.4pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">Yannis Stournaras was
Greek Minister of Finance from 5 July 2012 until he moved to the BoG last year.
As a senior consultant to the Bank he was personally involved in the entry of
Greece into the euro. As a senior Governor he sits on the Board of the IMF, a position
that places him in a serious conflict of interest with the Greek government. “Meanwhile, the forensic investigation into
debt overstatement in 2010 and how much Greek debt can be objectively defined
as ‘odious’ continues”. </span><span lang="EN-US" style="color: #4d555a; font-family: "Verdana","sans-serif"; font-size: 14.0pt; letter-spacing: -.4pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: Arial; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;"><o:p></o:p></span></div>
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com18tag:blogger.com,1999:blog-8732662769765511163.post-47483257555747938412015-03-25T23:23:00.000+01:002015-03-26T09:58:21.145+01:00GREXIT<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;"><i><span style="line-height: 115%;">Si vis pacem, para bellum</span></i><span style="line-height: 115%;"> – </span>If </span><span style="font-family: Verdana, sans-serif; line-height: 115%;">you want peace, prepare for war, said Vegetius
in the 5</span><sup style="font-family: Verdana, sans-serif; line-height: 115%;">th</sup><span style="font-family: Verdana, sans-serif; line-height: 115%;">-6</span><sup style="font-family: Verdana, sans-serif; line-height: 115%;">th</sup><span style="font-family: Verdana, sans-serif;"><span style="line-height: 115%;"> century b.C. Just as then, and by the same token, </span><i style="line-height: 115%;">Si vis euro, para exitum</i><span style="line-height: 115%;">: if you want to keep the euro, prepare for exit.</span></span></span><br />
<span style="font-size: large;"><span style="font-family: Verdana, sans-serif;"><span style="line-height: 115%;"><br /></span></span></span>
<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif;">In 2012 Willem H.
Buiter and Ebrahim Rahban, respectively chief economist and global economist of
Citygroup, writing in the <i>Market Insight</i>
section of the <i>Financial Times</i> </span><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">(</span><span style="font-family: Verdana, sans-serif; line-height: 115%;"><a href="http://willembuiter.com/Greece2.pdf"><span lang="EN-US" style="color: blue; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">Greece far from safe even after debt swap</span></a></span><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">, 13 February), coined the word <i>Grexit</i>
– a euphonic synthetic neo-logism for Greek exit from the Eurozone. They wrote then:</span></span></div>
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<span lang="EN-US" style="font-size: large;"><o:p></o:p></span></div>
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif;">“</span><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 12.0pt; mso-ansi-language: EN-US;">There is some good news. Plentiful ECB liquidity has
pushed back the risk of disorderly default of systemically important euro area
banks and, combined with financial repression in euro periphery nations, has
eliminated the near-term risk of a disorderly default by a systemically
important sovereign. The external damage caused by a Greek euro area exit (or
‘Grexit’, as we call it) could, given appropriate policy response from the ECB
and euro area creditor countries, be limited and need not trigger waves of
“exit fear contagion” to other fiscally weak peripheral countries. The second
LTRO on February 29 may buy more time but until the fundamental drivers of the
euro area sovereign debt and banking crises are addressed, volatility will
remain a constant companion and recovery and growth absent friends” </span><span lang="EN-US" style="font-family: Verdana, sans-serif;"><o:p></o:p></span></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">Since the
unexpected victory of Alexis Tsipras and his Syriza Party, elected on 25 January
2015 on a programme rejecting European austerity and its embodiment the
Memorandum imposed by the Troika (EC, ECB and IMF) on the Samaras government,
references to Grexit have become increasingly frequent, including its variation
<i>Grexident</i> (Wolfgang Schauble) to
indicate the possibility of Greek “accidental” exit, in spite of neither the
Greek government nor European authorities (perhaps not including Schauble) actually
wanting to provoke that event.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">Three observations
are in order.<o:p></o:p></span></div>
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<span style="font-size: large;"><i><span lang="EN-US" style="font-family: Verdana, sans-serif;">1) There are serious legal
