Directed democracy, III: Harry Potter is a banker

don't worry, the EU isn't behind it

The EU has unveiled yet another plan to rein in credit agencies’ unquestioned sway over the market in sovereign debt — their ability, in effect, to overthrow governments by downgrading their ratings. The Irish Independent paints a rosy picture of an attempt to restore “political sovereignty”:

The proposals, unveiled yesterday in Strasbourg by the EU‘s internal market chief Michel Barnier, are the third clampdown on agencies in as many years, and build on existing rules that force firms to register in the EU before they can operate here. Mr Barnier said ratings agencies had made “serious mistakes” in the past and that the spate of sovereign downgrades since the start of the Greek debt crisis last year had compounded market instability.

Eurozone nations including Ireland and Portugal have undergone repeated downgrades of their debt, even as bailout plans were being put in place, a fact that Mr Barnier said “surprised” him…

“We can’t let ratings increase market volatility further,” he said.

“We need to rebuild our political sovereignty so we’re not subject to the sovereignty of the markets.”

The Guardian is more skeptical about these fanfares of resistance. “Sounds rather like Europe’s efforts to clean up the murky world of credit rating agencies have been put firmly on the back burner,” they say. They quote one observer who notes that “the only major reform left” in Barnier’s quiver is the possibility that a future “error would be referred to the courts”:

[It] quickly becomes clear that Barnier has been forced to ‘postpone’ his proposal of a ‘blackout’ on cutting the credit rating of any country involved in “live negotiations” on a bailout.  He’s now indicating he has been forced to give way elsewhere too…  Barnier has also dropped the suggestion that larger agencies (those with more than 20% market share in EU) should be banned from taking over smaller ones.

Yes, so much for “political sovereignty.”

I was thinking of things like this the other night while watching the penultimate Harry Potter movie. I’ve never quite got what makes these extravaganzas so amazingly popular. The books are devoured and the movie tickets bought, after all, by Muggles. And even setting aside Voldemort’s Nazi ardor for a pure-blood wizard world and his call of “Wir müssen die Mugglen ausrotten,” the stories are not really very kind to the Muggles who consume them. Those artless dullards are plump, powerless,  passive, and irrelevant, while Harry and the magic kids get all the fun. A child or a parent reading them might feel palpably and permanently inferior to these superbly wand-endowed masters of the universe.

Yet that’s the point, isn’t it? The books capture the feel of living in a world, our world, that verges on another, marvelous one to which somebody else has the key. Out there, other people ride broomsticks, own elves, inflict unbearable torture with a cry of crucio, invest their souls in silver commodities, and keep their treasures safe in impregnable goblin-owned banks. Here our cars are repossessed, the elves own us, we save for months to buy a garden gnome, we calculate the cost-benefits of “extreme interrogation,” and worry whether Bank of America is going down. If only you could get past the barrier to Platform 9 3/4!  But you need a Harvard MBA to break through; the other, the masterful King’s Cross is closed to you.

The stories show a split life not too unlike our own. Harry Potter is a masterpiece of realism! it’s the magic universe of sovereigns erected athwart our own subjection.  The final Battle of Hogwarts, the climax of the series, will engross all eyes; but it’ll be fought between forces — Standard & Poors and BNP Paribas, let’s say — that might entice us to admire the one or the other, but that will never admit us as warriors or even allies. We’re too pathetic. All that’s left is to enjoy our spectatorship. You put on the 3-D glasses and exult in your exclusion. It’s a fun world to watch, the one that decides our lives but we don’t live in.

Unfortunately, even the movie tickets get more and more expensive.

God guarantees our loans

I once met a famous Greek musician who, after serving a jail term for illegally exporting antiquities, had abandoned song and gone into a different line of work: designing ecclesiastical ornaments for the Orthodox Church. He was gay, and over dinner his ex-lover whispered to me in a scandalized tone, “Really, you can’t imagine. All the priests were gay too! They used to come over here and try the crosses on and shriek at each other, ‘Oh, Mary! Don’t you look divine!

This came to mind today as TV played the odd ceremony — “Byzantine” is a word that springs naturally to mind — attendant on the swearing-in of Greece’s new prime minister, Lucas Papademos. No fewer than five priests with beards and funny hats presided over the anointing, muttering spells and hoohaws over him. They carried many pretty, shiny gewgaws, some possibly made by my acquaintance; it’s a pity they’ll probably be melted down for bullion soon and shipped to Brussels or Berlin.  The whole affair seemed unusual on a continent so steeped in sin, and I thought perhaps it reflected an innocent, and thoroughly wrong, belief that God has some influence over the European Central Bank.

