European Politics

This column by Clive Crook today:

Democrats therefore find themselves having to deny the obvious. Obama wants to make the country more like Europe? Ridiculous. A straw man. But it isn’t ridiculous. What’s ridiculous is the idea that Republicans take for granted and squirming Democrats tacitly endorse—that making the U.S. more like Europe would be a disaster. … The biggest step the U.S. needed to take in Europe’s direction, and the longest overdue, was health-care reform. The Affordable Care Act is a start. … Obviously, political cultures differ in deep ways, so there will never be One True Capitalism, right for everybody. … Still, Europe’s biggest economies all reflect a social- democratic tradition that puts more emphasis on collective provision and the guiding hand of government than seems natural in the U.S. The American political tradition stresses the rights and responsibilities of individuals; it exalts private enterprise and almost celebrates risk. These are choices that countries should be free to make.

… Europe’s politicians looked at the U.S. and decided they needed, among other things, more American incentives and more American creative destruction. … They said so explicitly: Unlike their U.S. counterparts, they weren’t embarrassed to point to the other model. … On the other hand, Europe can teach the U.S. a thing or two about social insurance—and not just in health care, the most egregious failure of the American economic model. Help for the unemployed has traditionally been ungenerous in the U.S. … Republicans might also ask whether America is living up to the merit-society ideal. … In America, land of opportunity, if you are born poor, your chances of staying poor are higher than in Europe. The trade-off between economic vitality and economic security cannot be eliminated. But its terms can be improved in the U.S. and Europe, if each pays closer attention to the other.

presents a striking contrast with this one from three years ago.

Where has France gone too far, in the view of an American liberal? … Presumably, liberals approve of the universal health care, the generous and extensive welfare state, the comprehensive worker protections, the stricter regulation, the vastly more-generous subsidies for higher education, the stronger unions, the higher taxes, and especially the higher taxes on the rich. … Perhaps some liberals privately long to make the United States over in the image of France, but the great majority, I imagine, are more interested in taking the things they regard as best in the European economic model—all the things I just listed—and combining those “socially enlightened” policies with the traditional economic virtues of the United States. Take French social policies and welfare-state institutions and add them to the American work ethic, spirit of self-reliance, and appetite for change. Et voila, the best of both worlds. Color me skeptical. Culture shapes institutions and vice versa. Culture—that bundle of traits of self-reliance, self-determination, innovation, and striving for success—underpins the American exception. … In ordinary times, this culture makes it hard for a government to push the United States in a European direction … it would be an error to assume that the policy transformation that some liberals long for—and which Obama, if his budget is any guide, appears to be aiming for—would leave America’s unusual cultural traits unaffected. … the American exception is alive and well, and that it is more than likely the secret of this country’s awesome success. … I would need to think long and hard before casting it for “transformation.” Repairs here and improvements there, of course, but transformation? It would be a shame to see America revert to the Western European norm.

NB that I am noting, not criticizing, this apparent change of heart. People have different attitudes to returning prodigals. Except in the case of continued rank hypocrisy, I’m by and large in favor of killing the fatted calf (or at the least, keeping it nicely plump in the hopeful anticipation that the change will stick).

Two months ago, I wrote a post which argued, among other things, that the European Union used to be run according to the ‘Community Method’ (according to which member states often used to defer to each other on matters of vital interest, and the Commission had an important role), had moved to the so-called ‘Union Method’ (under which member states were supposed to do stuff on their own, in practice being led by France and Germany), and was now transitioning towards the `ECB Method’ (under which the European Central Bank determined politics). I suggested that this was going to be untenable, and hoped that we might see a push instead towards greater democracy. Well, we didn’t get one. Instead, what we’re getting is the ECB method on steroids. By supporting bank borrowing rather than sovereign state borrowing, the ECB has managed to prop up the system without openly changing its mandate. But by doing this under the table, and without very much in the way of an officially stated long term policy, it has retained and indeed arguably dramatically expanded its political clout.