problems involved in Grexit.</span></i><span lang="EN-US" style="font-family: Verdana, sans-serif;"> <o:p></o:p></span></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">For a start, there
is no legal provision in the Treaties for an EMU member state to withdraw from
or be compelled to leave the Eurozone. The decision to introduce the euro is
“irrevocable” (Art. 140 TFEU). The same
was true for the EU as well. Article 50 TEU, however, grants EU member states
the right to withdraw from the European Union. It is inconceivable, though it
has not been explitly stated, that a country could leave the EU and still
maintain all the rights reserved to EMU members. Conversely, membership of the
EMU is part of the obligations of membership, the so-called <i>acquis communautaire, </i>unless a
derogation had been successfully negotiated in 1992 at the time of signing the
Maastricht Treaty. Therefore a State
that left EMU or, by some unspecified measure, was no longer a member of EMU
would have to leave the EU as unable to fulfil its membership requirements. And even if a country was allowed such a
derogation <i>ex-post, </i>thus maintaining
EU membership, it would still be subject to the fiscal straightjacket of the
so-called Growth and Stability Pact and the Fiscal Compact, i.e. the exit from
EMU would not restore a country’s fiscal sovereignty. Unilateral exit from the EU would take effect
only two years after its declaration, but we must presume that exit from the EU
of an EMU member would involve its immediate exit from the Monetary Union. The immediate implementation of capital
controls and ceilings on cash withdrawals from banks, in order to avoid capital
flight and bank runs, would certainly follow. That the Council, the European
Parliament and the relevant Greek institutions would have to be consulted
beforehand would also and detrimentally make secrecy impossible.<o:p></o:p></span></div>
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<span style="font-size: large;"><i><span lang="EN-US" style="font-family: Verdana, sans-serif;">2) Grexit would involve the
problems of managing the new currency.</span></i><span lang="EN-US" style="font-family: Verdana, sans-serif;"> <o:p></o:p></span></span></div>
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif;">The rate of
conversion of the old into the new currency would have to be identical, at
least to start with, with the rate of conversion of euro prices and wages into
the new currency. Without loss of generality therefore at time 0 the new
currency could be initially issued at par with the euro. Immediately afterwards, however, the exchange
rate between the old euro and the new currency, let us call it the drachma,
would necessarily have to be floating, fully determined by the market. At any
managed exchange rate different from the market rate </span><span lang="EN-US"><a href="http://en.wikipedia.org/wiki/Thomas_Gresham" style="font-family: Verdana, sans-serif; line-height: 115%;" target="_blank" title="Thomas Gresham">Gresham</a>'<span style="font-family: Verdana, sans-serif;">s</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;"> Law would operate: “<i>Bad
money</i> [i.e. the currency overvalued with respect to the market rate] <i>drives
out good </i>[the undervalued currency]”. One of the oldest economic
discoveries, anticipated in 1519 by Copernicus, even earlier by Nicole Oresme
in the fourteenth century, the law was first stated clearly by Aristophanes in
his play <i>The Frogs</i>, around the end of the fifth century b.C.</span></span><br />
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: x-small; line-height: 115%; mso-ansi-language: EN-US;"><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">The new currency
would have to be devalued, very soon after issue, for the exiting country to
obtain the benefits of greater international competitiveness and devaluation of
debt payable in that currency. (Wolfgang
Munchau expects the new currency to continue to circulate at par with the euro
voluntarily on a significant scale, but this is unrealistic). However the
currency to be used for discharging earlier obligations cannot be chosen at
will; it is determined by the law of the country where the transaction has
taken place. Thus, for instance, much
and probably most of the outstanding import and export orders, as well as past
unpaid tax, and the servicing of already existing debt will have to continue to
take place in euro, under penalty of default; overall, something like 30% of
debt and almost all of derivatives trade. Target 2 large balances – a purely
technical construct while the euro lasts – would become real and would have to
be settled or canceled, coming to a head.
