Current Affairs

The newspaper header is:

Panos Kammenos, Greece’s defence minister, threatens to open country’s borders to refugees – including potential members of Islamic State of Iraq and the Levant (Isil) – unless Athens receives debt crisis support

The story is here, via Andrea Castillo.  Whether it jives with your mood affiliation or not, it’s time to admit “these people simply don’t know what they are doing.”  Fortunately, it does seem the Greek government has been walking back on this talk.

Just asking

Theory would seem to suggest yes the swap is contractionary (though see Evan Soltas), but so far European QE seems to have had a mildly stimulative effect, mostly through the exchange rate.

In any case someday you can tell your grand kids about this.

Even though the Greek electorate has elected left-wing leaders, the “the Greek government” hasn’t actually changed all that much.  It is still dysfunctional, corrupt, and very protective of special interests in nationally harmful ways.  Yet I find that if I criticize the Greek government on Twitter I receive many angry, self-righteous comebacks, often but not always from Greeks and usually with a left-wing slant.

One reason the Greek government is so popular with “the Left” has to do, I think, with theories of social change.  I often read or hear it suggested that, if only the truth is spoken in forthright, galvanizing terms, beneficial social change will follow.  This was a common meme in Krugman’s columns for instance over the years.  The claim was that Obama needed to be more like FDR and mobilize a coalition around a commonly articulated series of truths.  I don’t think it was ever promised this would succeed right away, due to Republican intransigience, but it has been portrayed as a good long-run investment in political change through the education of the citizenry.

The new Greek government of course has done this and more.  They have rather flamboyantly staked out extreme positions, insulted their opponents, and warned of the doom that will follow if renegotiations were to run along the lines of EU law rather than the New Old Keynesian economics.  They told their citizenry how much they were standing up for them, and how much this was a moral clash of progressive good vs. austerity evil, with the values of democracy and national sovereignty (supposedly) on the side of good.

The thing is, it’s turned out to be a total catastrophe.  As I had suggested early on, there is, in the ruling Greek coalition, no Plan B.  Germany and especially Spain just held tight on the negotiations and the Greek government more or less had to fold, not even wanting to vote on the negotiated plan.  That plan then failed to receive European approval, nor has Greece drummed up much general support from the other peripheral countries, and now no one knows what to do next.  The ECB, IMF, and others still have Greece “by the balls,” to cite one colloquial expression.  They’re still trying to spin that “the institutions” are not the Troika, but they don’t talk much about liberating the economy as a means of increasing exports.  It seems Emergency Liquidity Assistance may be up for review.  Oops.

The Greek government also riled up its citizens and now doesn’t know how to deliver anything satisfactory to them, to the detriment of political stability.  The latest irresponsible plan is to threaten a referendum on a new government, a new economic plan, or in one case even a referendum on euro membership was mentioned.  Message discipline is scarcely to be seen.

All of that is simply painting the Greek government into a corner all the more, since a referendum will simply heighten the demands for mutually inconsistent outcomes.  Signs of broader eurozone recovery, and the relative success of QE in talking down the value of the euro, have almost completely removed the bargaining power of Syrizas, or so it seems as of early March.

As I’ve said before, these people ruling Greece are The Not Very Serious People, and they are increasingly acquiring a reputation as such within the rest of the EU and eurozone.

All of this reminds me of the wisdom of Dani Rodrik and his propositions about the incompatibility of democracy, national sovereignty, and global economic integration.  Angry words won’t undo those constraints and they are not something you will hear the Greek government mention very often.

Krugman a few times has praised Syrizas for renegotiating the required primary surplus figures, but it seems this is hardly mattering.  Due to plummeting tax collection, the primary surplus is gone in any case, and the agreement with “the institutions” [read: Troika] is not even the main driver of the action here.  Greece needs to take steps to reestablish a higher [read: positive] primary surplus in any case.

