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Showing posts with label Europe. Show all posts
Showing posts with label Europe. Show all posts

Monday 12 December 2011

Population decline is the elephant in the world's living room

The fifth horseman of the apocalypse
By Spengler

(The essay below appears as a preface to my book How Civilizations Die (and Why Islam is Dying, Too). [1]

Population decline is the elephant in the world's living room. As a matter of arithmetic, we know that the social life of most developed countries will break down within two generations. Two out of three Italians and three of four Japanese will be elderly dependents by 2050. [1] If present fertility rates hold, the number of Germans will fall by 98% over the next two centuries. No pension and health care system can support such an inverted population pyramid. Nor is the problem limited to the industrial nations. Fertility is falling at even faster rates - indeed, at rates never before registered anywhere - in the Muslim world. The world's population will fall by as much as a fifth between the middle and the end of the 21st century, by far the worst decline in human history.

The world faces a danger more terrible than the worst Green imaginings. The European environmentalist who wants to shrink the world's population to reduce carbon emissions will spend her declining years in misery, for there will not be enough Europeans alive a generation from now to pay for her pension and medical care. [2] For the first time in world history, the birth rate of the whole developed world is well below replacement, and a significant part of it has passed the demographic point of no return.

But Islamic society is even more fragile. As Muslim fertility shrinks at a rate demographers have never seen before, it is converging on Europe's catastrophically low fertility as if in time-lapse photography. The average 30-year-old Iranian woman comes from a family of six children, but she will bear only one or two children during her lifetime. Turkey and Algeria are just behind Iran on the way down, and most of the other Muslim countries are catching up quickly. By the middle of this century, the belt of Muslim countries from Morocco to Iran will become as gray as depopulating Europe. The Islamic world will have the same proportion of dependent elderly as the industrial countries - but one-tenth the productivity. A time bomb that cannot be defused is ticking in the Muslim world.

Imminent population collapse makes radical Islam more dangerous, not less so. For in their despair, radical Muslims who can already taste the ruin of their culture believe that they have nothing to lose.

Political science is at a loss in the face of demographic decline and its consequences. The wasting away of nations is an insoluble conundrum for modern political theory, which is based on the principle of rational self-interest. At the threshold of extinction, the political scientists' clever models break down. We "do not negotiate with terrorists". But a bank robber holding hostages is a terrorist of sorts, and the police negotiate with such miscreants as a matter of course. And what if the bank robber knows he will die of an incurable disease in a matter of weeks? That changes the negotiation. The simple truth - call it Spengler's Universal Law #1 - A man, or a nation, at the brink of death does not have a "rational self-interest".

Conventional geopolitical theory, which is dominated by material factors such as territory, natural resources, and command of technology, does not address how peoples will behave under existential threat. Geopolitical models fail to resemble the real world in which we live, where the crucial issue is the willingness or unwillingness of a people inhabiting a given territory to bring a new generation into the world.

Population decline, the decisive issue of the 21st century, will cause violent upheavals in the world order. Countries facing fertility dearth, such as Iran, are responding with aggression. Nations confronting their own mortality may choose to go down in a blaze of glory. Conflicts may be prolonged beyond the point at which there is any rational hope of achieving strategic aims - until all who wish to fight to the death have taken the opportunity to do so.
Analysis of national interests cannot explain why some nations go to war without hope of winning, or why other nations will not fight even to defend their vital interests. It cannot explain the historical fact that peoples fight harder, accepting a higher level of sacrifice in blood and treasure, when all hope of victory is past. Conventional geopolitical analysis cannot explain the causes of population collapse either, any more than its consequences - for example, under what circumstances strategic reverses (notably the two world wars of the past century) may crush the aspirations of the losers and result in apathy and demographic death.

Why do individuals, groups, and nations act irrationally, often at the risk of self-destruction? Part of the problem lies in our definition of rationality. Under normal circumstances we think it irrational for a middle-aged man to cash in his insurance policy and spend money as fast as possible. But if the person in question has a terminal illness and no heirs, we think it quite reasonable to spend it all quickly, like Otto Kringelein in Grand Hotel or his updated equivalent, Queen Latifah's character in The Last Holiday. And if we know that we shall presently die of rabies, what is to prevent us from biting everyone we dislike? Countries sometimes suffer the equivalent of terminal illness. What seems suicidal to Americans may appear rational to an existentially challenged people confronting its imminent mortality.

Self-immolation of endangered peoples is sadly common. Stone-age cultures often disintegrate upon contact with the outside world. Their culture breaks down, and suicides skyrocket. An Australian researcher writes about "suicide contagion or cluster deaths - the phenomenon of indigenous people, particularly men from the same community taking their own lives at an alarming rate". [3] Canada's Aboriginal Health Foundation reports, "The overall suicide rate among First Nation communities is about twice that of the total Canadian population; the rate among Inuit is still higher - 6 to 11 times higher than the general population." [4] Suicide is epidemic among Amazon tribes. The London Telegraph reported on November 19, 2000,
The largest tribe of Amazonian Indians, the 27,000-strong Guarani, are being devastated by a wave of suicides among their children, triggered by their coming into contact with the modern world. Once unheard of among Amazonian Indians, suicide is ravaging the Guarani, who live in the southwest of Brazil, an area that now has one of the highest suicide rates in the world. More than 280 Guarani have taken their own lives in the past 10 years, including 26 children under the age of 14 who have poisoned or hanged themselves. Alcoholism has become widespread, as has the desire to own radios, television sets and denim jeans, bringing an awareness of their poverty. Community structures and family unity have broken down and sacred rituals come to a halt.
Of the more than 6,000 languages now spoken on the planet, two become extinct each week, and by most estimates half will fall silent by the end of the century. [5] A United Nations report claims that nine-tenths of the languages now spoken will become extinct in the next hundred years. [6] Most endangered languages have a very small number of speakers. Perhaps a thousand distinct languages are spoken in Papua New Guinea, many by tribes of only a few hundred members. Several are disappearing tribal languages spoken in the Amazon rainforest, the Andes Mountains, or the Siberian taiga. Eighteen languages have only one surviving speaker. It is painful to imagine how the world must look to these individuals. They are orphaned in eternity, wiped clean of memory, their existence reduced to the exigency of the moment.

