Public policy: discovery and bargaining or applied knowing?

Is public policy a discovery process which takes into consideration the diverse interests, experiences and perspectives of the political nation (however defined--in a democracy, that is supposed to be the entire citizenry) or is it an engineering problem, an application of applied knowing?

There is, of course, a lot of engineering at the implementation level of public policy. To take some obvious examples, such things as roads, bridges, dams, etc are engineering problems in their construction. But policy in general is full of aspects where technical knowledge is important. Which can easily encourage the belief that policy problems are engineering problems all the way up. But the further up the policy process such a claim is made, then the greater the claims of knowledge, understanding and normative authority one is making for the policy makers.

Conversely, the more sceptical one is about such claims, then the more comfortable one is with the notion that public policy is embedded--and rightfully embedded--in discovery and bargaining processes. Which encourages confidence in multiple levels of government, so that such discovery and bargaining processes can take place in varying jurisdictions among varying players.

The irony of opposition to federalism is that by implying one or more levels of government are redundant, one is making strong claims about the knowledge, understanding and normative authority of the remaining level(s) of government. The implicit notion is that there is a correct policy, which is easily discovered and reliably implemented.

Thus, scepticism about government and political processes encourages belief that there should be more levels of government, not less. (Unless one is so sceptical that one believes there should be none at all: but that entails elevated confidence in non-governmental mechanisms.)

Bargaining and confidence
The more confidence one has in people in general, the more one is likely to endorse broad consent and bargaining mechanisms. The more confidence one has in a specific group of people relative to the wider population, the less so.

The more belief on has in knowledge being dispersed, the stronger sense one is likely to have that policy has to be understood as a discovery process--remembering that social bargaining is itself a discovery process. Noting also that politics is not the only discovery process, nor the only general process for achieving social ends.

The more belief one has in the level of understanding of a specific group or a specific framework of ideas, the more belief one is likely to have that policy is a process of applied knowing which bargaining gets in the way of. In this conception, diversity of policy is simply multiplying error.

Intellectuals and centralised uniformity
It is hardly surprising that intellectuals in general have a tendency to see policy as applied knowing and be impatient with social bargaining and policy diversity. Their life and identity is bound up in their sense of being the people who know more than others, with a strong tendency to also flatter themselves as folk of superior virtue--including the notion that it is their greater knowledge which leads to their superior virtue.

The long arc of history is not flattering to such pretensions, but they are so natural to the work of intellectuals, and so inherently self-flattering, that they retain a perennial appeal. Flowing from these tendencies is their recurring tendency to sneer at the profit-seeking of commerce, so lacking in grand pretensions to virtue and with its lively ordinariness so failing to apply to whatever grand moral schema intellectuals dream up. The claimed grounds and content of virtue have varied enormously, as have the grand moral schemas; but the disparaging contempt for commerce is a hardy perennial across time and space.

The (very) long arc of history has tended to favour policy as discovery-and-bargaining processes, but the temptation to retreat into "but this time we just know!" is also a hardy perennial.

Economics and public policy
The development of economics has tended to point in both directions at once. Mainstream economics tends to be favourable to markets, including markets as discovery processes. But the sense of understanding how things work can lead to deprecating political bargaining as something that gets in the way of good (i.e. economically informed) policy.

An amazing amount of nonsense has been written by academics about "neoliberalism", typically because they never seriously interact with folk who might be in any way sympathetic to "neoliberalism". Neoliberalism has come to mean not much more than "anything vaguely market connected that has been bad since 1980".

If we define neoliberalism as (in the Western context) the application of mainstream economic policy so as to create a sustainable welfare state, then the neoliberal policy surge has, at times, been guilty of seeing political bargaining as "getting in the way". Of it providing an unhelpful obstruction to policy being just applied knowing. Not always--the Hawke Government, in particular, provided an excellent example of accepting that political bargaining was a necessary part of the process. Nevertheless, impatience with political bargaining has been something of a failing of the neoliberal push in policy.

Confusing projects
The polity which has done the most to give neoliberalism a bad name is the EU (European Union). Ironic, in a way, as its bureaucratic aggrandising is not what neoliberalism is supposed to be about. Still, creating a common market for the free flow of goods, services and people looks like a very neoliberal project. As does creating a common currency with a strongly anti-inflation central bank.

But looked at through the prism of political bargaining and policy as discovery process, and the European Union looks a lot less impressive--particularly compared to the European Economic Community (EEC) that proceeded it.

The EEC was a neoliberal project, and a very successful one. A particular virtue being the insistence that only democracies could join. The Common Agricultural Policy was regrettable: a form of political bargaining in a way, but one which seemed an iconic example of narrow, organised special interests triumphing over general interests. Nevertheless, the EEC had a deserved association with prosperity and international cooperation.

The EU, not so much. The EU has become a case study in policy over-reaching. Harmonising regulation has been an example of suppressing policy-as-discovery process and, at best, very narrow social bargaining. Worse, as the reach of the European Project has grown, it has had an increasingly invidious effect on policy making within the member states by becoming a means to avoid accountability for policy actions and consequences by muddying who is responsible for what and providing blaming cover for actions.

But the worst over-reaching has been in the Euro and the ECB (European Central Bank). The idea of the Euro was straightforward--a Deutsche Mark for everyone. Something with very strong appeal, particularly for those used to high inflation "soft" currencies.

The problem with the Euro is that it became a Deutsche Mark for everyone; the entire Eurozone had a monetary policy imposed on it that suited Germany first and others much less, with the greater the differences between a particular economy and the German one, the worst the consequences. The human costs of the Euro alone has made the EU a morally very dubious construction.

