Wolfgang Streeck: Immigration, Refugees and Brexit

The German sociologist Wolfgang Streeck has an interesting argument on the German refugee crisis, which he links--via the problem of immigration-- to Brexit. It is short and well-worth reading. --it's a postscript to his longer review of Martin Sandbu's book.  (Streeck has become an important public intellectual in the last few years, as a consequence of his penetrating criticisms of contemporary capitalism.  He has a very pessimistic take on the ability of capitalism to survive. In that respect, he's a Marxist who has given up on the emancipatory power of the working classes.) See here and here and here.) His book Buying Time is well-worth reading. Miriam Ronzoni has a good discussion here. (Miriam's piece is available digitally from the library.)



As is:



The essay that concerns is us in this course is the shorter article linking German refugees, immigration, and Brexit. If you are writing on any of these topics, read it and the critique here.

I have a few thoughts about Streeck's argument (as expressed in the longer LRB essay  and the shorter SPERI postscript on Brexit).

Niall Ferguson Changes His Mind; this time on Brexit

In a much discussed piece in today's Sunday Times (behind paywall, but a summary here), Niall Ferguson apologizes for supporting the REMAIN side in last June's vote.  He now announces he is switching to the LEAVE aside.

[This is not the first time he has switched sides. He was in favour of the Iraq War, then--in a move that would make Donald Trump proud--claimed (in his ST column of June 2016) he was always agin it: a forgetful claim, since he had written this back in 2003:

"Let me come clean. I am a fully paid up member of the neoimperialist gang. Twelve years ago—when it was not fashionable to say so—I was already arguing that it would be “desirable for the United States to depose” tyrants like Saddam Hussein. “Capitalism and democracy,” I wrote, “are not naturally occurring, but require strong institutional foundations of law and order. The proper role of an Imperial America is to establish these institutions where they are lacking, if necessary by military force.” Today this argument is in danger of becoming a commonplace…. Max Boot has gone so far as to say the United States should provide places like Afghanistan and other troubled countries with 'the sort of enlightened foreign administration once provided by self-confident Englishmen in jodhpurs and pith helmets.' I agree."] The New York Times Magazine (April 27, 2003)

He apologizes for getting his Brexit vote wrong, and justifies his error on the grounds that he was supporting his friends (Cameron and Osbourne) and had been bamboozled by living in pro-EU America for 14 years.  

But now he sees the light and advances 4 arguments sufficient, in his view, to justify BREXIT:

1. The EMU doesn't work and "has made it extremely difficult for Southern Europe to recover from the financial crisis."

2.  Europe's "supposed foreign policy has been a failure," as shown by the Arab Spring--"European governments intervened just enough to make the Islamist winter worse." Ditto wrt Ukraine.

3. European institutions mishandled the financial crisis--evidence: "the crisis drags on in Italy."

4. EU leaders --esp Merkl-- "made a disastrous mess of the refugee crisis precipitated by the Syrian civil war, turning it into a mass migration crisis. They wholly failed to secure the EU's external border. Finally, they utterly read the mounting public dissatisfaction...with the consequences of unfettered free population movement."

I agree with him that the EMU was a bad idea. The EU needs to jettison the sneaky Monnet/Delors project of using economic integration to drive forward political integration. I've argued that political integration--openly discussed with the public and respecting a sensible form of "subsidiarity"--ought to precede economic integration. That said, it is worth bearing in mind the following counterarguments:

1. Italy's problems have very little to do with the EMU. The Italian Crisis--very low productivity and growth--precedes the appearance of the EMU. I share Martin Sandbu's view (here and esp. here) that devaluation will not work for Italy. (See also Daniel Gros who doubts there is anything that Germany/EU can do to save Italy.) In fact. the root of Italy's economic problems is (as Giavazzi and others have noted) a misallocation of capital, which itself can only be understood in terms of a failure of the capital and credit markets in that country.  Simply stated, Italian banks allocate money in a way that starves the productive sectors of sufficient funds.  This problem has nothing to do with the EMU; it would persist even if the Euro were abolished.