But are these dying remnants of primitive societies really so different from the rest of us? Mortality stalks most of the peoples of the world - not this year or next, but within the horizon of human reckoning. A good deal of the world seems to have lost the taste for life. Fertility has fallen so far in parts of the industrial world that languages such as Ukrainian and Estonian will be endangered within a century and German, Japanese, and Italian within two. The repudiation of life among advanced countries living in prosperity and peace has no historical precedent, except perhaps in the anomie of Greece in its post-Alexandrian decline and Rome during the first centuries of the Common Era. But Greece fell to Rome, and Rome to the barbarians. In the past, nations that foresaw their own demise fell to the Four Horsemen of the Apocalypse: War, Plague, Famine, and Death. Riding point for the old quartet in today's more civilized world is a Fifth Horseman: loss of faith. Today's cultures are dying of apathy, not by the swords of their enemies.

The Arab suicide bomber is the spiritual cousin of the despondent aboriginal of the Amazon rain forest. And European apathy is the opposite side of the coin of Islamic extremism. Both apathetic Europeans and radical Muslims have lost their connection to the past and their confidence in the future. There is not a great deal of daylight between European resignation to cultural extinction at the hundred-year horizon, and the Islamist boast, "You love life, and we love death." Which brings us to Spengler's Universal Law #2: When the nations of the world see their demise not as a distant prospect over the horizon, but as a foreseeable outcome, they perish of despair. Like the terminally ill patient cashing in his insurance money, a culture that anticipates its own extinction has a different standard of rationality than does conventional political science.

Game theorists have tried to make political strategy into a quantitative discipline. Players with a long-term interest think differently than players with a short-term interest. A swindler who has no expectation of encountering his victim again will take what he can and run; a merchant who wants repeat customers will act honestly as a matter of self-interest. By the same token, the game theorists contends, nations learn that it is in their interest to act as responsible members of the world community, for the long-run advantages of good behavior outweigh the passing benefits of predation.

But what if there isn't any long run - not, at least, for some of the "players" in the "game"? The trouble with applying game theory to the problem of existential war is that the players may not expect to be there for the nth iteration of the game. Entire peoples sometimes find themselves faced with probable extinction, so that no peaceful solution appears to be a solution for them.

Situations of this sort have arisen frequently in history, but never as frequently as today, when so many of the world's cultures are not expected to survive the next two centuries. A people facing cultural extinction may well choose war, if war offers even a slim chance of survival. That is just how radical Islamists view the predicament of traditional Muslim society in the face of modernity. The Islamists fear that if they fail, their religion and culture will disappear into the maelstrom of the modern world. Many of them rather would die fighting. 

Paradoxically it is possible for wars of annihilation to stem from rational choice, for the range of choices always must be bounded by the supposition that the chooser will continue to exist. Existential criteria, that is, trump the ordinary calculus of success and failure. If one or more of the parties knows that peace implies the end of its existence, it has no motive to return to peace. That is how the radical Islamists of Hamas view the future of Muslim society. A wealthy and successful Jewish state next to a poor and dysfunctional Palestinian state may imply the end of the moral authority of Islam, and some Palestinians would rather fight to the death than embrace such an outcome. Rather than consign their children to the Western milieu of personal freedom and sexual license, radical Muslims will fight to the death.

But why are Muslims - and Europeans, and Japanese - living under a societal death sentence? Why are populations collapsing in the modern world? Demographers have identified several different factors associated with population decline: urbanization, education and literacy, the modernization of traditional societies. Children in traditional society had an economic value, as agricultural labor and as providers for elderly parents; urbanization and pension systems turned children into a cost rather than a source of income. And female literacy is a powerful predictor of population decline among the world's countries. Mainly poor and illiterate women in Mali and Niger bear eight children in a lifetime, while literate and affluent women in the industrial world bear one or two.

But what determines whether it is one child or two? Children also have a spiritual value. That is why the degree of religious faith explains a great deal of the variation in population growth rates among the countries of the world. The industrial world's lowest fertility rates are encountered among the nations of Eastern Europe where atheism was the official ideology for generations. The highest fertility rates are found in countries with a high degree of religious faith, namely the United States and Israel. And demographers have identified religion as a crucial factor in the differences among populations within countries. When faith goes, fertility vanishes, too. The death-spiral of birth rates in most of the industrial world has forced demographers to think in terms of faith. Dozens of new studies document the link between religious belief and fertility.

But why do some religions seem to provide better protection against the sterilizing effects of modernity than others? The fastest demographic decline ever registered in recorded history is taking place today in Muslim countries; demographic winter is descending fastest in the fifth of the world where religion most appears to dominate. And even more puzzling: why does one religion (Christianity) seem to inoculate a people against demographic decline in one place (America) but not in another (Europe)? In many parts of the world, what once looked like an indestructible rock of faith has melted in the hot light of modernity. In others, modernity has only added compost for the growth of faith. Apparently some kinds of faith will survive in the modern world, and others will fail.

Strategic analysts and politicians are poorly equipped to understand these new and disturbing circumstances, with their overarching implications for political strategy and economics. To make sense of the world today we must do better than secular political science, which pigeon-holes faith as one more belief-structure among the other belief-structures in its collection of specimens.

