Apr 282017
 

By Michael Nevradakis99GetSmart

Originally published at MintPressNews:

According to economist Roger Bootle, the EU has grown unsustainable and due to various factors, is about to burst. (AP/Francisco Seco)

According to economist Roger Bootle, the EU has grown unsustainable and due to various factors, is about to burst. (AP/Francisco Seco)

Britain’s departure from the EU, a process that will take about two years, has formally gone into motion. MintPress News had the opportunity to speak with prize-winning economist Roger Bootle about what Brexit will ultimately mean for the country’s economy, as well as the European Union as a whole.

LONDON– The recent triggering of Article 50 of the European Union’s Lisbon Treaty by the United Kingdom has formally set into motion the process of Britain’s departure from the EU, an action that is in line with the result of last June’s referendum, where 52 percent of British voters chose to leave the union.

Europe is now faced with the prospect of a turbulent period ahead, with the upcoming French presidential elections and the possibility of a victory for populist candidate Marine Le Pen, as well as snap parliamentary elections declared in the UK, German elections in September, a rising tide of Euroscepticism across the continent and the process of Brexit now formally put into motion.

Economist Roger Bootle, chairman of Capital Economics in London and specialist adviser to the British House of Commons Treasury Committee, is the lead author of the report “Leaving the euro: a practical guide,” which was awarded the prestigious Wolfson Prize in Economics in 2012. The report presents a comprehensive proposal for how any eurozone member could depart the zone in an orderly fashion. Bootle discussed his findings extensively in a March 2015 interview with Dialogos Radio.

MintPress News recently had the opportunity to speak with Bootle, in an interview that also aired on Dialogos Radio, about the prospects of the British economy following Brexit and the future of the EU and eurozone following Britain’s upcoming departure.

MintPress News (MPN): The British government has recently gone ahead and invoked Article 50, formally triggering the process for Great Britain’s departure from the European Union. Many doom-and-gloom scenarios have been voiced, particularly by media pundits, regarding the adverse impacts of “Brexit” on Great Britain’s economy. In reality, how has the British economy performed since the referendum vote and, more recently, since Article 50 was invoked, and what are its prospects going forward?

Roger Bootle (RB): The British economy has done extremely well since the referendum. In fact, you can’t really see any adverse effects at all. It’s just bowled along much as before. In the immediate weeks and months after the referendum, there was some hesitation and some business sectors undoubtedly felt a bit of a slowdown, but that didn’t last long.

As things are at the moment, they’re looking really very strong. Surveys suggest that economic growth will continue roughly at the level we’ve seen recently. Of course, the pound has dropped quite considerably, and that’s helped British exports. They are looking very strong. Even if there’s a bit of a squeeze on consumers, which there may well be, I think all the signs are that the British economy is going to sail through this period.

MPN: From an economic point of view, what are the next steps in the Brexit process for Great Britain? For instance, do you believe that Great Britain will still maintain access to the European common market, and more so, do you believe that Great Britain should maintain access to the European common market?

RB: Now of course we are in a difficult phase, which could go on for up to two years because the Lisbon Treaty allows for a period of up to two years for negotiations for a country leaving. Of course, there’s been no country apart from Greenland, a long time before, that’s actually left the European Union, so we’re in uncharted territory really.

I think that what we’re going to see, what I hope we’re going to see, is some sort of free trade deal hammered out between Britain and the EU. Now if that doesn’t happen, it’s very important that this word “access” is nobbled, that Britain needs “access.” I think it really is very misleading, this word.

Every country in the world has got access to the single market – the United States, India, China, Japan, all these countries trade with the single market, they’ve got access to it, it’s just that not being part of the single market, not having a free trade deal with the European Union, they have to pay the

European Union common external tariff, and of course they have to meet all the standards and certificates and so on that the EU demands.

Now, if Britain doesn’t reach some sort of free trade agreement with the EU during this two-year negotiating period, then we’re effectively going to be in the same sort of situation that the United States, China, Japan and India are all in. That doesn’t sound to me to be too bad.

MPN: There have been many rumors and many press reports regarding the pound of flesh, if you will, that the European Union will demand from Great Britain as an exit bill for leaving the EU. Do you view this as a distinct possibility, or does Great Britain have bargaining chips of its own to possibly avoid this as it navigates the exit process?

RB: Various figures have suggested bills as high as 60 billion euros that the UK will have to hand over to the EU. I think the chances of the EU being able to secure anything like that are vanishingly small, next to zero. There was a report by the British House of Lords recently which obtained expert legal opinion, and the result of that expert legal opinion was that Britain was obliged to pay nothing at all. That is to say, the common sense interpretation of this would apply, that once you leave the club you’re no longer asked to carry on paying your membership dues.

Now, I suspect that there might be reasons of political and economic self-interest such that Britain might end up paying rather more than zero, but 60 billion euros, well they’ll have to whistle for that. I think there’s plenty of room for some sort of reasonable deal.

MPN: Part of the exit process, from what I understand, would have to do with Great Britain’s share of the European Central Bank’s cash reserves, which amount to 16 percent of the ECB’s total cash reserves. Can these cash reserves be returned to Great Britain as part of the Brexit process?

RB: I don’t see that as being a factor to be taken on its own. As a shareholder in the ECB, we do have a claim on the ECB’s net assets. The ECB’s got liabilities as well, so it isn’t reasonable to just look at the cash the ECB holds, you have to look at the balance sheet as a whole, and then you’ve got to put that into the context of the whole position of the EU. I can’t see the UK walking away with 16 percent of the ECB’s cash holdings. I think there’s going to be some overall totting-up of assets and liabilities and whatever the EU thinks are the UK’s continuing obligations after it’s actually left the club, and that’s something that’s going to be a major argument. These ECB cash reserves will be just one factor among very many that will affect this question of how much the UK has to hand over.

MPN: What are the possibilities that Great Britain has on the table as it prepares to depart the European Union, in terms of new trade deals or other beneficial agreements outside of the European Union?

