Jacob Christensen

Okay, okay: One last post before 2012 kicks in…

“Carinagate” may have been the political blunder of the year but if we think twice, Özlem Cekic’s badly chosen case actually raises some relevant questions about social policy. Unfortunately, Cekic’s framing meant that her initiative backfired so badly that it now risks completely to turn the political debate in the direction of envy (recipients are either lazy, rich or otherwise undeserving) than in the direction of considering the means and goals in social policy.

So, as a free lunch, here are my thoughts about the mess brought up by Özlem Cekic, Joachim B. Olsen and Ekstra Bladet.

Carina is not poor. Is that a problem?
Carina, the thirtysomething single mother on cash benefit, whom Özlem Cekic used as a case in her campaining for poor families turned out not not to be poor if the official OECD line of poverty was applied. Once we looked at the data, there were two reasons for this: 1. She has a child and 2. She receives a housing allowance due to the high rent of her apartment. Oh, and with one child Carina is hardly a case of a welfare queen.

Personally, I do not think that children should grow up in poverty in a country like Denmark (or any country, but this is another matter), so viewed from the child’s perspective, Carina’s economic and social situation is acceptable. If the child grows up in somewhat ordered circumstances, its chances of finishing school and getting an education is higher and this is good for all parties.

But then the problems begin. Housing policy has been a mess in Denmark for a long time and Carina is in fact among the losers. This is why she receives a housing benefit. One problem is that public housing was financed in an expensive way from the 1960s on while insiders on the housing market perfectly legally were able to rent cheap apartments. Others faced the choice between an expensive new apartment or buying a bigger, cheaper house. A no-brainer. In terms of housing, however, Carina as an outsider is stuck. And this is bad for all parties.

We should also ask why the authorities over a period of 20 years basically parked Carina on long-term benefits and apparently never seriously reviewed her case and offered her help with her condition. It is very difficult for anybody – even experts – to diagnose people from a distance but a number of people – from case-workers up – should ask themselves if the handling of psychiatric and somatic conditions is adequate. If people who would be able to work are left outside the workforce, everybody lose. And this is very bad for all parties.

I haven’t read Lisbeth Zornig Andersen‘s autobiography but it is obvious to me that Carina unlike Lisbeth Zornig never met somebody who had the power and engagement to push open the doors of the educational and social systems. This is bad and we might ask how we engage people in various kinds of social work and how social programmes can be organised to rehabilitate people who fail to get an education or enter the labour market.

One final thought: The level of social benefits always raises the issue of the relationship between benefits and wages. Ideally, we would want people to have a decent level of security while keeping an economic motive to work (there are other motives besides money, btw) and not putting public finances under too much stress. This is not an easy equation to solve. But we should remember that means-tested cash benefits are only available to people who have depleted their means. This means: No home-ownership and no savings. Not an enviable situation. The situation is different for unemployment benefits and similar programmes.

General benefits vs. means-testing
The other issue which has captured the public mind is the existence of a number of social policy programmes that cover the entire population, most notably the general old-age pension and the child allowance. The typical criticism against this type of programmes is that 1. benefits are paid to people who do not need them and consequently that 2. the programmes create a system where everybody pays money to everybody.

We might expect that voters would react by being more positive to programmes directed at people in need but the fact is that means-tested programmes are often viewed less favourably than general programmes and that people receiving means-tested benefits are often viewed with suspicion. Voters do not like paying for people who do not resemble them: The greater the distance between voters and the poor, the harder it is for politicians to mobilise support for social policy programmes. Someone once coined the phrase that “Welfare for the poor is poor welfare”.

This is not entirely correct: A country like Germany has targeted programmes but also quite generous health care and old-age pensions programmes, but it is true that we should not assume that money saved by not paying benefits or providing services to high-income earners can be used to make social policy programmes more effective.

Another issue is that means-testing creates marginal economic effects and while it may seem easy to create some kind of discretionary or rule-based deductions for one programme, things get really complicated when taxes and a number of transfers and services are added to the equation. So, politically, economically and administratively it may be easier and cheaper to make some programmes available to all citizens.

As they say on Facebook: “It’s complicated”. Anyone promising easy solutions is selling snake oil.

Despite alle the doom and gloom in previous posts, it is still time to celebrate Christmas

Even if you don’t agree with some of the fundamental political values at the heart of the Euro, the prospect of the single currency going south is pretty scary on a European scale. But can we think of developments that would be an even bigger disaster on a global scale?