Our political science is uniquely ill-equipped to make sense of a global crisis whose ultimate cause is spiritual. But was not always so. From the advent of Christianity to the seventeenth-century Enlightenment, the West saw politics through the lens of faith. St Augustine's fifth-century treatise The City of God looked through the state to the underlying civil society, and understood that civil society as a congregation - a body bound together by common loves, as opposed to Cicero's state founded only on common interests. (In the concluding chapter, we will consider Augustine's view as a lodestar for an American foreign policy that realistically addresses the threats created by the imminent demographic collapse of nations.)

We might call Augustine's view "theopolitics." A millennium later, Niccolo Machiavelli and Thomas Hobbes changed the subject, to the individual's desire for power, wealth, and personal survival. Hobbes, the 17th-century grandfather of modern political science, introduced a radically truncated anthropology, centered on the individual's struggle for survival. The state, he argued, was a compact among individuals who survival prospects were poor in a "state of nature"; thus they ceded their individual rights to a sovereign in return for protection. A century later Montesquieu added differences in climate, terrain, and resources to the mix. The modern view of atomized man motivated only by the pursuit of material advantage is loosely known as "geopolitics".

What prompted this revolution in political thinking that has left modern political theory without the tools to understand the causes and implications of the current demographic collapse? Undoubtedly, the terrible religious wars of the 16th and 17th centuries poisoned the idea of faith-based politics. Europe fought dynastic and political wars under the false flag of religion until the Thirty Years' War of 1618-1648 destroyed almost half the population of Central Europe. The Peace of Westphalia that ended this fearful war forever buried the political model that Christendom had advanced since Augustine: a universal Christian empire that would keep the peace and limit the arbitrary power of kings. Things are not as simple as they seem in the standard account of the violence that soured the West on theopolitics. For - as we shall see - the nation-states that opposed universal empire were founded on a contending kind of faith, a fanatical form of national self-worship whose internal logic was not played out until world war and genocide in the 20th century, and the collapse of faith and fertility in the 21st. But when Thomas Hobbes published his great book Leviathan three years after the end of the Thirty Years' War, it seemed credible that "the papacy is no other than the ghost of the deceased Roman Empire, sitting crowned upon the grave thereof".

One powerful attraction of the Hobbesian revolution in political thinking was the power it promised to intellectuals. If politics reduces to the individual and his material concerns, then it is possible to manipulate the individual through the alternation of his material circumstances. A clever elite could fix all the problems of the world. Immanuel Kant boasted in 1793 that he could write a constitution for a race of devils, "if only they be rational." Europe ignored him and proceeded to destroy itself in the Napoleonic Wars and the two world wars of the past century. Today, as in Kant's time, the great frustration in world affairs is the refusal of some players to act rationally. Something was gained, but much more was lost, in the 17th-century Hobbesian revolution in political thought. To view human beings as creatures concerned solely with power, wealth, and security is an impoverished anthropology. The missing tools - the ones Machiavelli and Hobbes removed from the toolbox - are exactly the ones we need to understand and cope with the dangers inherent in the wholesale collapse of cultures that faces us today.

Secularism in all its forms fails to address the most fundamental human need. Sociologist Eric Kaufmann, who himself bewails the fecundity of the religious and the infertility of the secular, puts it this way: "The weakest link in the secular account of human nature is that it fails to account for people's powerful desire to seek immortality for themselves and their loved ones." Traditional society had to confront infant mortality as well as death by hunger, disease, and war. That shouldn't be too troubling, however: "We may not be able to duck death completely, but it becomes so infrequent that we can easily forget about it."

Has death really become infrequent? Call it Spengler's Universal Law #3: Contrary to what you may have heard from the sociologists, the human mortality rate is still 100%.

We can stick our fingers in our ears and chant "I can't hear you!" only so long in the face of mortality. Religion offers the individual the means to transcend mortality, to survive the fragility of a mortal existence. Homo religiosus confronts death in order to triumph over it. But the world's major religions are distinguished by the different ways in which they confront mortality. We cannot make sense of the role of religion in demographic, economic, and political developments - and of the different roles of different religions in different places and times - without understanding the existential experience of the religious individual. It is challenging to recount this experience to a secular analyst; it is somewhat like describing being in love to someone who never has been in love. One doesn't have to be religious to understand religion, but it helps.

But without understanding humankind's confrontation of his own morality in religion, political science is confined to analysis on the basis of the survival instinct - which suddenly seems to be failing whole peoples - and rational self-interest - at a time when nations and peoples are not behaving in a conspicuously rational manner.

At the conclusion of a previous irruption of irrationality - the First World War - a young German soldier at a remote post in Macedonia jotted down his thoughts on army postcards in the final months of the First World War. A small, bespectacled man with a thin mustache, he had been groomed to be one of the mandarins of the German academy, a philosopher whose function was to reinforce the country's confidence in its culture. Just before the war began he had returned to Judaism, after a near conversion to Christianity. As the casualty lists rose in inverse proportion to the hope of victory, the consolations of philosophy seemed hollow. Philosophers, he wrote, were like small children who clapped their hands over their ears and shouted "I can't hear you!" before the fear of death. "From death - from the fear of death - comes all of our knowledge of the All," the soldier began. It was not the individual's fear of death that fascinated the young soldier, but the way entire nations respond to the fear of their collective death. He wrote:
Just as every individual must reckon with his eventual death, the peoples of the world foresee their eventual extinction, be it however distant in time. Indeed, the love of the peoples for their own nationhood is sweet and pregnant with the presentiment of death. Love is only surpassing sweet when it is directed towards a mortal object, and the secret of this ultimate sweetness only is defined by the bitterness of death. Thus the peoples of the world foresee a time when their land with its rivers and mountains still lies under heaven as it does today, but other people dwell there; when their language is entombed in books, and their laws and customers have lost their living power.
The soldier was Franz Rosenzweig, and the postcards would become his great book The Star of Redemption. Awareness of death defines the human condition, so that human beings cannot bear their own mortality without the hope of immortality. And our sense of immortality is social. The culture of a community is what unites the dead with those yet to be born.