2.  Europe's foreign policy failures in the Arab Spring were largely the fault of Cameron and (esp.) Sarkozy, who facilitated the demise of Gaddafi without a plan for his succession. This failure had very little to do with the EU. EU action on Ukraine has not been as bad as people suggest. The EU's existence has helped stimulate a freedom movement in Western Ukraine, which has proven a thorn in the side of Russia, which--despite its power and interests in this region--has not been able to bring under full control the one country that it considers absolutely crucial to its own security.

3.   The financial crisis was largely a consequence of the badly-regulated derivative market in the US.   The current Italian banking crisis--basically Monte dei Paschi and a few others-- is a function of Italy (not the EU's) failure to reform its quasi-medieval banking structure, which allows Fondazione (amateur political appointees for the most part) to meddle in business decisions. (See here for an account of how PD politicians screwed up MPS and were duped by Bolin's Santander into overpaying for Banca Antonveneta in 2007; see also this article by Veron).

4.  Ferguson is right to criticize the EU for not policing its Southern Med. border properly and for dropping Greece and Italy in it. But he is wrong to complain about Merkel's decision to admit refugees. She deserves praise for recognizing her humanitarian duties to rescue a bunch of people fleeing from ISIS, which itself is partly a consequence of the disastrous Iraq War that Ferguson himself-- in his pith-helmet phase--supported.  

More generally, even if NF were right on all four points--and he isn't--this does not justify BREXIT. Britain isn't in the Eurozone, so points one and three are irrelevant. Britain has the strongest military in Europe and is very well-represented in EU foreign policy circles. Britain could easily veto any major European foreign policy it disliked. The EU, for better or worse, acts largely through consensus, especially in the foreign policy area, where the EU lacks any independent "federal" means for action.

The only argument that bears on Brexit is the refugee argument and immigration.  But here I think Merkel is right. Europe has a humanitarian duty to Middle Eastern refugees--especially Britain, whose foreign policy has done more than most to reduce the region to a zone of insecurity and misery.

  

Can anyone think of anything good about 2016?--A Personal Take

Can anyone think of anything good about 2016?

Donald Trump and Matteo Salvini (leader of Italy's racist Lega Nord)

I'm having a hard time thinking of anything positive about this year, a year that has seen nationalists defeat cosmopolitans, bigots outwit the enlightened, and the vulgar triumph over the refined.

Some random, melancholy thoughts in the wake of Brexit, Trump, and now the Italian referendum:

Everything bad about this year is summed up in Matteo Salvini's (leader of Italy's racist Lega Nord) exuberant tweet last weekend after the Italian referendum:

--"Viva Trump, Viva Putin, Viva la Le Pen, Viva La Lega."

There's 2016 in a nutshell. A tweet--in fact a retweet of a tweet he posted immediately after Trump's victory.

I still struggle to accept that our President, the ostensible leader of the Western World, is a fanboy of a Russian thug, an KGB agent no less, owes his wealth to his racist slumlord father, married an illegal immigrant, and proudly boasts about assaulting women--a man who has never read a book, incites violence, makes racist insinuations against our President, has a serious personality disorder, and now---to cap it all--promises to make a fortune out of the Presidency.  Compared to him, even that draft-dodging dimwit George W. Bush was a man of decency, a leader of Periclean abilities.

As I said earlier, Trump, for all his apparent deficiencies, still remains hard to assess, because it is not clear what, if anything he stands for and what he intends to do. I said there were Five Possible Trumps (not mutually exclusive):

(i) Trump the Protectionist;
(ii) Trump the "America-First" Nationalist;
(iii) Trump the White Nativist Xenophobe;
(iv) Trump the Infrastructure-Builder;
(v) Trump the Cypher (the mere frontman for others);

and now a new possibility given the prominent positions of Bannon and Flynn:

(vi) Trump the Neo-Con, the new scourge of ISIS and militant Jihadi Islam.

[Since writing that post, I've come to think that his campaign involved a form of bait and switch.

Trump campaigned as a singular figure, someone beyond GOP dogma--he made noises that sounded democratic--protect workers, have a better health care plan etc.  But now it seems that he has sold his soul to the most reactionary, most white conservative, elements of the GOP. This is an Administration further to the right than Reagan, GWBush and even Ted Cruz. The views of the Cabinet (Price, Sessions etc) do not reflect the average GOP voter still less the country at large.