There are a number of candidates for Catastrophe of the Year 2012 out there: Iran getting nuclear weapons and using them against Saudi Arabia or Israel would be very high on the list. Similarly, the prospect of a hard landing of the Chinese building boom in particular and the Chinese economy in general has economists worried – although they wouldn’t be surprised if it happened. Still, as long as everybody consider the perspectives, Iran would be a basically regional problem (so long as we forget about the Saudi oil) and the Chinese economy slowing down would probably first and foremost be a problem for the Chinese.

So, what about the world’s remaining superpower being taken over by a political movement decoupled from anything remotely like the reality? As in the Republican Party winning the 2012 Congress and Presidential elections in the US.

The US Republicans are interesting and scary because they – and their associated think tanks, media outlets, etc. – from the 1980s on increasingly have developed into a post-modern party. What I mean by this is that one defining characteristic of post-modernism (at least in my interpretation) is that reality is seen as constructed. So what in an earlier age or among more traditional politicians were seen and treated as facts, are seen and treated as the results of a rhetorical power struggle. Win the people’s minds, and you create the reality.

The approach has been in force in economic policy since the 1980s as the “starve the beast”-strategy – cut taxes at all costs even if it makes absolutely no sense and makes grown economists cry – and also came to prominence in foreign policy during the Bush43 years. Actually, the “if we say it’s real, it’s real”-approach has now spread to just about every conceivable policy area among US Republicans.

During the past thirty years – and during the Bush43 years in particular – the Republicans have done unspeakable damage to the US federal budget, something that now makes it very hard for the present administration to manage the worst recession in more than 70 years in an economically sustainable way. Fuelled by the anger of Tea Party militants, a new Republican administration would be Bush43 squared and blow a massive hole in what is left of the economy’s resilience. The Bush43 years were an epic of crazy foreign policy adventures. A new Republican administration would concentrate on building an imaginary Third Temple. Anything even resembling environmental policy would go down the sewer. And so on. And so forth. Politics will be creating the facts.

Until something – the international economic system, the Middle East or the global climate – blows up in a very big way, that is. (Not that the Republicans would ever admit it: After all, they haven’t talked about any disaster).

And remember: If this happened in, say, Denmark, it would be a problem for the Danes (well, actually not: Part of the Euro crisis is due to the fact that Greece and Italy were run by governments subscribing to the economics of imagination). The US is a slightly bigger deal.

Enjoy your campaign.

And with this, I wish you a happy 2012.

Over the years, I have voted on the European Monetary Union twice – or even three times, depending on how you count: The 1992 Maastricht referendum in Denmark, the 2003 EMU referendum in Sweden – and technically speaking the 1993 Danish referendum on the Edinburgh agreement also included the issue of Denmark’s relation to the future monetary union. Among us, I will admit to having voted “yes” both (all three) times even if I had become more critical of the project over the years.

The EMU raises a number of political and economic issues. Basically, there were two arguments for the monetary union: First, it should facilitate trade in the EU; second, it should help create a common identity. The question here is if the EMU and the single currency were and are necessary conditions for reaching either goal – even if we should also be critical of developments on the financial markets, they have come up with a number of instruments designed to lower the costs of currency fluctuations during the past thirty years and as for bank notes as a means of creating identity, well, yes and no. The Deutschmark-nationalism is a well-known fact.

Back in the early 1990s, I found the technicalities of the entire adventure hard to grasp even if I actually attended a lecture where Niels Thygesen explained the process and the institutional set-up. Maybe I was theoretically challenged, maybe Thygesen wasn’t a master of didactics or maybe there was some kind of flaw in the political set-up. Still, all things considered I thought the Maastricht package was better than letting what was then the EC go sideways.

In 2003, I had some more specific issues with the EMU. In 2000 the Danish Economic Council had more or less destroyed the basis of the “yes”-campaign by pointing out that joining the EMU had no economic benefits for Denmark – an important part of the reason was that the Danish currency had been pegged to the D-Mark and later the proto-Euro since 1982 – and that membership was a purely political question. We would have expected Danish politicians to receive this conclusion enthusiastically but the problem is that Danish EU-politics in general has relied on de-politicising issues related to Europe. Similarly, monetary policy has been depoliticised in most Western countries since the 1980s by handing over competences to the national reserve banks.

