Fukuyama's "End of Democracy"

 November 25, 2013

The political gridlock in Washington DC gave Francis Fukuyama the opportunity to attack as unworkable one of the pillars the American democracy, namely the priciple of separation of powers . According to one of his recent articles ( republished by Courrier International) Obamacare has no real chance of success because the American political system is designed in a way that gives too much veto power to the opposition, thus depriving the Administration of real clout. He calls this “vetocracy“.

In actual fact, the crisis experienced by the American political system has very little to do with the way power is allocated within it and everything to do with the economic and social difficulties experienced since the 2008 financial crisis onwards. The spillover effect has now reached the political system, which itself cannot function in the absence of a minimal bipartisan political consensus . (no democratic system could)

Montesquieu’s principle of separation of powers and checks and balances was criticised as early as the XVIII century by, among others, the physiocrats . Their leader, Quesnay, nicknamed ” Confucius of Europe ” by his admirers, believed that ” the system of checks and balances within a government is a dismal one ” ( Quesnay, Maximes générales du guvernement économoque d’un royaume agricole). Condorcet considered that ” in matters of government ,every complication is scary” ( Réflexions sur le commerce des blés ) , and the list could go on. Undaunted, the framers of the American constitution, which served the US well for over two hundred years, adopted the principle.

To be sure, the US badly needs to extend universal medical coverage to some forty million Americans in order to be considered a truly civilised Western country. The timing of the reform does seem rather unfortunate, as the US federal deficit is one of the largest in America’s history. In truth, the US politicians lost a golden opportunity to adopt such a reform during the sixities, when the country’s economic circumstances were excellent and when the political leaders were less ideological and more pragmatic than it is the case today. In other words, Obamacare is some fifty years too late to be adopted quickly and without much resistance from vested interests.

When a democracy ceases to function the way it has been intended to, that usually happens because leading political players fail to reach consensus on major issues. It would therefore be wrong to blame the malfunctioning on the core principles – like that of the separation of powers – on which the American system has been built upon. Fukuyama even argues that the Westminster system is better equipped to prevent gridlock, although it does not seem to help David Cameron be a more powerful and/or succesful leader of Britain . Moreover, the Westminster system could lead to an ” elective dictatorship“, as the development is known among political scientists. This is exactly the outcome the American framers tried to avoid when they adopted the separation of powers principle.. Nor is the French presidential system, in which the Socialist executive has more power than the American president does and the Socialist party controls both the Parliament AND the regions, in a better position to solve the country’s economic or social problems . Unemployment in France is much higher than in the States or Germany, whilst economic growth has all but stalled. Germany, a federal state, does not seem to be affected by the way power is distributed within the system. Clearly, Fukuyama’s theoretical approach to US’s political problems is not only flawed, but it is also misleading .

Geography and Geopolitics During the Cold War

 November 16, 2013

Since the onset of the sovereign debt crisis, it has again become fashionable to explain southern Europe’s economic troubles in the light of the Mediterranean countries’s natural habitat, climate and lifestyle. The people of Greece, Spain and Italy, for example, are regularly portrayed in the popular press as less productive and laid back, in contrast with northern EU nationals. The latter are presented as industrious, thrifty and unlucky enough to be part of a union which makes them dip into their hard-earned savings to pay for the excesses and profligacy of southern EU members.

A heightened interest among philosophers, historians, economists and geopoliticians in the influence of geography/natural habitat over the course taken by human history or economic development is quite normal, especially during major crises. This type of intellectual inquiry happened to be the object of my research for my licence thesis in 1979 at Iasi University. Trouble was, during the bi-polar world both superpowers shared a common dislike of Geography and its potential role in human history and economic affairs. Their respective satellite-countries largely fell into line during that period, with the shining exception of France, where the research and study of Human Geography continued regardless.