And furthermore </span></span><span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">“</span><span style="font-family: Verdana, sans-serif; line-height: 115%;"><a href="http://dmarionuti.blogspot.it/2010/02/dual-currencies-are-always-bad-idea.html"><span lang="EN-US">Dual currencies are
always a bad idea</span></a></span><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">” (this Blog, 10 February 2010).</span></span><span style="font-family: Verdana, sans-serif; font-size: large;"> </span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">Euro denominated
obligations contracted under the law of a non-Eurozone country like Britain
will have to be discharged by converting the new currency into euros at the market
exchange rate. Thus the introduction of
the new currency would not avoid default, it would simply be the form that a
default would take. As well, a default
would involve the inability to access international financial markets for the
next 10 or 15 years and/or a much higher cost of finance.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">The devaluation of
the new currency would necessarily involve an acceleration in inflation with
respect to euro inflation, and therefore an increase in the interest rate with
respect to euro rates, and especially a higher spread with respect to German
<i>Bunds</i>. The impact of the new currency on external accounts, income and
employment, will depend both on its subsequent impact (“pass-through”) on the
path of wages and prices inflation, and on trade elasticities of both demand
and supply; in principle perverse effects cannot be ruled out. In the end the success of a euro exit would
depend on the flexibility of real wages and prices, as well as on the country’s
ability to implement productivity-enhancing policies, which are the same
conditions under which the maintenance of a common currency would work. <o:p></o:p></span></div>
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<i><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">3) Grexit would never be accidental.
<o:p></o:p></span></i></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">Grexit would be
the result of a deliberately destructive strategy adopted by Germany and the
Nordic countries (Finland, the Netherlands, France, the Baltics) aided and
abetted by Spain and Portugal for fear of opposition parties ousting their
governments should Syriza’s example succeed, and by Italy out of perceived
self-interest. The Greek refusal, backed
by the new elected government and today reportedly supported by 80% of the Greek
population, to continue with the self-defeating, ruinous austerity policies
imposed from Brussels, Frankfurt, Berlin and Washington, is a completely
rational and democratic choice rather than the reckless strategy in an irresponsiblee
game of “chicken” of which Greece has been accused. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">The most likely
course of events leading to Grexit would be: the continued denial of Greek
access to any of the €7.2bn residual funds provided by the Troika’s earlier
rescue package, while Troika officials slowly verify compliance with outdated
conditions, impossible for a poor country to satisfy; the continued prohibition
by the ECB of the Greek government raising finance through the issue of short
term Treasury bills, indeed the imposition of ceilings on banks’ holdings of
such bills, under the pretext that in Greek circumstances this would amount to
funding the government deficit directly (a peculiar dysfunction of the ECB,
seeing that the independent Bank of England and the independent Central Bank of
Japan are allowed to fund government deficits all the time). <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: large;">At the end of
March the Greek government is facing a bill of €1.7bn for wages and pensions;
on 9 April the IMF is owed a loan repayment of €450mn, and in mid-April two
Treasury bills for a total of €2.4bn also are due for repayment. </span></div>
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif;">Since the elections of 25 January Greek
corporations and households have cut their tax payments drastically; a
government running a primary surplus, even at the reduced rate of 1.5% of GDP, should
always be able to finance current public expenditure but now the position is
unclear. The Greek government has been
particularly skilled at mobilizing cash belonging to the National Health
Service and state-owned corporations to </span></span><span style="font-size: 14pt; line-height: 115%;"> </span><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;"><a href="http://click.email.ft.com/?ju=fe2d157675630474771479&ls=fdfd15717d63007e74117277&m=fe92157377600c7477&l=ff241c737c63&s=fe2c1674766d0d7e741672&jb=ff991674&t=" style="line-height: 115%;" title="Athens raids public health coffers in hunt for cash - FT.com"><span style="font-size: large;">keep the government afloat</span></a><span style="font-size: 14pt;">.</span></span><span style="font-family: Verdana, sans-serif; font-size: large;"> But cash withdrawals from the banks have been
accelerating since the new year, both before and after the elections. According to Barclays on Wednesday 18 March
withdrawals reached a record €300mn per day, at which rate they regarded a
block on deposits as unavoidable (not least because of this kind of malicious
rumour). The Greek government has
admitted that without fresh funds they will not be able to meet all payments
due in April: we should believe them.