RB: We’ve heard President [Donald] Trump say that he’s keen on a prospective U.S.-UK trade deal, and he’s made it pretty clear that he thinks that can be accomplished very quickly. There’s a whole series of other countries that are interested, including former members of the British Empire that are now members of the British Commonwealth: Canada, Australia, New Zealand, India. Countries outside, such as Japan and China, I think will be able to secure some sort of agreement pretty soon.

I think it’s very important not to overplay the significance of trade deals. Britain trades all around the world with all sorts of countries with which it does not have a trade deal, the United States being one of them, Britain’s biggest single export market. The UK does not have a trade agreement with the United States, and the reason it doesn’t have one is because at the moment it can’t make its own trade policy! It’s the EU that has to do that, and the EU hasn’t been able to make a trade deal with the United States!

I think very much [that as] a result of “euro-brainwashing,” in the European Union most people seem to think that prosperity emerges at the end of the fountain pens of these wonderful official trade negotiators in Brussels and elsewhere, and that all our futures depend on these people. This is complete hogwash. It’s a fairy tale. Around the world, all sorts of countries do extremely well and trade with each other without having anything to do with these panjandrums in Brussels. Britain could be in exactly the same position.

MPN: How does the City of London and the business community in Great Britain view the prospects of the British economy following Brexit?

RB: In the run-up to the referendum, there was a majority of the leaders of big business in Britain, including in the City of London, the financial interests, in favor of Britain staying in. That hasn’t changed very much, and accordingly there’s a preponderance of voices, although it’s less strident than before, worried about exactly what sort of arrangement Britain is going to put in place.

But even before the referendum vote, this description of the state of business opinion was far from uniform. There were a lot of businesspeople who were in favor of Britain leaving. A lot of people in the City were in favor of Britain leaving. On the whole, it was the more entrepreneurial City firms that were in favor of Britain leaving, as opposed to the big established banks and brokerage houses and so forth, who on balance were in favor of Britain staying.

I think that now the debate has moved on a lot. It’s been helped by some of Mrs. [British Prime Minister Theresa] May’s speeches and by the triggering of Article 50. It’s now pretty clear that we are leaving; accordingly, business opinion has switched from trying to operate as some sort of rear-guard action to realizing that it’s going to happen. Obviously, there’s a difference of opinion.

There are still some business leaders, including some in the City, who are a bit concerned and they want to make sure that we get the softest of soft Brexits. But a lot of business leaders are more optimistic than that. I think the mood, though, has changed. It’s changed towards, as I thought it would and hoped it would, towards making the most of Brexit, getting on with it, getting on with the job, getting the job of leaving the EU done and then making sure that Britain is best placed in the world that follows.

MPN: A recent survey of reserve managers at 80 central banks around the world found that there is a recent tendency for central banks to cut their euro exposure, while viewing British currency as a safer prospect for their banks’ portfolios. Is this a trend that you have observed in the markets and is this likely to continue?

RB: I don’t find it surprising that central bank reserve managers should find the prospect of having substantial amounts of their reserves in euros alarming. I don’t find that surprising at all, because there is a mega-crisis in the European Union. For the last year or so, the media has been obsessing about the so-called “British crisis” triggered by the fact that we voted to leave the European Union.

But fundamentally, putting aside for a moment the possible question of a second Scottish referendum — that is a big worry for the UK — that aside, the UK is a pretty stable place, and I think all the signs are that although there might be a few wobbles over Brexit, it can continue to be both successful and stable in the years ahead. And of course, famously it’s got extremely liquid financial markets. So I can see why international money managers, including central bank reserve managers, would find the UK fairly attractive.

By contrast, you can paint a scenario that’s deeply alarming for the countries of the EU. It’s still, I think, more than possible that another country is going to leave the euro over the next few years. The Italians remain very weak, the Greek economy is in a very, very serious state. Either one or both of those countries can leave. You’ve got a political crisis in France, with the possibility of far-right leader Marine Le Pen becoming president.

Even if that doesn’t happen, there’s no doubt over what way France is going over the next couple of years. So there are really fundamental questions about the integrity of the EU as a political unit, and the euro currency alongside that. Why would you want to expose substantial amounts of your reserves to that?

From a British point of view, there is a danger, I think, in all of this. I happen to think that the lower pound brought on by Brexit is a great boon for the British economy. I wanted the pound to be weaker for a long time. I think we needed it, it’s improved our competitiveness, so the last thing I would want to see is international capital holders becoming really worried about the euro and the EU, moving money into the pound with the result of the pound rising a lot in the exchanges. I think that would be extremely unhelpful for Britain.

MPN: Even though Great Britain was not in the eurozone, many people forget that it had been a part of the European Exchange Rate Mechanism, the ERM, before departing in 1992. This departure had, like Brexit, been accompanied by doom-and-gloom scenarios for what the impact on the British economy would be. In reality, how did exiting the ERM impact the British economy at the time?

RB: It’s very funny, this, because I remember extremely well that before Britain left — ”left” is too dignified a word, it sort of fell out of the ERM. What happened in September 1992, the UK Treasury was telling anyone who wanted to listen, and quite a few who didn’t, that we absolutely had to stay in the ERM, because otherwise inflation would soar, interest rates would soar and the economy would go down the tubes.

Various economists, myself included, said this was rubbish and that the opposite would happen, and dare I say it, after Sept. 16, 1992, the Treasury was proven wrong. That’s to say, the currency fell a long way, and exactly as a few of us had said, interest rates would not have to go up. Indeed they fell, inflation carried on falling too, and the economy recovered. After that, there were five years of very strong growth under the Conservatives before Labour won the election in 1997. So that was an earlier occasion where the Treasury forecasts of doom and gloom were proved comprehensively wrong.

MPN: Looking at economic and political developments in Europe, with an emphasis on the upcoming presidential elections in France and the candidacy of Marine Le Pen, who has delivered her own strong Eurosceptic message to French voters, do you believe we are seeing the beginning process of the breakup of the eurozone or the European Union, and how can Brexit serve as a catalyst for this process?