I don’t have sufficient expertise to make strong claims about whether this will be a sustainable way of propping up bond markets for any significant period of time. What I am convinced of is that it will be a political disaster. As Cosma Shalizi and I argued (Cosma puts it much better than I did) about libertarian paternalism, the problem is that it “break[s] the feedback mechanisms which (1) keep policy-makers accountable to those over whom they exercise power, and (2) allow[s] policy-makers to tell whether what they are doing is working, and revise their initial policies and plans in light of experience.” This dynamic can be extended to explain why the European Central Bank is making a complete hash of the European economy. I’ve spoken to people at the European Central Bank – they are very smart, and very sincerely believe that the best path to long term prosperity is through enforced austerity. They are also – by design – nearly completely insulated from democratic pressure. And despite claiming that they are apolitical, they are in fact playing a profoundly political role, dictating the kinds of domestic institutional reforms that states need to implement if they want to continue getting ECB support.

This means that ECB decision makers are under no very great obligation to think about why they might be wrong, up to the point where complete disaster occurs. And disaster is very likely, if the lessons of the gold standard in pre-World War II Europe tell us anything at all. Enforced austerity does not produce economic growth. What it does produce is political instability.

This is why we should be deeply skeptical of claims for technocracy as a way of making political decisions. Technocracy is supposed to work better because it is insulated from political pressure. But exactly because of that, it is liable to go off the rails when left to its own devices. Expertise is a very good thing – when it is leavened by democratic accountability. When it is not, it is likely to be responsive instead to its own internal discourses and understanding of the world, which can lead it in some very problematic directions. It isn’t just that the eurozone is an experiment in the economic virtues of imposed austerity (as a means of creating confidence and hence a by-its-own-bootstraps cycle of virtuous growth). It’s that the experiment is already visibly failing. And it’s that despite this visible failure, there is little chance of any reversal of direction, because those who have the power to set the course have no obligation to listen to anyone else, and hence aren’t listening.

David Cameron’s use of the veto in the recent EU summit opens an era of deep uncertainty (and possible catastrophe) for British and European politics. Two things seem to be true: Cameron is an incompetent opportunist in thrall to his backbenchers and the proposed treaty is a disaster for the Eurozone countries themselves. The fact that it is a disaster (a fact recognized by Francois Hollande’s declared intention to renegotiate) might seem to give some support to Cameron. But of course it doesn’t, since the remaining 26 countries will just go ahead without the UK. All Cameron has done is isolate and exclude himself. As one MEP is reported as saying today, “If you’re not at the table, you’re on the menu.”

Cameron vetoed the proposed EU treaty on the basis, or pretext, that other countries wouldn’t agree to “safeguards” for the City of London. The reason he was asking for these was essentially just because his backbenchers had demanded he show the “bulldog spirit” and, since EU treaties need unanimity, he thought he could extract some symbolic gain to satisfy them. He didn’t clear this with Merkel or Sarkozy in advance and would have been inhibited in doing so because the British Tories withdrew from the mainstream Euro conservative grouping in order to hob-nob with a bunch of extreme nutters and anti-semites. Sarkozy, who wanted a more integrated core Europe without Britain in any case, took the opportunity to call Cameron’s bluff. All very good for Sarko in the run-up the the Presidential elections. Exit Cameron stage right, claiming to have stood up to the EU - and getting praised by the UK’s tabloid press and an opinion-poll boost – but actually exposing the City to further regulation under qualified majority voting. He’s also chucked away decades of British policy which favoured EU expansion with the new accession countries serving as a counterweight to the Franco-German axis. Where are the other countries now? Lined up with the French and Germans.

The Euro treaty itself, assuming it goes ahead as planned and is enforced, mandates balanced budgets and empowers the Eurocrats to vet national budgets and punish offenders. Social democracy is thereby effectively rendered illegal in the Eurozone in both its “social” and “democracy” aspects. Daniel put it thus :

a takeover of Europe by the neoliberal “permanent government” who failed to get their way by democratic means. All of the nationalism and anti-German sentiment is a distraction from the real scandal here. The ‘technocrats’ (which is apparently what they want to be called, although frankly I am seeing a lot of ideology and not much technical ability) want to reorganise the whole of Europe on neoliberal lines (ironically, to basically replicate the Irish economic transformation

One might think, then, that the left should be happy to be well away from it and that Cameron has inadvertently done us a favour. However, the short-term consequences in British politics could well be awful. My worst-case fantasy scenario has Cameron calling a snap General Election on nationalist themes, getting a majority dominated by swivel-eyed propertarian xenophobes and dismantling the welfare state, the Health Service, the BBC etc. Riots and civil disorder would be met with force, and those driven to resistance or crime would be incarcerated in giant new prisons. The Scots would then, understandably, opt for independence, and England and Wales would be left at the mercy of the crazies for several decades. Texas-on-Thames, in short.

