Sunday, 7 October 2012

State of war

This may sound really silly, but from a theoretical point of view it makes quite a lot of sense.

Much has been said about the current economic climate. Too much, as I see it. But I want to focus on a particular analysis made by some groups, especially some radical left-wing anti-market groups. They have stated there is a war waging right now. Instead of countries fighting each other or factions fighting a civil war, this is a more subtle kind of war. Cold War-like, but with an economic focus.
Indeed, it could be said that countries are trying to fight markets, in this war, and as much as it pains me to say this, markets would be winning this war, so far.
To be fair, however, this is not the whole story. A few centuries ago, just after the Peace of Westphalia,  if a country could not repay another country what they owed, the solution was simple: invasion. Similar to a business hostile takeover, so to say. Which also meant feudal lords really tried to keep up with their payments and not be more indebted than they could afford to be. Capitalism is based on incentives, after all, and the prospect of losing a good way of life, a fortune and your independence is a very good incentive for you to try to avoid the circumstances which might make it happen.
However, during the financial boom, these negative incentives were removed. If brokers did really well, they earned outrageously huge amounts of money. If they did really bad, they were not penalised. Therefore, as for brokers it all was risk-free, they invested heavily, instead of wisely.
I do not want to discuss this, however. It is good to keep it in mind, but that's about it. I want to talk about countries today. I am going to take a realist perspective during this essay, overriding even the main EU tenets. Because, frankly, they need being overridden.
I have said before that in medieval times, creditor countries invaded indebted countries if the latter could not pay the former and defaulted. This is datio in solutum, after all. Something medieval lords used but modern European banks do not seem to understand, when it comes to mortgages. Even so, you probably have thought something like "these medieval savages, they did not know how to solve anything without war". Well, you are right, it is probably a savagery to use precepts such as might is right. But has it really changed that much?
Well, surprise: the answer is no.

Let us look at Europe. Since the implementation of the euro was badly made and created artificial economic change in much of Europe, it has led to so much trouble. Some say only more unity can solve this, others say there is no way to avoid suffering and an eventual breakdown of the currency will have to take place. I am not an economist and since the little money I have to my name is in sterling, I am not too concerned. Well, I am, but not just for now.
But the eurozone is in serious trouble, and peripheral countries within it all the more. Curiously enough, peripheral eurozone countries are actually geographically peripheral within Europe. This may be chance but to be fair it probably is not. When the ECSC was first conceived it affected largely the centre (and Italy), and being on the edges means having been a) more isolated from pan-European values (ie having less in common with countries at the centre) and b) more exposed to other ways of doing stuff, other values. Countries such as Ireland, Finland and Greece have pretty much nothing in common to have the same currency. But they do have the same currency. It was meant to encourage trade, but it encouraged many other things, and all of them artificially.
Historically, these countries have had different ways of doing things. Greece was part of Turkey until a century ago, while Ireland had a Celtic character largely oppressed by the British. Finland was part of Russia. One needs not be a genius to see Britons, Russians and Turks had next to nothing in common in managing their respective empires. Spaniards, the Portuguese and Italians also had different ways.
You may think this does not matter as it happened many, many years ago, but it does matter, and a lot.
Two of the countries most in trouble right now, Greece and Spain, fought civil wars around 80 years ago. As a result, you should expect those societies to be still largely fragmented, and you would be right. But then, what sense does it make that Germany is faring so well, since it was actually fragmented just about 20 years ago? Well, you might say it is a mystery, but not really. Germans have seen their country reduced to ashes twice in thirty years and they have moved on quickly, it is part of their ethos. This is not to say Germany has no internal problems and eastern Germany fares as well as western Germany because that would simply be a lie, but they have been more able to move on. At the price of forcing a sizeable chunk of the population to subsistence, but for some reason Germans have always been good at making sacrifices for the good of the nation. (If any Germans read this, do not be offended. I am not saying all you lot are equal or you like making those sacrifices, but it is true this has happened.) Spaniards or Greeks cannot be expected to make any sacrifices for the nation because there simply is no nation.
I am saying all this just to make you think whether it was a good idea to create the eurozone so soon and out of the blue, just like that, just like they did. This is coming from a convinced pro-Europe thinker, but it is true that they rushed it all a little bit too much for my liking.
So when it all happened, both Northern and Southern Europeans alike saw a land of opportunity in these peripheral countries. There was a boom and a massive growth, and no one wanted the party to ever end. Northerners invested and Southerners got rich. Everyone was happy.
Then the bad times came. And all that fraternity and sharing vanished. Suddenly everyone was more self-conscious than ever of whether they were Southerners or Northerners.
In a war there are winners and losers, and in this case the North is being clearly a winner. At least so far. They started talking about massive corruption and laziness and who-knows-what. Which is partly true, of course, especially the corruption bit, but they do not explain how they got on that same train because everyone was so happy they did the Dance of Joy.
After all this talk, the we-are-all-brethren discourse took hold, and like good brothers, help was given. But not without conditions because, after all, we are not brethren.
And so; Greece, Ireland and Portugal received bailouts but now have to accomodate  German-speaking civil servants who have a final say in their economic policy. These committees, known as the troika, are technically European but are controlled by Germany. Just like bailout money, technically European but ultimately given by Germany.
This control has led to harsh austerity measures which are not proved to improve a single thing but are ok because they allow more money to go to German pockets in interest payments; and these measures have led to many grievances, lots of poverty and effectively misery. So much for good brethren: siblings may hate each other but they would not let the other starve.
Wait a minute! I don't know to you, but to me this sounds pretty much like waging war and invading a country. You may think I am exaggerating but think of it: foreigners controlling policy and the general populace starving.