RB: I think we are seeing probably the beginnings of the breakup of the EU. The beginnings of the breakup of the euro were seen some time ago. Of course it hasn’t happened, but the signs are, I think, pretty clear, of the strains, very clear of course in Greece, but also I think more significantly in Italy. Less dramatic, of course, in Italy, but Italy is a much bigger economy, and I think this is more significant for the EU because Italy, of course, was a founding member of the EU. Greece didn’t join until much later.

If Greece ends up leaving the euro, then that is a hammerblow not just to the euro but, I think, to the institutions of the EU itself. Now, it may well be that one of these events, a country leaving the euro or the election of Marine Le Pen, could happen fairly soon, and that would still be early on in the Brexit process, because it will be almost two years until Britain leaves the EU.

But if Italy doesn’t leave the euro, and/or we don’t get Marine Le Pen as president of France, and both the euro and the EU hold together, then I think Brexit is going to play a major role, because then all eyes are going to be on seeing how the UK does outside the EU. Now of course, it’s going to take quite some time for this to be testable. We’ve got the up to two years of negotiations, and I suspect there will be some wobbles and difficulties and short-term problems associated with the business of exit, so it might be a year or two after exit before we can see how the UK is doing.

But if the UK is doing really pretty well after that period, we’re going to see a lot of pressure within the EU for other countries to leave, because then the UK will have gotten out of the free movement of labor, gotten out of the jurisdiction of the European courts without having to pay Brussels these huge annual subventions, and I think a lot of countries will look at this deal and think “oh gosh, I think I rather like that setup.”

MPN: A few years back, you were awarded the Wolfson Prize in Economics for your analysis that showed that any eurozone member state could safely depart the eurozone in an orderly fashion. Could you recap some of the highlights of this proposal for our listeners, and has anything changed in your analysis since then?

RB: I don’t think the essence of the situation or indeed my recommendations for what a country should do have changed at all, but there is a particular relevance to the French situation. What we said was, first of all, don’t be afraid of the fact that the exchange rate for the new currency falls, that the currency is weak immediately after the exit. That is part of the solution, not the problem. You shouldn’t try to stop it, indeed you should encourage it. It’s how you get the combination of reduced burden of debt and increased competitiveness.

We recommended that preparations for this exit should be conducted in secret. If this is not possible, then you have to impose capital controls. You might have to close the banks, which would be a serious worry. You don’t need to be able to issue new currency in order to leave. It takes quite some time for notes to be printed. You can do it without doing that in these days of electronic money. You could do without notes for a while, and indeed you could carry on using euros in the interim before your new notes are available.

You probably will need, in some sense, to default on some of your debt. The aim should be redenominate your national debt into the new currency, the one that’s depreciated, and depending on whether you can do that, it’s going to depend on the precise legal position of the debt. But insofar as you can, that’s what you should do, and the aim should be, through a combination of a reduced debt burden as a share of GDP, and the increased competitiveness, to get a period of economic growth, and from that of course, all sorts of good things will follow.

The connection with the French election is that Marine Le Pen has talked about having a referendum on ditching the euro and bringing back the franc, which is completely different from what we suggested in our Wolfson Prize-winning study. The significance of this is that Marine Le Pen’s proposal is going to cause an awful lot of financial instability. The financial markets aren’t going to wait for the result of the vote, they’re going to act with their feet straight away!

If Marine Le Pen wins, I think you’re going to see substantial capital flight from France even before she announces the referendum, and a lot of money leaving France. I could see a real banking crisis following from that, as people try to get their money out and to put it in, as it were, safer members of the eurozone, principally Germany. There might have to be some sort of capital controls imposed to stop that capital flight and to stop the French banking system from collapsing.

MPN: Looking at economic conditions in Europe today, and specifically in countries such as Greece that continue to enforce a regime of strict economic austerity as prescribed by its lenders, do you believe that exiting the eurozone is still an option for these countries?

RB: I don’t see how Greece can escape from its current situation without a much-devalued exchange rate. Spain is a country that is now recovering, and I think would probably be able to stay in the euro system, although not if Italy leaves and devalues. Italy, especially, and Greece, I don’t see any chance of emerging from their current economic torpor that doesn’t involve leaving the euro.

MPN: In Greece, there are various arguments that are heard against Grexit, ranging from claims that it’s too late and that it is something Greece should have done seven or eight years ago at the onset of the crisis, to arguments that a catastrophic devaluation of the new currency would follow, or that hyperinflation would result, or that Greece would be unable to import vital necessities. How do you respond to these arguments?

RB: There’s no doubt that it would be possible to do Grexit badly, and in the same vein, it’s possible to do Brexit badly. You could make a complete mess of it. There’s no doubt that’s possible. It’s very important, I think, not to let the perfect be the enemy of the good. Yes, there will be difficulties as a result of Grexit, but the most important thing is, it gives hope.

You have to ask yourself what you’re comparing your option with. A country that’s lost something like 25 percent of its GDP, that has a huge proportion of its workforce unemployed, there doesn’t seem to be much hope under the current situation. So I think it’s a bit extreme to say “oh gosh, if Greece left the euro, there would be hyperinflation.” Well, there wouldn’t be hyperinflation at all. If it’s managed properly, there wouldn’t be an uptick in inflation, and that wouldn’t necessarily be all bad, because it would help to devalue the real value of some of the debt.

You’d have to, though, keep this under control. It would have to be well-managed. You would need the effective management of the Bank of Greece and the Greek government to make sure that this was a fairly benign process. That doesn’t mean to say that you can avoid pain. You can’t avoid pain! You’ve had pain for the last how many years in Greece, and this is a country that’s lost 25 percent of its GDP!

Apr 272017
 

By Michael Nevradakis, 99GetSmart

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Dear listeners and friends,

This week on Dialogos Radio, the Dialogos Interview Series will feature a timely interview with award-winning British economist Roger Bootle. Bootle is the founder and chairman of Capital Economics in London, a specialist adviser to the British House of Commons Treasury Committee, a columnist for The Daily Telegraph, the author of “The Trouble With Europe,” and the winner of the prestigious Wolfson Prize in Economics for his proposal titled “Leaving the Euro: A Practical Guide,” proposing how any Eurozone member could depart from the Eurozone in an orderly fashion. Bootle will speak to us about Brexit and the process which lies ahead for Britain, the prospects for Great Britain’s economy going forward, how Brexit will impact the European Union and Eurozone, and his award-winning plan for how any country can exit from the Eurozone and why he believes countries like Greece should depart.