Failure to repay the IMF loan instalment would not have immediate
adverse implications, but would involve the loss of all IMF credits. Failure to repay the €2.4bn Treasury bills
would trigger-off cross-default clauses in other loans and precipitate a deeper
crisis, including the likely loss of ECB Emergency Liquidity Assistance. At that point a run on the banks, stricter
limits on bank withdrawals, capital controls and actual default would become
self-fulfilling prophecies. In order to
avoid the de-monetisation of the economy and its vast contractionary
implications the government would be forced to issue a euro substitute, i.e. a new
currency parallel to the Euro.</span></div>
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif;">The transition to
the new currency presumes that the new banknotes and coins can be produced
quickly or, better, well in advance in complete secrecy. Normally this would
take about six months; </span><span style="font-family: Verdana, sans-serif; line-height: 115%;">it has been suggested that</span><span class="apple-converted-space" style="font-family: Verdana, sans-serif; line-height: 115%;"> </span><span style="font-family: Verdana, sans-serif; line-height: 115%;">the new currency could be introduced
by stamping old euro notes as drachmas, but this would be a silly waste of good
money</span></span><span style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">.</span><span style="font-family: Verdana, sans-serif; font-size: large;">However a cash shortage could be initially
tackled by means of the issue of small denomination Treasury notes, or by the
issue of bank cheques like those that were introduced in Italy in the 1980s to
deal with a shortage of coinage. At least initially, and indeed for some time,
the euro and the new currency would circulate in parallel, but as long as the
rate of exchange between the two was market determined this should not create
problems other than some confusion and uncertainty.</span><br />
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<span style="font-size: large;"><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">It might be safest to turn our deposits into bricks
and mortar, withdraw as much cash as we can as fast as we can while we still
can, and hide it under the mattress to avoid negative interest rates. Actually,</span><span lang="EN-US" style="font-family: Calibri, sans-serif; line-height: 115%;"> </span><i><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">si vis pacem para pacem</span></i><span lang="EN-US" style="font-family: Verdana, sans-serif; line-height: 115%;">, as Pope Francis might have said, and if you
want to keep the Euro get on with completing a banking Union, promote fiscal
and political integration; above all Growth and Stability suicide Pact must be
imaginatively re-interpreted and accompanied by a serious, large scale, European
public investment effort. Together with the felicitous large reduction in oil
price, overdue but welcome Quantitative Easing by the ECB and substantial euro
de-valuation, this might still do the trick without the drama and trauma of
Eurozone and European Union dis-integration.</span></span><br />
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com24tag:blogger.com,1999:blog-8732662769765511163.post-8910491021556497982015-02-12T11:36:00.000+01:002015-02-20T22:27:54.676+01:00 Kakistocracy<div dir="ltr" style="text-align: left;" trbidi="on">
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">In 1988 my old friend, teacher and mentor Luigi
Spaventa was made Treasury Minister in the Italian government. The
Communist Party had been offered a few posts in the government, including
Vincenzo Visco at the Ministry of Finance, but had refused; Luigi belonged to
the left but was not a party member, and fortunately accepted. On
that occasion, I sent him a postcard with the following verses:<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Visco al
Fisco! Noo? Peccato,<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Il Partito s’e’ imbranato.</span><span style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Per fortuna c’e’ Spaventa<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Che al Tesoro s’arroventa,<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">E la fine e’ ormai per via<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">della Cachistocrazia.<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">[Visco at Finances! No? Pity./The Party has goofed./But fortunately
Spaventa/At the Treasury is getting fired-up,/And at last we are on the way/To
end our kakistocracy.]<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Naively I thought I had coined the word, from the Greek <i>kakistos</i>,
superlative of <i>kakos</i>(bad), government by the worst citizens, but on
googling the word there are almost half a million entries: <i>kakistocracy</i> was
first used in 1829 by the English satirical writer Thomas Love Peacock. The
American poet James Russell Lowell wrote in a letter in 1876: <i>"Is
ours a government of the people, by the people, for the people, or a
