6/5/15: Thus Spoke 'Not a Dwarf' of Politics...

Does it make you wonder what the U.S. might have looked like if Sarah Palin was elected in 2008? Well, here's a snapshot of a similar experiment currently ongoing in Europe: behold the European Titan of Thought, the (one of the numerous) President of Europe, Jean-Claude Juncker and his latest escapade http://www.telegraph.co.uk/finance/economics/11583755/Anglo-Saxon-world-would-rip-apart-Europe-after-a-Grexit-says-Juncker.html.

This is the best that Europe can do in making high level appointments. And it is out there, on par with Palin.

So here are some choice moments from Mr Juncker-Palin lengthy career as Europparatchik...

• On the 2005 French referendum on the Lisbon Treaty: "If it's a Yes, we will say 'on we go', and if it's a No we will say 'we continue'."
• On the Lisbon Treaty, 23 June 2007: "The constitutional treaty was an easily understandable treaty. This is a simplified treaty which is very complicated."
• On the Lisbon Treaty, 2 July 2007: "Britain is different. Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?"
• On 20 April 2011: "Monetary policy is a serious issue. We should discuss this in secret, in the Eurogroup [...] I'm ready to be insulted as being insufficiently democratic, but I want to be serious [...] I am for secret, dark debates."
• Referring to his work in the European Council in 2012: "We decide on something, leave it lying around and wait and see what happens. If no one kicks up a fuss, because most people don't understand what has been decided, we continue step by step until there is no turning back."
• On Greek crisis, 2011: "When it becomes serious, you have to lie."
• To George W. Bush, June 20 2005: "I was going to say he's a piece of work, but that might not translate too well. Is that all right, if I call you a 'piece of work'?"
• As PM of Luxleaks: "We do not attract Russian money to Luxembourg with high interest rates."
• Ibid: "The Luxembourg financial centre is based on several pillars, we are characterised by the breadth of our product range, we are an active participant in the international credit business."
• "I am not a dwarf."
• "God understands more about the financial markets than many who write about them."
• "...we must be careful that we do not blow up the global financial system by insisting on regulatory principles."
• Answering the question: :what happens if we're sitting here again next year and conclude that Greece is still not on a stabilization course?", Juncker produced the following: "If the donkey were a cat it could climb a tree. But it is not a cat. Nevertheless, this is a question that worries many people. My answer to it is almost a little theological: I do not believe that this question will ever be asked."
• "We must go back to teach Europeans to love Europe."
• "I believe neither the French nor the Dutch really rejected the constitutional treaty."
• "Now is the time to give a message of hope to the Greek people, not only implement, implement, implement and obligations, obligations, obligations, the message that the European institutions will give help and solidarity with particular rates, in order to over come this very bad situation at the social level."
• "One should stop - especially Britain, which was always for expansion of the European Union - discriminating against countries only because it comes across well in the current context if you beat up on others, i am strictly against that one should - and this is the key point - act as if all Poles, all Romanians, all Bulgarians who are on the European labor market are doing this out of a basically criminal disposition. These are people who are working to get paid." [It is worth remembering that the UK was one of just 3 countries in the EU that opened its labour market to the Accession States]
• On Greek bailout negotiations currently underway: "I am working together with Eurogroup President Jeroen Dijsselbloem to achieve an extension of the existing program, in order to bridge the time until summer."
• "Britain is different. Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?"

All of which provides a decent comic relief across the Atlantic, and a dose of tears here, in Europe, where taxpayers are paying for this 'leadership' through the nose.

05/09/2011: Euro area governance indicators: evolution or decline?

In recent years, the EU has embarked on a set of institutional reforms and unveiled a number of institutional platforms for reforming the core principles of governance, transparency and accountability. These reforms are rooted in 2000-2005 processes that accompanied direct evolution of the Euro area and the EU enlargement.

In this light, it would be instructive to take a closer look at the dynamics of EU governance evolution, focusing on the specifically more integrated group of countries – the Euro area. Using data from the World Bank Governance Indicators for 1996-2009 (latest available) we can draw some interesting conclusions on the topic.

Before we begin, however, note that WB data is lagged in some cases up to 2 years. In addition, many variables are "sticky" - in a sense that they do not change dramatically year on year as institutional reforms take time to feed through to actual delivery on metrics. Hence, the period from 1996 through 2002 is really covering a period of data closer to 1985 through 2001, on average. Thus, I separate the data into 2 periods: the period prior to the Euro area creation (1996-2002) and post Euro area creation (2003-2009). In addition, note the following two facts: that help support this division:

1. I tested the results for the period split 1996-2001 against 2002-2009, for split 1996-2000 vs 2001-2009 and for split 1996-2003 vs 2004-2009. All came back with very similar, qualitatively, results.
2. A number of Euro area states were in a mode of EU accession prior to 2004, thus splitting the sample at 2002-2003 makes some logical sense to capture better the average effects of governance reforms coincident with the euro period.

Now to the results: charts below plot changes across two periods for the countries members of the euro area, plus euro area as whole (simple average), the new accession states and the old (core) euro area member states. The plots capture all 6 core components of the World Bank Governance Indicators in terms of change in each indicator score (higher score implies better ranking in the league tables).

So to summarize - a table

What the above clearly shows is that Governance scores improvements across the euro area were driven primarily by improvements in the Accession States. In 4 out of 6 criteria, Core euro area member states have, on average, posted deterioration in the scores. Thus, overall euro area scores improved in 3 out of 6 criteria, remained unchanged in 2 criteria and deteriorated in 1 criteria.