Indeed, for decades both Russians and Americans all but banned academic research along these lines. The very mention of geopolitics was regarded as subversive. In a book written at the end of the ‘90s (« The Wealth and Poverty of Nations »), Harvard historian David S. Landes explains how after 1945 US authorities actually closed down the geography departments at Harvard, Yale, Princeton and Columbia, to mention but a few academic establishments. The Soviet Union also developed a powerful aversion to geography, probably because during the 1930s Stalin fell for Mackinder’s well-known Heartland theory, which had led him to conclude the Molotov-Ribbentrop Pact with the Nazis (Pascal Lorot).

This is the reason why it took me a long time, as an undergraduate, to convince one of my gutsier professors to supervise my thesis. To make matters worse, documentation behind the Iron Curtain was painfully scarce, especially from American sources. In the background, the dean of the faculy was constantly at pains to impress upon me that we were only 25km away from the Soviet border. What would we do if my thesis incurred the wrath of the Russians ?

These days, when both geographers and experts in geopolitics are back in vogue, I think it is worthwhile remembering how detrimental the Soviet-American duopoly really was for the development of social sciences in general and that of geography and geopolitics in particular.

US Foreign Policy in the Post-Unipolar World

 October 12, 2013

Superficially at least, the ongoing civil war in Syria appears to highlight the West’s inability, unprecedented for decades, to put a stop to it. Adverse to direct military intervention, President Obama has even ruled out Kosovo-style punitive strikes without the endorsement of Congress. Premier David Cameron’s strident advocacy of military action against Syria has been silenced by a negative vote – the first such occurrence in centuries – in the British Parliament. The West’s economy is weaker than at any time in the past save the Great Depression and the increasingly assertive members of the UN’s Security Council are blocking any efforts to outlaw the slaughter of Syria’s own citizens by the Assad regime. This is surely not the unipolar world we got used to during the Clinton – Bush Jr. years.

By placing domestic concerns above military entanglements in far away places around the world, President Obama is in sync with the mood of the majority of his countrymen. Even if his foreign policy could appear to outsiders as indecisive, it is nevertheless popular at home. Like in the times that preceded the 1938 Munich conference, the West is economically distressed, tired of fighting, as well as challenged by a rising power – China – and an increasingly resurgent Russia.

The preference for diplomacy over the use of military force has become the hallmark of Barack Obama’s approach to international affairs.(During my masteral studies in international relations, I qualified Obama’s foreign policy as « Jeffersonian with Wilsonian trappings », an assessment that I maintain today). Taking into account Iran’s dire economic situation, for instance, diplomacy is seen by Obama strategists as having a chance of succeeding where sanctions and threats of military action have not.

In Asia, the US is currently shying away from endorsing the bellicose stance of the Japanese and the Philippine leadership against China over the Diaoyu/Senkaku islands or the Scarborough Shoal. Given the mayhem in the Middle East, the « pivot » strategy for Asia is being quietly put on the backburner.

A well-framed foreign policy could, however, be judged only in the light of its practical results. If the US succeeds in destroying the Assad regime’s stock of chemical weapons and finds a way of determining the Iranians to drastically reduce their nuclear ambitions, Obama’s foreign policy might just be remembered as a worthwhile contribution towards reducing international instability and ultimately to world peace.

Not the Clintons Again !

 September 27, 2013

Joe Klein of Time Magazine has recently published an editorial about the Clintons’ renewed presidential ambitions. (“The Clintons need a restart“, Time, September 9, 2013, p.21). According to him, there is a real danger for the Democrats – not to mention for the rest of us – that coming 2016 H. Clinton might just get back into the Oval Office, courtesy of corrupt Democrat politicians and of the “ morbid state” of the Republican party.

Klein is careful to remind readers the Clintons’ past and present excesses, such as the renting of the Lincoln bedroom, the Clinton Foundation’s “fancy conferences” and fees to match ( between 200,000 dollars for H. Clinton going up to 700,000 dollars charged by W.J.Clinton for a speech in … Nigeria), lobbying on behalf of the plutocracy through Teneo and Clinton Global Initiative, closeness to Wall Street bankers and the list could go on.

