Saturday 25 July 2015

Labour ‘Leadership’ and British Politics

The British media is focused on Jeremy Corbyn, the radical outsider who, according to opinion polls, might win the Labour Party’s leadership vote. That vote is in about seven weeks’ time, so don’t hold your breath. But it is worth making some comments on what this reveals about British politics.
Most of the Labour leadership contenders make Ed Miliband look like a charismatic guru who could inspire followers to walk over burning coals and not feel a thing. By comparison, Corbyn is an exception, at least in having a personality and some political beliefs. I would only point out that his political beliefs have not prevented him from remaining a Labour Party Member of Parliament for more than thirty years. Just consider what that means. So many years and so many crimes, either committed by, or supported by, the party to which you belong. Was the Labour Government’s interventions in Afghanistan and Iraq weird anomalies – against which a critical voice could build an effective opposition? Or would history judge instead that Labour has always supported British imperialism’s interests and that dissident voices reflected naivety at best?
However, Corbyn’s dissident beliefs on Iraq and Palestine, among other things, are not the basis of his support, either in his London constituency or among ordinary Labour party members in this leadership contest. Instead, that support comes from his anti-austerity stance. Yet while his inner-City constituency might support Corbyn’s position on opposing cuts in welfare payments, the rest of the UK does not. Against his stance, one has to consider why the other Labour leadership contenders basically support the Conservative government on the need to slash welfare payments, something summed up by the recommendation of Harriet Harman, acting Labour leader, to abstain in the recent Parliamentary vote on welfare cuts. The Conservative government’s proposals reflected not just a Conservative prejudice, but also a view that they would go down well with their supporters and others. Recall that, in the May 2015 UK general election, close to 50% of the British electorate voted either for the Conservatives (36.9%) or for UKIP (12.6%).
This is the substance of the horror expressed in the news media, by Tony Blair and others who are shocked by Corbyn’s rise to prominence in the polls. A vote for Corbyn as Labour leader will make Labour even more unelectable! It is not a question of his anti-New Labour beard, or even his opinion that the government should discuss with Hamas and Hezbollah. The key point is that he has failed to reflect in his political stance the fundamental conservatism of the British electorate.
It will take an eruption some years in the making even to begin to alter the scene. Perhaps that will come when this Conservative government eventually encounters its own ‘Poll Tax’ moment, a wall that Thatcher hit after believing that British politics was at her command. But, at close to the peak of her power, even she could not make her favourite adviser, Alan Walters, like Caligula’s horse, a consul and instead lost Nigel Lawson, her once-feted Chancellor. This miscreant group of slimeballs has less ability. It is full of low-grade chancers, not least Boris ‘water cannon’ Johnson, so it could unwittingly contrive to generate protest from the UK populace. However, personally, I do not bet on that eventuality making any real difference.

Tony Norfield, 25 July 2015
(some small amendments to the text on 31 July)

Tuesday 7 July 2015

Imperial Hypocrisy and Greek Debt Data

The recent Greek referendum 'No' to its creditors' plans was welcome, even unique in recent history, as a sign of some serious resistance to being crushed by the exigencies of capitalism. Yet, the referendum has changed nothing because the Greek economy remains at the mercy of the creditors, especially its euro-based creditors. It is worth looking back at some points on the history on this, which will shift attention from the intransigence of German politicians like Merkel and Schauble to the double dealing of the French.

The question of writing off some of the obviously unsustainable debts was first raised back in 2010, when Greece's problems first exploded into view as the debt was over 130% of its GDP. Then, a certain Dominique Strauss-Kahn, the hereditary European who was chosen as the head of the IMF, and also a key French politico, was against a debt 'restructuring' (ie write off). No doubt citing fundamental IMF principles and the laws of God, or Mammon, Monsieur DSK was no doubt also mindful of the fact that a large proportion of Greek debt was held by French banks. In March 2010, French banks were holding the biggest pile of dung. Out of €134 billion worth of European bank claims on Greece, French banks had €52 billion, one and a half times as much as Germany.

In 2010, Greece was given further IMF and other loans, amounting to €110 billion. This was not because Greece did not have enough debt already, but because this was a way of paying off liabilities to the European banks, among other things, and making the new debt a liability of the Greek state to official creditors, who would have more power in forcing eventual repayments. One study estimates that:

"Whereas in March 2010 about 40% of total European lending to Greece was via French banks, today only 0.6% is. Governments have filled the breach, but not in proportion to their banks’ exposure in 2010. Rather, it is in proportion to their paid-up capital at the ECB – which in France’s case is only 20%.

"In consequence, France has actually managed to reduce its total Greek exposure – sovereign and bank – by €8 billion, as seen in the main figure above.  In contrast, Italy, which had virtually no exposure to Greece in 2010 now has a massive one: €39 billion.  Total German exposure is up by a similar amount – €35 billion.  Spain has also seen its exposure rocket from nearly nothing in 2009 to €25 billion today.

"In short, France has managed to use the Greek bailout to offload €8 billion in junk debt onto its neighbors and burden them with tens of billions more in debt they could have avoided had Greece simply been allowed to default in 2010.  The upshot is that Italy and Spain are much closer to financial crisis today than they should be."

This was not a full escape for private creditors, since they (including non-Europeans) were also pressured to write off roughly half of their 'assets' - around €100 billion - in a 2012 restructuring of Greek sovereign debts. But in 2012 this had become more manageable, since there had been some economic recovery and also much more intervention by central banks to prop up the financial system.

The sticking point for Greece's creditors remains writing off official debt. Now the IMF, led by Christine Lagarde, another French politico - who once smiled sweetly at Yanis Varoufakis, perhaps expecting the compliance that her position demands - is able to negotiate with a lower exposure of the French banks and the French state. Her aim now is essentially to put the burden of the creditors' setbacks onto eurozone members in general, especially Germany. Previously, the (French) banks, as the main original creditors, would have been in the front line for write offs.

In this context, there is another neat, hypocritical manoeuvre by French president Fran├žois Hollande, who now wants to act as the supporter of a deal for Greece. France has long positioned itself as the saviour of southern Europe, hoping politically to build up a counterweight to Germany's supporters in any euro-based vote. As long as France can manage to put the economic burden of its political decisions onto some other country, then it will continue to do so.

Tony Norfield, 7 July 2015

PS: The authors of the debt analysis cited above also note that Greece has an unusually large amount of defence spending compared to other NATO countries of more than 2% of GDP. Why Greece needs this, apart from idiotic nationalism believing that Turkey will invade at any moment, is a mystery, but is another dysfunctional feature of the economically unviable Greek state.