The death of a culture is an uncanny event, for it erases not only the future but also the past, that is, the hopes and fears, the sweat and sacrifice of countless generations whose lives no longer can be remembered, for no living being will sing their songs or tell their stories.

The first surviving work of written literature, the Epic of Gilgamesh written perhaps 3,700 years ago, recounts the Sumerian king's quest for immortality. After a journey beset by hardship and peril, Gilgamesh is told: "The life that you are seeking you will never find. When the gods created man they allotted to him death, but life they retained in their own keeping."

In the pre-Christian world, Rosenzweig points out, the peoples of the world anticipated their eventual extinction. Every nation's love of itself is pregnant with the presentiment of death, for each tribe knows that its time on earth is limited. Some fight to the death. Others cease to breed. Some do both.

Christianity first taught them the Jewish promise of eternal life. To talk of "man's search for meaning" trivializes the problem. What humankind requires is meaning that transcends death. This need explains a great deal of human behavior that otherwise might seem irrational. One does not have to be religious to grasp this fundamental fact of the human condition, but religion helps, because faith makes explicit the human need to transcend morality. Secular rationalists have difficulty identifying with the motives of existentially challenged peoples - not so much because they lack faith, but because they entertain faith in rationality itself, and believe with the enthusiasm of the convert in the ability of reason to explain all of human experience.

But not only the religious need the hope of immortality. The most atheistic communist hopes that his memory will live on in the heart of a grateful proletariat. Even if we do not believe that our soul will have a place in heaven or that we shall be resurrected in the flesh, we nonetheless believe that something of ourselves will remain, in the form of progeny, memories, or consequences of actions, and that this something will persist as long as people who are like us continue to inhabit the Earth. Humanity perseveres in the consolation that some immortal part of us transcends our death. Sadly, our hope for immortality in the form of remembrance is a fragile and often a vain one. Immortality of this sort depends upon the survival of people who are like us - that is, upon the continuity of our culture. If you truly believe in a supernatural afterlife, to be sure, nothing can really disappoint you. But there is no consolation in being the last Mohican.

And that's because of Spengler's Universal Law #4: The history of the world is the history of humankind's search for immortality. When nations go willingly into that dark night, what should we conclude about human nature?

Human beings may not be the only animals who are sentient of death. (Elephants evidently grieve for their dead, and dogs mourn their dead masters.) But we are the only animals whose sense of continuity depends on culture as much as it does upon genes. Unlike men and women, healthy animals universally show an instinct for self-preservation and the propagation of their species. We do not observe cats deciding not to have kittens the better to pursue their careers as mousers.

I do not mean to suggest that humans beings of different cultures belong to different species. On the contrary, the child of a Kalahari Bushman will thrive if raised in the family of a Glaswegian ship's engineer. (As Jared Diamond, the author of Collapse: How Societies Choose to Fail or Succeed, observes it is easier to be stupid in a modern welfare state than in a hunter-gatherer tribe in New Guinea.)

But culture performs a role among human beings similar to the role species plays for animals. An adult Bushman would never fully adapt to industrial society, any more than a Glaswegian ship's engineer would last a fortnight in the Kalahari. Insofar as an animal can be said to experience an impulse toward the future beyond his own life, that impulse is fulfilled by the propagation of the species. But individual human existence looks forward to the continuation of the culture that nurtures, sustains, and transmits our contribution to future generations. Culture is the stuff out of which we weave the hope of immortality - not merely through genetic transmission but through inter-generational communication.

In the absence of religious faith, if our culture dies, our hope of transcending mere physical existence dies with it. Individuals trapped in a dying culture live in a twilight world. They embrace death through infertility, concupiscence, and war. A dog will crawl into a hole to die. The members of sick cultures do not do anything quite so dramatic, but they cease to have children, dull their senses with alcohol and drugs, become despondent, and too frequently do away with themselves. Or they may make war on the perceived source of their humiliation.

The truth is - to invoke Spengler's Universal Law #5 - Humankind cannot bear mortality without the hope of immortality. When men and women lose the sacred, they lose the desire to live. Despairing of immortality, we stand astonished before the one fact we know with certainty - that someday we must die. This is as true of modern homo sapiens sapiens as it was of our remotest ancestors. Even Neanderthal burial sites have been unearthed with grave gifts. "Man does not live by bread alone," Moses said on the east bank of the Jordan River. The affluent peoples of the world have all the bread they need, but have lost the appetite for life.

Americans are ill-equipped to empathize with the existential fears of other nations. America is the great exception to the demographic collapse sweeping the modern world. As an immigrant nation we regenerate ourselves. We bear no baggage from a tragic past. The glue that holds us together is a common concept of justice and opportunity. The United States is what John Courtney Murray called "a propositional nation". In our benevolence and optimism we assume that all peoples are like us, forgetting that we are or descend from people who chose to abandon the tragic fate of their own nations at the further shore and selected themselves into the American nation. But we have learned that our capacity to influence events in the rest of the world, even in the absence of a competing superpower, is limited, and that the dissipation of our resources can be deadly for us. Our strategic thinking suffers from a failure to take into account the existential problems of other nations. We think in the narrow categories of geopolitics, but we need to study theopolitics - the powerful impact of religious beliefs and aspirations on world events. Even we exceptional Americans must come to grips with the collapse of faith and fertility - especially in the rapidly and dangerously declining Muslim world - in order to prevail in a world in which tragic outcomes are more common than happy endings.