The real danger here is that such leading representatives of the “ gauche-caviar”,-as the French call Socialist leaders that sold out to the plutocrats – do lasting damage both to the party propelling them to power and to the society as a whole ( remember the Clinton’s attitude to financial deregulation, which brought about the Great Stagnation ?) In Germany, since the Volkswagen-Schroeder labor market “reforms” , the SPD has lost two consecutive elections and the “working poor” numbers have increased dramatically.

In truth, candidates to the gauche-caviar status ( which can on occasion include conservative leaders such as France’s former president Sarkozy) still lurk around and do not seem to have learned anything from their older peers, nor apparently did their parties. This is reason enough for the Bilderberg bosses – the ones who selected and financially supported Clinton’s first bid for the presidency back in 1991, when he was but an obscure Arkansas politician – to rejoice and to continue through their meddling to put at risk the normal functioning of Western economies and/or democracies.

Economic Science and the EU

June 22, 2013

Every few decades or so we are brutally reminded that the global economic system can experience serious dysfunctions and that the science called upon to find the necessary remedies is rarely, if ever, up to the task. The latest controversies among economists regarding austerity policies or possible solutions for dealing with sovereign debt are a case in point.

The head of the IMF’s research unit and potential Nobel-prize recipient, Mr Olivier Blanchard, has recently revealed that his institution is partly responsible for botching the rescue of Greece and, by miscalculating the impact of austerity policies, for plunging Spain, Portugal, Italy, Ireland and even the Netherlands into recession (Alternatives économiques).

In a parallel development, a 2010 study by former IMF chief economist Kenneth Rogoff and Carmen Reinhart of Harvard University has stirred up a huge controversy involving three economists from Amherst University and Nobel-prize laureate Paul Krugman. The study claimed to have found a connection between economic growth and public borrowing: whenever government debt rises above 90 percent of GDP, the data available seems to indicate that growth slows down, although the authors freely admit that they are not entirely sure if higher debt leads to slow growth or whether it is the other way around (The Economist).

Almost as influential among EU finance ministers is a second Harvard study, “Large Changes in Fiscal Policy : Taxes vs. Spending “, authored by Alberto Alesina and Silvia Ardagna. According to it, deep cuts in public spending generally lead to economic expansion, not to contraction. As the two have explained during a meeting in the spring of 2010 with Ecofin ministers, austerity policies give the private sector the confidence it needs to increase their investments, which compensate for the budget cuts . The study found a convert in Jean-Claude Trichet, who claimed the same year that

[…] the ideea that the austerity measures could bring about stagnation is incorrect […] I am firmly convinced that in the current circumstances such policies that inspire confidence would reinforce, not affect the economic recovery because today’s essential factor is confidance.” (as quoted by P. Krugman in New York Times)

This is all academic, one might say. Only, in an unfortunate turn of events, Mr Rogoff’s or Alesina’s studies determined the European Union’s neoliberal-leaning politicians to adopt stringent austerity policies aimed at reducing public debt, thus bringing about the current recession on the continent. As Mr Rogoff argues, however, his recipe for debt reduction involved not austerity, but writing down bank debt, allowing for some inflation and using “financial repression” techniques.

This, of course, is not the first time that the IMF’s policies have gone tragically wrong, or that macroeconomists’ advice has fallen short of expectations. The ‘dismal science’ – a nickname for economics that many Asian, Latin American and European nations would readily approve as appropriate – is after all relatively young and imperfect.