bears in fancy dress

But it is, in fact, standard procedure in Greece; here is Papademos’ predecessor being certified, and looking perhaps a little alarmed by the Santa Claus convention in front of him. On checking the Greek Constitution I found that it is quite a theologically grounded document. Article 3 — just after the introductory genuflections, and before any other business comes to hand — declares,

The prevailing religion in Greece is that of the Eastern Orthodox Church of Christ. The Orthodox Church of Greece, acknowledging our Lord Jesus Christ as its head, is inseparably united in doctrine with the Great Church of Christ in Constantinople and with every other Church of Christ of the same doctrine, observing unwaveringly, as they do, the holy apostolic and synodal canons and sacred traditions. It is autocephalous and is administered by the Holy Synod of serving Bishops and the Permanent Holy Synod originating thereof and assembled as specified by the Statutory Charter of the Church in compliance with the provisions of the Patriarchal Tome of June 29, 1850 and the Synodal Act of September 4, 1928. …

The text of the Holy Scripture shall be maintained unaltered. Official translation of the text into any other form of language, without prior sanction by the Autocephalous Church of Greece and the Great Church of Christ in Constantinople, is prohibited.

I can’t think of another Constitution that addresses itself, particularly so early in its business, to the question of Biblical translation.

Greece is notoriously neither a particularly open nor a particularly secular society.  (For example: a recent report on homophobia in Greece shows a high level of social prejudice and a low level of legal protection. On a different note, when the National Opera tried in 2009 to stage Dvorak’s opera Rusalka with a kiss between two male characters, the orchestra refused to play, and musicians handed out leaflets claiming that the “degenerate” scene “tainted the central hero with homosexual tendencies.” They then attacked a few gay activists who showed up to protest.)

At the same time, it is useful to recall that separation of church and state in its American version is by no means the norm even in highly secular societies.  Secularism is primarily a matter of mores, not law. It can flourish in society regardless of formal religious favoritism on the government’s part. Denmark, Norway, and Iceland — three highly open and tolerant countries, on the whole — all have a state church.

How the Greek population’s sense of its own identity will shift amid the wrenching economic changes going on, how Greeks will reevaluate the values — religious or cultural — that define Greekness, is anybody’s guess. Papademos is probably grateful for some prayers. But it’s the bankers whose blessings he’ll be needing next.


Goodbye Euro, hello apocalypse

Nouriel Roubini explains why the Eurozone is doomed. The only way to ensure that economies on the poor periphery are healthy enough to want to stay in it is to abandon the austerity-only plans being forced down their throats, and allow them to expand. But the big economies in Europe won’t hear of this. The salvation measures would involve

significant easing of monetary policy by the European Central Bank [ECB]; provision of unlimited lender-of-last-resort support to illiquid but potentially solvent economies; a sharp depreciation of the euro, which would turn current-account deficits into surpluses; and fiscal stimulus in the core if the periphery is forced into austerity.

Unfortunately, Germany and the ECB oppose this option, owing to the prospect of a temporary dose of modestly higher inflation in the core relative to the periphery.

The bitter medicine that Germany and the ECB want to impose on the periphery – the second option – is recessionary deflation: fiscal austerity, structural reforms to boost productivity growth and reduce unit labor costs, and real depreciation via price adjustment, as opposed to nominal exchange-rate adjustment.

In other words: politically and socially unacceptable misery around Europe’s rim. There’s one last option for the Eurozone’s rich countries: “bribing the periphery to remain in a low-growth uncompetitive state.”

This would require accepting massive losses on public and private debt, as well as enormous transfer payments that boost the periphery’s income while its output stagnates. Italy has done something similar for decades, with its northern regions subsidizing the poorer Mezzogiorno. But such permanent fiscal transfers are politically impossible in the eurozone, where Germans are Germans and Greeks are Greeks.

In fact, we now see that the whole Eurozone is in something of the same state as the chronically inept and divided Italian state that was cobbled together 150 years ago. It’s called uneven development; rich regions and poor regions have to coexist in uneasy fear and envy, forced into the same currency and polity. In Italy, the misbegotten result has been decades of political deadlock and massive corruption. For Europe, by contrast, the last ten years looked fairly hopeful, buoyed by a strong Euro and the housing bubble. But now the illusions have been stripped away and the reality is on view. Germany wanted the southern European markets, but it’s not willing to keep their economies strong enough to survive.

Roubini expects the zone to start crumbling:

The recent chaos in Greece and Italy may be the first step in this process. … With Italy too big to fail, too big to save, and now at the point of no return, the endgame for the eurozone has begun. Sequential, coercive restructurings of debt will come first, and then exits from the monetary union that will eventually lead to the eurozone’s disintegration.

Everybody says this will make the 2008 implosion of Lehman Brothers look like a hand grenade compared to the Big Bang.  Whatever’s coming, it’s unlikely to be fun.