Notes
1. These ratios are based on the Elderly Dependency Ratio calculated by the model of the United Nations World Population Prospects 2010 revision, assuming constant fertility. The model is available at http://esa.un.org/unpd/wpp/unpp/panel_indicators.htm 2. Jared Diamond’s 2005 book Collapse: How Societies Choose to Fail or Succeed blames exhaustion of resource and environmental damage. The extinct people of Easter Island and the pre-Columbian Mayans chopped down too many trees, Diamond observes, and thus he argues that environmental damage is the greatest threat to our civilization. (Never mind that America has expanded its forests by 20 million acres during the past quarter century: disaster stories of this sort resonate with a public fed on media reports of global warming and apocalyptic disaster movies.) Easter Island, though, is something of a rarity in world history. The cultures about which we know the most - and from which our own civilization descends - failed from a different cause. Classical Greece and Rome died for the same reason that Western Europe, Japan, and other parts of the modern world are dying today: they lost their motivation to bring children into the world. The infertile Greeks were conquered by Rome’s army and the inexhaustible manpower of the farms of the Italian peninsula; as the Romans later grew childless, they were overrun by a small force of barbarian invaders.
 

 

Saturday 19 November 2011

To secure credit, Europe finds global financial markets no longer attuned to Western interests

Joergen Oerstroem Moeller 

The eurozone crisis has not only raised questions about the viability of the common currency, but could also jeopardize an economic model that has so far reigned supreme. The course taken to resolve the crisis in Europe will have long-term impact on the most vibrant parts of the world – from Asia to Latin America.

In developed countries of the West, debtors have run up a high debt ratio to gross domestic product, even while economic growth was high – overspending when they should have saved. They borrowed to spend more, demonstrating a disastrous failure to grasp basic economic principles as well as flaws in moral behaviour and ethical judgment. Among these borrowers are established heavyweights – the United States, most European nations and Japan. The United States, one of the wealthiest countries, became an importer of capital instead of exporting capital, registering its last balance vis-à-vis the rest of the world in 1991.

After accumulating savings over several decades through prudent and cautious policies, the creditors sit on a large pile of reserves with low domestic debt and government deficits. These reserves are largely held by emerging countries with China at the forefront. As a paradox, the emerging economies have taken it upon themselves to lend to the richer countries – exporting capital almost as vendor’s credit. Indeed, this reversal of roles is one explanation for the global financial crisis. The global monetary system is not geared to function under such circumstances.

This development was framed by the so-called Washington Consensus of the 1980s – a neoliberal formula that spurred globalisation by promoting liberalization of trade, interest rates and foreign direct investment; privatisation and deregulation; as well as competitive exchange rates and fiscal discipline. Fundamental flaws were exposed, raising the question about which economic model might replace it.

There are two possibilities in this competition: One strategy is from the United States and a group of Democrats who suggest that more short-term borrowing and spending could lead to growth, tax revenues and exit from recession – even if the debt grows and deficits become permanent. A breakthrough by the US Congressional super-committee to make substantial cuts over the next 10 years won’t fundamentally change this stance, merely reducing rather than eliminating the deficit. The Europeans have taken the opposite view: They advocate starting the recovery by reducing deficits and debt even if that seems counterproductive for economic growth in the short run. The Europeans are also raising taxes across the board, regarded as indispensable for restoring balance in government budgets.

The results of either plan won’t be known for a few years. Chances are, however, that the European policy will carry the day for the simple reason that creditors call the tune. It’s highly unlikely that creditors favour continued reliance on deficits as the inevitable consequence will be inflation, eroding the purchasing power of their reserves. Indeed, the Chinese rating agency Dagong has announced that it may cut the US sovereign rating for the second time since August if the US conducts a third round of quantitative easing.

Early in the crisis, as Europe set up a stabilizing bailout fund, there were rumours in the market that China, Russia and Japan might rescue of the euro, either by buying European bonds or going through the International Monetary Fund. It’s unclear how China wants to proceed with such an undertaking, but Russia and Japan have allegedly acted to do that through the International Monetary Fund or by buying European bonds.

Countries with surpluses do not dream of rescuing the euro; they act in their own interest. Economically they prefer the European fiscal discipline, reasoning that American prodigality will shift much burden of adjustment onto them. They may dread being left with the US dollar as the only major international currency, forcing them to endure, at times, whimsical policy decisions by the Federal Reserve System, the US Treasury Department or US Congress. The euro and the European Union are seen, and indeed needed, as a counterweight. The EU may look weak, but it’s a respectable global partner, offering the euro as an alternative to the dollar and serving as a major player in trade negotiations and the debate about global warming, just to mention a few examples.

It can be expected that other nations will step forward to support the euro. But at what price? What conditions, if any, will be put on the table and will the Europeans consent? A case can be made that, as creditors undertake investments to help the euro, they actually help themselves, and there are no reasons why the eurozone should pay any price. We can expect a game of hardball, in which nerves matters, and who gives what to whom may not be clear at all.

Another question has arisen about who decides and who is in charge. The G20 meeting in Cannes revealed a growing consensus to stop the financial houses amassing and subsequently abusing power. If the global financial system is big enough to force Italy into a default-like situation, many countries are surely asking whether they’ll be next. The big financial houses are viewed by many as irresponsible stakeholders, if stakeholders at all. Consider, the US government is suing 18 banks for selling US$ 200 billion in toxic mortgage-backed securities to government-sponsored firms, the Federal National Mortgage Association and the Federal Home Mortgage Corporation, known as Fannie Mae and Freddie Mac. In April 2011 the European Commission initiated investigations into activities of 16 banks suspected of collusion or abuse of possible collective dominance in a segment of the market for financial derivatives.