In addition, this week’s broadcast will feature a special interview with Leonidas Babanis, organizer of this year’s Greek Panorama exhibition, set to take place in New York City’s Grand Central Station on from May 11-13. Dialogos Radio is an international communication sponsor for this exhibition, and Babanis will talk to us about what visitors and attendees can expect to find at this year’s event.

Tune in for these two exclusive interviews, plus some great Greek music, on this week’s English-language broadcast of Dialogos Radio! For more details and our full broadcast schedule, visit http://dialogosmedia.org/?p=6880.

Interview with Turkish Journalist Gürkan Özturan Published in Mint Press News

Our interview with Turkish journalist Gürkan Özturan of dokuz8news has recently been published in Mint Press News. In this timely interview, Özturan discusses the Turkish constitutional referendum and the political changes transpiring in the country, the vision of Tayip Erdogan for Turkey, the ongoing conflict with the Kurds, and the stripping away of rights for opposition political parties and journalists in the country.

Find this interview online here: http://www.mintpressnews.com/the-turkish-referendum-and-descent-towards-absolute-rule-interview-with-journalist-gurkan-ozturan/227015/.

Best,
Dialogos Radio & Media

Mar 012017
 

By Michael Nevradakis99GetSmart

Originally published at MintPressNews:

If termites ‘start eating away at the foundations on both the left side of the building and the right side of the building, then the building looks fine from the outside but it could go any day,’ Mark Blyth tells MintPress, describing the hollowing out of the right and left in the US and Europe.

The crowd cheers as Republican presidential candidate Donald Trump speaks at a campaign rally in Baton Rouge, La., Thursday, Feb. 11, 2016. (AP Photo/Gerald Herbert)

The crowd cheers as Republican presidential candidate Donald Trump speaks at a campaign rally in Baton Rouge, La., Thursday, Feb. 11, 2016. (AP Photo/Gerald Herbert)

 

PROVIDENCE, Rhode Island — The world is in the midst of a tremendous political and global shift, with the rise of populism in the United States and Europe, largely in response to broader economic and social trends which have been materializing in recent decades.

From the election of Donald Trump in the United States, to the victory of “Brexit” in last summer’s British referendum and the strong position of populist parties in many European countries, including France, Germany, and Holland leading up to domestic electoral contests, voters are increasingly responding to political systems which many believe have failed them.

Mark Blyth, a political scientist and professor of international political economy at Brown University, has done extensive research on growing inequality and one of its possible causes: policies of economic austerity. Blyth is the author of “Austerity: The History of a Dangerous Idea,” and is a frequent contributor to a variety of publications, including The Guardian and Foreign Affairs.

In this interview for MintPress News, which first broadcast on Dialogos Radio in February, Blyth discusses the impacts of economic austerity, the potential outcome of Brexit and the economic policies of the Trump administration, the underlying reasons behind these electoral results, the opposition to “free trade” agreements such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership, and the possibility of a Greek departure from the eurozone.

 

MintPress News (MPN): Looking at the past couple of years and at the present in Europe, is there any sign, any indication at all, that the policies of economic austerity that are being pursued have had any sort of positive outcome?

Mark Blyth (MB): Quite the contrary, because what’s happened in the past couple of years is that everyone’s pretending to do a good game on austerity, but, in fact, they’re actually not. Budget deficits in Spain are around 5 percent of GDP. Italy’s is getting larger as well. So the so-called “automatic stabilizers,” in effect, kick in when an economy’s in a recession — taxes go down and transfers go up — is actually being allowed to operate. This means that the fiscal stance for the EU as a whole for the past couple of years has been positive instead of contractionary.

Now, is this because of some great revolution that people have had, that everyone tightening at once when you’re in a common currency union is simply zero sum against itself? Not really. It’s essentially a quid pro quo, and the quid pro quo is, the Germans will continue to allow the ECB [European Central Bank] to do whatever it takes to save the euro, basically the massive program of bond buying that has been going on and suppressing interest rates and adding liquidity to the banking system. And in return, the Germans will turn a blind eye to what’s going on in Spain and France, and we won’t even mention Portugal. The one place of course where it has continued is the troika program in Greece, and as you know it’s not going very well, still.

Watch Mark Blyth explain the follies of Austerity:

 

MPN: In recent months, we’ve been seeing a pronounced political shift, with the Brexit referendum result and with the election of Donald Trump in the United States. Detractors argue that the reasons Trump was elected and the reasons why Brexit prevailed have to do exclusively with racism and xenophobia. Do you agree with this view, or do you believe there are other reasons why we have been seeing this shift?

MB: If you’ve seen the stuff that I’ve been doing on “Global Trumpism,” if it’s racism that’s driving this exclusively, then the world has generated an abnormally large number of racists all at one time, which would be a hard thing to explain. So, yes, is there racism? Yes. Is there xenophobia? Yes. One of of my colleagues at Cornell, Jonathan Kirshner, in an essay on the L.A. Review of Books, I think put it best, saying that while it’s absolutely true that not everyone who voted for Trump is racist, it is absolutely true that every racist who bothered to vote, voted for Trump.

Now, what does this mean in terms of how we understand Trump and Brexit? The “blue wall,” the five states in the middle of the country that were solidly democrat, so solidly democrat that the Democrats forgot to visit four of them during the campaign, they were the ones that tipped the election. They were the ones that went for Trump. On a county-by-county level, the majority of those counties voted for Obama not once but twice. So you’ve got to explain to me why a bunch of people who voted twice for a black president suddenly voted for racism, if that’s what was driving it. Or, is it more likely that it was the message that Trump was sending, which was essentially, “You voted for hope and change with Obama. What changed? Nothing. What was your hope? Not very good. So you might as well try something with me.” And I think that’s what was driving it.