Lately there has been talk about a Spanish bailout. Spain is already bailing out its regions, but because it does not have any money, many say it is now time for Spain to seek a bailout from the EU. Like all rumours in this crisis, it will eventually be confirmed, probably sooner rather than later.
So, because I am in Spain right now and for the foreseeable future ([lack of] health obliges!), I am going to put forward a solution for Spain.
Even though a Spanish bailout would not carry as many conditions as the Greek, Irish and Portuguese bailouts, largely because Spain is so big it cannot be as bullied as those other small countries, it would certainly carry some further hardship conditions. And let us face it, it is not good for any country to have conditions dictated from overseas (realism anyone?).

So I say to Spain: declare a state of war. It does not matter to whom, it can even be to no one, or if that's not possible, declare war to an extinct country, or something. What matters is the state of war back home. Suddenly austerity would seem a must, and idiotic spending like tonight's Clásico would seem superfluous and be abolished. Instead of putting people to work on arms factories, the country could invest in itself, and get some unemployed (maybe an unemployed person per household) workers to fix the country. Infrastructure, nurture exports, etc.
Why should this work? Well, for two reasons. Firstly, because it would be temporary and given the circumstances, it would not change people's lives much. And secondly, because during that period, all superfluous spending would be cut. Think of the amount of money we could save if we slashed spending in, say, fireworks, parades, etc. Sports leagues could perhaps continue but caps on wages should be introduced, "to contribute to war effort". Yes, I know this would not work as footballers would simply move to another European country, but if it could be done Europe-wide, things would be different.
And yes, I am aware tourists would go elsewhere if we were at war, but to be fair, I am not too worried about this for a number of reasons. Firstly, we are seeing how Greece's tourism figures are plummeting, given its pseudo-war current situation. Many services are now offered in sterling due to uncertainty on the euro. Secondly, tourists are actually already going elsewhere and not to Spain, largely due to an increase in air and hotel taxes, which makes other sun destinations more attractive. Thirdly, because let's face it, Spain is not going to declare war on anybody.
And fourthly, because even if this were done, it could be done European-style. In other words, disguising it as stimulus, or as brotherly cooperation for the common betterment of the community, or some other long cheesy-sounding name like that. And then of course we would not technically be at war and tourists would still come, excited to see the exotism of this betterment which would ultimately involve more people starving while a small elite are cashing in all the money.

NB: I know this is silly, I know. But to be fair, what is currently being done about this is even more silly, so why should I be ashamed of speaking up?
We need some change and we need it now. I am not going to be typical and say 'cuts are bad', simply because sometimes they are necessary and even beneficial. But unless you do something else along with the cuts, you are shrinking output further, which in turn will lead to even more cuts because even less revenue will be collected. A Catch-22 situation which will be deadly for us pretty soon unless they try to do something to get out of it soon.


  1. I couldn't agree more. I have expressed very similar thoughts in the recent past, albeit using the less effective 'declaring a State of Emergency and implementing survival measures'. I believe 'State of War' is the very name I was looking for, although it simply wouldn't occur to me. 'War' sounds harsh in every ear and I still think we really need a lot of toughening up to own the current times. A reality check, if you will.

    Great post, as is your wont. I hope you'll be back in shape real soon.

  2. Thaaank you! Pretty much everyone would rather accept tough conditions imposed on them for no reason and with no real positive effect than toughen up themselves, something I find weird as well as disturbing.

    As for recovering, that promises to be harder, but I am definitely working on it.


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