kakistocracy rather, for the benefit of knaves at the cost of fools?"</i><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Luigi, a wonderful teacher and a great economist, died prematurely in
2010. Had he lived longer he might have been appointed premier in 2012
instead of Mario Monti (for he was President Napolitano’s economic adviser), or
to even higher office later: Italian recent history would have taken a turn for
the better. In any case I was patently wrong: not only does <i>kakistocracy</i> –
the mafia in collusion with the political <i>Casta</i>- still rule Italy,
now it has spread to the entire world. Whenever the best men come to
power in a country, the global kakistocracy tries to squash them. This is
the case right now in Greece.<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">All that Alexis Tsipras is asking of the European and global rulers is six
months of breathing space to prepare an alternative plan for debt management
and economic recovery. After all, the elections of 25 January had been
called only on 14 December and he </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">could not conceivably have been
expected </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">to have a
plan ready when his outstanding surprise victory was proclaimed.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">His first moves were directed at reassuring the global community: Greece
would honour its debts in full, without insisting on a debt haircut; the
country would remain in the Eurozone, as preferred by a large majority of its
citizens; it would fight tax evasion and raise the living standards of those
who had suffered most from the austerity imposed by the Troika (the
”Memorandum” issued by the EC, ECB and IMF): the unemployed, especially those
unfairly dismissed, the poor, old age pensioners and the other economically
weak groups. ”If the country’s sacrifices were conducive to recovery and
growth I would be the first to advocate them” – he said to Parliament last week
(I am quoting from memory) – ”if the bitter pill was necessary to recover
health I would readily swallow it”. But the austerity imposed by the
European and globalist kakistocracy demonstrably leads only to cumulative
impoverishment and ruin, as it has already done. Thus Tsipras rejected at
once the continuation of the programme agreed with the Troika by his
predecessor, renouncing the €7.2bn aid that Greece otherwise expected to
receive at the end of February, asking only for the €1.9 bn repayment of ECB
profits made on its Greek bonds, with a view to using the next six months to
negotiate a new agreement and in the meantime to meet all outstanding
obligations by issuing around €10bn short-term Treasury bonds. <o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">So far the Kakistos and Tsipras are set on a collision course. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">The Greek Finance Minister Yanis
Varoufakis and German Finance Minister Wolfgang Schäuble would not even “agree
to disagree”</span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">. On
11 February in Brussels at a meeting of Eurozone Finance Ministers talks
collapsed after six hours. There is no way the debt owed to the ECB or
the IMF can be cut, under penalty of losing access to assistance from these
institutions – though Greece might be allowed to repay ECB credits by borrowing
on very long terms from EFSF, the Eurozone bail-out fund. Moreover
Tsipras has promised that private investors will not be hit. The only
room for debt renegotiation is with European governments, to whom Greece owes
directly or indirectly about €195bn, around 62 per cent of its total debt (of
which almost 148bn or 45 per cent to the bail-out fund EFSF). </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">True, Greece has already benefited </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">from a debt cut in 2010 and 2012, and from
the lengthening of maturities right up to 2057; and from a reduction of
interest on its debt down to 2.6% of GDP, equivalent to that paid by Italy or
France (and only 1.5% on its debt with the EFSF, which could not possibly be
cut further).</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">But according to the Troika Memorandum Greece is committed to running a
primary surplus (before paying interest) of 4.5% of GDP a year, which is an
exceedingly heavy burden on an impoverished country. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Such a surplus requirement </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">could very well be cut at least temporarily,
by an interest moratorium until growth is resumed, back to earlier income
levels, to the 1%-1.5% primary surplus that Syriza’s current plans would
require. This is the purpose of the proposal put forward by Yanis Varoufakis,
of swapping debt owed to European governments with new bonds indexed to the
Greek growth rate. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">The ECB was certainly within its rights to cancel the waiver allowing Greek
banks the use of Greek government bonds as collateral, thus denying Greece
access to liquidity at 0.05% interest, once Tsipras had indicated his
unwillingness to continue on the agreed course at the end of February.