In fact, during the discipline’s two and a half centuries of evolution, the most influential theorists were actually members of entirely different professions. As we know, Adam Smith was initially a customs agent and a professor of moral philosophy; David Ricardo – a stockbroker; Thomas Malthus – a pastor; Quesnay and Juglar – medical doctors; Marx – a philosopher; and Leon Walras – a mining engineer and journalist. As a rule of thumb, policy recommendations by economists have not been consistently successful to date, when they were not ignored by governments on ideological grounds. Even well-known policies such as Roosevelt’s New Deal were discontinued before they could produce their full effects, such as solving mass unemployment in the US. The latter, as J.K. Galbraith pointed out, was solved not by the adoption of macroeconomic policies, but inadvertently by Hitler, who decided to wage war on the West.

The current economic climate tends to lend full credibility to Keynes’ stagnationist thesis, as it bears many similarities to the long period of stagnation following the 1929 crash. His thesis is again influencing business people and social scientists alike, making economic recovery a distant and uncertain prospect, especially within the EU.

When Elites Expire

 

June 1, 2013

It has been almost a century since O. Spengler heralded the decline of the West. Apart from a 30-year hiatus between 1945 and 1975, this decline has become irreversible, a development even Samuel Huntington was forced to acknowledge.

One of the most telling symptoms of the west’s fall from its former pre-eminence is its citizens’ disenchantment with elites. In its April 25, 2013 issue, the French magazine Marianne has published an opinion poll which shows that only 25 percent of the French public still trusts their national politicians, regardless of party affiliation. This low score is consistent with an IFOP poll from 2012 where just 25 percent of respondents have said they still have faith in the capitalist system.

Sure, in the massive, EU-wide rejection of capitalism and its elites, it could be tempting to read a mere repeat of the social and political developments which followed the Great Depression of the 1930’s. Today’s prolonged economic crisis, the lack of job opportunities for the 20 million European unemployed and the harmful policies of austerity adopted so far seem to justify such a parallel. This time, however, the people’s disgust with their elites in the west is squarely focused on the 1 percent who profited hugely from three decades of neoliberalism, as well as on the associated political and intellectual elites who helped them along the way.

The rise of stateless corporations

In their quest to avoid paying corporate taxes, old-style multinational corporations have transformed themselves during the 1990’s into global entities. Their number increased from around 2,000 to 63,000 and they moved their financial operations to fiscal havens or to countries known for very low tax rates, such as Ireland. They were joined there by the richest 1 percent of the west’s individuals, with disastrous results for the public finances of their home countries.

According to James S. Henry, chief economist of leading management consulting firm McKinsey, the amount of money shifted offshore has reached 26,000 billion dollars in 2012. Half of this fortune belongs to only 91,000 people, or 0.001 percent of the world’s population. The other half is owned by 8.4 million citizens (CEO’s of multinationals, founders of SME’s, financial consultants and so on), or 0.14 percent of the world’s population. (Alternatives Economiques)

The most accomplished tax evaders are the big corporations whose complex “fiscal optimisation” schemes are devised by tax consultants working for the Big Four international accounting houses. Over the last decade, the ranks of the latter have swelled to 700,000 people, garnering 100 billion dollars per year in fees. (Stern)

Consequently, corporations like General Electric are currently able to pay only 2.3 percent tax on their profits; Google pays 2.4 percent. The burden of taxation in a country like France is heavier for companies with less than 20 employees: around 30 percent. By contrast, the CAC40 corporations pay only 8 percent in tax on average. Between 2007 and 2009, 40 percent of all tax revenue from CAC40 companies was collected from only 4 corporations – EDF, GDF Suez, Renault and France Telecom – in which the state is a stakeholder. Regardless of this fact, the current Socialist government is considering selling off its share in the abovementioned corporations.

As US Senator Levin has stated, tax avoidance by US corporations has diminished the share of corporate taxes to just 9 percent of federal government revenues. “A recent study found that 30 of the largest US multinationals, with more than 160 billion dollars in profits, paid nothing in federal income taxes over a recent three-year period” (Senator Levin, in The Economist).

The attitude of the new breed of stateless capitalists was best expressed by Eric Schmidt in an October 2012 interview:

I am very proud of the [tax] structure that we set up. We did it based on the incentives that the governments offered us to operate…It’s called capitalism. We are proudly capitalistic. I’m not confused about this.