Same thing with Brexit. Xenophobia, anti-immigration, all that sort of stuff is definitely in the cards. Well, think about the conjunction of events. You’ve got a migrants crisis brewing in Europe. You’ve got terrorist incidents which the right are all too keen to play upon. So of course there’s a rise and of course this is part of the story. But at the end of the day what was driving this, and we’ve seen this in the statistics and in the more careful analyses on Brexit that have been done, is that it’s not so much areas where you have a high degree of immigration that are the most pro-Brexit. It’s the combination of that also with stagnant or declining incomes over a long period of time.

There’s a very simple public policy reason. If everyone is suddenly racist and that drives everything, what do you do with that? Do we send them off to re-education camps? Because if it’s economics, there’s something you can do about that, but if it’s racism and it’s pure cultural hatred, then I don’t know where we go from here. So I don’t actually buy that argument, I don’t think it’s a useful argument. The last thing I’ll say about it is, when you say this, you’re giving [an excuse to] the center-left in particular, who have authored these things such as trade agreements and presided over declining or stagnant incomes for the majority of people while the top 20 percent, the top 1 percent boomed. They’re the ones who have said everything’s fine, they were the ones running the campaign in the United States saying everything’s great, why would you possibly want to vote against us? And for many people’s experience, things are not great. So basically they’re being lied to.

Now, if the center-left or the center parties in the United States and Britain simply write these people off as racists, then there’s nothing they have to do in terms of examining their own actions, their own policies, or even think that what they’ve done is wrong in any sense, giving them some inclination as to why people dislike them so much. So it’s very dangerous to use the racism diagnosis, not because it’s empirically wrong but because it leads us to a dead end politically.

 

MPN: Looking at Brexit, how has the British economy performed since the referendum and how do you believe that the British economy will perform once the Brexit process has been completed?

MB: This is really interesting. There’s a famous line from one of the British politicians who, when all the experts lined up and said, before the Brexit vote, don’t do this, it’ll be the end of the world. The IMF, the ECB, the British Treasury, the Bank of England — all the experts agreed it would be terrible. And then for the next 12 months or so, the economy booms. What that guy, Michael Gove, said is that the British public have had enough of experts. In a sense he’s right, because of course they were wrong.

Why were they wrong? A lot of economics of the past decade and a half has been thoroughly wrong, so there’s nothing new in that. But what the fact is, people are calling people on their claims. I think what’s going on is this, and I know this from personal experience, as I was in London in January. London’s now super cheap if you have dollars or euros. Since Brexit, the pound has devalued quite a lot, and what that basically means is there’s a giant shopping spree going on which is boosting the economy, because imports are down while exports are rocketing ahead, they are getting a boost. But essentially, Europe, which is a free movement of peoples zone, is essentially going to London to shop and is driving up prices and has given the economy a real consumption kick. Now that won’t continue, it’ll adjust over the longer term, and then what happens is, those devalued pounds have to buy more and more imports, and those imports are going to get more and more expensive. So that’s going to lead to both an actual step function increase in the cost of living in Britain and also going to push some inflation into the system.

Now, is this deadly? Is Britain going to fall off a cliff? That’s what I’m going to be skeptical about with the experts. Will the British economy cease to function? Absolutely not. So it’s very much a mixed bag on that one.

 

MPN: You have argued recently that Donald Trump is, in a sense, a Marxist. This is certainly a comment that will provoke some reaction… Explain this to us, how does Donald Trump resemble a Marxist?

MB: This is a provocation, and I even wrote a piece for the Washington Post, but they decided to sit on it. Can’t think why. Here’s the story: Back in the 1970s, there was a debate between a guy called Ralph Miliband, who is the father of the two Milibands who went on to run the British Labour Party, David and Ed. He was a good Marxist. And there was another good Marxist in Paris, a Greek guy named Nikos Poulantzas. So you had the Miliband-Poulantzas debate about the state and capitalist society, and on the Miliband view, it was a sociological view that it’s these elites that go to the same schools, that talk the same way, they get all the top jobs, and that’s why the state does what the capitalists want and vice versa.

Poulantzas gave a much more structural reading, which basically goes along the following lines: There’s a collective action problem at the bottom of capitalism, and here’s what I mean by this — while it’s individually rational for a firm to offshore its labor or to replace its workers with robots, if everybody does it, it’s collectively suicidal. So, what the state has to do is get above the short-term interest of profits and take the long-term view of the health of the economy.

In that sense, Trump and the people around Trump kind of are drawing on that kind of Marxist thinking. They’re not really Marxist, they’re not reading Poulantzas, but they’re coming to the same conclusion. Essentially, if you have unbridled competition — and [Steve] Bannon, his adviser, has been quite explicit on this — if you basically turn everything into commodities with a price and turn everything into a balance sheet and make everything into assets, then you create a system that is incredibly volatile and has a huge race to the bottom component. Seen against that, the whole thing about border taxes and exhorting businesses to invest at home and buy American, is kind of drawing on those similar threads. Now, does that mean that Donald Trump is a Marxist? Absolutely not. But are they both getting at that endogenous weakness in capitalist power structures? They are. In that sense, Donald Trump’s a Marxist.

 

MPN: What is your outlook for the U.S. economy going forward? Do you believe that “Trumponomics” will be allowed to prevail and that his administration will succeed with the stated goal of bringing back jobs and industry which were lost?

MB: There’s two stories in this, and I honestly don’t know how which one to believe, because they’re equally probable. Let’s assume that we don’t end up in a war with Iran and China and markets fall off a cliff, and all those things which are sadly possible under this administration. And let’s assume that we sort of backpedal a little bit, that he tries to do what he says he’s going to do. Now here’s the story as to why it won’t work: Look at Germany. Germany’s the most efficient exporter in the world, it’s got a large manufacturing sector. It’s short 300,000 skilled engineers. So there’s plenty of room for manufacturers in this world, that’s true. But the size of the German manufacturing sector, in terms of the number of workers they employ in total, has been shrinking for the past 20 years. And it’s shrinking in China. Because ultimately in capital, machines do substitute for labor very efficiently, and unless you’re going to make a political commitment to build 1980s-style cars with 1980s-style production techniques, it’s just not clear how you’re going to provide that volume of jobs, because most of those jobs can and should be automated, because they’re dirty and unhealthy and probably better done by robots. So there’s that story.