And Nick Clegg? Well I wonder if even Daragh McDowell will make a case for him now.

Understanding developments in the European crisis has become rather like Kremlinology, trying to figure out the meaning of subtle changes in wording, and rearrangements of the Politburo on the podium for May Day parades. In particular, Mario Draghi of the ECB goes back and forth, sometimes suggesting that the ECB will do what nearly everyone else can see is minimally necessary to the survival of the euro (namely, print lots of them, and use some to buy EU government debt, as was done by the Fed and the Bank of England). At other times, though, it’s as if Jean-Claude Trichet is doing a ventriloquist act.

In one respect, todays EU agreement was anything but subtle. The fact that the Eurozone countries and those aspiring to join them were prepared to go ahead without the UK (and a few others) suggests that they have something serious in mind. But what – the announcement is pretty much a restatement of the Growth and Stability pact, and under present circumstances, the deficit targets can only be seen as aspirational.

Applying one of the approaches that used to be standard in Kremlinology (not necessarily a reliable one, then or now) I’m going to assume that the EU leaders are acting with some sort of coherent goal in mind and work from there. In particular, I’m going to assume that everyone who matters now recognizes the need for a big monetary expansion and the use of newly created money to resolve, or at least stabilize, the debt crisis. [click to continue…]

That’s the name of the new government of Belgium, inaugurated yesterday, which got off the ground after fivehundredfourthyone (that is: 541) days of negotiations (mind you: that number is written in Globish, not Oxford English). Elio di Rupo, leader of the Francophone social-democrats, had been trying to form a coalition for quite some time, but whether by coincidence or not, soon after Belgium’s credit rating worsened about 10 days ago, the agreement between the 6 negotiating parties quickly emerged. For those of you thinking that 6 parties make a government unworkable: a 6-party coalition is not unusual for Belgium. In fact, until quite recently this would be better formulated as 3 ‘party-families’, since it was assumed that the ideological line (being green, liberal, Christian-democrat or social-democrat, for example), was overwhelmingly more important than the linguistic identity of a party. But those days are gone, which means that we now do have 6 parties, rather than 3 party-twins.

I haven’t been following the coalition negotiations in detail, so mainly want to open up space for those of you who want to discuss whatever you want to discuss regarding the new coalition. Just three brief observations below the fold.
[click to continue…]

My review-essay of David Marquand’s book on Europe (Powells, Amazon (deprecated))is up at the Nation (paywalled version here , unpaywalled PDF here). It pulls the usual US review-essay trick of being as much about the arguments of the reviewer as of the author (however, since Marquand and I agree on the major issues, it should be less annoying than it sometimes is). I use Marquand’s book to talk about the ways in which technocracy has become the EU’s default mode of policy-making, and the political problems that this creates. Paul Krugman wrote a couple of weeks ago that:

It’s a dubious idea to supplant democratic governance with allegedly non-political management even in the best of times. But to assign authority to unelected men whose actual record suggests that they govern based on prejudices rather than analysis is even worse.

and then went on to write a column about the incompetence of the current shower of technocrats. My piece is about the other part of this argument – the sorry consequences of “supplanting democratic governance” with “allegedly non-political management.”

The End of the West was written before the deficit crisis (HF – it actually was finished at the beginning of the crisis – this is an editing artefact which made it through). Nonetheless, it provides a crisp and relevant analysis of the difficult choices that Europe faces. As Marquand says, the current crisis involves the “revenge of politics over economism.” Europe is caught in a “no-man’s-land between federalism and confederalism — and between democracy and technocracy.” Because they could not get the politics right, European leaders left the politics out, hoping that the usual gradual accretion of policymaking authority would provide an acceptable substitute.

This was a grievous mistake. Yet the EU’s efforts to fix it have been as riddled with hedges as was the original arrangement for economic and monetary union. Europe’s richer states want the deficit problem to go away, but they are not ready to make the necessary fundamental political commitments. They have tried to obscure this lack of commitment in various ways, but the illusion is wearing thin. More hedging will not work. Markets need the certainty of politically credible guarantees if they are to be genuinely reassured. Politically credible guarantees require that European governments come clean with their citizens about the need for new arrangements.

