I have read an interesting interview with George Soros. For those who do not know he is a Hungarian financial invester who earned a lot of money on currency speculation (British pound in the 1990) and parallely started giving a lot of money to the developement of democracy in Central Europe (Open Institute). He warns that we still do not know the real magnitude of the economic crisis and that he believes it will be much deeper than we imagine.
For some years now the Chinese model of state capitalism will prevail. The role of China, India and Brasil will grow while that of US will fade. Nothing will be the same cause the fundamental belief of recent 20 years - that markets tend to automatically seek equilibrium has proved false. And that living on credit has finished when nobody wants to risk another credit.
What is the impact of the above on the politics in general? I think that politics will have to move back to the area which it has left to the specialists - bankers, insurers etc. The new agenda will paradoxically be: not only 'better regulation' but we cannot trust markets - financial markets especially.
But unfortunately Barroso, who put better regulation as a paramount preoccupation of his first term as Commission President, he failed to deliver in the view of the public (at least from our current perspective). I do not want to say that he is guilty for the financial crisis. The whole economists community is guilty for the epistemic mistake we took as a new truth. The problem with Barroso is that in normal times his conciliatory approach, niceness would win him another term. I am afraid (am I?) that this will not prove to be a winning policy this time. Politics needs scapegoats and somebody who has been perceived as supporting liberalisation and markets is a perfect bird to shoot at.
The paradox is that the subjective 'losers' of the last European elections - the Socialists are now rediscovering the meaning of confrontational politics. Probably to a large extent due to the approaching September elections in Germany, Mr Schultz is flexing his muscles in the name of Socialists. And as says Euobserver (http://euobserver.com/9/28374) the Socialists and Greens want to block a quick confirmation of Barroso for his new term. If this political position wins, there is a great risk that the grand coalition in the EP (PSE and EPP) shall be jeopardised once and for all. If Barroso is elected with the votes of EPP, Liberals and the New Conservative Block (together 401 votes - simple majority needed out of 732 MEPs) this will alter the consesus which has prevailed over the last 30 years (with the small exception of EP presidency by Pat Cox).
But coming back to the larger world context, this will not be business as usual anymore. Probably next 10 years will show an unprecedented level of international strain and conflicts. Soros predicts that international institutions will roll back - they will lack the backing of state leaders. I think there is great time now for a new analysis of the political consequences of the Great Depression. We talk about Hitler as the main cause of the WWII but we often forget in what situation he came to power. A situation when the German (Weimar) parliamentary democracy faced 25% of unemployment rate (6M jobless). But we often lose from perspective that the 30ties were the years of growing authoritarism and that international strains were partly a result of its use for domestic purposes (have to think more about this aspect...).
Coming back to the main thesis, politics will no longer be as we used to perceive it to be. It will step back into the areas of economics/monetary relations left to the markets.
Europe needs to prepare for increased tentions both inside and outside. This paradoxically can be positive for the legitimacy of EU as a political project. It will increase the political competition in the EP (more conflicts, more media coverage) and in the international arena there will be a need for a concerted action, otherwise no single EU state will be able to influence the situation. I hope only that the world will not repeat the short-term trade policy of 'beggar thy neighbour' of the 30ties. So far OECD has hailed the world leaders for sticking to the WTO rules and not increasing protection. But with the situation getting worse/stagnating, the quick wins such a policy might offer is a serious temptention. And as Oscar Wild once said: 'I can resist anything but temptation'.
To sum up, the next years will be far from boring. And both the next Commission and hopefully External Action Service shall have a lot of work to do. This is a test they cannot fail!
For some years now the Chinese model of state capitalism will prevail. The role of China, India and Brasil will grow while that of US will fade. Nothing will be the same cause the fundamental belief of recent 20 years - that markets tend to automatically seek equilibrium has proved false. And that living on credit has finished when nobody wants to risk another credit.
What is the impact of the above on the politics in general? I think that politics will have to move back to the area which it has left to the specialists - bankers, insurers etc. The new agenda will paradoxically be: not only 'better regulation' but we cannot trust markets - financial markets especially.
But unfortunately Barroso, who put better regulation as a paramount preoccupation of his first term as Commission President, he failed to deliver in the view of the public (at least from our current perspective). I do not want to say that he is guilty for the financial crisis. The whole economists community is guilty for the epistemic mistake we took as a new truth. The problem with Barroso is that in normal times his conciliatory approach, niceness would win him another term. I am afraid (am I?) that this will not prove to be a winning policy this time. Politics needs scapegoats and somebody who has been perceived as supporting liberalisation and markets is a perfect bird to shoot at.
The paradox is that the subjective 'losers' of the last European elections - the Socialists are now rediscovering the meaning of confrontational politics. Probably to a large extent due to the approaching September elections in Germany, Mr Schultz is flexing his muscles in the name of Socialists. And as says Euobserver (http://euobserver.com/9/28374) the Socialists and Greens want to block a quick confirmation of Barroso for his new term. If this political position wins, there is a great risk that the grand coalition in the EP (PSE and EPP) shall be jeopardised once and for all. If Barroso is elected with the votes of EPP, Liberals and the New Conservative Block (together 401 votes - simple majority needed out of 732 MEPs) this will alter the consesus which has prevailed over the last 30 years (with the small exception of EP presidency by Pat Cox).
But coming back to the larger world context, this will not be business as usual anymore. Probably next 10 years will show an unprecedented level of international strain and conflicts. Soros predicts that international institutions will roll back - they will lack the backing of state leaders. I think there is great time now for a new analysis of the political consequences of the Great Depression. We talk about Hitler as the main cause of the WWII but we often forget in what situation he came to power. A situation when the German (Weimar) parliamentary democracy faced 25% of unemployment rate (6M jobless). But we often lose from perspective that the 30ties were the years of growing authoritarism and that international strains were partly a result of its use for domestic purposes (have to think more about this aspect...).
Coming back to the main thesis, politics will no longer be as we used to perceive it to be. It will step back into the areas of economics/monetary relations left to the markets.
Europe needs to prepare for increased tentions both inside and outside. This paradoxically can be positive for the legitimacy of EU as a political project. It will increase the political competition in the EP (more conflicts, more media coverage) and in the international arena there will be a need for a concerted action, otherwise no single EU state will be able to influence the situation. I hope only that the world will not repeat the short-term trade policy of 'beggar thy neighbour' of the 30ties. So far OECD has hailed the world leaders for sticking to the WTO rules and not increasing protection. But with the situation getting worse/stagnating, the quick wins such a policy might offer is a serious temptention. And as Oscar Wild once said: 'I can resist anything but temptation'.
To sum up, the next years will be far from boring. And both the next Commission and hopefully External Action Service shall have a lot of work to do. This is a test they cannot fail!
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