But it was certainly not ”legitimate <i>and opportune</i>” as declared by
Matteo Renzi, who presented Tsipras with an elegant tie instead of solidarity
(”So that he could go and hang himself with it”, commented Giorgia Meloni,
leader of the right-wing party<i> Fratelli d’Italia</i>). As long as
Greece has access to Emergency Liquidity Assistence (even at the higher cost of
1.55%) Greek banks can cope even with the slow run on deposits that has already
begun (€15 bn in the two months preceding the elections); but such access has
to be confirmed every fortnight and its possible suspension is a Damocles’
sword. Gre</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">ece
really needs the </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Tsipras
really needs the €10bn Treasury bonds that Tsipras wishes to issue.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">The trouble is that Greece is already right up against the €15bn limit to
short term indebtment that has already been imposed by the Troika, and the
additional €10bn bonds have to be, but have not been, authorised. Yet
this is the only and therefore the best way out of the Greek-Troika
confrontation. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Wolfgang Schäuble </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">declared that ”Europe is not in the business of granting bridging loans”,
but the €10bn would be no skin off his nose, they would be raised – at a price,
that current delays make rise all the time – in the international market.
By giving up its entitlement to €7.2bn under the Memorandum surely Greece can
have its €15bn borrowing ceiling lifted at the same time? The Troika
cannot have it both ways, tying Greece to its borrowing limit when it is
renouncing some of the benefits of its current deal with the Troika.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Germans display the memory typical of elephants when they evoke the ghost
of their 1922-23 hyper-inflation to justify their opposition even to ECB
quantitative easing. But they have a shorter memory than goldfish when it
comes to the 1953 cancellation of German debt of over 200% of its GDP at the
time, much in excess of the current Greek debt burden of under 180%.
According to the economic historian </span><a href="http://www.spiegel.de/international/germany/economic-historian-germany-was-biggest-debt-transgressor-of-20th-century-a-769703.html"><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">Albrecht Ritschl</span></a><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> (LSE), </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Germany was ”</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">the “biggest debt transgressor of the
twentieth century”</span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">;</span><a href="https://www.project-syndicate.org/commentary/robert-skidelskytakes-on-kenneth-rogoff-s-defense-of-britain-s-austerity-policy"><span lang="PL" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL;">Robert Skidelsky</span></a><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> recently reminded us that</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">“Germany experienced eight debt defaults
and/or restructurings from 1800 to 2008. There were also the two defaults
through inflation in 1920 and 1923. And yet today Germany is Europe’s economic
hegemon, laying down the law to miscreants like Greece.”<o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Tsipras’ mention of war reparations was not commented on by Merkel but both
vice-Chancellor Sigmar Gabriel and Wolfgang Schäuble immediately said that
the issue was definitively closed years ago, and its re-opening was out of
the question. Tsipras mentioning the War was treated as an inappropriate
gesture in bad taste. Shades of Basil Fawlty of </span><a href="http://en.wikipedia.org/wiki/Fawlty_Towers"><i><span lang="PL" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL;">Fawlty Towers</span></i></a><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">, shouting at the Hotel’s Spanish waiter
Manuel: ”Don’t mention the War!” when German guests arrived. But why ever
not? If memories of 1922-23 hyper-inflation are not buried, <i>a
fortiori</i> neither should more recent and tragic ones. Such a
combination of a good memory for distant events with forgetfulness of recent
ones is typical of dementia.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">A secret Greek Finance Ministry report </span><a href="http://www.dw.de/greece-ponders-german-war-reparations/a-16744823"><span lang="PL" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL;">is said to provide detailed evidence</span></a><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> of ”atrocities and forced loans
during </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Nazi
occupation of Greece </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">in World War II”. Apparently ”in 1960 Germany paid DM 115 million in
