"Postcapitalism"? Paul Mason Has Been Thinking Too Much Again

Still, a provocation worth a weekend read.

Unfair I know, but hard not to make fun of him & his obsessing with Greece, though.

On the ground in places such as Greece, resistance to austerity and the creation of “networks you can’t default on” – as one activist put it to me – go hand in hand. Above all, postcapitalism as a concept is about new forms of human behaviour that conventional economics would hardly recognise as relevant.

Networks you can't default on, eh?  Sounds like the mafia to me.

The lefties really, really do love this Greek thing: they think it might be ... The Revolution!  Let's see what they've made of it in 12 months' time.  There must be a scenario - let's call it '1789' - in which none of us will be thinking about anything else.

ND

Athens, Brussels and the Awful Lesson of Melos

History Corner

Sheesh, the euro-types have given Greece a going-over.  If those perennial fudgers and compromisers are willing to go as far as that, Tsipras clearly overplayed his hand catastrophically (and of course got right up their noses at a personal level).  Can it possibly stick?  - there's such a thing as a deal that is too good for its own good.

Anyhow, to the history books.   5th-century Athens bore some resemblance to 21st-C Brussels, the hub of a semi-imperial set-up, administering a more-or-less compliant collection of diverse and once-proudly-independent city-states and regional entities.  Some they had taken by conquest, others had originally been fellow members of the Delian League before it morphed into the Athenian pseudo-empire.  In any event they were pretty much obliged to accommodate the wishes of Athens which, for its part, was bluntly guided by its own self-interest, sometimes far-sighted and moderately enlightened, sometimes less so.

Melos was an island which sought to persuade Athens not to enforce punitive levels of tribute.  A debate ensued: the famous Melian Dialogue, as written up by Thucydides, which starts off with some fairly even-tempered exchanges, the Melians attempting to achieve their goals by rational argument, the Athenians courteously responding - giving details - that they didn't see it that way.

It didn't end well.

The Melians should have known.  Although by that time Athens was a democracy (of sorts), and public morality was evolving towards something we'd recognise in the Judeo-Christian tradition, the massive residual influence of the Homeric tradition was still out there.  Homeric morality is simple: only one thing counts, and that is Results.  How you achieve them may be more or less decorous, but a successful Result trumps all nicer considerations and finer feelings.  Initially the results in question were to the benefit of a noble family, later to a city-state, and later still by extension to a wider civic entity.  As the Athenian empire became more complex, it became ever more difficult to determine what exactly was in its best interests (the birth of politics and the rise of the esteemed counsellor alongside the great warrior): but that's not the point.

Tsipras and his chums are Marxists, or so we are told.  Greek Marxists, of all people, ought to have a clear historical perspective on this stuff.  Apparently not: and now his people will be getting the Melian treatment in no uncertain terms.  What price a classical education, eh?

ND

Russia: the Bear-Baiting Continues ...

... unabated, as one might say.  I have just returned from an outing across France and Germany to report that while all eyes are on Greece, something else very interesting is afoot.  Until a year ago the biggest civil actions the world has ever seen were (a) that being pursued against the German government by the three German nuclear power operators (E.on, RWE + Vattenfall), for damages in respect of Merkel's precipitate post-Fukushima closure of their plants.  That one weighs in at around EUR 12 billion, and is perhaps a story for another day.   (b) The BP oil spill ($18 billion, as we now know).

However, these were relegated to the second division by the extraordinary award against the Russian government of $50 billion last July, in favour of Yukos shareholders claiming that Russia destroyed their oil company illegally.

I don't recall this making monster headlines at the time (CU covered it here), but that might change.  Because all across Europe, law firms are diligently working up practical plans to seize Russian state assets - and last month the tip of this iceberg was sighted.  In all the Greek excitement, I certainly didn't spot it.

Apparently this is all very real and maybe even imminent.  There may be trouble ahead ...  oh, and that EC investigation on Gazprom rumbles on.    The countries of the Orthodox faiths must think us western europeans have got it in for them.