  Whether abortion should be legal in most or all cases

Price

U.S.

32%

Illegal

64%

Legal

Republicans

60%

35%

Democrats

13%

84%

Source: Quinnipiac University Poll, Nov. 2016

Effect of illegal immigrants on American jobs

Sessions

U.S.

25%

Take jobs away

65%

Take jobs Americans don’t want

Republicans

46%

48%

Democrats

12%

79%

Source: CBS News poll, October, 2016

And yet as soon as I travel down these lines, as soon as I get annoyed at Trump's bait and switch, I realize I'm viewing the world from the perspective of a comfortable liberal.

Would I think the same way if I were a mid-western auto-worker, a white-van driver from the North of England, or some unemployed Italian graduates who can see no hope for employment no matter how distantly he peers into the future?

Perhaps we liberal elites screwed it up. We were too willing to deregulate the economy, ship jobs abroad, open borders to immigrants, even--God help us--launch hubristic foreign wars. We pushed our values and advanced our interests, while dismissing those who resisted as no more than fools and bigots.

If only we had cared more about material equality.  For years, people had been pointing out that western societies were becoming plutocracies.

There's something comforting in believing that greater material equality will fix things. More troubling is the thought that the turn against liberal elites is animated less by material than ideal interests, less a lack of opportunity than a lack of tolerance.

What we are seeing in a lot of Trump and Brexit etc. supporters is a turn towards authoritarian populism. These are people, as someone in the Guardian (where else?) put it: "who could broadly be described as out of step with the cultural assumptions – such as a respect for human rights, immigration, feminism and diversity – that are the bread-and-butter of liberal democracy."

Leaving aside the contentious claim about "the bread and butter of liberal democracy." lets concede that it was the genius of Farage and Trump and Steve Bannon to articulate the worldview of this hitherto belittled rump. (For more on Bannon's worldview, see here.)  Liberals had nothing to say to them. Liberals tend to assume that everyone is reasonable and shares the same basic moral outlook.

That's one of the great shocks of 2016: we occupy modern societies that are deeply-divided on fundamental values. Liberals are now going around saying: "I don't recognize my country."

They should get out more.

I can't forget my encounter with a New York city fireman--off-duty at the time--back in early 2009.  We were sitting next to each other at the bar of an Italian restaurant and got talking. He was incensed by Obama's election. He thought Tim Geithner was a tax criminal who belonged in jail. He was especially bothered by suggestions that poor people caught-up in the sub-prime mortgage crisis might get bailed-out. (Bankers didn't seem to bother him.) He thought that Muslims ("rag-heads," as he predictably called them) were taking over the country. And it would only get worse now Obama was in charge.

When he figured out I was a liberal, he became especially animated. He hated liberals--like everyone else in his Fire House--partly because they preferred an argument to a fistfight. He sneered when he learnt that I didn't follow UFC cage-fighting. He thought everyone should look in a mirror before they voted and "choose one of their own."

I'm almost certain this guy voted for Trump; and I suspect a lot of Trump and Farage and Salvini and Le Pen voters think exactly like him.  Moreover, this is a guy who is not poor.  Firemen earn a ton of money in New York and retire early on fabulous pensions. This guy told me he also owned a plumbing business.

Perhaps we liberals should now give this new order--this form of popular authoritarianism--its chance.  Maybe the popular authoritarians like Trump will do a better job with the economy-- especially if they can escape the cold skeletal hands of austerity--, perhaps they can bring people together in joint hatred of some other "other."

If there is any optimism to be found, surely here is the place to look. Trumps great infrastructure plans will grow the economy--Larry Summer's charge that these plans are a scam will be proven wrong--and the economically disgruntled will all become merely gruntled. The Europeans--the Germans in other words, since they are the only Europeans with agency--will follow suit.  Southern Europe will be lifted on a great tide of fiscal policy. Targeted EU investment will rejuvenate their economies.

And yet...even if this economic renaissance were to appear, I worry that we have more to fear from Trump's success than his failure. For then we will have entered a very different world.   Capitalism, Liberalism, and Democracy will be pulling in conflicting directions. The likely loser here will be liberalism.  The views of that racist New York fireman will gain respectability.

