All entries for August 2011

August 19, 2011

Back to the continental crisis

The EU crisis is deepening. Italy is succesfully managing to get its "I" back from Ireland in the PIGS group. It may be an opportunity to finally move on with fiscal and economic union, or a negative one where capital exploits a good crisis to weaken labour and democratic prerogatives - as it is happening with the Italian reforms apparently forced, in the middle of the August holiday, by the European Central Bank.

In any case - the situation is foggy and Stirling is definitely not a good observatory for the European crisis. So tomorrow I am flying back to Spain, sorry, Catalunya, for a couple of weeks. On my way back, I will stop for a week in Switzerland, for a conference and hopefully some good mountain hiking, but don't take this as a run to the Swiss Franc.

Stirling castle

August 10, 2011

Riots, politicians, sociologists

I am in Scotland, immersed in peace and nature, light-miles away from burning England. But it is impossible to ignore what’s happening there, in particular when former neighbourhoods in Birmingham are affected.

Boris Johnson, London’s Mayor, interrupted his holiday and yesterday was on the streets of London, armed with a groom as if helping to clear up the mess. He didn’t really need a groom though as he could have used his hair, but politicians are there to speak and not to clean up. He said some sensible stuff on the ‘true spirit of London’, and I would add that there is a ‘true spirit of Birmingham’ too, where it appears that three men died tonight while standing to defend their neighbourhood. But then he moved on saying that ‘it is time that people who are engaged in looting and violence stopped hearing economic and sociological justifications’.

What confusion. It is true that academic experts in the heat of events should rather not speak too much – we had a terrible example a few weeks ago with armies of ‘security’ and ‘terrorism experts’ explaining to us that the Oslo bombing was Al Queda’s work. But Johnson caught the occasion for a cheap attack on social sciences and progressive thinking, adding only to confusion.

It is not the job of social scientists to explain individual events – for that there are journalists, police investigators, judges, local authorities, and eventually historians. Even more so for contemporary events. Despite the recent stress on ‘impact’ from research authorities, the best social research actually proves its usefulness only years, sometimes decades after it is carried out: take Becker’s research on youth subcultures in the 1950s, that became topical ten years later. Sociologists, in particular, are interested in patterns, regularities of behaviour, and should never try to explain ‘everything’: human behaviour is just too unpredictable. By the way, even natural sciences can predict very little, and mostly talk of probability only. So, as sociologists we are not so much interested in the Tottenham riots, but in riots as such – in the way Simmel said they were interested in king John and not in King John. Sociologists cannot solve the ongoing riots, but can try to explain why they tend to happen in certain places and at certain time. Explaining has nothing to do with justifying, but it is necessary if we don’t want repetitions, and therefore Johnson should in the future pay more attention.

These riots remind me strongly not so much of those in the Paris banlieus in 2005, which were much more political, but, rather, those of Los Angeles in 1992: which also had as immediate cause a police killing, were aimed at shopping malls, and took place during an economic crisis. In this sense riots are an example of 'succesful' adoption of the American social model - indeed in Southern Europe they are virtually unknown. The racial element was probably stronger in Los Angeles, though: in England now there may be a significant black component, but overall looters from all ethnic groups are uniting, and thank’s God no ethnic group is being targeted by the violence (in Los Angeles it was the Koreans, and in Birmingham in 2005 there was a minor Asian-Black Caribbean riot). And without falling into justification, cuts to community social services did matter in both cases: in Tottenham, the majority of youth centres has been recently closed because of the cuts, and I can see in my Tile Hill neighbourhood in Coventry what difference a youth centre can make.

But sociologists can also tell something to some kind of leftists. I remember people so excited the Los Angeles riots footage (probably the first riot so heavily televised) that they watched them with rap soundtracks. Now, as Merton famously said, there are various kinds of ‘social deviance’, depending on whether it is on the goals or on the means. Gangs of looters are not deviants in terms of goals or values: they just want to consume more in a consumerist society. They are just deviant in terms of the means they use to achieve their socially-shared goals. In this sense, they are not unknowing allied of the Left, but actually it is its exact opposite: the radical Left should be deviant in terms of goals, but, if it is democratic, not in terms of means. And historically, let’s remember that the 1992 riots in Los Angeles finished with the intervention of the army, more repression, and a wave of ‘zero tolerance’ policing across the whole United States.

August 03, 2011

EU or USA: who is worse at facing the financial crisis?

In rapid succession during the last two weeks, EU and US have faced their own ‘five minutes before midnight’ crisis. Both have managed to find a way out, although it is not sure for how long: European markets are in crisis only few weeks later, and the US rating may well still be downgraded in a few months.

Politically, the interesting thing is that the EU solution (the Greek rescue deal of the 21st of July) came to many as a positive surprise: the EU and EMU were already seen as dying. By contrast, it came to many as a negative surprise that the US would be in such a dramatic situation ahead of this week’s deadline to raise the debt cap. This is because the EU has had for a long time a very bad press: in many regards it acts as a political scapegoat, an unelected body used to relieve national elected politicians of their responsibilities for anything that goes wrong. Just to the contrary, the US are often idealised, even by those who dislike it, as a ‘superpower’ able to decide and to act, unlike the headless EU. In fact, the crisis has shown that both EU and US are politically very dysfunctional. And economically in crisis: actually, despite all that has been said for about thirty years, the US are in a worse situation. Their debt is much bigger than the aggregate EU or EMU ones, and their economic and social fundamentals are also worse: higher unemployment, higher debt, worse trade deficit. In fact, once one looks at America, the ‘disastrous’ EMU problems strike for their small nature: all the fuss about Greece, but the whole Greek debt amounts to just 2.2% of the Eurozone's GDP. Even rescuing the whole of it would not be such a big cost for the EU, in the broader order of things and of the whole money spent to rescue the banks. The EU problem is political more than economic: it does not have the tools to face the economic problems.