A good job the Chinese have problems of their own.  More nervous days in Mariupol though, I'd suggest.

ND

The Grown-Ups Will Be Taking Charge Again

Is it the ritual of voting for who's to be chucked off 'Strictly' that gives people strange ideas about democracy?  Do people 'voting against austerity' think they are doing something meaningful?   Or do they recognise it's just a way of registering their bit of a protest with those - 'the adults in the room', © Christine Lagarde 2015 - who will take decisions regardless.  Or done out of devilment, like when we voted Jocelyn Hapless-Nerd to be form captain.  Not a golden age for democracy.

There's quite a lot of this going on, and it's prominent enough to be taken seriously - or at least, analysed as a serious phenomenon.  Scotland has had its spasm, and will probably be invited to jerk itself off again at a tactical moment of the SNP's choosing sometime soon.  The Greek thing will play itself into another frenetic bout of megaphone diplomacy next week.  Before 2017 is out we shall all be having a go at the old In-Out.  Hey, and the game may soon be extended to 16-year olds, that'll do wonders for the maturity-level of the whole thing.

So: if I vote 'no to austerity', more-or-less in a vacuum, do I consider I am invoking a fundamental right unilaterally to force *someone* to implement a Marshall Plan in my favour?  A bit of a perversion of of the least-worst-system-yet-devised, that.

I am reminded of the 1980s, when Lambeth and Liverpool councillors were wont to vote for utterly demented things, some of which were just empty (unilateral nuclear disarmament in Kennington) but others of which couldn't be allowed to pass: 'spending' money they didn't have was a favourite.  Reality struck, in the form of a new law requiring that a named council employee (the 'nominated adult-in-the-room') was personally responsible for imposing a balanced budget on the naughty councillors.

Jocelyn H-N's electoral success didn't turn out quite as funnily as we'd hoped either.  Not dissimilar really: when it comes right down to it, the adults always get out the cane.  Eventually.

ND

People. Fear. Change.

Some years ago when I was a councillor, I attended a big public meeting called by London Transport, as it was then. The occasion was 'Consultation' on a plan to improve the bus services for a huge, sprawling, isolated council estate (covering 2 entire electoral wards, if that helps to convey the scale) that was fairly dependent on said buses.  LT's plan was radical but clever and - history records - was in due course implemented with great success.

But that was all in the future. At the meeting, speaker after speaker rose from the floor to thunderous applause, and they each the same two points: (1) the current bus service is crap;  (2) nothing must be fundamentally changed.  As Einstein said:  "Insanity is doing the same thing, over and over again, but expecting different results".

This, then, is the human condition, the very basic stuff of politics.

Michael Portillo's TV essay on the Great Euro Crisis (Wednesday of last week) brought all this to mind**.  There he was, interviewing every Greek and German citizen high and low that he could lay his camera on, getting them to illustrate his thesis and, sometimes, to agree with it flat out; namely that current euro set-up lay at the root of their problems.  But with a single and non-representative exception, none of them would abandon the Euro.

Innate conservatism ? Fear of something worse ? Expression of deep-seated support for the federast euro-project ?  

Probably not quite the last of those; although we in this island have very little intuitive grasp of how far enthusiasm for that project runs in many quarters.  But the humano-political condition was on full display.

And something else, which is fairly germane to these considerations: no-one was particularly exercised over the anti-democratic aspects of the major political interventions of the last 9 months' and more.  Oh yes, democracy comes a pretty poor third, or worse, after 'jam tomorrow' and 'grass is greener'.  The senior German minister interviewed, Wolfgang Schäuble was particularly sinister on this: MEPs are elected, he beamed - what more do you want ?

Not hard to see how demagogues play their hands in such circumstances, and how Europe ended up under the totalitarians in the 1930's.  One way or the other.  Yes, London Transport simply ignored all those speeches from the floor.