I'm certainly not willing to let that lot take over.  

So what's to be done?

Germany and the Eurozone Crisis

Here are some links:

On German Ordoliberalism; see here and here

Interview with Jens Weidmann, Head of the Buba (2013)

Glyn Morgan, "Greece and the Limits of European Solidarity" (consult the references to Germany in the bibliography)

Italy--Post-Referendum

Matteo Renzi 

(giving his resignation speech)

"Now that the referendum has failed, the next Italian government—which will have to draw support from Renzi’s Democratic Party to govern—will need to address five challenges in particular: a worsening sovereign debt problem, an unstable banking system, tangled public finances, immigration, and the disillusionment of the country’s youth." (Eric Jones FA)

THE AFTERMATH

As expected, the Italian Referendum on Constitutional change was defeated--a good overview here. The NO vote (59%) was unexpectedly large.

In today's lecture, I want to;

(i) Examine the vote;

(ii) Explore the implications for Italy;

(iii) Speculate on the longer-range implications for Europe.

(iv) Provide my two-cents and explain why I think the negatives of this vote outweigh the positives of the Austrian election, which saw the defeat of the right-wing candidate Norbert Hofer.

My predictions from last week of a substantial NO vote were pretty much spot on.

Market reaction has been more muted than I expected, but it is early days yet. Expect the Euro to sink and the bond spread to blow out as he market realizes what a mess Italy is now in.


CURRENCY MARKET

EUR/USD --1.0776





(i) The Vote:

This is a case where the pre-election polls got it (nearly) right; they show that Renzi managed to go from 60% in favor of the reforms to 53% against by the end of Oct--a trend that continued, taking the vote to nearly 60% against:




The take away message from the exit polls is that the NO vote was driven by the young (according to exit polls, 80% of those between 18-24 voted NO), the unemployed, and people on a low wage.

This suggests people voted more on their (very negative) feelings about the current regime--and especially its failure to remedy (or persuade Germany to remedy) the enduring economic crisis--than about the merits of the constitutional changes.

See the interactive graph from Il Sole 24 Ore here (in Italian but easy to follow).

The vote was also split along party lines. PD voters were overwhelmingly in favour of the referendum--FI, Lega and esp. M5S overwhelmingly against.



The geographical distribution of the vote shows that support for NO was pretty much ubiquitous. Only 12 provinces went YES (in Green) --many of them from Tuscany, Renzi's home region--the South went overwhelmingly for NO.




Despite the crushing defeat for Renzi, there is one promising sign for him.

The yes vote performed better in nearly all provinces (and 13% better over all) than did the Parti Democratico (the PD--center-left party) under the left-wing unionist Pierluigi Bersani. Indeed, the yes vote did not do much worse (only 0.7% worse)  than Renzi's vote in 2014, when he was at the peak of his popularity. These results suggest that Renzi still remains more popular than the PD than under its old leadership--a leadership (in the form of Pierluigi Bersani, Massimo D'Alema, and Roberto Speranze) that is hoping to now takeover the PD.

Since Renzi owes his position as head of PD to an election, he will remain PD leader until he is toppled in a vote.

My friend Enzo Rossi (University of Amsterdam) has a useful explanation of the voting blocs behind the YES and No camps:

"The international press is obsessed with populism these days, but the Italian NO was not just a victory of populists. Part of the anti-Renzi vote was anti-populist, in two senses: the old left sees Renzi as too populist, and the proposed reform was seen as dangerous in case of future victories of populist parties. Roughly, I think there were five voting drives:

A. People voting on the merits (not sure about the split).
B. Old left and respectable bourgeoisie rebelling against Renzi's juvenile vulgarity (and/or protecting their baby boomer privileges).
C. Populist left wanting to get rid of a neoliberal prime minister.
D. Xenophobic-conspiratorial-europhobic populists (M5S, Lega).
E. People believing in Renzi's renewal impulse and/or frightened of the economic consequences of a NO vote.

Part of A and E just weren't enough to win. Until not long ago B wasn't such a problem for Renzi, but the moment that the old middle class opinion makers start beating their drums the baby boomers come flocking and do the 'respectable' thing. They've got their good 'pay as you go' pensions anyhow, paid by the precarious workers of my generation. Until the banks hold, that is."