(Thanks to Eric Rauchway for a great and apposite Keynes quote which I repurposed for the review).

A bloggingheads between me and Yanis Varoufakis on the eurozone crisis. It’s more of an interview (of him) than a conventional dialogue. I do try to be slightly less pessimistic – he does his best to bring me down (and as it transpires, all his predictions about the Germans shooting down the Commission’s proposal for a eurobond etc were vindicated within a few hours.

Mario Draghi

Let me use this occasion to dwell a bit further on monetary policy in the current environment. Three principles are of the essence: continuity, consistency and credibility. Continuity first and foremost refers to our primary objective of maintaining price stability over the medium term. Consistency means to act in line with our primary objective and with our strategy both in time and over time. Credibility implies that our monetary policy is successful in anchoring inflation expectations over the medium and longer term. This is the major contribution we can make in support of sustainable growth, employment creation and financial stability. And we are making this contribution in full independence. Gaining credibility is a long and laborious process. Maintaining it is a permanent challenge. But losing credibility can happen quickly – and history shows that regaining it has huge economic and social costs.

Daniel Davies (on the Iraq War, but trust me – the logic travels).

At this late stage in the occupation of Iraq, many of Henry Kissinger’s old arguments about Indo-China are being dusted down. One of the hoariest and worst is that we need to “stay the course” (or some similar euphemism) in order to maintain “credibility” – to demonstrate our resolve to our enemies, who will otherwise continue to attack us. It reminds me of my one and only contribution to the corpus of game theory.

The Folk Theorem in game theory states that any outcome of a repeated game can be sustained as an equilibrium if the minimax condition for both players is satisfied. In plain language, it can be summarised as stating that “if we take strategic considerations into account, there is a game-theoretic rationale for practically anything”. This formulation leads on to my contribution, the Davies-Folk Theorem, which states that “if we take strategic considerations into account,there is a game-theoretic rationale for practically fucking anything” (it’s a fairly simple corollary; proof available from author on request).

The point being that since game theory in general provides the analyst with so many opportunities to twist himself repeatedly up his own arse like a berserk Klein bottle, if a given real-world course of action appears to have nothing going for it other than a game-theoretic or strategic justification, it’s almost certainly a bad idea. Thus it is with that bastard child of deterrence, “credibility”.

… The idea is that the war is costing huge amounts of money and lives with no real prospect of success and a distinct danger that it is making things much worse. However, to do the logical thing would send the signal to our enemies that we will give up if fought to a pointless bloody standstill. Therefore, for strategic reasons, we must redouble our efforts, in order to send the signal to our enemies that we will fight implacably and mindlessly in any battle we happen to get into, forever, in order to dissuade them from attacking us in the first place. It’s got the kind of combination of “counter-intuitive” thinking and political convenience that always appeals to the armchair Machiavelli, as well as to the kind of person who thinks it’s witty to describe things as “Economics 101” (Airmiles has been all over this one for ages, naturally). What’s it like as a piece of game-theoretic reasoning?

Lousy. It is certainly true that one of the benefits of doing something stupid is that it saves you from having to spend money on maintaining your reputation as an idiot. However, is the reputation of an idiot really worth having?

It turns out that it can be proved by theorem that the answer is no. If the game of being a belligerent idiot with no sensible regard for one’s own welfare was worth the candle, in the sense of conferring benefits which outweighed the cost of gaining it, then everyone would want to get that reputation, whether they were genuinely an idiot or not. But if everyone wanted that reputation, then everyone would know that simply acting like an idiot didn’t mean that you were one, in which case it would be impossible to establish a reputation as an idiot in the first place. The point here is that it’s one of the more important things in game theory that a signal has to be a costly signal to be credible; like membership of the Modern Languages Association, a reputation in deterrence theory is something that is worth having, but not worth getting. People who use the word “signal” in this context (usually on the basis of a poorly understood or second-hand reading of Schelling) don’t always seem to realise that they are explicitly admitting that the costs of being in Iraq are greater than the benefits.

This story highlights the political awkwardness of the current European political dispensation. The German Bundestag’s Finance Committee apparently knows more about the Irish government’s economic plans than the Irish public or, indeed, the Irish parliament. Nor is it very good at keeping the information to itself.