Well. What else could they do ?

N

** Literary allusion: geddit ? small prize for correct answer 

UPDATE  Purplepangolin  was on this like a shot, identifying it as Yeats (and jolly apposite, too as I think you'll agree).  As prize, he has nominated that we give publicity for this good deed - which we hasten to do.  Support Martin House Hospice and Alastair Green's run ! 

Greece, ISDA, Derivatives - and a Puzzle

So the ISDA committee pontificated on the Greek bond-swap, the smoke issued from the chimney and yes, habemus papam, we have a Credit Event.

This is interesting. The conspiracy theorists had predicted the committee would be swayed by substantial Wall Street influences to vote the other way - against all reasonable judgement - in order to avoid them having to pay out (mainly to European banks) on untold billions of CDS liabilities. You could see why they might: and the word was that an avalanche of systemic risk would otherwise be realised.

Well, t'committee jumped the right way and good on 'em. The whole purpose of ISDA is to have an internationally credible contractual basis for transacting derivatives. ISDA provides definitive guidance on contract language for drawing up forwards, swaps, options etc to ensure the transactions (a) achieve the desired commercial result and (b) are enforceable, which isn't always easy. The problems relating to the first part of this have largely been long-since solved; and for enforceability the usual solution is to have the contracts made subject to English or New York law (i.e. common law, none of your civil code nonsense). But bankruptcy and default will often perforce be subject to overriding local law, and in consequence most of ISDA's work over the past decade or more has related to 'credit support' issues. ISDA's credibility is absolutely vital.

Here's the puzzle. Far from this excellent decision resulting in meltdown,

"according to the Depository Trust & Clearing Corporation’s CDS data warehouse, the total net exposure of market participants who have sold CDS credit protection on Greek sovereign debt is approximately $3.2bn as of March 2, 2012"

and the payout would of course be even less - i.e peanuts, relatively speaking. Do we believe this ? Time will tell.

Incidentally, when writing that ISDA's cred is vital I am conscious that some C@W readers consider derivatives to be the work of Old Nick. Well, take it from Young(er) Nick, this is badly misconceived. Example: without liquid forward markets in commodities there can be no effective & sustainable competitive markets in the physical commodities themselves, for reasons I could bore you with at length. Does anyone around here doubt we need competitive conditions in such markets ? I hope not.

And for effective forward markets, as with any derivatives, we need (inter alia) bankable contracts, and depth - which in turn requires speculative money at the table and plenty of it, as well as 'natural counterparts'. We must hope that things are as benign as they now seem, and that the hype around ISDA's Greek decision was as ill-informed as the Y2K nonsense.

ND

When The Grown-Ups Take Charge

Many of us in these parts are pretty hostile towards Euro-federalism, and it’s easy enough to have a chuckle at the apoplectic reaction to Papandreaou’s referendum. Seeking democratic endorsement for fundamental economic interventions, perish the thought, ha-ha ! These Euro-democrats, they don’t like it up ’em, eh ?

Maybe, just maybe, it was a calculated Machievellian move. But it looks like, and certainly counts as, an entirely childish act, in circumstances where only grown-ups are welcome. And this particular Boy George has shown himself to his Euro-peers to be delinquent. Juvenile.

Look at the haggard faces of the main players, look at their negative body language. Hear them lost for words. See their mortification at the disapproval of China and the USA. At times like these, the only contributions wanted are those intended constructively, by the lights of the crisis itself. Anything else is to miss the gravity of the point.

The Mediterranean debt crisis is the equivalent of war: we might as well all be facing an invasion from the planet Zog. In real war, of course, the position is clearer: the generals, the War Cabinets (no children appointed there) take the powers they need and their actions require no further legitimacy (until, of course, they lose and victors’ justice prevails). Those that by temperament would be minded, or even likely, to raise issues of due process, of morality or balance or consultation or constitutional propriety or any number of happy peacetime considerations - of anything that falls short of iron resolve, immediate purpose and utter expediency – will never make it into those counsels.