On this view, B,  C, and D carried the day for the No camp.

Personally, I can understand (while not sharing) the motivations of the C and D camp. But I don't understand the B camp, who surely have the most to lose from Italy losing foreign confidence, which is now a genuine worry.

(ii) Implications for Italy:



Padoan--Matterella--Amato
Prodi-Grasso-Franceschini

Immediately after the Referendum results, Matteo Renzi--as expected--resigned. The ball is now in the Court of President Matterella (a parliamentary appointed position) to select the next PM to form a government that can command enough support to pass a vote of confidence.

Some of the figures in play are the now elderly former PMs, like Guilio Amato and Romano Prodi (for crying out loud). The most likely candidate is Pier Carlo Padoan, a technocrat and current finance minister.

No less important than the PM choice is what happens to the political parties, especially the PD and the remnants of Berlusconi's party (currently split between NCD--"New Center Right"--and "Forza Italia"--Berlusconi's current party).

Before talking about the PD and NCD/FI, it is worth noting that both M5S and the Lega Nord (the racist, xenophobic Northern League party of Matteo Salvini) have proclaimed the NO victory as "their victory"--both are calling for a new election.There is a certain cynicism in the M5S position. they are calling for an election under the current ITALICUM (the electoral system that gives a seat bump to the Majority Party), despite long berating the unfairness of this system. Now that they are presumptively the largest Party, they want to take advantage of this bump option.

The point of departure for thinking about any government is the voting blocs behind the formation of Renzi's Government in 2014.

25 February 2014 Investiture vote for Renzi Cabinet
House of Parliament	Vote	Parties	Votes
Senate of the Republic	Yes	PD (109), NCD (32), PSI-SVP (13), PI (10), SC (7), Others (5)	176 / 320
	No	FI (59), M5S (40), LN (15), GAL (9), SEL (7), Others (14)	144 / 320
Chamber of Deputies	Yes	PD (298), NCD (27), SC (27), PI (16), Others (20)	388 / 630
	No	M5S (104), FI (70), SEL (25), LN (19), FdI (9), Others (15)	242 / 630

PD (298)--Demoratic Party (the Center-Left party)

M5S (104)--Grillo's Party

FI (70)--Forza Italia--Berlusconi's Party

NCD (27) --New Center Right (a center-right party of ex-Berlusconi supporters)

What will happen within the PD?

What will happen within NCD/FI? (Will Berlusconi return?)


(iii) Implications for Europe

The German reaction is worth noting:

Referendum in Italien
Renzis Gegner interessieren sich nicht für Italiens Zukunft

Der italienische Ministerpräsident Renzi ist mit seinem wichtigsten Reformprojekt gescheitert. Jene, die sich nun als Sieger gerieren, haben selbst keinen Plan. Egal ob sie aus seiner Partei kommen oder Silvio Berlusconi heißen. Eine Analyse.

05.12.2016, von TOBIAS PILLER, ROM
.......Doch in der römischen Politik der kommenden Tage geht es nicht mehr um die Substanz der Reformen, sondern nur um die Frage, wer mehr Vorteil daraus schlagen kann, wenn sofort oder später gewählt wird, oder wenn die Wahlgesetze nun geändert werden oder unverändert bleiben. Renzis Gegner stecken nach ihrem Sieg in dem Referendum schon wieder mitten in den alten Riten der kurzsichtigen römischen Politik.

My translation:

RENZI'S OPPONENTS ARE NOT INTERESTED IN ITALY'S FUTURE

Italian Prime Minister Renzi has failed with his most important reform project. Yet those who are now victorious have themselves no plan. That's true whether they come from Renzi's own party or from  Silvio Berlusconi himself.

An analysis.

05.12.2016, by TOBIAS PILLER, ROME

....... However, Roman politics of the coming days is no longer about the substance of the reforms, but about the question of who can gain more advantage-- whether elected immediately or later, whether the electoral laws change now or remain unchanged. After their victory in the referendum, Renzi's opponents are once again stuck with the old rites of short-sighted Roman politics.

-----
The view that the referendum returns Italy to stasis--whether right or wrong--is enough to further damage the economy and discourage both foreign and domestic investors.