On Greece – and some broader issues

I haven't been posting lately, but I have been following very closely the Greek debt crisis whilst continuing to review my own ideas on economic and political issues. Needless to say, my sympathies are not with the the radical leftist coalition which has been in power in Greece for a little over a month now – and which has been indulging in absurd posturing and making reckless and unrealistic claims and promises and unnecessarily alienating their creditors (mainly other eurozone governments).* But nor am I endorsing the approach of the euro establishment whose actions have arguably exacerbated Greece's problems.

With respect to my own general views on social, political and economic questions, there hasn't been any dramatic change, though one always watches how well (or badly) one's (for want of a better phrase) ideological preferences match the unfolding realities.

One of my main preoccupations is to resist those metaphysicalizing tendencies which are as much – if not more – a feature of left-wing as of conservative thinking. In general I find views based on religion or traditional metaphysics – for example, notions of natural law and universal human rights – to be flawed and unconvincing and am very much scientifically-oriented in terms of my worldview. At the same time, I am strongly attracted to conservative and pragmatic approaches to many personal, social, cultural and political questions.

Something I have been trying to do for years now – and without much success, actually – is to identify thinkers with whom I can identify on a wide range of issues. The trouble is scientifically-oriented thinkers are usually leftists or at least left-leaning; whereas conservatives or classical liberals all too often maintain an explicit or tacit commitment to religious ideas.

Take the European neo-liberals I refer to in the current version of my 'Sketch of a Social Philosophy'. Most of the thinkers in this group, including the most prominent examples like Ludwig von Mises and Friedrich Hayek, arguably had religious or at least traditionally metaphysical convictions. Mises was not religious in the conventional sense but saw the major world religions as somehow reflecting some kind of underlying metaphysical or essential religious truth. Hayek, who had a Catholic background but was not a churchgoer, called himself an agnostic. There are very strong Kantian elements in his thinking, however, and, as with so many of his friends and colleagues (Karl Popper and Eric Voegelin come to mind), it seems clear that his moral and political commitments were driven by a sense that human beings have a capacity for freedom (and insight?) which somehow transcends the bounds of scientific and pragmatic reason. I value my personal autonomy and privacy as much as anybody, but I balk at transmuting this feeling – part cultural, part psychological trait – into some kind of metaphysical position or generalized belief in 'human freedom'.

Voegelin I have been looking at recently: interestingly conservative ideas but tied explicitly to a distinctly religious (though non-doctrinal) view of the world.

I have also been looking at some legal philosophy. Hans Kelsen's legal positivism is worth considering but I'm not entirely convinced by it. (Kelsen, by the way, was Voegelin's dissertation advisor.) At least Kelsen rejects the natural law tradition.

Another legal philosopher I have been looking at is Carl Schmitt (who in fact engaged in a long dialogue with Hans Kelsen). Schmitt also emphasized the parallels between religion and politics. His analysis of the weaknesses of liberal-democratic systems is insightful but his prescriptions could all too easily be used (as they were by the Nazis) to justify totally unacceptable practices along the lines of ethnic or ideological cleansing.

Schmidt's ideas are not focused particularly on 'race'. He saw the roots of the political in the friend/enemy distinction, in a sense of collective identity so strong that group members would be willing to defend the group's existence and autonomy by force of arms.

Schmidt's views reflect a very pessimistic view of human nature which, although obviously related to the notion of original sin, is not without a certain plausibility. In general terms it could be defended on secular and empirical grounds alone. And, though he bases the political in the notion of potentially lethal antagonisms, he doesn't glorify war or encourage violence in the way many radical thinkers do. (Georges Sorel, for example, saw certain forms of violence as intrinsically noble; and many Marxists, of course, actively encourage(d) violent revolution.)

In today's economically and politically volatile environment, respect for the basic social and political institutions is waning, even (especially?) amongst conservatives, so there is a special interest in truly radical thinkers (like Schmidt) who question the liberal foundations of modern Western democracy.

I personally see the law in very pragmatic terms and only respect it to the extent that it limits itself to providing basic and uncontroversial guidelines and protections and disincentives to harmful and antisocial activities. In my view the legal systems in most Western countries have been ideologically corrupted over recent decades and have, as a consequence, lost a large degree of their credibility.

But these are deep and complex issues and I am here merely noting a few half-developed thoughts and feelings.



* Ambrose Evans-Pritchard – currently in Athens – gives an excellent, historically-informed account of how things stand at the moment.

Gloomy about Europe

Borrowing costs may have come down across Europe – even in Greece – but the underlying economic situation in many euro zone countries is still grim. And it may well be that the political consequences are only just starting to emerge.

In a recent piece in the Financial Times Gideon Rachman suggests that the euro crisis hasn't gone away: it has simply moved from the periphery to the core.

Italy, for example, has lost 25% of its industrial capacity since 2008, and the real level of unemployment is about 15%. The country's ratio of debt to GDP is more than 130%. France too has double-digit unemployment and the national debt is rising towards 100% of GDP.

Tension between European Central Bank president Mario Draghi and the German economic establishment including finance minister Wolfgang Schäuble seems to be increasing. And Rachman fears that Europe is very vulnerable to an external shock – such as higher energy prices as a result of any standoff with Russia over Ukraine.