[“Open fire on that building.” “But Sir, there may be some of our own men, taken prisoner, inside!” “Fortunes of War. Carry on.”]

There are almost as few constraints in evidence in the boardroom when a full-blown commercial crisis is in progress – and certainly none welcomed, in the person of weak-willed HR directors or meddling non-execs. [“What about the accounting treatment ?” “We’ll take a view.” “Fiduciary responsibility ?” “Let the lawyers tidy that up tomorrow.” “The Risk Committee ?” “They’ll do as they’re told.” “The unions? the works council ?” “Stuff ’em. Get with the programme ! (& get rid of this man ...)”]

And in democratic politics, replete as it is with oppositions, awkward squads, disaffected back-benchers, ambitious and unscrupulous Disraeli-opportunists, parliamentary rules freaks and newspapers with copies to sell and agendas of their own ? Ah yes, it all gets a bit more difficult. But the same basic rules apply: adults to the front, children to the play-pen; Whips out, cards marked, threats made – we know the score. Oh yes, everyone knows the score – except, it seems, Papandreaou (and the eternal smirking schoolboy Berlusconi).

And is this an endorsement of expediency ? Hardly – we know that ghastly mistakes are made when counsel is no longer sought, when ‘yes’ is the only correct response – don’t we, Sir Fred ? For many years Churchill was the juvenile – until he took charge of the war room.

But, seriously. This is serious.

And in these circumstances, they stop at nothing.

Nothing.

And where does this leave Cameron, Hague and our own Boy George ? We should all read this, from the Economist. And ponder.

ND

History Corner: Forced Political Union

At the start of the 18th Century, the Scots were in trouble. A run of bad harvests was bad enough, but it was perhaps the ill- fated Darien scheme that really brought Scotland face to face with its inability to hack it on the world stage. They'd tried to play with the big boys; convinced them- selves they were worthy of a place in the sun ... but it wasn't ever really on. The country was up a gumtree and, individually, the cream of Scottish society had lost huge amounts in the Darien venture.

The stage was set for a bail-out by England, which came at a price, of course. Large sums of cash were forthcoming from south of the border (some of which went straight into the pockets of Scottish negotiators), facilitating the Act of Union and, incidentally, binding Scotland into underwriting a chunk of England's national debt. The Scottish Pound was fixed in relation to the English currency (at the demeaning rate of 1:20). A single monarchy capped the deal. Political and financial union was thereby completed in return for a short-term infusion of urgently needed £££. The Edinburgh mob rioted, but to no avail: and as Robbie Burns was later to bewail of his countrymen -

"we're bought and sold for English Gold - such a parcel of rogues in a Nation!"

Yes folks, this is how independence is bought and sold. Coming to a Mediterranean nation near you soon; and perhaps to all of us, if we don't tread carefully.

Still, some say the Act of Union was the making of Scotland ... eh, Alex ?

ND

No way to run a currency

After all weekend talks to try and resolve the Greek situation, the net result is nothing today. Instead we will have a week or two delay whilst he Greek Government tries to hold together and agree some sort of acceptable plan.

All this demonstrates the fundamental weakness of the Euro when in a crisis situation. Politics is now the driver and politics takes days and week; but markets are open daily.

A sub-plot being worked out here is that I perceive that the Western banks in the City and elsewhere are liquidating their PIGS and European assets as quickly as they can; they know the end game is a default and probably exit from the Euro for Greece. If I was being conspiratorial I would suggest that the European leaders have left this gap open just long enough for the banks to try and save themselves (not that convinced by that line though, it has been obvious this was going to happen for 18 months).

When there is a crisis you need strong leadership and decisive action; the Euro currency leaders provide the diametric opposite. Weak and confused leadership and a variety of not quite satisfactory solutions to any problem.

Indeed, it will be a wonder if the Euro survives the next few years of Sovereign insolvency crises.