THE GOVERNMENT has complained to the European Commission over the release in Germany of a document disclosing confidential details about new taxes to be introduced in Ireland over the next two years. In a deeply embarrassing development the document – identifying austerity measures of €3.8 billion in next month’s budget and €3.5 billion in budget 2013 – was made public after being shown to the finance committee of the German Bundestag yesterday. … Germany’s federal finance ministry confirmed yesterday that it had forwarded troika documents to the 41 member Bundestag budgetary committee in line with its legal obligation under European Financial Stability Facility guidelines. … Taoiseach Enda Kenny said last night he had “no idea” how details of the forthcoming budget ended up being discussed in the Bundestag in Germany. “Let me confirm something to you, the Cabinet has made no decision in regard to the budget which is on December 6th,” he said, referring to the documents [sic] specific references to the budget.

Herr Kauder’s unfortunate turn of phrase aside, this is not a sustainable political equilibrium, either for Germany or for the states on the receiving end of EU-crafted austerity policies. The politics of the bailout are embroiling the national politics of different European member states in ways that are likely to increase distrust and unhappiness in all of them. Nor is this going to get better without major institutional reforms at the EU level (assuming, of course, that the EU survives long enough to institute such reforms).

Skeptics of the need for ‘more Europe’ and in particular ‘more democratic Europe,’ have some excellent arguments. It’s extremely difficult to map out the political processes through which this could happen. But the ever-more-labyrinthine entwinement of different countries’ national economic politics with each other will be increasingly unbearable without some such changes. A Europe in which Germany is both the paymaster and the taskmaster is not going to be a happy Europe, either for Germany itself or for the countries entangled with it.

I’m at a workshop, unable to blog properly, and saving my eurozone energies for revisions to a piece for The Nation (the ending of which has changed dramatically twice, and which is likely to change dramatically again before its Friday deadline). But this piece in the FT is not very far from what I would be writing if I had the time.

Apparently, the answer to the huge problems of the eurozone is the replacement of elected premiers with economic experts – approved officials dropped from European institutions. In Greece, Lucas Papademos, a former vice-president of the European Central Bank, has been pushed hard for the job; in Italy, Mario Monti, another economist and a former EU Commissioner, is much mentioned. They may lack a democratic mandate but they’re fantastically well regarded in Frankfurt. It remains to be seen if either will clinch the role. But what exactly is the great attraction of technocrats?

If ever modern Europe needed brave, charismatic leaders to carry their nation through turbulent times, it would seem to be now. Instead, it is as if the crew of the Starship Enterprise had concluded that Captain Jean-Luc Picard is no longer the man for the job and that it is time to send for the Borg. Efficient, calculating machines driving through unpopular measures across the eurozone with the battle cry “resistance is futile” are apparently the order of the day. Faced with a deep crisis, once-proud European nations are essentially preparing to hand over power to Ernst & Young.

The announcement that Greece is proposing a referendum on the latest bailout deal is causing dismay and consternation among the usual suspects, reports that markets are troubled by the possibility of a disorderly default etc etc. But perhaps this is the best news that the European Union has seen in two years. At the very least, it’s the first time that we’ve actually seen citizens actually being asked about what they actually want (elections in which they kick the bastards out to see Tweedledum replaced by Tweedledee implementing pretty well the same austerity agenda, despite pre-election promises, don’t actually count).

To put it differently, I imagine that the strong likelihood is that the Greeks will vote ‘No’ to the proposed austerity measures. But I’m not at all convinced that this will result in disorderly default. Instead, I suspect that it will result in people running around in panic for a few weeks, grave pronouncements from senior European politicians about how horribly the Greeks are betraying their European vocation, and then efforts to stitch together a deal which might actually make sense (e.g. enough aid to prevent the economy from crashing as horribly as it is doing, as a quid-pro-quo for genuinely intrusive reformation of the Greek tax collection system). This might in turn provoke an actual real argument over what EU politics should look like post-crisis (because make no mistake – the system that is being articulated on the fly at the moment is likely to have profound long term consequences for the shape of the EU).