If both EU and US are politically dysfunctional, they are so in very different, and sometimes, surprising, ways. Let’s look at the ways they have faced the crisis.

First, the EU deal. For an institution that has near-universal bad press, it was surprising to see, in the immediate aftermath of the last Greek rescue, a near-unanimous praise. This time, the Greek rescue was approved by all EMU countries, including the previously ‘refuseniks’ (and hyper-Thatcherite) Slovaks. The Greek rescue seemed in fact to achieve many things. First, it was bigger than the previous ones, evoking even the memory of the Marshall Plan. Second, it included a reasonable share of private sector contribution: about one third of what had been asked, but still substantial enough considering that banks wanted to pay nothing, as proven by the fact that the share prices of the contributing banks have been hit quite hard. Third, it reduced significantly the interest rates that Greece and the other rescued countries were paying, which at above 5% were making it impossible to get out of the hole. Fourth, by re-lending money over a period up to 40 (!) years, this was quite an ingenious way to cover up what looked like a default – or at least to stick it under the carpet. If one adds to this the plans for a long-needed European rating agency, the rescue package looked like a major step towards EU-level economic governance and fiscal federalism: with some fifteen years delay, the necessary political spill-over of EMU is starting to be conceived. This was positively surprising, considering the conflicts and divergences of the previous weeks - something we actually should be used to in the multi-level horse trading political system of the EU. Even more surprising, considering that only in Spring 2010 Merkel was still ridiculously defending the no-bailout article103 of the Maastricht Treaty – a ‘wishful thinking’ article which could have equally well declared ‘the EU does not use the umbrella, so it will never rain’.

Make no mistake: the rescue package was no political turning-point, which also explains the near-universal praise from Right to Left. The main source of re-adjustment still comes from public sector cuts. Banks still get more than what they pay for. The Eurobonds, as probably the best long-term solutions are still not in place, for the opposition of the Germans although probably they would cost them less than the continuous rescue packages may do. And there was only additional wishful thinking in the declaration that ‘Greece is exceptional’ and all other economies are fine. In fact, the speculative markets are now addicted to the drug of public rescue they have been intensively dispensed over the last 3-4 years, and after a short ‘high’ following the Greek rescue, have as usual come back wanting more within weeks – this time, from Italy and Spain. Nonetheless, a major step in policy-making capacity was visible from the deemed policy-making incapable EU elites.

Let's move to the US. If the complex EU policy making, requiring all member states’ unanimity for most issues, seems blocked, the US has done worse. With mid-term elections regularly punishing the president, it has been by now common to have at least one chamber in the hands of the opposition, and to make any meaningful political reform near-impossible. Only wars abroad can be still decided rather quickly. In addition, an electoral system that privileges the median voter, and that keeps half of the population away from the polls, distorts the whole political representation in favour of a mythical ‘middle America’. Add to it complex constitutional restrictions such as the debt limit itself, and populist practices like the recall vote, and the US found it dramatically difficult to take a decision even smaller than rescuing Greece: letting debt increase until they find a way to reduce it.

The eventual deal of the 31st December has been seen as a Republican triumph and thereby an Obama’s defeat: America has changed Obama, instead of Obama changing America; and ‘no, we can’t’ has become the sentence he is associated with. Sure, it does not increase tax, so the US are stuck with the unbelievably regressive system inherited from G.W. Bush (and punctually criticised by Hacker and Pierson in their works). In fact, the deal is not necessarily that bad for Obama. First, it postpone all meaningful cuts to after the elections of 2012 – so he will not pay too high a price for it, and if he wins, he may well abandon them subsequently. Secondly, the cuts include military expenditure – they may be even be more damaging for the Republicans. Third, the Tea Party is now officially in the establishment – their anti-establishment rhetoric, therefore, is from now empty.

So we have two mixed and messy decisions on both sides of the pond. Some deductions go against the common sense. First, unlike what we used to think, the EU is not less politically dysfunctional than the US. Second, neither is it more economically doomed. Third, however, on the economy the US are actually more democratic than the EU, in the sense that the debate is politicised and takes place in parliament and under close public scrutiny, unlike in obscure intergovernmental negotiations or through unelected bodies like European Central Bank and the European Commission.

These deductions could be seen as a vindication of the ‘technocratic’ nature of the EU: obscure technocracy, not democracy, is the only way to govern a complex economy like the European one, and it is proving more effective then the messy, populist US one. But there is a different conclusion. The EU’s legitimacy is actually lower than Obama’s, and unless it reduced some of its ‘democratic deficit’ (and not just the public finances’ one), it is doomed. But also, economic democracy is not something easy to build, and if it collapses into tax populism in the US, it is even more difficult in an international body like the EU. It requires institutions, public spheres, associations, starting from the local community and the workplace, up to the financial issues. But as Jean-Paul Fitoussi had written in 1995 (on the eve of the EMU), the debate on European political economy is ‘le débat interdit’. Let's try to start it.

August 2011

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