The market has muscled its way in as judge about whether a country’s political system or economic policy are good enough. But the market is neither a single institution nor a broad, balanced mix of diverse players. It’s become a small group of large financial institutions, the power of which overwhelm what even big countries can muster: 147 institutions directly or indirectly control 40 percent of global revenue among private corporations. A sore point is that they pursue profits without concern over implications for countries and societies. Rather than let measures work, these financiers force the issue here and now, even as they speculate against efforts, many admittedly delayed and inadequate, to resolve debt crises. Financial institutions holding sovereign bonds that could default insure themselves by buying a credit default swaps. What seems like prudent corporate governance becomes a shell game as these obligations are traded among financial institutions, some of which don’t hold sovereign bonds in their portfolios – all of which heightens interest in forcing default.

The temptation to roll back economic globalisation inter alia by breaking up the eurozone or restricting capital movements has been resisted. Economic globalisation is holding firm.

Creditor countries can set the course on future economic policies – likely highlighting fiscal discipline. While the West had vested interest in the big financial houses, the incoming paymasters do not, and they can be expected to increase their control over investment patterns. This can be done either by setting up own financial houses or buying into Western financial institutions as was the case in the slipstream of the 2008 global debt crisis.

The global financial market is changing course, away from looking after Western interests and acting in accordance with corporate governance as defined by the West toward a more global outlook guided by the interests of new group of creditors.

Joergen Oerstroem Moeller is a visiting senior research fellow, Institute of Southeast Asian Studies, Singapore, and adjunct professor, Singapore Management University and Copenhagen Business School.

Wednesday 2 November 2011

Eurocrats are terrified of democracy

Shall I tell you the truly terrifying thing about the EU? It’s not the absence of democracy in Brussels, or the ease with which Eurocrats swat aside referendum results. It’s the way in which the internal democracy of the member states is subverted in order to sustain the requirements of membership.
George Papandreou, the luckless Greek leader, is the latest politician to find himself being chewed up because he stands in the way of the Brussels machine. On Monday afternoon, Papandreou announced a referendum on whether to accept the EU’s bail-out terms. He had evidently had enough of the antics of the opposition party, New Democracy, which kept insisting that Greece remain in the euro, while opposing all the austerity measures necessary to that end – an outrageous stance given that New Democracy ran up the deficit in the first place. Papandreou hoped to force his opponents off the fence: in favour of the spending cuts or against euro membership. Perhaps he also hoped to put pressure on the EU to offer more generous terms.

I wish I could convey the sheer horror that his proposal provoked in Brussels. The first rule of the Eurocracy is “no referendums”. Brussels functionaries believe that their work is too important to be subject to the prejudices of hoi polloi (for once, the Greek phrase seems apposite). Referendums are always seen as irresponsible; but, at a time when the euro is teetering on the brink, Papandreou’s proposal was seen as an act of ingratitude bordering on treason.

Across the palaces and chanceries of the continent, Euro-elites closed ranks. Nicolas Sarkozy’s spokesman described Papandreou’s announcement as “irrational and dangerous”, Angela Merkel’s called it “irritating”, Silvio Berlusconi’s “negative”. Such phrases, in the mouths of government officials, suggest purple, choking rage.

The Athens establishment lined up with them. Antonis Samaras, the leader of New Democracy, vowed – with splendid disregard for his party’s name – to prevent a referendum “at all costs”. Constantine Michalos, the president of the Athens Chamber of Commerce, called the proposal “an act of political blackmail”. All these insults were provoked by the suggestion that people be allowed to determine their future through the ballot box.

Euro-enthusiasts in Brussels and in Athens are ready to bring down an elected government rather than allow a referendum. Yet the funny thing is that Papandreou is a Euro-enthusiast. He fervently wants to remain in the euro, and had been planning to campaign for a Yes vote. His sin, in the eyes of Brussels, was not to hold the wrong opinions, but to be too keen on democracy. Leninists had a term for people who, while they might be committed Bolsheviks, none the less behaved in a way which endangered the movement. They were called “objectively counter-revolutionary”. Poor Papandreou finds himself in this category.

Nor is he the first. When it became clear that Ireland was to have a referendum on the Lisbon Treaty, Bertie Ahern was required to fall on his sword lest the corruption allegations seeping about him tainted the Europhile cause. He was replaced by Brian Cowen, the former Europe minister, who went on to lose the referendum anyway. Cowen then refused to accept the verdict, siding openly with Brussels against his own countrymen. Result? Fianna Fáil, the party which had won the most votes at every election since 1932, was extirpated.

Borrowing a phrase from C S Lewis, I think of this phenomenon as the EU’s “hideous strength”. Brussels has a bizarre power to make politicians break their words, split their parties and betray their voters so as to keep the project going. Again and again, it makes good men do bad things.

Think of the way all three British party leaders whipped their MPs against an EU referendum proposal last week – despite the fact that two thirds of the country wanted such a vote, and despite the fact that all three parties were promising referendums on Europe in the last Parliament. Think of the way Margaret Thatcher was ousted, by a combination of Tory Europhiles and Continental leaders, when she made clear her opposition to Jacques Delors’s plans for Euro-federalism.

One of Papandreou’s supporters, a socialist MEP called Anni Podimata, argued that a referendum would bring catharsis. It’s a good metaphor. Catharsis is the purification and emotional renewal that comes at the end of a Greek tragedy. Greece has been through the hubris – the boom years, when the markets pretended that Greek and German debt were interchangeable – and is now suffering the nemesis, but the catharsis has been artificially stayed. Greece won’t begin to grow again until it leaves the euro, writes off its debts and prices itself into the markets.