The broader lesson is this: if politicians are not “speaking the truth to power,” there are usually some pretty good reasons for that.   As a political strategy, it doesn’t typically work and it is worse than irrelevant as it very often backfires.

The situation is still not beyond repair, but the Very Serious People are serious for a reason.

Japan’s nominal [correction: real] gdp growth for 2014 turns out to be about…zero.

The primary source is here, via Ben MacLannahan.

And can happiness research be trusted?:

According to the latest opinion survey in Russia, the share of people who are happy with their life has increased to 52 percent, from 44 percent in December 2014, and from 41 percent in December 2013. The survey results were published at the end of February by the state survey agency VCIOM. This is quite a spectacular finding, suggesting that despite Western sanctions and the recent ruble devaluation, life in Russia is going well.

Except these attitudes are hard to square with some facts.

Fact #1: Between January 2014 and March 2015, the price of food products has increased by 29.3 percent. After the sanctions, prices of fruit have shot up by 45 percent, vegetables by 41 percent, fish by 30 percent, and meat by 28 percent. All this, according to Rosstat, the state statistical agency.

Fact #2: January 2015 saw a 51 percent fall in the number of Russian traveling abroad, relative to January a year earlier. Fewer Russians go skiing in Europe: Russian tourism dropped by 27 percent to Austria, by 52 percent to Finland, and by 43 percent to France. And lest one thinks that most Russian skiers now go to Sochi, it is worth pointing out that the numbers from last summer also show a significant decline in the tourist visits to Thailand, Bulgaria, Spain, Dubai, and other beach destinations.

Fact #3: 115,390 cars were sold in Russia in January 2015, down from 151,000 in January 2014, and 163,000 in January 2013. In other words, about one quarter fewer new cars have been sold so far this year.

That is from Simeon Djankov, via www.macrodigest.com.  And if current trends continue, maybe the Ukrainians will end up happier yet.

Today, it would be impossible to obtain a federal court order permitting a five-day protest march on a 52-mile stretch of a major U.S. highway. Under contemporary legal doctrine, the Selma protests would have ended March 8, 1965.

…Starting in the 1970s…the federal courts began rolling back this idea. A series of rulings erected what is known as the public forum doctrine, which lets a city, state or the federal government decide whether public property can be used for 1st Amendment activities. It also means that if courts do not designate a place a “traditional public forum,” government may forbid its use as a site of protest altogether.

That is from Ronald J. Krotosynszski, Jr., there is more of interest here.

China expert David Shambaugh is claiming exactly that in a bold argument.  Here is a summary of his brief:

He points to “five telling indications of the regime’s vulnerability”: an apparent lack of confidence among the country’s wealthy; intensified political repression, betraying insecurity among the leadership itself; a sense that “even many regime loyalists are just going through the motions”; corruption too pervasive and deep-rooted for Xi’s ongoing crackdown to fully address; and an economy “stuck in a series of systemic traps from which there is no easy exit.”

Shambaugh also argues “Communist rule in China is unlikely to end quietly.”

That’s pretty heady stuff and I am happy to link to material I disagree with, but disagree I do.  My reasons are simple:

1. There are internal coups, which are more or less invisible to most of the world, and external coups, where a visible overthrow of a government makes the front page and is accompanied by violent conflict in public places and a change in the labeling of the regime.  China already has shown its system can accommodate internal coups, for better or worse.  You can argue they have such internal coups (on average) every ten to twelve years.

2. It is entirely reasonable (though very hard to call) to expect another internal coup in China.

3. Does any coup in China prefer to a) jettison the Communist brand?, or b) refurbish the Communist brand?  I say b), by a long mile.  The Communists drove the foreigners out of the country, built the modern nation, and delivered close to ten percent growth for almost thirty-five years running.  Most of the time the Communist Party has been pretty popular, in spite of all the (justified) cynicism about the corruption.