reparation payments to victims of the Nazi terror regime in Greece in accord
with a bilateral reparation agreement”. But 1) the Netherlands suffered much
less and received a much larger compensation</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">; 2) “</span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">the 1953 London Agreement on German External
Debts, between the Federal Republic of Germany and creditor nations, stipulated
that payment obligations from World War II were to be deferred until ‘after the
signing of a peace treaty’", and 3) apart from the cost of war suffering,
casualties and loss of material assets, there was a loan the Greek</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">Central Bank was forced to give the Nazi
regime in 1942, </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">476
million reichsmarks which the occupiers not only acknowledged but had actually
started repaying shortly before the end of the war. Even at a modest
interest rate of 3% a year (though German loans after the War generally had a
6% interest rate) after 70 years that loan would have built up to a handsome
three digit billion </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">sum in today's euros.</span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> Professor Hagen Fleischer, a historian from Athens University,
explains that "Before 1990, Germany tended to point out [that] it was too
soon, because Germany was divided and it was the entire country that had gone
to war, not just one half. So the issue was supposed to be canned until Germany
was again reunified". After reunification, however, "Germany's
response was suddenly, 'So much time has passed - now it's too
late’". Clearly the Greek Ministry of Finance should publish its
secret report in full on the Internet at once, together with all the body of
evidence of post-2009 Greek negotiations with the <i>Kakistos</i> of
the Troika that led to the ”Memorandum”.</span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span></div>
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<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">There is a perfectly feasible solution to the otherwise potentially
catastrophic losses involved in the confrontation between Greece and the
Troika: lifting the €15bn ceiling on short-term debt in exchange for Greece
renouncing the aid otherwise payable under the Memorandum. Paradoxically,
Angela Merkel is standing firm and </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">and wisely stopping Europe from joining
the USA </span><span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">and its
jejeune warmongering President Barak Obama in arming Ukraine and fighting
Vladimir Putin. Let’s hope that she might come to her senses also in her
dangerous confrontation with Greece. </span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><o:p></o:p></span><br />
<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span>
<br />
<div class="MsoNormal" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; margin-bottom: 9pt; vertical-align: baseline;">
<span lang="PL" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">UPDATE<o:p></o:p></span></div>
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<span lang="PL" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">On Thursday 13 February it was announced that fiscal
revenue for the month of January was €1bn lower than forecasts </span><span lang="EN-US" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">(a shortfall of
23%). </span><span lang="PL" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">The
ECB extended another </span><span style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;"><a href="http://click.email.ft.com/?ju=fe2b157576610c75761671&ls=fdfd15717d63007e74117277&m=fe92157377600c7477&l=ff241c737c63&s=fe2c1674766d0d7e741672&jb=ff991674&t=" target="_blank" title="ECB extends €5bn emergency loans to Greek banks - FT.com"><span lang="PL">EUR5bn in emergency loans</span></a></span><span lang="PL" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: PL; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;"> to banks in Greece
after fears that a spate of bank withdrawals could dry up funding. </span><span lang="EN-US" style="color: #333333; font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: IT;">In fact
according to JP Morgan withdrawals from bank deposits since the beginning of
2015 amounted to €21bn. But ELA is
subject to fortnightly verification and is not a permanent solution. On Friday 14 it was announced that in the
fourth quarter of 2014 the Greek economy had contracted slightly, reversing the
trend after nine months growth. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">The Greek
government claims that it does not need any fresh cash: “We do not want new