Eurocrats are prepared to pay any price rather than admit that the single currency was a mistake – or, more precisely, to expect their peoples to pay, since EU officials are exempt from national taxation. The peripheral countries are to suffer poverty, unemployment and emigration, the core countries perpetual tax rises, so that supporters of the euro can save face.

It’s chilling to write these words, but EU leaders are evidently prepared to vitiate Greek democracy and wreck the Greek economy rather than allow the euro to break apart. Yet even if they succeed in Greece, they may find that their efforts are for nothing. Italian bond spreads yesterday were back at the level that usually triggers bail-outs. We are about to see quite how far the Brussels apparat will go in defence of its privileges.
 
Daniel Hannan is a Conservative MEP for South East England

This is no return to ancient Greek democracy


There may be nothing new under the sun, but according to the ancient Greeks it is quite the celestial Johnny-come-lately. Long before the sun, long even before the Titans rose and fell, and Zeus slew his father Cronos to seize control of Olympus, there was only Chaos. The mother of all things is back in charge as the muthah of all financial crises moves closer – thanks to the modern Greeks – to sucking us all into the Abyss (Chaos's firstborn, as you cosmology fans well know). Perhaps by now a semblance of order has re-asserted itself over the mayhem prevailing at the time of writing, with markets in freefall and confusion reigning over Greece's forthcoming referendum on the euro bailout. If so, it won't last long.
The date of that vote is as unclear as any intricate political calculations behind Prime Minister George Papandreou's decision to call it, or even whether he informed the Franco-German neo-axis powers before announcing it. Nor is it obvious what the precise implications for Europe might be, other than perfectly hideous.

Chaotic hardly seems an adequate adjective. The Greeks have unleashed pandemonium, and if there is any hope remaining in Pandora's box this time around, you'd want the Hubble Telescope to locate it. In the frantic quest for an upside, all I can dredge up is gratitude that I took the mediocre redbrick degree in Classics, hence all the tiresome and pretentious allusions, rather than in economics. Now that would have been a waste of time. No professional economist has much clue what's going on, beyond a basic appreciation that we are, as Richard Littlejohn will surely put it, going to Hellas in a handcart.

What is abundantly clear is that all the comparisons between this grumbling nightmare and the approach to war in 1939 were less fanciful than one would have liked, though in the globalised age everything moves faster. There was almost a calendar year between Neville Chamberlain declaring peace for our time and war with Germany. From the moment Angela Merkel and Nicolas Sarkozy waved their Greek bailout paper in Brussels and Mr Papandreou's startling announcement were barely five days.

Why he did so is the source of contention, but we can probably rule out any driving passion to invoke the memory of fifth century BC Athens. Some muscular Eurosceptics will posit that, in offering the plebiscite denied us, Mr Papandreou honours his nation's status as the birthplace of democracy. But politicians tend not to think in such grandiose terms when trying to navigate a course between a rock and hard place. Or, to continue this whirlwind odyssey through half-remembered lectures, between Scylla and Charybdis. The waters may be uncharted, but the menaces to Greece are in plain sight. On one side stand the unforgiving rocks of unending austerity within the eurozone, struggling to tame sovereign debt which remains crippling despite that offer of a 50 per cent haircut. Already suffering horribly and riven by civil unrest, the Greeks do not much fancy a future of penury under German dominion, as the explosion there of Nazi-themed cartoons and graffiti confirms.

On the other side lies the dreaded whirlpool of "disorderly default"... leaving the euro in disgrace, and attempting to return to growth via a devalued drachma, with no protection from the world's second reserve currency. Which is the quicker route to perdition is anyone's guess, but from this remove it looks a bit like offering a terminal patient the choice between a revolver and the hemlock.

Mr Papandreou, who seems neither a madman nor a nihilist, will not have taken this apparently deranged last throw of the dice without feeling irresistible pressure. Apart from a livid electorate, he is assailed by an opposition so irresponsible in promising cure without pain that it makes Ed Balls look like Stafford Cripps the day his hairshirt returned from Sketchley's with a wire-wool lining. In delegating the decision, he presumably believes this is the only possible way to compel the opposition to face reality and to scare the electorate into accepting that the alternative is worse than the bailout. It is, to put it gently, a monstrous gamble.

It is also playing with fire on behalf of the rest of us, within and outside the eurozone. If Greece goes, as begins to look inevitable, the fall of Italy becomes more imminent... and as with their respective empires long ago, the latter is rather more threatening to the rest of Europe than the former. Perhaps when your liver is being daily devoured by vultures, you can be forgiven for losing sight of any obligation to the world beyond your shores.

It hardly behoves a country that slags the euro off from the sidelines at every turn – to borrow from Mr Sarkozy's trenchant rebuke to David Cameron – to lecture others on the altruistic need to remain in it. But there is a strong sense that, just as with the supremacy of chaos, the Greeks have been here before. Disguised as a white bull, Zeus kidnapped Europa and ravished her. With this referendum, Greece seeks to take Europe hostage and is screwing her in Olympian fashion once again.

Tuesday 21 June 2011

The Super Rich Sabotage The Arab Revolutions

By Shamus Cooke

20 June, 2011
Countercurrents.org

With revolutions sweeping the Arab world and bubbling-up across Europe, aging tyrants or discredited governments are doing their best to cling to power. It's hard to over-exaggerate the importance of these events: the global political and economic status-quo is in deep crisis. If pro-democracy or anti-austerity movements emerge victorious, they'll have an immediate problem to solve -- how to pay for their vision of a better world. The experiences thus far in Egypt and Greece are proof enough that money matters. The wealthy nations holding the purse strings are still able to influence the unfolding of events from afar, subjecting humiliating conditions on those countries undergoing profound social change.

