Jacob Christensen

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”.

Ah, yes: The Conservative Party. Does anybody remember them these days? They used to be a major, if often troubled player in Danish politics and the guarantee for (reasonably) stable centre-right governments. The party under Poul Schlüter even held the position as prime minister between 1982 and 1993.

But these days? Imagine that the Conservative Party actually slipped under the 2% threshold: What would Danish politics be losing?

No?

No-one can come up with any great politicians or any outstanding ideas that the electorate has been waiting for?

Where exactly did it all go wrong? (Yes, that is a lot of question-marks)

Back in first half of the 1980s, there was in fact a lot of talk about the prospect of the Conservatives overtaking the Social Democrats as the largest party – they never quite made it but still won a respectable 42 seats in the 1984 election. The fatigue only really sat in following the 1988 election when the Liberals finally after a decade in the doldrums staged one of the most impressive comebacks in Danish political history, going from 10% of the vote in 1987 to 30% in 2001. The Liberals are still outdone by the Conservatives’ massive rebound from 5% in 1975 to 23% in 1984.

What may be more interesting is the talk about the Conservative Youth Federation which was described as the place for cool kids to be in the 1980s. The thing is that those leading the Conservative Party in the 2000s and 2010s would have been recruited during the 1980s so obviously something went very wrong here.

The conflicts during the 1990s didn’t make things any better – two or three rounds of internal struggle drained the party of a number of potential leaders, leaving it with the tired, those who fit in with the paint on the wall and the self-absorbed. Not exactly a happy constellation.

In policy terms, the Conservatives have spent the 2000s by trying to position themselves as the business-friendly party. Business-friendly as in effectively having only one point on the agenda: Tax-cuts for high-earners. The fate of the Swedish Conservatives in the 2002 election should have served as a warning to the Danish party: Single-mindedly focusing on tax-cuts combined with occasional declarations about what the party don’t like is not enough to guarantee a long-term following.

Now the party faces a double (if not triple) challenge: It will have to come up with a full political agenda which is not exclusively focused on the business community, it will have to reconsider its strategies for recruiting political talent (at a time when the Liberals are appearing as the default party for the general centre-right and Liberal Alliance for the self-absorbed) and it will have to demonstrate its political relevance during a parliamentary term where the party is, effectively, irrelevant.

My old post about Sohn from February is here. I’m not really sure if the new reports about Sohn’s knowledge of and active participation in the transfer of money from the SUCP to DKP really adds anything new to the story but it obviously creates a lot of noise which the Liberals and Conservatives will love to use.

A guide for lazy journalists, provided by Kosmopolito.

Any similarity with real existing journalism is … oh, well…