Now here’s the other one: If you look at the total volume of manufacturing and total output of manufacturing across the planet, output is up but the number of workers is down, and that seems to go with that story. But there’s another way of telling that story, which is that a lot of firms just moved to China and moved to globalized locations, where it’s so cheap that you can substitute labor for capital. In a sense what you’ve done then is artificially depressed the number of workers that you can have in manufacturing. We could still have a bigger manufacturing sector if those processes were reversed.

Now, I think the second one is interesting. I’m not sure it contradicts the first one, but they do push in different directions. If the second one is true, Trump can do a lot of what he says he’s going to do. If the first one, the effect of the first one overrides the effect of the second one, he’s not going to be able to do that. But more importantly and more immediately, have a look at what he’s doing. The first thing is, we’re basically going to create trouble with every Muslim country that we’ve either bombed or been in or have bad relationships with. We won’t do anything to the Saudis despite all their links to God knows what.

That’s one thing, and the next thing is, we’re going to start talking trash with China, etc.

The third thing is we’re going to roll back the Wall Street playbook to 2006 and we’re going to have big tax cuts. So what does that actually look like? It looks like a Trumped-up version of Reaganomics. Giving me another tax cut is not going to produce jobs in the Midwest, irrespective of trade policy. It’s heading in several contradictory directions at once, but we’ll see where it goes. As to exactly how it’s going to play out, I have as much of a clue as anybody else, which is to say, we don’t know.

 

MPN: President Trump recently announced the formal withdrawal of the United States from the Trans-Pacific Partnership (TPP). It also looks like the Transatlantic Trade and Investment Partnership (TTIP) is also dead in the water, while the North American Free Trade Agreement (NAFTA) may be up for renegotiation. Free trade, of course, and these agreements are presented by some as this really great thing. What was the real economic impact of free trade agreements such as NAFTA, and what would TPP and TTIP have actually meant, in economic terms?

MB: I’m not a trade economist, so these are comments about what I think about this stuff without having the benefit of really deeply studying it. My basic story goes like this: NAFTA is qualitatively different from TTIP and these other agreements. NAFTA was about trade in real goods and services between countries that abut each other and were already heavily integrated, particularly in the Canadian case, into the American economy and supply chains. In a sense, what the American auto industry got was slightly cheaper, more flexible production of auto parts by the Canadians, and then what they got from the Mexicans was cheap labor to offshore a bunch of stuff. It’s the jobs effect in the Mexican side that people have paid the most attention to.

Ross Perot was right when he said there will be a giant sucking sound as all those jobs leave America and go to Mexico. That happened. But we also have to remember that prior to that — take Wisconsin, for example. Wisconsin lost one-third of its manufacturing jobs before NAFTA, when they moved from Wisconsin to places like Texas. There was a huge drain to the south to get away from organized labor, to make labor cheaper. So in a longer-term view, you can see NAFTA as the continuation of a process of getting out of the heartland which began in the 1960s, in fact. So that’s that one.

Now what about the other [trade agreements]? The other ones are totally different. If you think about their economic effects, they were all estimates because they didn’t do them. People talked about how they would boost GDP 0.5 percent or 1 percent. That’s nothing, that’s a rounding error. One percent on a $70 trillion economy is nothing to be sneezed at, but it’s not like it’s going to give us 10 percent or a huge boost to growth, and this is over a very long time period.

So why was the left, in particular, incensed by these agreements? Because of things called investor protection clauses, which essentially locked in the rights of firms to sue governments for policies they didn’t like. An example of this was the company which was suing the U.S., I think it was over the Keystone pipeline decision of Obama, for lost profits, because they would have made a profit had that decision not come down. The decision has now been reversed, of course, but I’m using it to illustrate the problem. Or imagine you’re in Denmark, and Denmark decides it’s going to do even more against climate change, and it pushes regulations on firms that cost them money. Under these agreements, they can go to a shadowy court where no minutes are kept, the public doesn’t get invited, and an independent tribunal of trade lawyers and lobbyists will decide if the Danish taxpayer has to compensate a firm for voting for things that they would like.

That’s why the left got really nervous about this stuff, and I think justifiably so. But they were missing the trick, because those agreements really weren’t about trade, they were about security. They were essentially cementing in the 21st century, with a rising China and a shift to Asia in terms of general economic activity on the planet, the Americans’ special position in the world. The TPP didn’t contain China but it contained everyone else. It was a way of keeping the Chinese out and keeping the economy locked down in terms of American rules and order. By walking away from that, we’ve in a sense shorted American rule and American hegemony in that area, and this is why the Chinese were absolutely delighted at first, when Trump got elected, because that meant no TPP, which meant their influence was going to grow. Of course, what’s happened since then has been a doubling of that effect, because the sum of the random shocks that appear to be generated almost every day by the Trump administration is effectively driving more and more countries across the world into the arms of China, because suddenly they look pretty reasonable. So there’s some, let’s say, some interesting politics going on because of these agreements.

Watch Mark Blyth answer the question “What is “free” trade?”:

 

MPN: How do you gauge the backlash to Brexit and to Trump’s presidency thus far, and all of the reactions that both have generated?

MB: What’s the Brexit reaction, the backlash against Brexit? Even when they had a free vote in Parliament, the vast majority of MPs endorsed it. The Brexit backlash, to the extent that it exists, is people like me and people of my class sitting in London and fretting about their rather exalted position in society and how it’s going to change because you’ve got this populist move which the Conservative Party, under [British Prime Minister Theresa] May, has embraced. Imagine the economy working for ordinary working people and not just the banksters and the elites. Goodness me! So there’s that.