This strategy is being ruthlessly deployed in the Arab world. Take for example Egypt, where the U.S. and Europe are quietly supporting the military dictatorship that replaced the dictatorship of Hosni Mubarak. Now Mubarak's generals rule the country. The people of Egypt, however, still want real change, not a mere shuffling at the top; a strike wave and mass demonstrations are testing the power of the new military dictatorship.

A strike wave implies that Egyptians want better wages and working conditions; and economic opportunity was one of the central demands of the revolutionaries who toppled Mubarak. But revolutions tend to have a temporarily negative effect on a nation's economy. This is mainly because those who dominate the economy, the rich, do their best to sabotage any social change.

One defining feature of revolutions is the exodus of the rich, who correctly assume their wealth will be targeted for redistribution. This is often referred to as "capital flight.” Also, rich foreign investors stop investing money in the revolutionary country, not knowing if the company they're investing in will remain privately owned, or if the government they're investing in will strategically default and choose not to pay back foreign investors. Lastly, workers demand higher wages in revolutions, and many owners would rather shut down -- if they don't flee -- than operate for small profits. All of this hurts the economy overall.

The New York Times reports:

"The 18-day [Egyptian] revolt stopped new foreign investment and decimated the pivotal tourist industry... The revolution has inspired new demands for more jobs and higher wages that are fast colliding with the economy's diminished capacity...Strikes by workers demanding their share of the revolution's spoils continue to snarl industry... The main sources of capital in this country have either been arrested, escaped or are too afraid to engage in any business..." (June 10, 2011).

Understanding this dynamic, the rich G8 nations are doing their best to exploit it. Knowing that any governments that emerge from the Arab revolutions will be instantly cash-starved, the G8 is dangling $20 billion with strings attached. The strings in this case are demands that the Arab countries pursue only "open market" policies, i.e., business-friendly reforms, such as privatizations, elimination of food and gas subsidies, and allowing foreign banks and corporations better access to the economy. A separate New York Times article addressed the subject with the misleading title, Aid Pledge by Group of 8 Seeks to Bolster Arab Democracy:

"Democracy, the [G8] leaders said, could be rooted only in economic reforms that created open markets ...The [$20 billion] pledge, an aide to President Obama said, was “not a blank check” but “an envelope that could be achieved in the context of suitable [economic] reform efforts.” (May 28, 2011).

The G8 policy towards the Arab world is thus the same policy the International Monetary Fund (IMF) and World Bank have pursued against weaker nations that have run into economic problems. The cure is always worse than the disease, since "open market" reforms always lead to the national wealth being siphoned into the hands of fewer and fewer people as public entities are privatized, making the rich even richer, while social services are eliminated, making the poor even poorer. Also, the open door to foreign investors evolves into a speculative bubble that inevitably bursts; the investors flee an economically devastated country. It is no accident that many former IMF "beneficiary" countries have paid off their debts and denounced their benefactors, swearing never to return.

Nations that refuse the conditions imposed by the G8 or IMF are thus cut off from the capital that any country would need to maintain itself and expand amid a time of social change. The rich nations proclaim victory in both instances: either the poorer nation asks for help and becomes economically penetrated by western corporations, or the poor country is economically and politically isolated, punished and used as an example of what becomes of those countries that attempt a non-capitalist route to development.

Many Arab countries are especially appetizing to foreign corporations hungry for new investments, since large state-run industries remain in place to help the working-class populations, a tradition begun under the socialist-inspired Egyptian President, Gamal Abdel Nasser that spread across the Arab world. If Egypt falls victim to an Iraq-like privatization frenzy, Egypt's working people and poor will pay higher prices for food, gas, and other basic necessities. This is one reason, other than oil, that many U.S. corporations would also like to invade Iran.

The social turmoil in the Arab world and Europe have fully exposed the domination that wealthy investors and corporations have over the politics of nations. All over Europe "bailouts" are being discussed for poorer nations facing economic crises. The terms of these bailout loans are ruthless and are dictated by nothing more than the desire to maximize profits. In Greece, for example, the profit-motive of the lenders is obvious to everyone, helping to create a social movement that might reach Arab proportions. The New York Times reports:

"The new [Greece bailout] loans, however, will only be forthcoming if more austerity measures are introduced...Along with faster progress on privatization, Europe and the [IMF] fund have been demanding that Greece finally begin cutting public sector jobs and closing down unprofitable entities." (June 1, 2011).

This same phenomenon is happening all over Europe, from England to Spain, as working people are told that social programs must be slashed, public jobs eliminated, and state industries privatized. The U.S. is also deeply affected, with daily media threats about the "vigilante bond holders" [rich investors] who will stop buying U.S. debt if Social Security, Medicare, and other social services are not eliminated.

Never before has the global market economy been so damningly exposed as biased and dominated by the super-wealthy. These consciousness-raising experiences cannot be easily siphoned into politicians promising "democracy,” since democracy is precisely the problem: a tiny minority of super-rich individuals have dictatorial power due to their enormous wealth, which they use to threaten governments who don't cater to their every whim. Money is thus given to subservient governments and taken away from independent ones, while the western media never questions these often sudden shifts in policy, which can instantly transform a longtime U.S. ally into a "dictator" or vice-versa.

The toppling of dictators in the Arab world has immediately raised the question of, "What next"? The economic demands of working people cannot be satisfied while giant corporations dominate the economy, since higher wages mean lower corporate profits, while better social services require that the rich pay higher taxes. These fundamental conflicts lay just beneath the social upheavals all over the world, which came into maturity with the global recession and will continue to dominate social life for years to come. The outcome of this prolonged struggle will determine what type of society emerges from the political tumult, and will meet either the demands of working people or serve the needs of rich investors and giant corporations.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action ( www.workerscompass.org ) He can be reached at shamuscooke@gmail.com