Monday, February 29, 2016

On the environment I support dictatorship

My response to my friend Dutch central banker -- see previous post, Dialogue with a Dutch central banker on Europe :

Regarding environmental issues that concern the whole earth I am opposed to democracy and support dictatorship, a dictatorship of wise men and women who develop a wise policy for the world community. Governments, businesses and citizens should implement these wise policies dutifully and, ideally, with conviction and sense of world citizenship. I believe and hope that this would be possible. For this we do not need a eurozone but an EU that creates as much as possible agreement among its citizens - an EU that is able to make itself popular.

Incidentally, I am in favour of European cooperation, which I would never want to throw overboard, just as I am in favour of cooperation in other regions of the world, and cooperation between regions (but not TTIP). Under that constellation we carried out in the nineties (of the last century) the three-year Fondad project on regional integration and multilateral cooperation.

You're right, as long as there is power politics, it is wise to make yourself strong in your own region. But, at the same time, you have to work on a change of mentality: you should not pursue power and out compete the other but promote power-sharing and cooperation with others. We're all together in this small and fragile world, and we must love each other and have interest in each other.

What about the ordinary citizen? Is he / she a pawn or participant in society that can be manipulated or is he / she an actor who co-determines society? Both. In today's Western democracies, the citizen has become too much a pawn or voting-cattle that can be easily manipulated. That is unfortunate and bad for our democracies. And we must never forget that Hitler was elected by the German people.

Only by empowering citizens in a good way (through good education, good media, and grassroots democracy) you have democracies in the true sense of its name. If not, they are playground and plaything of populist politicians (coming from political parties, business and other groups).

There is a long way to go and on the way (in the meantime) important decisions must be made by political leaders; they can not avoid it.

I applaud the climate agreement in Paris. Instead of being cynical by saying "it will be too late" and "governments will not take the measures necessary, because the companies and the people in their countries do not like that", it seems to me important to not give in to cynicism and to continue to give hope to people.

Traduction en français :

Ma réponse à mon ami banquier central néerlandais - voir post précédent, "Dialogue avec un banquier central néerlandais sur l'Europe", Dialogue with a Dutch central banker on Europe :
En ce qui concerne les questions environnementales qui concernent toute la terre, je suis opposé à la démocratie et je soutiens une dictature, une dictature des hommes et des femmes sages qui développent une politique sage pour la communauté mondiale. Les gouvernements, les entreprises et les citoyens doivent mettre en œuvre ces politiques sages consciencieusement et, idéalement, avec conviction et le sens de la citoyenneté mondiale. Je crois et espère que cela serait possible. Pour cela, nous n'avons pas besoin d'une zone euro mais une UE qui crée autant que possible un accord entre ces citoyens - une UE qui est en mesure de se faire populaire.

Soit dit en passant, je suis en faveur de la coopération européenne, que je ne voudrais jamais jeter à la mer, tout comme je suis en faveur de la coopération dans d'autres régions du monde, et la coopération entre les régions (mais pas TTIP). Sous cette constellation, nous avons réalisé dans les années nonante (du siècle dernier) le projet FONDAD de trois ans sur l'intégration régionale et la coopération multilatérale.

Vous avez raison, tant qu'il y est de la politique de puissance, il est sage de vous faire fort dans votre propre région. Mais, en même temps, vous devez travailler sur un changement de mentalité : vous ne devriez pas rechercher le pouvoir et à concurrencer l'autre, mais de promouvoir le partage du pouvoir et de la coopération avec les autres. Nous sommes tous ensemble dans cette petite et fragile monde, et nous devons nous aimer les uns les autres et avoir un intérêt dans l'autre.

Qu'en est-il du citoyen ordinaire? Est-il / elle un pion ou un participant à la société qui peut être manipulé ou est-il / elle un acteur qui joue la rôle de co-déterminant de la société? Tous les deux. Dans les démocraties occidentales d'aujourd'hui, le citoyen est devenu trop un pion ou vote-bétail qui peût être facilement manipulé. Cela est regrettable et mauvais pour nos démocraties. Et nous ne devons jamais oublier que Hitler a été élu par le peuple allemand.