Pretty poor performance for the group of states that set out as their core agenda to achieve transparency, good governance, government effectiveness, etc. And even worse for the idea that more integration yields better policy outcomes. Clearly, in the case of governance at least, it does not.

Eurozone: The High Cost of [Corporatist] Complacency

An interesting article from the Economists’ Voice (Éloi Laurent "Eurozone: The High Cost of Complacency", January 2009) argues that while the Euro is politically and economically attractive to a host of collapsing smaller economies, the Eurozone itself "is inert".

"How to make sense of this seeming contradiction?" asks Laurent. "It is tempting to blame America for Europe’s recession, but... Actually, if we view the last decade as a whole, we see that European passivity has cost it dearly and there lies the key to the Eurozone’s still unfulfilled promise."

Laurent's view of the Eurozone's failures reads like a description of what has happened in Ireland.

"...The ten years between 1999 and 2008 have been a golden era. There probably was not a better time in contemporary history to launch a monetary union and, learning by doing, to build efficient and resilient economic policy institutions to ensure its prosperity and sustainability. Yet, the decade was largely lost by Europeans in vain doctrinal debates and sterile blame game sessions. ...The reason [that technocratic debate] absorbs so much time and energy [of the European leadership] is that, absent a true democracy, economic doctrine has become over the years the justification of political power in Europe."

Laurent is only partially correct. Indeed, the technocratic economic doctrine debates have been a marker for European political landscape since 1999, but the debates became so central to the EU functioning because of the dogmatic pursuit of social consensus as the only benchmark for policy success. In other words, absent real democracy, the EU had to devise a deus ex machina replica of legitimizing democratic institutions. This is what social consensus - or corporatism, as it became known in Europe in the 1930s and 1940s - predicated upon.

The problem is that social consensus fails when ti comes to the need to formulate potentially unpopular and decisive policies. "With virtually the whole planet booming over the past decade, the Eurozone has, since its creation in 1999, displayed the worse performance in terms of growth and unemployment of the developed world, barely ahead of a depressed Japan."

What was the EU response to this crisis of insufficient growth? "One might conclude from [international comparisons] that the value added of the Euro is so far, at best, dubious and wonder why. But the European Commission did not, and recommended instead more of the same economic policies, stressing the importance of “budgetary surveillance” for the future and dismissing calls for improving economic cooperation and coordination among member states. [Thus] the ECB made in 2008 the exact same mistake as in 2001 by resisting a necessary cut in interest rates (actually, it increased interest rates in July 2008), waiting for the worst to be certain instead of trying to prevent it."

Laurent omits to mention the laughably naive EU Commission road maps and 'agendas' - the Lisbon I and Lisbon II frameworks for economic growth, the Barroso's Social Economy lunacy, and lastly the idea that geopolitical enlargement will resolve economic growth and political legitimacy deficits. For their claim that European Unification is predicated on a deeply historical rooting of European people, this Commission is failing a primary school lesson in history: the same strategies for legitimization have marked the Ottoman and Austro-Hungarian Empires, as well as a bag full of unsavory regimes in the early 20th century Europe.

But, getting back to the economy: few probably remember today the 1970s. Back then, it took European countries more than double the length of time it took the US to come out of the crises, despite the fact that Europe had at the time much lower dependency on imported oil than the US. Why? That European disease of not willing to take the necessary economic policy adjustments. The same sclerosis is present within the Eurozone today. "After the 2001 recession, [thanks to the Fed active intervention] it took a year for the US to go from negative to vigorous growth. In the Eurozone, it took five years to fully recover. As for fiscal policy, ...a true European stimulus is still nowhere in sight, even as the economic outcome worsens by the day."

Taking real policy decisions and implementing new policies is something that is clearly not en vogue in Brussels. "Facts speak for themselves in this regard: the financial and banking crisis started to receive an adequate response after an improvised meeting of head of states and governments of the Eurozone last October, a standing body that does not even exist in
European treaties. As [Jean-Paul] Fitoussi observed: “the structure of power is such in Europe that those institutions who have the instruments to react have not the legitimacy to do so while those which have the legitimacy no longer have the instruments. Hence the passivity of European policy reaction.”

This is a sweeping (and absolutely apt) description of the entire political illegitimacy of the current EU power structures. But it is also an apt description of the Irish governance disease.

Just as an unelected and unaccountable EU Commission (and its Directorates) has no capacity to legitimize its rule, except via an elitist consensus bought by providing a guarantee of access to the feeding troughs of Brussels, so the elected European Parliament has no capacity to exercise its democratic mandate. Just as an unelected and unaccountable Social Partnership in Ireland has no capacity to rule except by bribing its way through all and any changes in economic environment, the elected Dail has been reduced to a nearly irrelevant student debating society. In both cases, corporatism has won and society has lost.

In 1934, Eoin O'Duffy - an Irish corporatist - stated: "We must lead the people always; nationally, socially and economically. We must clear up the economic mess and right the glaring social injustices of to-day by the corporative organization of Irish life; but before everything we must give a national lead to our people... The first essential is national unity. We can only have that when the Corporative system is accepted."

Am I the only one who sees clear parallels between this historical statement and our Government's (and EU's) active suppression of any dissent and the pursuit of a social-consensus model of policy formulation?