The situation in Sweden was – and is – slightly different, as the Swedish currency has been floating since the mid-1990s so technically Sweden has some degrees of freedom with regard to monetary policy which Denmark do not have.

In any case voters are a curious bunch: They do not like “politics” but on the other hand they do not like the idea of not having any actual influence on central political issues – such as economic growth and employment.

And this was one major problem with the EMU: It is copied on the (West-)German post-war tradition of fiscal and monetary policy which basically states that employment and economic growth are subordinate to price stability, so if you adopt the EMU, you also make a political choice which not everybody would agree in.

Another problem is that EMU assumes that economic development in all member countries follows the same economic cycle. This raises the question what happens when some countries are going through an economic slump while others are in a boom. The EMU does not have the instruments to deal with this situation, except banning countries with weak growth from boosting their economies. There are more problems, but this will illustrate the political-economic-institutional corner the EMU countries risked painting themselves into.

Finally there was the question about governance in the EMU. Having guidelines is all very well, but problems arise when they are not followed. A more thorough examination of Greece’s political and economic institutions would probably have kept the country out of the EMU to the benefit of both Greece and the EMU. Similarly, France and Germany forced the EMU to bend its rules with regard to deficits and debt in the early 2000s.

Add a major global economic slump and the EMU vehicle is very likely to hit the wall in a violent matter. We are now in a situation where four or five EMU countries are facing a choice between a decade of severe austerity and slow (if any) growth on the one hand or leaving the EMU suffering the penalties of the financial markets. This is a recipe for severe social disorder: 2012 may not be 1932 but politicians and bureaucrats would still do well to remember the name “Heinrich Brüning”, the German chancellor whose technocratic austerity policies led Germany to the brink of civil war.

At the same time, politicians are slowly recognising that the existing political-economic institutions are inadequate and have to be amended. But, first, passing institutional reforms in the multi-level EU system is notoriously tricky, and, second, the process has already revealed the cracks in the relationships between EU countries. It is not outlandish to consider the possibility of the UK leaving the EU or the Eurozone breaking up into two or more parts.

So to conclude: What the EU needs now is not another patchwork agreement (even if the Union has to muddle through in the short and medium term) but a reassessment of the raison d’être of a political and monetary union and the adequacy of its institutions.

Given my general mood, I thought it would be appropriate to end 2011 with a discussion of some things which could go terribly wrong in 2012 and leave us – to use a popular expression – FUBAR‘ed. Being a political scientist I have chosen to concentrate on political matters, beginning with the bad and ending with the utterly terrible.

But first a warning: There will be no massive earthquakes, tsunamis or exploding nuclear power plants here. This is much, much worse.

We begin at home, with the Danish coalition government which was already shaky at its conception and after a couple of months looks more rattled than any Danish government since the SocDem-Liberal government of 1978-1979. The worst thing is that that government was the result of a parliamentary accident and gross miscalculations while the SocDem-SF alliance had been carefully negotiated and prepared.

Or so we thought.

Two problems troubling the three-party government in general and SF in particular are that a) SF lost votes and seats in the election and b) the Social Liberals, not SF held the decisive seats and knew how to use them. The result is a construct which looks as if it could implode at any moment.

But how likely is an implosion of SF and the three-party government and what would the long-term effects be?

First of all, Danish parties seldom break up while they are in government but during the course of the last sixty or so years, we have seen some cases of parties suffering serious internal conflicts due to government participation. Consider this list: The Justice Party (beaten into oblivion after participating in the 1957-1960 triangle government), The Social Liberals and the Conservatives (deep factional conflicts during and after participating in the 1968-1971 VKR-government), the Social Liberals (during and after participating in the 1988-1990 KVR-government) and the Conservatives (in the latter stages of the 2001-2011 VK-government). And then there is of course the “Red Cabinet” of 1966-1967 which led to a major split in SF and years of internal struggle even after the formation of VS.

So as you can see, it is perfectly possible for SF to find itself in a state of internal conflicts and if factional struggles break out, they are likely to weaken the party for a decade with the Red-Green Alliance ready to pick up the spoils.

Even worse: The driving force behind factional strife has generally been a perceived or real lack of political efficacy. The Justice Party was anti-state but failed to stop the expansion of the welfare state (it was also becoming irrelevant because the war rationings had been abolished by the mid-1950s), the Social Liberals were torn between liberal economics and radical cultural policy, the Conservatives were a low-tax party presiding over the biggest increase in taxes in Danish history. And so on, and so forth.