Seulement en responsabilisant les citoyens dans le bon sens (par une bonne éducation, bons médias et la démocratie de base) nous aurons des démocraties dans le vrai sens de son nom. Sinon, ils sont aire de jeux et jouet des politiciens populistes (provenant de partis politiques, des entreprises et d'autres groupes).

Il y a un long chemin à parcourir et sur le chemin (en attendant) les décisions importantes doivent être prises par les dirigeants politiques ; ils ne peuvent pas l'éviter.

Je salue l'accord sur le climat à Paris. Au lieu d'être cynique en disant «il sera trop tard» et «les gouvernements ne prennent pas les mesures nécessaires, parce que les entreprises et les personnes dans leur pays n'aiment pas", il me semble important de ne pas céder au cynisme et à continuer à donner de l'espoir aux gens.

Friday, February 26, 2016

Dialogue with a Dutch central banker on Europe

I asked a friend of mine, who is a Dutch central banker, what he thought of my post Europe could become again an inspiring example for the world. This is what he answered (translated from Dutch):

"Interesting to read. You address major issues on which I am inclined to have a nuanced look. I also understand that having a euro at this time is not easy and perhaps is not ideal in the case of Greece. Legitimate questions of whether Greece actually should have joined the euro do not necessarily mean that they would have to leave the euro. Perhaps you're in the wrong train, but that does not mean it is wise to get out of it.
With respect to regionalization, there are many nuances: indeed countries can no longer pursue their own policies. Sometimes that's unfortunate, but sometimes that's a good thing. Because many problems in a "global village world" can not be solved nationally (particularly environmental issues).
Your call for a fair division of power in the world will never succeed without strong regions.
Seen from the advancing technology regionalization is fairly irrelevant: companies do not mind about country borders and increasingly neither about regional borders. At the same time regionalization can not succeed if it is not in line with the preferences of ordinary citizens. Sooner or later it creates conflicts: cf. the discussions in the UK on EU membership.
Yet I still see the movement towards further integration in Europe, with all its hick ups and problems, as the best way to serve both peace and to ensure environmental sustainability. In short, these are big questions - and I only have small answers ..."

In the next post I will say how I responded. What would you respond to either my friend's comments or my previous post?

Saturday, February 20, 2016

Europe could become again an inspiring example for the world

Bernard ter Haar, key official in drafting the Maastricht Treaty
Before I tell you why I think Dijsselbloem and Varoufakis are demagogues in their defence of the euro, let me stress that I don't like to call someone a demagogue. I used the term in the previous posts following Robert Triffin's criticism of his colleagues - Robert Triffin: "Most economists are demagogues". I find it a bit demagogic to call someone else a demagogue and sometimes I find myself a demagogue... 

Why do I think Dijsselbloem and Varoufakis are 'demagogues' in defending the euro?
Because the euro monetary system is less rational and less beneficiary to its citizens than they pretend it is or could be. In Dijsselbloem’s view, the euro system is rational and only needs some improvements. Varoufakis does not think it is rational and sees the need to democratise it and base it on more rational diagnosis and more human economic policies. 
But I think the eurozone monetary system is not rational and will not become rational by democratising it or by improving its internal assessment and diagnosis. In my view, it is a system that countries should reform or abandon when they feel it is not in the interest of their people and/or the world at large. Just like they should reform (abandoning is impossible) the US dollar based international monetary system because it is not in the interest of the large majority of US citizens and the world at large. 
Both the euro and the US dollar systems serve the interests of a small minority of people who represent the military industrial complex (term coined by Eisenhower). It's NATO countries that have opposed reform of the international monetary system. By maintaining the US dollar as the key currency the United States is able to spend as much as it wants on its military force, giving protection to the other NATO countries and maintaining their financial and economic power. And by maintaining the dollar as key currency NATO countries have also succeeded in making other countries participants (stakeholders) in the system and having them contribute to the financing of US military expenditures. But the Chinese are moving forward with their bilateral monetary arrangements, foreign investments, and their recently established Asian Infrastructure Investment Bank (AIIB)...