Or, to put it differently again, the European Union is at a point where it actually has to start taking enormous – and explicitly political – decisions about what kind of entity it wants to be. I have a long piece coming out in The Nation in a couple of weeks, which talks to how traditional politics has always been a problem for the EU. European politicians have preferred to integrate by stealth rather than public debate. But they cannot do that any more. They have tried repeatedly, and failed repeatedly, to treat the rolling crisis as another, albeit much more complicated, technocratic problem, which can be solved through the usual kind of technocratic solution. As they started to do this, European Union governance shifted from the so-called “Community method” (under which decisions were taken by rough consensus among the member states, with the Commission acting as a kind of neutral buffer), to Angela Merkel’s Union method (PDF) in which the member states1 were supposed to take decisions on their own. This in turn hasn’t worked out very well (Germany and France disagree on quite a lot), leading to the effective governance of the European Union by the European Central Bank (what might be called, for all its perplexities, the “ECB method”). Each of these steps has led to an ever greater remove between actual decision making and democratic control. But, when you are asking people to accept a fundamentally different way of ordering politics than the one that they are used to, lack of democratic input is a problem. What is being debated at the moment is not a technocratic fix to Europe’s problems of economic stability. It is a long term set of institutional arrangements which, if they succeed, will shape Europe’s politics for generations to come, and if they fail will likely take the world economy down with them.

Momentous decisions like this should not be made on an ad-hoc basis. They need democratic legitimation. Here, the German Constitutional Court, which is typically regarded by pro-EU people as a pain in the arse, is absolutely right. Its Lisbon decision (summary PDF) reads oddly in some ways – the standard of democracy that it demands is so high that arguably Germany itself does not satisfy it. But its basic claim is undeniably correct. The European Union is not a democratic constitutional order, and no number of technical fixes to the powers of the European Parliament will make it one. Andreas Vosskuhle, the President of the GCC, recently made a speech which again pushes the argument that the European Union needs to democratize if it is to grow in competences – but which implicitly suggests that there is a path to democratization (Vosskuhle has elsewhere suggested that Germany too should have a referendum). My rough translation of the most relevant bit:

Europe’s destination cannot simply be decided within elite circles. To reach the best decisions, we must engage in more open and serious debate, in the parliaments of the member states, in the European Parliament, and in the public. Criticism and opposition are part and parcel of how democracy defines itself. And without a vibrant democracy, Europe can grow no wider.

This basic claim – even if it is usually ignored in practice by European politicians – is hard to argue with. I don’t know whether there is a European Union that could be affirmed (after long and painful debates) by both the Greek and German publics. I think that there is, but I’ll grant that these are not the most propitious times for finding out. Then, there rarely is a propitious time for finding out – when things seem stable, no-one has an interest in upsetting the balance.

Still, I am quite sure that unless there is a space for possible agreement, traditionally technocratic solutions will fail. Figuring out whether there is some such space is going to require active politics, of a kind that European politicians are innately suspicious (they systematically have tried their best to avoid consulting the public about major political changes, for fear that the public will give the wrong answer. None of this, obviously, provides a short term solution to the need to come up with some kind of fix. And perhaps, by increasing uncertainty on panicky markets, it will make things worse (equally though, markets appear not to be especially convinced by the multiple kludges we have seen to date). Even so, long term stability requires some form of explicit public buy-in – and political debates over what exactly they want to be buying into. Which is why today’s news makes me a little more optimistic – even if the politics are going to be messy we need more of them.

1 For which read: the big member states. For which read: Germany and France, with a little bit of input from Poland, the UK and Italy. Romano Prodi likes to joke that this too had its own internal dynamic – the Germany-France bilateral relationship was one in which Merkel took the decisions, and Sarkozy held the press conferences.

When I read Evelyn Waugh long ago, many thoughts passed through my mind, but I can safely say that the idea of writing a blog post starting “Henry and I have a piece in the Daily Beast …” was not among them. Nevertheless:

Henry and I have a piece in the Daily Beast on the politics and economics of saving the euro, along lines that will be familiar to readers here. Some reactions from Ezra Klein and Paul Krugman.

I’m not going to be able to blog my opinions on the latest iteration of the eurozone crisis in any detail, thanks to an exceptionally busy week (comprehensive orals to be supervised, reports to be written, grant applications to be reformulated, papers to be presented and book workshops to be sat in upon). Semi-organized versions of my thoughts can be found here and here; John Quiggin and I have another short piece that will likely be coming out soon. But fwiw I was distinctly heartened by the news today that Wolfgang Schäuble and Alain Juppé are both floating the idea of real fiscal integration and accompanying democratic reforms of the EU. This has plausibly been orchestrated. If they are right to think that this could be pulled off, it would finally create an intersecting set in the Paul Krugman Eurovenn. I’m still not optimistic – but I’m now prepared to up the odds to a 35% chance that Europe could actually get out of this alive. I’ve always suspected that Schäuble was playing a complex game – he’s now putting his cards on the table. Unsurprisingly, this is giving rise to howls of indignation from conservative and euroskeptical Germans – this Spiegel piece (in translation) gives some flavor.