loans, we need time, not money to implement reforms” – the Greek premier said
in an interview to the German weekly <i>Stern</i>. But a spokesman for the Commission commented:
“We fear that the available liquidity is shrinking faster than anticipated”. <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;"><br /></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">Monday 16 February
was supposed to be the day of reckoning. But the Brussels meeting of Eurozone
Ministers of Finance with Tsipras and Varoufakis ended with a bitter row, with
general recriminations and yet another postponement of the final decision until
no later than Wednesday next. The Union
offered Greece only the extension of the pre-existing agreement, at the same
conditions; the Greeks rejected the proposal as “absurd and unacceptable”<o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">Time is running
short, for some countries, like Germany, the Netherlands, Finland and Estonia,
need parliamentary approval not only for a new Memorandum but also for an
extension of the last one.</span><span lang="EN-US"><o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">One might think
that the difference between the positions of the two antagonists is minimal and
purely formal. After all, what big difference there might possibly be between
the extension of a pre-existing agreement subject to consensual renegotiation
within six months, and a slightly different stipulation also subject to
consensual renegotiation within the same term? <o:p></o:p></span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">The difference
however is immense. The extension of the
current agreement would involve the acceptance not only of the general
principle of austerity but also of new privatizations of public assets at
derisory prices, and the reversal of policy measures already taken by the
Tsipras government, such as the reinstatement of public employees especially if
unfairly dismissed, the adoption of a higher minimum wage and higher
pensions. It would be a capitulation on
the part of the Greek government, involving the rejection of the main
principles of their electoral campaign and popular mandate. And for the kakistos European leaders it is a
serious question of asserting who is really Master in Europe. <o:p></o:p></span></div>
<span lang="PL" style="font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">
</span><br />
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">We could say that
the Troika, like Shylock <i>The Merchant of
Venice, </i>is demanding of Greece its
pound of flesh in payment of its debt, whereas Greece is willing to pay a pound
of its flesh only on condition that it does not include any of its blood. This Shakespearean drama is being replicated
next Wednesday, with an open ending. </span><span lang="EN-US"><o:p></o:p></span><br />
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<span style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%;">BREAKING NEWS</span></div>
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<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">Greeks and eurozone
agree bailout extension<o:p></o:p></span></div>
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</span><br />
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"><br /></span></div>
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<span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">“Greece and its eurozone bailout
lenders agreed an 11th-hour deal to extend<span class="apple-converted-space"> </span></span><span style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%;"><a href="http://www.ft.com/intl/topics/places/Greece" style="-webkit-font-smoothing: antialiased;" title="Greece headlines"><span lang="EN-US" style="color: #2e6e9e; mso-ansi-language: EN-US; mso-bidi-font-family: Arial;">the
country’s €172bn rescue programme</span></a></span><span class="apple-converted-space"><span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;"> </span><span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Verdana, sans-serif; font-size: 14pt; line-height: 115%;">for
four months, avoiding bankruptcy for Athens but setting up another potential
stand-off in June when a €3.5bn debt payment comes due”.</span></span><span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-family: Arial, sans-serif;"> </span><span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;"><a href="http://www.ft.com/cms/s/0/808f5fb0-b90e-11e4-b8e6-00144feab7de.html#ixzz3SK14yWMx">Financial
Times</a>, 20 February 2015, 8.18pm</span><br />
<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;"><br /></span>
<span lang="EN-US" style="font-family: "Verdana","sans-serif"; font-size: 14.0pt; line-height: 115%; mso-ansi-language: EN-US;">Hip Hip Hip! Hooray!</span><br />
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D. Mario Nutihttp://www.blogger.com/profile/17319653816487296802noreply@blogger.com24