This last thought, a monetary system that serves geopolitical interests and the economic interests of large corporations, rather than the people (though we, the consumers, are benefiting from relatively low-priced products), is the reason I copied in the previous post my letter about China and the need for global power sharing -- Power should be shared globally.

But there is another reason I was critical of the euro even before it was introduced. In the days of drafting the Maastricht Treaty I happened to convene and chair an informal discussion group on international finance comprising officials of both the public and private financial sectors in the Netherlands. One of them, Bernard ter Haar of the Ministry of Finance, happened to be the key official drafting the euro treaty. So we had discussions in our group about the pros and cons of introducing the euro. I was against it because in my view it would limit the policy space of member countries and impose neoliberal policies. I was not the only one against it, but we were a minority in the group.

As Fondad we did in the 1990s (after the creation of the euro system) a three-year project on regional integration and multilateral cooperation dwelling on both themes in the various regions of the world: Latin America, Africa, Europe, and Asia. In the introductory chapter of one of the six books that emerged from this project I wrote in April 1998: 
"This brief account of European integration points to another issue which I see as one of the major problems of an unbridled process of ever-deepening regional integration: How far should it go? Isn't Europe's energetic embracing of a single currency, the Euro, now showing the pitfalls of integration that has gone too fast or too far? Should European nations not put more energy in keeping alive  their rich variety of differences – in cultural, social, political and even economic life – rather than almost blindly following the new dogma of 'conversion' of economic policies? Let me explain. As with other ideals, regional integration should never become a dogma. It is a useful and attractive project as long as those who are intended to benefit from it indeed reap the fruits (without jeopardizing those who remain outside). But on the day that citizens begin to raise serious and well-founded doubts about the supposed beneficial effects, policymakers and entrepreneurs should begin to rethink the wisdom of ever-increasing regional integration. In my view, regional integration should never become an end in itself, but it should be subdued to the broader and 'higher' goals of justice, social equality, cultural identity and respect for nature. In other words, social, political and cultural (and economic!) considerations can be good reasons for a revision of integration plans."

Two-and-a-half years ago I organized at the Dutch central bank (De Nederlandsche Bank) a seminar about the future of the euro. On this blog I wrote a post about it, The future of Europe, in which I said, "Europe could become again an inspiring example for the world -- if it maintains its social ideals, its social system, and creates more effective economic policies, for the sake of Europe and for the world at large." 

The negotiations between Greece (Varoufakis) and the eurogroup (Dijsselbloem) during the first half of 2015 convinced me that the euro does no longer serve the interest of the Greek people. 

I know, it is hard to abandon a regional monetary system that businessmen (large and small) and citizens (e.g., pensioners in northern Europe) do like, or see as the only alternative. But even businesses (and pensioners) need to think about serving the interests of the people in the whole of Europe and not only those of themselves and their own countries. International solidarity is key to both regional arrangements and the global system. 

PS: Last year Paul de Grauwe predicted that the euro would come to an end, Paul de Grauwe: "Europe's monetary union will not last.

Wednesday, February 17, 2016

Power should be shared globally

Before I answer the question raised in my previous posts whether Varoufakis and Dijsselbloem are demagogues in their defence of the euro (just like Triffin called his friends who defended the US dollar dominated international monetary system, demagogues), I would like to put the European debate on the euro in a broader international and historical context.

Six years ago, on 26 January 2010, in an exchange of e-mails between Fondad Network members, I wrote about that wider context in a letter to Andrew Sheng, Wing Thye Woo, Zdenek Drábek, Charles Wyplosz, John Williamson and Dani Rodrik.

I said the following:

Some Western European powers (including the Netherlands to a minor extent) and in particular the UK dominated the world during a couple of centuries. After WW2 the US was able to dominate the world during a couple of decades, partly thanks to NATO and maintaining the dollar as the key currency. This domination is likely to end, prompting the US to seek alliances with emerging world powers like BRIC. 