4. Once you accept #3, and work back to rethink #1, you expect at most an internal coup in China, with external continuity and a maintenance of the Communist party brand, albeit in refurbished form.

5. The strongest version of Shambaugh’s argument is that there is no “core” to the internal coups, a’ la Gordon Tullock’s book Autocracy.  You get too many internal coups, or too many incipient internal coups, and the public square is required to impose structural equilibrium on the problem.  Maybe so, but that requires lots of claims about the internal dynamics of Chinese politics, and the lack of internal coup stability mechanisms.  The cited evidence by Shambaugh does not seem to bear directly on this question, and so I am back to having no strong reason to expect an external coup, much less a chaotic and bloody one.

Jean Pisani-Ferry makes a few good arguments, this is the most interesting:

…an exit would force European policymakers to formalize their so-far unwritten and even unspecified rules for divorce. Beyond broad principles of international law – for example, that what matters for deciding an asset’s post-divorce currency denomination are the law governing the underlying contract and the corresponding jurisdiction – there are no agreed rules for deciding how conversion into a new currency would be carried out. A Grexit would force these rules to be defined, therefore making it clear what a euro is worth, depending on where it is held, by whom, and in what form. Indeed this would not only make the break-up risk more imaginable; it would also make it much more concrete.

The entire piece is here.  File under “The End of Creative Ambiguity.”  That file is growing larger all the time.

In Ferguson and the Modern Debtor’s Prison I wrote:

You don’t get $321 in fines and fees and 3 warrants per household from an about-average crime rate. You get numbers like this from bullshit arrests for jaywalking and constant “low level harassment involving traffic stops, court appearances, high fines, and the threat of jail for failure to pay.”

The DOJ report on the Ferguson Police Department verifies this in stunning detail:

Ferguson has allowed its focus on revenue generation to fundamentally compromise the role of Ferguson’s municipal court. The municipal court does not act as a neutral arbiter of the law or a check on unlawful police conduct.

… Our investigation has found overwhelming evidence of minor municipal code violations resulting in multiple arrests, jail time, and payments that exceed the cost of the original ticket many times over. One woman, discussed above, received two parking tickets for a single violation in 2007 that then totaled $151 plus fees. Over seven years later, she still owed Ferguson $541—after already paying $550 in fines and fees, having multiple arrest warrants issued against her, and being arrested and jailed on several occasions.

Predatory fining was incentivized:

FPD has communicated to officers not only that they must focus on bringing in revenue, but that the department has little concern with how officers do this. FPD’s weak systems of supervision, review, and accountability…have sent a potent message to officers that their violations of law and policy will be tolerated, provided that officers continue to be “productive” in making arrests and writing citations. Where officers fail to meet productivity goals, supervisors have been instructed to alter officer assignments or impose discipline.

Excessive, illegal and sometimes criminal force was used routinely:

This culture within FPD influences officer activities in all areas of policing, beyond just ticketing. Officers expect and demand compliance even when they lack legal authority. They are inclined to interpret the exercise of free-speech rights as unlawful disobedience, innocent movements as physical threats, indications of mental or physical illness as belligerence. Police supervisors and leadership do too little to ensure that officers act in accordance with law and policy, and rarely respond meaningfully to civilian complaints of officer misconduct. The result is a pattern of stops without reasonable suspicion and arrests without probable cause in violation of the Fourth Amendment; infringement on free expression, as well as retaliation for protected expression, in violation of the First Amendment; and excessive force in violation of the Fourth Amendment.