The general agreement is that SF was the big loser in the negotiations and based on historical evidence, this puts the party in a very dangerous situation where internal conflicts could erupt at any moment. And even if the Social Liberals would love to see SF go down in flames, they should think twice before pouring the champagne.

What the Social Liberals should consider is that the Social Democrats continue to be in the electoral doldrums: They have lost votes in every national election since the surprise victory in 1998 and consequently the mobilisation of voters for the left-wing depends of the Social Liberals, SF or the Red-Greens being successful. If SF implodes, this effectively leaves the Social Liberals with the Red-Greens as the only realistic ally in so far that “blue” working-class voters do not revert to the Liberals and the Danish People’s Party as they did during the 2000s making left-wing politics irrelevant.

In fact, the implosion of SF is more than likely to result in another decade of right-wing government after the next election: A result the Social Liberals would grudgingly admit that they would hate even more than having SF in government.

So the Social Liberals are in fact faced with a curious dilemma. While they want to promote the Social Liberal economic programme, they should ideally also consider strategies that could help boosting support for SF. That SF’s leaders haven’t helped themselves by leaving the party organisation in a vacuum following the election is another matter.

In many ways, David Cameron has been an interesting acquaintance as British Prime Minister. I suspect that a lot of observers assumed that he would end the Thatcherite era on the British right and lead the Conservatives to the centre of British politics but instead the coalition with the Liberal Democrats now in almost every respect looks like one of the most right-wing governments the UK has had for ages – something which also raises the question of the strategies and political efficacy of the LibDems. But we will leave that for later.

The relationship between the UK and Europe is an equally intriguing issue. To an outsider, it has long seemed obvious that the Tory right (supported by the Daily Mail and the Daily Telegraph) would prefer to leave the EU and better yesterday than today. The breakdown of the latest round of negotiations over EMU rescue packages actually makes a British exit from the de facto EU a likely prospect, even if I would expect Britain to formally stay in some kind of zombie-EU.

But the process and the outcome raise a lot of questions which I am not really competent to answer. Still, here goes:

1. How much of the breakdown was due to Cameron (and Downing Street, etc) being an incompetent negotiator? This report from the Economist more than suggest that Cameron s****d up in an epic way in presenting the British position – and if Cameron wasn’t incompetent in a technical sense, he surely miscalculated Britain’s influence completely.

2. While the Tory backbenchers will surely celebrate a breakdown of UK-EU relations in a very loud way, the question is if the UK financial sector (“The City”) will be equally happy over losing influence in the EMU. Will yesterday’s events undermine an alliance which has otherwise been fundamental to the strength of the Conservative Party?

3. The institutional design of the Euro17 or whatever the new arrangement will be named also raises some interesting questions. On the one hand, the Euro17 agreement will strengthen the supranational element in economic and fiscal policy compared with the present arrangements, but on the other hand the institutional setting will – at least de jure – be more intergovernmental than today’s EU, eg. with the European Commission being sidelined. This is very weird, given that Britain has always favoured an intergovernmental EU while France and Germany traditionally have pushed for more supranational government in the EU. But then again: EU politics always had a slightly absurd element to it.

As I say: I have no good answers so far, only questions.

Today’s Berlingske has another of those articles (not published on the web) telling us that “Germans have a natural fear of inflation” due to the hyperinflation of the early 1920s.

This may be but isn’t it strange that the deflationary austerity policies of Heinrich Brüning which were an important element in the developments leading to the collapse of the Weimar Republic and democratic order are completely forgotten in the narrative?

(This isn’t an original thought of mine: Some economist – Krugman? deLong? – posted similar ideas some weeks ago)

This – to put it mildly – was not pretty to watch. Many had suspected that the personal advisor of former Minister of Taxation, Liberal hopeful Troels Lund Poulsen was indeed the man behind the leaking of documents about Social Democratic leader and present Prime Minister Helle Thorning Schmidt and now we pretty much have it in the open.

An inquiry will be chewing through the evidence about the involvement of a number of high-ranking civil servants and politicians during the coming year, and I suspect that one or the other skeleton will be brought to light. This also means that we should be careful in making early judgements.