An accommodating political elite

Political elites in leading western countries are remarkably homogenous, the products of a limited number of academic establishments. British politicians usually come from Oxford or Cambridge universities; the French political elite is educated at the Ecole Nationale d’Administration (ENA) or the Polytechnique, whereas leading US politicians are usually graduates of Harvard, Princeton or Yale. Firm supporters of neoliberalism or believers in social-liberalism, politicians belonging to these elites are spending the little capital they have left on promoting further privatisations and on defending the austerity policies that have brought most western economies to a standstill. In the United Kingdom even the privatisation of police services is underway. In France, former minister and current IMF director Christine Lagarde has opened the way for private justice to replace the state court system in a landmark (commercial) case in which Bernard Tapie of Adidas fame was awarded 400 million euros of public money in 2008. In many countries across the European Union leading politicians have been involved in mega-scandals involving serious financial fraud (Jerome Cahuzac in France, Silvio Berlusconi in Italy, Adrian Nastase in Romania and the examples go on).

Past solutions won’t work

Although the dire consequences of tax avoidance by corporations and individuals call for resolute political action, western political elites continue to demand more sacrifices from the middle- and working classes instead, in the form of higher VAT, increased taxation or diminished social benefits. Thus, experts like Nicolas Shaxson do not believe leaders such as David Cameron when they say they will now put an end to EU-wide tax evasion which, according to Mr. Barroso, is worth 1,000 billion euros. His assessment is shared by The Economist :

“[…] there are strong vested interests behind today’s flawed system. Chief among them are the governments of places that benefit from acting as tax havens, which are not just small tropical islands but include Luxembourg, Ireland (which gains jobs from hosting some of Apple’s subsidiaries) and Britain, which has a tradition of being relatively lenient on firms that break, as well as bend, the tax rules. So it will be no surprise if any reforms that emerge from the current political fury will do no more than tinker.”

People’s anger with their political and business elites has reached levels not seen since the time of the Ancien Régime in France. The problem, primarily, is not the mismanagement of state affairs, but, as Montesquieu put it in his 1721 Lettres persanes,

“Le plus grand mal que fait un ministre sans probité n’est pas de desservir son prince et de ruiner son people, […] c’est le mauvais exemple qu’il donne.”

Arnold Toynbee explained that when the elites lose touch with the rest of society or even become toxic for it, the civilisation they used to lead is about to implode. The challenge for progressive social scientists now is not to attempt to delay the inevitable, but to articulate alternative visions of our possible future instead.

At Odds with Europe

 May 11, 2013

Since its reunification 22 years ago, Germany has become the leading economic power in Europe. The sovereign debt crisis has offered it the opportunity to translate economic might into political clout within the EU. Problem is, as the austerity policies currently ravaging the continent illustrate, German politicians – from both the right and the New Left – are rather ill-prepared for such a responsible role.

This assessment belongs to former Chancellor Helmut Schmidt, who in 2011 cautioned his party and conationals against issuing economic diktats and against insensitivity to the plight of other, economically less fortunate, EU members (speech re-published by Alternatives Economiques in 2012). He mentioned the fact that the German trade surplus had been obtained at the expense of other countries’ deficits. (Gerhard Schröder labour market reforms prevent Germany from acting as consumer of last resort in Europe, as the purchasing power of millions of Germans has suffered severe reductions over the past few years. The current leadership’s refusal to introduce a minimum hourly wage and its insistence on the imposition of draconian austerity packages in Southern Europe have greatly unsettled a majority of its partners within the Union).

In this election year, German politicians would therefore be wise to keep in mind Helmut Schmidt’s sensible advice:

“Taking into account our central geopolitical position, our unfortunate role in European history until the middle of the 20th century, as well as our current economic performance, the German government has to take the particular care of the interests of our European partners. Such altruism is indispensable.”