Europe's fragile economy is in danger of being tipped into a deep recession. "And," writes Rachman, "a return to deep recession would favour the radical fringes in Europe."

Anyone who has witnessed Marine Le Pen's unequivocal and outspoken but brilliantly controlled television interview performances will be only too aware of the dangers.

But though she has made the Front National far more respectable than it was under her father and has achieved impressive electoral successes (such as in recent mayoral elections) with the prospect of more to come, she has not moved her party into the political – and certainly not into the economic – mainstream. She appeals directly (and effectively) to the French people and scorns the institutional status quo. And her protectionist economic policies are quite at odds with the economic thinking of both the centre left and the centre right.

The situation in other European countries, of course, is different but groups supporting policies similar to those of the FN are now a common feature of the political landscape.

In Asia, by contrast, despite rising nationalism and real threats to the continuing growth of trade and prosperity, bilateral free trade deals and other new arrangements to facilitate international trade and financial transactions are somehow continuing to happen. (Deals between Australia and Japan and Australia and South Korea have been finalized in recent days, for example, and a suite of new arrangements between Australia and China is expected to be concluded this year.)

Despite problems in some regions – like poor air or water quality, or food contamination – much of East Asia (and South and South-East Asia and Australasia) continues to benefit from strong levels of economic activity, with most countries still firmly committed to further lowering barriers to increased trade and investment.

Meanwhile Europe, driven by long-term historical, economic and demographic trends as well as more contingent cultural factors, is moving slowly (but apparently inexorably) to the periphery of global politics and trade. It doesn't help that, under an ineffective President and an increasingly dysfunctional political system, the United States seems to be drifting into a long, drawn-out and perhaps inevitable decline.

Such prognostications, I know, are not worth much. But as more people come to see things in this way – and they will if nothing happens to suddenly render this narrative implausible – these expectations will affect behaviour, feeding and consolidating deep, underlying economic and social trends. Even now, many Asian cities (like Singapore, for example) are booming and attracting some of Europe's and America's best talent.

I don't know that it makes sense to talk about Europe as a single entity. It has always been a patchwork of nations and regions with very different cultures and levels of prosperity. And – despite attempts over recent decades to create a more unified and homogeneous union – it remains something of a patchwork, more interdependent, certainly, but also more divided in new and complex ways.

Some regions, no doubt, will prosper; others will languish, relatively speaking. Given the overall economic situation, however, the best one can hope for, I think, is that the countries of Europe will maintain social harmony and hold at least to the general levels of prosperity which currently exist.

This would not be so bad. But such an outcome is far from guaranteed.

Back to the drachma?

This piece (from Bloomberg Businessweek) makes some good points about the problems which a return to the drachma would cause for the Greek economy - including exporters. For example, the price of imported components and raw materials upon which many exports depend would soar. On the other hand, agriculture and tourism would benefit.

What stood out in the article for me was not so much the analysis as a reported remark by a disgruntled German guest (it would have to be a German, wouldn't it?) to an Athens hotel worker: "You don't have an economy, government, or money, but you're charging me €4 for a coffee."

The idea of Europe and France's idea of itself

I'm impatient to know what is going to happen to Europe. It matters to all of us, insofar as Europe plays an important part in the global economy, and it matters particularly to those of us who live in Europe, or intend to live in Europe, or who simply cherish an idea of Europe (for ethnic, cultural, intellectual or other reasons).

The Economist's Charlemagne gives a good account of the background to and the prospects for a new treaty. In fact there are two treaties being negotiated: the new intergovernmental treaty associated with the recent Brussels summit; and the not-so-new but yet-to-be-completed treaty setting up a permanent bailout fund (the European Stability Mechanism). These documents appear to be crystallizing not only a two-tier E.U. but also a two-tier euro zone (with debtor countries lacking veto powers, for instance).

But will the markets wait for the bureaucrats and politicians to complete their ambitious agenda of drafting and ratification? Will the temporary rescue fund, the European Financial Stability Facility, prove to be adequate (in conjunction with other funding sources like the IMF)? In the absence of massive bailouts (which can create their own problems), it's difficult to see how heavily indebted countries will be able to come out of this without devaluation (which would entail exiting the euro zone).

Particularly interesting, in the light of my recent reflections on dealing with decline, are comments by Johan Van Overtveldt who, in a new book (The End of the Euro) singles out France for special criticism. "France's inability to accept gracefully its political and economic decline has produced additional tension. La grandeur de la France, once an undeniable reality, is now a thing of the past."

Recent statements by French leaders attacking the creditworthiness of the U.K. were so far beyond the pale as to indicate a degree of panic.

And no wonder, with the ratings agency Fitch saying that "a comprehensive solution to the euro-zone crisis is technically and politically beyond reach," France's triple-A status on the brink of a downgrade - and a French presidential election just a few months away.

One last quote. On a Sky News Christmas special pre-recorded last week, Sir Philip Hampton (the Royal Bank of Scotland's chairman) said he thought the banking system could cope with Greece's exit from the euro zone, but he had broader concerns about social cohesion, even in France. "France has got an unmatched history of getting on to the streets and making a big noise. I'm amazed the French have been so subdued. I don't think it will continue."

If the French do take to the streets, let's hope the Islamists don't hijack the revolution. That would be an interesting twist.