In terms of the backlash against Trump, if you put a bull in a china shop, people who buy china will get nervous. That’s exactly what’s happened, and there’s a certain kind of shock that still hasn’t receded in the U.S., that the election actually happened and that this guy and the people around him are now in charge. I’d like to think it was what Wynton or Branford Marsalis, the musicians, one of them I believe was critiqued on social media for not showing up at a rally against Trump. He said how about we actually wait until he does stuff and then we’ll find out what we can protest. Well, given the way things have gone with the immigration orders and the way that security tends to be trending and what’s going to happen with financial regulation, I think there’s plenty to get upset about at this juncture, and I think that’s going to continue. But even though the drivers behind Brexit and Trump were dissatisfaction with elites and declining wages and everything going to the top and the top getting bailed out but nobody else is, they’re the same but they’re playing out in different ways because they are in very different political systems.

 

MPN: Is the very existence of the eurozone or even the EU itself now in danger, in your view?

MB: It is, and that’s the line that I used to say. I used to worry about the euro so I wrote about it, and it decided it was going to stay. But what I wasn’t paying attention to is the thing that lies under the euro, which is the support of mainstream parties for the European project itself. What happens if those parties become very weak or fragile and are replaced by insurgents from the left and the right? Well, the left kind of likes the EU as a project, they like the cosmopolitanism of it, they’re not so xenophobic in that sense. But they are nationalists in economics, in the sense that they want economics to, as Theresa May — no left winger, but we’ll use her words — make it work for ordinary people. And that’s about re-nationalizing control of markets, and the Brexit, and taking back control comes from that control.

On the right it’s much more pronounced now. It used to just be the left parties that were having their lunch eaten. Think about what has happened to the British Labour Party in particular and the German SPD [Social Democratic Party], who now poll regularly around 22-25 percent. They’ll never form another government. Back then it seemed that the center-right was the impregnable force, and while May and [German Chancellor Angela] Merkel have definitely shored up their vote, you actually see with the Brexit decision, with the rise of AfD [Alternative for Germany] in Germany and with a host of other things coming up, for example, the French election, the right-wing center bloc is having its vote eaten away by insurgents as well.

Think of termites in a house. If they start eating away at the foundations on both the left side of the building and the right side of the building, then the building looks fine from the outside but it could go any day. The French election is going to be absolutely crucial, and then there’s German elections coming up and that’s going to be very important as well. I think one of the things that might have happened is that the Europeans are now having a kind of timeout, because they’re not squeezing their economies mindlessly at the moment, things are actually getting better. Unemployment dipped below 10 percent for the average of the EU for the first time since, I think, 2008, even though youth unemployment is catastrophically high and there’s still very low growth. Things have stabilized over the past two years. Whether you can keep them stable through central bank intervention forever is a different question, but that’s where we are at the moment.

I think that one of the weird things that’s happened with the election of Trump, you think about protests in cities all over the world, only America can provoke such a reaction. They’re so important that people protest the election of someone who doesn’t govern your country. But with those protests and then with the Trump administration’s behavior as soon as they got into power, I think it may be the case that a lot of the European public are looking around saying that we were thinking about going down that road with these populists, maybe that’s not such a good idea. So there could be a negative demonstration effect from the Trump effect, and that could mobilize more people, particularly on the left, to go out and vote against the National Front, etc.

But unless mainstream parties change their message and actually embrace some of the concerns that have animated and thrown the populists into power, then there’s a big problem ahead. Because if everyone shows up to block the National Front, the legitimate question from the Front supporters is, “What are you for?” All you are doing is blocking forces that want to make a change. You become kind of like the defensive tackle in American football, all you’re doing is there to block, you’re not there to create anything. And that, itself, is its own form of fragility.

 

MPN: Greece once again finds itself popping up in the news. Despite the government’s claims of an economic recovery and the achievement of a primary budget surplus, the future of the IMF’s participation in the Greek so-called “bailout” program is in question, Greece is facing another huge debt bill, revenues are shrinking, while there is increasing talk of “Grexit,” one that would be imposed by the EU itself. What do Greece’s economic indicators actually show and do you believe that Greece is on its way out of the eurozone? Indeed, do you believe that Greece itself should leave now, on its terms?

MB: Your question is a bit of a shocker to me, because I didn’t actually realize that there was new talk of Grexit. I didn’t actually hear that, I have been focused on other things, as they say, since November, given everything in the United States. But in Greece it’s not going well, you’ve got a real problem, those who have skills, those who are young have left. They tend to be your future taxpayers. You’re left with the public sector and the old essentially, to be very crude about it. They don’t generate much in the way of tax revenues, particularly when the economy is chronically depressed and is constantly trying to drive a budget surplus, which in the context of a debt overhang means less and less employment. It’s in a terrible place. But given the way the troika [the European Commission, the European Central Bank, and the International Monetary Fund] have structured this and the way the European Stability Mechanism works, which has taken most of the private sector risk from the banks that lent Greece the money and put it into the public sector, Greece is in a kind of tutelage state, where it lives off the drip feed of the troika.

Would Greece be better off outside? Probably. Would Greece be better off with its own currency? Probably. But then you’ve got a question of how you get there. There’s been discussions of parallel currencies, etc., but whichever way you go it’s already bad, and that transition is going to hurt even more. Think of it this way: You still have euros, and you have assets in a Greek bank and you get wind of the fact that there’s going to be a parallel currency. You’re going to try to do everything you can to move those assets into an Italian bank, because that way you’ve still got real euros when ultimately you’re handed new drachmas. If there’s a huge devaluation because of that, then those euros will buy lots more new drachmas than whatever parity sets on the day there’s going to be a swap. So this is the problem of the euro as a whole, it’s a “Hotel California” problem — you can check in but you can’t check out. That’s why I’m surprised by the new talk about this, because it’s not clear to me how you affect this. We can imagine various scenarios, but at this point in time they are all scenarios.

 

MPN: You mentioned the parallel currency as a possibility, and there has been talk about a so-called parallel currency being imposed. What has the history of dual or parallel currencies been in other situations where they have existed, and would this be a harmful prospect for Greece and its economy?

MB: The Greek economy is already on life support, so if you start playing around with the electricity to the life support machine, that can be kind of damaging. But ultimately if you’re laying in a ward and slowly dying, you might as well try something.