Here is one example:

In January 2013, a patrol sergeant stopped an African-American man after he saw the man talk to an individual in a truck and then walk away. The sergeant detained the man, although he did not articulate any reasonable suspicion that criminal activity was afoot. When the man declined to answer questions or submit to a frisk—which the sergeant sought to execute despite articulating no reason to believe the man was armed—the sergeant grabbed the man by the belt, drew his ECW [i.e. taser, AT], and ordered the man to comply. The man crossed his arms and objected that he had not done anything wrong. Video captured by the ECW’s built-in camera shows that the man made no aggressive movement toward the officer. The sergeant fired the ECW, applying a five-second cycle of electricity and causing the man to fall to the ground. The sergeant almost immediately applied the ECW again, which he later justified in his report by claiming that the man tried to stand up. The video makes clear, however, that the man never tried to stand—he only writhed in pain on the ground. The video also shows that the sergeant applied the ECW nearly continuously for 20 seconds, longer than represented in his report. The man was charged with Failure to Comply and Resisting Arrest, but no independent criminal violation.

Here is another, especially interesting, example:

While the record demonstrates a pattern of stops that are improper from the beginning, it also exposes encounters that start as constitutionally defensible but quickly cross the line. For example, in the summer of 2012, an officer detained a 32-year-old African-American man who was sitting in his car cooling off after playing basketball. The officer arguably had grounds to stop and question the man, since his windows appeared more deeply tinted than permitted under Ferguson’s code. Without cause, the officer went on to accuse the man of being a pedophile, prohibit the man from using his cell phone, order the man out of his car for a pat-down despite having no reason to believe he was armed, and ask to search his car. When the man refused, citing his constitutional rights, the officer reportedly pointed a gun at his head, and arrested him. The officer charged the man with eight different counts, including making a false declaration for initially providing the short form of his first name (e.g., “Mike” instead of “Michael”) and an address that, although legitimate, differed from the one on his license. The officer also charged the man both with having an expired operator’s license, and with having no operator’s license in possession. The man told us he lost his job as a contractor with the federal government as a result of the charges.

Although the report says the initial stop was constitutionally defensible, the initial stop was also clearly bullshit. “The officer arguably had grounds to stop and question the man, since his windows appeared more deeply tinted than permitted under Ferguson’s code.” Deep tinting!!!

Missouri, like most states, has a window tint law which essentially requires that tinting not be so dark as to impede the ability of the driver to see out of the car. Ok. But why does Ferguson have a window tint law! What this means is that you can be fined for driving through Ferguson for window tinting which is legal in the rest of Missouri. Absurd. Correction: the code appears to be the same as the state code but passed as a municipal ordinance so fines were collected locally. The purpose of the law was simply to extract more blood:

NYTimes: Last year Ferguson drivers paid $12,400 in fines for driving cars with tinted windows. They paid another $4,905 for loud music coming out of their cars.

The abuse in Ferguson shouldn’t really surprise us–this is how most governments behave most of the time. Democracy constrains what governments do but it’s a thin constraint easily capable of being pierced when stressed.

The worst abuses of government happen when an invading gang conquer people of a different race, religion and culture. What happened in Ferguson was similar only the rulers stayed the same and the population of the ruled changed. In 1990 Ferguson was 74% white and 25% black. Just 20 years later the percentages had nearly inverted, 29% white and 67% black. The population of rulers, however, changed more slowly so white rulers found themselves overlording a population that was foreign to them. As a result, democracy broke down and government as usual, banditry and abuse, broke out.

Just to repeat myself….

by on March 4, 2015 at 9:21 am in Current Affairs | Permalink

1. The obviously correct legal answer is to toss at least part of ACA back into the hands of Congress for a rewrite.  (There is rarely a well-defined “intent of the legislature” in most matters of detail, yet the wording itself is clear.)  But since many people do not like what Congress would do (or not do) in this situation, this is an option which cannot be discussed very much.  The critics would have to let on that they do not consider the current Congress to be a legitimate governing body.

2. Along the lines of my recent blog post, it is remarkable how many “ugly” pictures of Hillary Clinton I have seen since the email scandal broke.  Aren’t there pretty pictures of Hillary with a Blackberry?

I used to think it was a decent enough school, and now:

Sweet Briar College announced today that it is shutting down at the end of this academic year.