FDP parliamentarians have long been convinced that the finance minister is not playing with an open hand, and that he would prefer to force them out of the coalition. But there has also been an increasing amount of discontent over Schäuble among the ranks of the CDU/CSU parliamentary group. … Many conservative parliamentarians, regardless of their position on the common currency, feel as if they are being treated with contempt. … Many German politicians are also insinuating that he has a hidden agenda. They fear that one of the last fully committed supporters of the European project is taking advantage of the crisis to advance his dream of a United States of Europe … heedlessly allowed himself to be drawn into a dangerous debate over whether the EFSF could get a banking license and leverage its assets to borrow even more money from the European Central Bank (ECB). Most of his German predecessors in office would have rejected such notions with indignation and referred to Germany’s traumatic experiences during the 20th century … In addition to being imprudent, Schäuble’s comments showed bad timing. … discovered that Schäuble was using a torrent of words and statements in an attempt to conceal what he is really planning and thinking. … Schäuble’s political style is also characterized by a good deal of posturing. … Schäuble had merely demonstrated another tactic from his bag of tricks as a seasoned politician.

That he’s arousing such vehement opposition (and nasty articles in prominent German news magazines) suggests that he may have a better chance of pulling this off than I would have thought yesterday. Fingers crossed …

It isn’t a good thing to have contradictory beliefs. Since I’ve notice what appear to be such beliefs in myself recently, I thought I’d share, both because I guess that there are others out there who also have them, and in the hope that Crooked Timber’s community of readers can tell either that I should discard some of them (on grounds of falsity) or that I’m wrong to think them contradictory. So here goes.

Belief 1: As a keen reader of Paul Krugman, Brad DeLong (yes, really), our own John Quiggin and other left-leaning econobloggers, I believe that most Western economies need a stimulus to growth, that austerity will be counterproductive, and that without growth the debt burden will worsen and the jobs crisis will get deeper.

Belief 2: As someone concerned about the environment, I believe that growth, as most people understand it, is unsustainable at anything like recent rates. Sure, more efficient technologies can reduce the environmental impacts of each unit of consumption, but unless we halt or limit growth severely, we’ll continue to do serious damage. There are some possibilities for switching to less damaging technologies or changing consumption patterns away from goods whose production causes serious damage, but the transition times are likely to be long and the environmental crisis is urgent.

Belief 3: Some parts of the world are just too poor to eschew growth. People in those parts of the world need more stuff just to lift them out of absolute poverty. It is morally urgent to lift everyone above the threshold where they can live decent lives. If anyone should get to grow their consumption absolutely, it needs to be those people, not us.

Belief 4: The relative (and sometimes absolute) poverty that some citizens of wealthy countries suffer from is abhorrent, and is inconsistent with the status equality that ought to hold among fellow-citizens of democratic nations. We ought to lift those people out of poverty.

If I were to attempt a reconciliation, I’d say that this suggests zero or negative growth in material consumption for the wealthier countries but a massive programme of wealth redistribution among citizens at something like the current level of national income, coupled with a commitment to channel further technological progress into (a) more free time (and some job sharing) or a shift in the mix of activity towards non-damaging services, like education (b) switching to green technologies© assistance to other nations below the poverty threshold. All of those things need mechanisms of course if they’re to happen—and I’m a bit light on those if I’m honest, outside of the obvious tax-and-transfer. What we don’t need is more in the way of “incentives” to already-rich supposed “wealth creators” and the like. What we certainly don’t need is a strategy that purports to assist the worst off in the wealthiest countries by boosting economic activity without regard to the type of activity it is, in the hope that this gives people jobs and, you know, rising tides, trickling down and all that rigmarole. The trouble is that Belief 1, which I instinctively get behind when listening to the austerity-mongers, is basically the same old tune that the right-wing of social democracy has been humming all these years. It is just about the only thing that will fly for the left politically in a time of fear, joblessness and falling living standards, but it seems particularly hard to hold onto if you take Belief 2 seriously.