During many centuries the Chinese and Arabs (and others) were much more important in the world economy (and culture) than the Europeans, while the US was still territory of the Indians (coming from Asia) in those days instead of European immigrants. I can imagine that "the" Chinese see European and US domination as a short interval in world history and are certain (if it were only because of their number of people) that they will become more and more important (together with Indians-India and other developing nations).

Will that be the end of Western Democracy as Dani fears? I don't know, I have the feeling western democracies are themselves undermining their democracies, inter alia by using voters for legitimizing the rule of small and powerful interest groups. How many people in "the West" still have confidence in their rulers? And if they have it, what does it mean in terms of the functioning of their democratic systems?

It is useful to speculate about the future of Western Democracy in its different features and "led" by its different politicians (e.g. Berlusconi, Blair, Bush, Balkenende), but rather than looking at the possible negative influence of China's rise as a world power, I prefer to look at what NATO countries do themselves to their democracies -- I feel they are not taking seriously the precious aspects of democracy thus allowing the rise of dangerous demagogues who remind me of Hitler and Mussolini (different characters), but I hope the demagogues will not be able to rise to the same "fame" as these two men (H&M) who both emerged in western democracies.

Maybe cooperation with China and other emerging economies will help prevent that from happening. But, first of all, citizens in western democracies should make an effort to improve the functioning of their democracies and stop seeing their interests as determined by the power of their nations in the world. Power should be shared globally and not enforced from one of the world's power centres -- be it the US, China, Japan or Europe.

Friday, February 12, 2016

Dijsselbloem and Varoufakis defend the Euro

Are Dijsselbloem and Varoufakis demagogues because they both defend the euro?

What do you think?

And do you think that both Dijsselbloem and Varoufakis defend the euro by "making a proper, rational analysis"? (quoting my previous post)

And isn't the euro "causing recurrent crises that hurt the poor"? (quoting again my previous post)

PS: For Varoufakis's defence of the euro see, for example, his modest proposal for resolving the euro crisis, and the 16 October 2015 article in FxStreet, Yanis Varoufakis On Tour: A Pan-European Plan to Fix the Eurozone. With respect to Dijsselbloem's view, you may like to read his 31 May 2013 speech given in Greece, The challenges of the euro area, and his 15 January 2015 speech in Seoul, Speech by Jeroen Dijsselbloem at the global trade forum in Seoul.

Wednesday, February 10, 2016

Robert Triffin: "Most economists are demagogues"

Jan Joost Teunissen interviewing Robert Triffin, 1985.
I would like to come back to an issue raised in a post of last year, Robert Triffin: "Most central bankers and economists are demagogues". In that post I quoted from an interview I had had with Robert Triffin in which he said, "policy decisions are dominated by slogans. (…) Many of my best friends share those slogans."

Why do academics (especially economists?) share and promote (!) slogans?

Because they believe in them?

Because they are conformist?

Because these slogans defend their interests?

All three answers may be true. But there is one other possible answer that I would like to dwell on and that is that many economists (most of Robert Triffin's friends were/are economists, I guess) simply do not see that they are sharing slogans. They feel, I think, that they are doing a serious, thoughtful job by defending these slogans.

What slogans am I talking about, or what slogans did Triffin have in mind when I interviewed him in Louvain-la-Neuve? Slogans that defended and promoted the current order, or disorder, as Triffin preferred to call it. Rather than promoting a proper international financial system, most economists defend and promote a global financial system based on the US dollar as key currency, which in Triffin's view is a non-system causing recurrent crises that hurt the poor.

Robert Triffin was not only critical of his fellow economists' defence of the US dollar based global system, but also of their lack of proper, rational analysis. Are many economists indeed not making a proper, rational analysis?

In a future post, I would like to try and answer this question taking the defence of the euro as an example. The insteresting fact is that both Dijsselbloem and Varoufakis defend the euro...