Small colleges close or merge from time to time, more frequently since the economic downturn started in 2008. But the move is unusual in that Sweet Briar still has a $94 million endowment, regional accreditation and some well-respected programs. But college officials said that the trend lines were too unfavorable, and that efforts to consider different strategies didn’t yield any viable options. So the college decided to close now, with some sense of order, rather than dragging out the process for several more years, as it could have done.

The story is here, and this is not the last such event of its kind.  Why is it failing financially?  Here is one take:

Sweet Briar officials cited overarching challenges that the college has been unable to handle: the lack of interest from female high school students in attending a women’s college like Sweet Briar, declining interest in liberal arts colleges generally and declining interest in attending colleges in rural areas. Sweet Briar is in the foothills of the Blue Ridge Mountains in Virginia. “We are 30 minutes from a Starbucks,” said James F. Jones Jr., president of the college.

It seems to me that many other small colleges are in a far worse position, but are instead papering over the cracks, for how long I do not know.  Update: This revised version of the story has additional information.

So the problem is not that austerity was tried and failed in Greece. It is that, despite unprecedented international generosity, fiscal policy was completely out of control and needed major adjustments. Insufficient spending was never an issue. From 1998 to 2007, Greece’s annual per capita GDP growth averaged 3.8%, the second fastest in Western Europe, behind only Ireland.

…Unsustainable growth paths often end in a sudden stop of capital inflows, forcing countries to bring their spending back in line with production. In Greece, however, official lenders’ unprecedented munificence made the adjustment more gradual than in, say, Latvia or Ireland.

There are many other good points at the link.  Hausmann makes this point:

Greece never had the productive structure to be as rich as it was: its income was inflated by massive amounts of borrowed money that was not used to upgrade its productive capacity.

And then the closer can only be described as an “ouch”!:

Unfortunately, this is not what many Greeks (or Spaniards) believe. A large plurality of them voted for Syriza, which wants to reallocate resources to wage increases and subsidies and does not even mention exports in its growth strategy. They would be wise to remember that having Stiglitz as a cheerleader and Podemos as advisers did not save Venezuela from its current hyper-inflationary catastrophe.

As I’ve said before, that out of control Greek government spending and borrowing has been converted into a (supposed) cautionary tale about the dangers of fiscal conservatism is one of the greatest (and most unfortunate) public relations triumphs of modern times.  That said, I would have preferred it if Hausmann had paid more attention to monetary policy.

The only version of the new Houllebecq novel I can read now is the one in German, Entwerfung., as the English edition does not come out until September.   I am about halfway through and can report it is excellent and a fun read as well, most of all when it makes fun of the vulnerabilities and vacillations of the West.

Here is an Anthony Daniels review, with lots of plot summary (and spoilers), part of the last paragraph shows he understands the work:

This novel is far from a crude anti-Islamic polemic, however, as many might have supposed it to be from its pre-publication publicity (Houellebecq has expressed himself very unfavorably on Islam elsewhere). It is rather a meditation, admittedly using all the author’s habitual tropes which fortunately, or perhaps unfortunately, are susceptible to an infinite number of bitterly amusing variations, on the state of Western civilization and what makes that civilization vulnerable to attack…In other words, it is an implicit invitation to us to look inwards, to think of what is wrong with us rather than with them. Whether we or they will read it like this, I rather doubt…

This is one of the novels of the year.  Here is a good Adam Gopnik piece on Houllebecq and the book.

American military commanders rarely seek out deserters and even more rarely punish them.  At the height of the Iraq War, fewer than 5 percent of deserters received a court-martial, and fewer than one percent served prison time.

And:

…the only deserters who have consistently been punished by the American military are those who went to Canada.

The full article, by Wil S. Hylton, is interesting throughout.

More than 100% of the self-reported income of Greece’s professional classes is going toward paying off consumer debts.

From Mike Bird, there is more here, via MacroDigest.