In terms of parallel currencies, they’re not great. The history of them is checkered, there’s not very many around. One of the ways that has been talked about most recently has been in the context of France and the National Front. The National Front want to get out of the euro, so in a sense what they’ve proposed is kind of reverse-engineering the euro. You had national currencies, now you have this thing called the EQ, which is kind of like, if we all had a currency, how much would it be worth and this is what it looks like, which was a prelude to going into the euro full blast. They’re saying, why don’t we basically take time to renegotiate all of our contracts, we’ll back out of it into the EQ as a kind of parallel currency, and from there we’ll go back.

The problem is the speed and reaction time of financial markets. Gone are the days where you could lock up the banks on a Friday on a bank holiday, stuff them with a brand new currency, and everybody opens up on a Monday and says, “Look at the new money,” and business goes on. In a global, interconnected, hyperlinked world run by algorithmic trading platforms and dominated by hedge funds and big banks that make bets on trades, if you’re trying to do this stuff, the currency markets will kick the hell out of you. It’s not about beating up Greece, it’s a bigger target. If I know that Greece is going to try this, I know there’s going to be a lot of volatility with the euro, I can basically take out options and bet on both directions in which way the euro moves, and then that creates amplifications in the system as everybody else tries to do it. So it’s just a very, very hard thing to do in the modern world, to back out of this. People talk about these things, but I have absolutely no way of weighing what the reality of it is.

 

MPN: What might the difference be between a parallel currency system and a cleaner break and a return to a national domestic currency?

MB: I find these conversations to be sort of, many angels dance on the head of a pin. If you just declare new drachmas tomorrow and start issuing script, anybody who’s got euro will recognize that as real money and will want to preserve their euros, so you’re going to be fighting an uphill battle immediately. If you try to do it more gradually through a parallel currency and hope that people adjust and you then legislate that payments should be done digitally rather than through cash and it’s always going to use the new unit of account, yes, in principle you can get there, but it’s not easy, and it’s not easy to foresee how it works out. I don’t really have any strong opinions on which one is better, because I do think these are philosophical more than practical exercises at this point.

 

MPN: Would you argue that the neoliberal world order, or even capitalism itself, are in crisis?

MB: I did a Foreign Affairs essay reviewing some recent work called “Capitalism in Crisis: Who’s To Blame and How We Got Here.” I think there really are big problems, and the big problems are pretty simple. One is inequality on a massive scale, simply because when 88 percent of the population doesn’t feel they are sharing in the prosperity they will want to redistribute one way or another, and if the mainstream parties are tone deaf to these needs or the movements that drive them, then they will be replaced, so that’s a problem.

In terms of capitalism itself as a social system, as an economic system, I think some of the stuff that’s out there, like robots replacing jobs, is a bunch of tech-speak from California, so I would short it. The fastest-growing job in the United States by volume is elder care nurse, and I have yet to meet an elder care nurse robot. But you do end up with a big service sector with low wages, in part because capital controls all the money, all the power, and all the advantages. That’s not going away anywhere soon, so that creates a lot of political tensions and frictions.

I think there are real deep structural problems. Can they be overcome? Yes, we can if we think smartly about them. It is easy to do something about inequality. Pick a tax system, the one from the 50s, the 60s, or the 70s. Any one, I don’t care which one. You’ll generate way more revenue, and you’ll actually create better patterns of consumption in the middle, because basically the top has all the money and they don’t pay taxes, the bottom isn’t earning any money and it pays most of the taxes, and then the very poor don’t pay any taxes and they have no money. That’s patently unsustainable. So you can imagine progressive tax reforms which would do a great deal to restore middle class consumption.

People have got to stop accumulating debt as a surrogate for wage growth. It’s great for banks, but it’s terrible for everybody who is actually taking on that debt. When you have an environment with low inflation there’s no way to eat away the value of the debt and your wages aren’t growing. You create kind of creditor-debtor standoffs. What’s happening at the level of Greece and Germany is in a sense also happening within countries, between borrowers and lenders, between generations, between the old — who have most of the assets, 75 percent of all financial assets are held by baby boomers — and the young — who are increasingly expected to pay for everything with wages that simply aren’t growing. There’s lots of problems and lots of tensions and the populism we see around the world is a reaction to that. Hopefully it’s not the only one.

 

michael-120x120ABOUT THE AUTHOR
Michael Nevradakis  

Michael Nevradakis is a PhD candidate in media studies at the University of Texas at Austin and a US Fulbright Scholar presently based in Athens, Greece.

Feb 242017
 

By Michael Nevradakis99GetSmart

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Dear friends and listeners,

Here’s the latest print pieces from Dialogos:

Our Article on Political Developments in Brazil and Similarities with the European South

Our latest article, taking a look at political developments in Brazil preceding and following the ouster of democratically-elected president Dilma Rousseff, and the many similarities and parallels which exist between Brazil and the European South, including Greece, has been published in Mint Press News. This article focuses on the politics of the previous Workers’ Party governments in Brazil and whether they were truly progressive, the harsh austerity which has been implemented by the non-elected president Michel Temer, and the many similarities of Brazil’s situation with countries like Greece.

Find this article here: http://www.mintpressnews.com/brazils-manufactured-coup-the-shock-doctrine-returns-to-latin-america/224823/.

Our Interview with Geopolitical Analyst Alex Christoforou Featured in Mint Press News

Our recent interviews, in English and Greek, with journalist and geopolitical analyst Alex Christoforou, co-founder of TheDuran.com, has been featured in Mint Press News! This is a combination of two recent Dialogos Radio interviews featuring Christodoulou, which aired on our radio broadcast in January and February.

In this interview, Christoforou discusses hot-button political and geopolitical issues, including Trump and the foreign policy he may follow, Russia and its response to developments along its border and in the Middle East, Syria, the Cyprus reunification talks, Brexit and Grexit, and much more.

Find this published interview, in English, here: http://www.mintpressnews.com/durans-alex-christoforou-treating-russia-bogeyman-failed/225175/.

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Dialogos Radio & Media