Tuesday, February 9, 2016

Tsipras could have rejected Troika demands, writes German journal "Die Welt"

I read an interesting article in the German newspaper Die Welt. For those who read German I copy the part that I found most interesting, which is about the fact that the Greek government of Tsipras could have decided on legal grounds (!) to not obey the Troika's demand to stick to debt agreements made with former Greek governments. (If someone knows of an English version of this story, please let me know:

(...) Nun bläst die prominente europäische Linken-Vorhut zur Attacke und singt das Hohelied nationalstaatlicher Souveränität: "Die Demokratien der Mitgliedsstaaten brauchen Luft zum Atmen und den politischen Raum, der ihnen die Möglichkeit gibt, sinnvolle Politik auf einzelstaatlicher Ebene voranzubringen." Mit ihrem Vorstoß treiben sie einen Keil in das linke Lager und bauen eine Front zu Gregor Gysi, der Links-Ökologin Katja Kipping und anderen Kräften auf, die auch weiterhin fest zur EU und zu Tsipras stehen. Gysi reiste sogar nach Athen, um Wahlkampf für die Reste der Syriza-Partei zu machen, die zerbrach, als sie im Parlament gegen die eigene Überzeugung und Programmatik stimmen musste.

Hätte Tsipras erfolgreich gegen Sparauflagen klagen können?

Seither fragen sich viele Linke: War das wirklich nötig? Hatte Tsipras wirklich keine andere Wahl? Zweifel scheinen zumindest angebracht. Zwar wird sein Handeln offiziell auch von den neuen Euro-Gegnern wie Sahra Wagenknecht gerechtfertigt. "Die EZB hat ihn erpresst, weil sie damit drohte, die griechischen Banken pleitegehen zu lassen", nimmt sie den Syriza-Vorsitzenden in Schutz. Aber dass Tsipras bewusst den Varoufakis-Vorschlag einer Parallelwährung in den Wind schlug und die Forderung der Geldgeber akzeptierte, den Finanzminister von internationalen Konferenzen auszuschließen, stößt bei den Euro- und EU-Kritikern in den Reihen der Linken auf Unverständnis.
Hinzu kommt, dass Tsipras wohl auch Vorschläge für eine juristische Abwehr der von den Gläubigern geforderten Sparauflagen ignoriert haben könnte. Während des Referendums über die Sparauflagen der Gläubiger veröffentlichten die UN eine Stellungnahme der Menschenrechtsexpertin Victoria Danda und der Experte für demokratische und gleichheitsgerechte Ordnung, Alfred de Zayas, dass völkerrechtliche Verträge und Kreditvereinbarungen, "die zur Verletzung universeller Menschenrechte zwingen", nach Artikel 53 der Wiener Vertragsrechtskonvention nichtig seien.
(underlining by me, JJT) 
Bereits ein Jahr zuvor hatte die deutsche Menschenrechtsaktivistin Sarah Luzia Hassel-Reusing dem Syriza-Führer darauf hingeweisen, dass die Kreditverträge nicht mit den UN-Menschenrechten vereinbar seien. "Darauf hätte sich Tsipras berufen und mit Hilfe der UN vor den Internationalen Gerichtshof ziehen können", sagt Hassel-Reusing und stellt fest: "Jedenfalls sind die von ihm unterschriebenen Memoranden höchstwahrscheinlich nichtig."
Vor wenigen Tagen verabschiedete die UN-Generalversammlung ganz in diesem Sinne mit der überwältigenden Mehrheit von 136 zu sechs Stimmen "Neun Prinzipien für einen fairen Umgang mit überschuldeten Staaten". Sie lauten: Souveränität, guter Glaube, Transparenz, Unparteilichkeit, Gleichbehandlung, Staatenimmunität, Rechtmäßigkeit, Nachhaltigkeit und Mehrheitsentscheidungen.

Grundbedürfnisse vor Gläubigerinteresse

Gegen diesen Beschluss votierten Deutschland, Großbritannien, Israel, Japan, Kanada und die USA. Kaum war das Votum bekannt geworden, lancierte Finanzminister Wolfgang Schäuble (CDU) ein dreiseitiges "internes Papier für eine europäische Insolvenzordnung" an die Öffentlichkeit, bei der der Internationale Währungsfonds eine entscheidende Rolle einnimmt. (...)