However, what we do know, is this:

1. The tax case did hurt Helle Thorning Schmidt and the Social Democrats: Support for the party fell noticeably both times the case hit the frontpages. From a purely party political/tactical view, exposing the case was very clever.

2. Peter Arnfeldt, special advisor to Tax Minister Troels Lund Poulsen, was involved in the leaking of the Thorning Schmidt case.

3. Peter Loft, the long-serving permanent secretary in the Ministry of Taxation, took a special interest in the case.

Would we need to know is:

1. How and why did Arnfeldt get access to the Thorning Schmidt case?
2. Did the ministry, in particular permament secretary Peter Loft, try to put pressure on Skat København in the handling of the case?
3. Did Arnfeldt act independently or was Troels Lund Poulsen in any way informed or otherwise involved?
4. …and was the press office of the Liberal Party and the party leader, then-Prime Minister Lars Løkke Rasmussen informed or otherwise involved, either by Arnfeldt or Lund Poulsen?
5. When Loft realised that papers regarding the Thorning Schmidt case had been leaked, why didn’t he immediately inform the permanent secretary of the Prime Minister’s Office?

Erling Andersen’s and Peter Loft’s reports to the Minister are published here. They are part of the material behind the Tas Minister’s decision to call for a full inquiry.

The case raises a number of other issues: The relationship between “special advisors” and other staff, the relationship between “special advisors” and other political sources on the one hand and political journalists on the other, limits for journalists’ protection of their sources, the norms guiding the political competition, etc, etc. But each one of these would merit busloads of blog-posts.

Occasionally, things happen that are so weird that you wouldn’t believe them if somebody tried to fictionalise them. Back in the 1990s the UK Prime Minister John Major famously tried to revive his party’s flagging fortunes by declaring that the party should go “back to basics“. No sooner had Major made his big declaration before the Conservatives were flooded with endless sex scandals – one more bizarre than the other – and stories of corruption.

So maybe SF should have been warned: Trying to go back to basics does include some political risks.

The attempt to put poverty on the political agenda should have been an obvious winner – with all the elegance of a herd of bulls in a china shop, Liberal Alliance’s Joachim B. Olsen had attacked earlier demands for Christmas benefits for people receiving social benefits (In Denmark, LA is also known as Team Saxo Bank with a reference to one of the party’s sponsors whose founders a strong adherents of the teachings of Ayn Rand). In political terms, Olsen looked like a sitting duck.

Unfortunately, SF MP Özlem Cekic hadn’t done her homework properly when she produced a single mother on benefits, trying to make a living for 15.000 DKK a month, presenting her as a case of Danish poor and an argument for the need for an official Danish definition of poverty. The thing blew up immediately: Following the OECD’s guidelines, the woman couldn’t be defined as poor and the debate immediately put the relationship between benefits and work income, rather than the conditions of people on the borders of and outside the labour market, at the centre of the agenda. Even worse from the perspective of SF, the latter-day descendants of Jakob Knudsen have won this round of the fight.

In short, Cekic and SF had pwned themselves more effectively than anybody on the right-wing of Danish politics could have hoped for.

I will leave aside the interesting question about poverty and benefits here and just ask: How did SF mess up the story so badly. After all, the party went through an impressive transformation since 2005 which made it much more professional and streamlined in its public relations. We really should have expected a better performance.

One answer could be that Özlem Cekic is a bit of a loose cannon and that the party leadership is struggling to control her. That she is motivated more by instinct than calculation would only make the faux pas more likely. All parties are plagued by rogue politicians but SF’s main problem is that its political profile has faded during the last year and the party can’t really allow itself any major blunders in the public eye.

Keeping control of loose cannons, however, is easier when the parliamentary leadership is working properly and as commentators have pointed out, SF has a bit of a problem here. Party chairman Villy Søvndal is busy establishing himself as foreign minister, the former chairman of the parliamentary group Ole Sohn is rattled both by loss of status in the internal hierarchy and allegations of his past and Thor Möger Petersen lacks a basis in the parliamentary group. Add that the choice of new group chairman after the formation of the government was a surprise and seen as a snub to the party leadership, and we have a very messy situation on our hands.

As a party which is new in government and as a party of the left (as in: to the left of the Social Democrats), SF faces special problems and the process leading up to the formation of the three-party government should give the party leadership ground for concern.

In the meantime, “doing a Cekic” will be the Danish equivalent of “going back to basics”.