Between the costs of the Euro (including fiscal austerity, with the underlying problem being monetary austerity), the deep muddying of policy accountability, and the resulting adverse effects on the quality of policy and sense of popular control, the EU has managed to generate increasing levels of "angry votes", including increasingly nationalistic political movements. How much in any particular country is still mediated by local political circumstances and levels of economic stress, but the wider pattern is clear enough.

Problematising people
Which comes back to the original sin of the EU--the original misdiagnosing of the problem of European history. The origins of the EU were based on the premise that the deep problem of European history was nationalism. This is false: Europeans have never lacked reasons to kill each other.

The deep problem of European history has been unaccountable power. Whether it was dynastically-grounded regimes using the weapon of nationalism to fight off the spectre of democracy (and then being consumed by the total war they could then not stop and failed to survive) or dictators wielding totalitarian power in megacidal projects, nationalism was a tool, not a cause.

But to make nationalism the great problem of European history is also to make the people of Europe the problem of European history, not inadequately accountable elites, given that nationalism is a sentiment among people. And if popular sentiments are the key problem, they cannot be allowed to be let loose. Hence the elite-dominated European project conceived as a restraint on the deemed problematic peoples.

Well, how has that worked out for them?

The notion of the EEC--to entangle the people of Europe so deeply with each other, and anchored in a common prosperity, that war became inconceivable--was a noble one.

The notion of the EU--to use ever-greater-union as ever-more-constraint-on-local-democracy--was not. It became a project of policy as applied knowing and (at best) very narrow bargaining. Not a project of policy-as-discovery process and broad social bargaining.

Clearly, more and more people have felt left out, ignored or worse. Moreover, as the policy reach of the EU has exceeded its actual knowledge and effectiveness, while having an invidious effect on policy accountability, it has become a mechanism for making policy worse, not better. Moreover, seeing the peoples of Europe as the problem has blocked learning anything from the resulting angry votes: treating voting patterns not as discovery process, but as confirmation of deeply problematic (indeed, profoundly counter-productive) assumptions built into the European project and oh-so-flattering to European elites.

The lack of a European demos is, of course, an advantage to evading accountability. But the consequence of that is poorer policy and more political alienation.

Entangling the people of Europe with each other should have been seen as a way of making certain sorts of politics less appealing, as a constraint on power holders, and those aspiring to the same. Not as a way to "manage" identities.

The original underlying structure of the EEC was a fine idea. The EU built on top of it, not so much. If one sees only the first while refusing to confront the second, one is going to continue to misdiagnose what is going on.

No, the peoples of Europe are not the problem. They never have been. Those who have seen them as the problem, they are the problem. What they thought they knew, they so didn't. They urgently need to rediscover a sense of policy-as-discovery-process, one properly based in broad social bargaining, not in demonstrably overblown notions of applied knowing.

[Cross-posted at Skepticlawyer.]

Yelling "bigot!" as a tool of bigotry

A recent study concluded that Party and ideological animus in the US was significantly stronger than (pdf) racial animus in the US.

To put that another way, opinion-bigotry is stronger than racial bigotry in the contemporary US.

This is not all that surprising. While bigotry can extend in any direction socially (upward, downwards, laterally), the most powerful bigotry is typically the bigotry of the most powerful. Particularly, those who dominate the commanding heights of ideas and opinion.

In the US (as in other Western countries) those commanding heights (media, academe, IT, entertainment) have become increasingly dominated by a fairly narrow range of opinion. Opinion that delights in seeing itself as the embodiment of morality--particularly of understanding, compassion and inclusion--and contrary views as being ignorant, exclusory and offensive: in other words, as deeply bigoted.

A key point to remember is that bigotry is everywhere and always a moral claim: it is a claim about the (lack) of moral standing for others. Far from moral fervour being an insulation against bigotry, it is often precisely moral concern that fuels bigotry.

By this understanding-compassionate-inclusive framing of themselves and the contrary ignorant-exclusory-offensive framing of those who disagree, the accusation of bigotry has become itself an instrument of bigotry. The expanding rhetoric of denunciation (racist!, misogynist!, xenophobe!, homophobe!, Islamophobe! etc) has been wielded as a weapon to separate the Virtuous from the Vicious. And to block public debate-as-conversation and replace it with abusive self-involved collective monologues.

In the name of understanding, compassion and inclusion, there has been an ever-expanding war against "hate speech". A deeply hypocritical war at so many levels (and pernicious in so many ways), but none more so than that using the rhetoric of denunciation is, itself, clearly hate speech when it is wielded against those who are not in fact racists, or misogynist, etc. Whether because that is simply a false characterisation of people's views or a false generalisation from the views of some to the views of a larger category of people.

Tied in with this has become the notion of privilege, particularly white privilege. A central claim of such Virtuous identity politics is that white people should think of themselves as primarily white people: specifically, as belonging to an identity that is both privileged and stained with past oppressions and present inequalities. Now, if one is one of the Virtuous, and keeps up with Virtue's moving moral goal posts, latest language taboos and ritual obeisances, one can functionally evade the moral burden of one's whiteness.

Those who fail to do all this, of course, have the entire privileged oppressor identity dropped on them.

Since this is very much a game for the educated middle class, members of the working class are not likely to jump through the various hoops, leaving them with the burden of identity as white privilege oppressors.

Oh look!, an excuse for the educated middle class to sneer at working class folk as vulgar moral barbarians, we've never seen that before. (Sarcasm and irony alert.) Hence the return of virtue signalling, which was so very powerful in the Victorian era; the contemporary version being used by much the same sort of folk against, well, much the same sort of folk: but with whiteness as moral negative rather than moral positive.

Which leaves the white working class with so much of the blame for, well, just about anything, but very little actual social power. (Which, of course, makes them such splendid targets for status-mongering contempt.)

So, we have the white working class as bigoted privileged oppressors yet have remarkably little say and who, moreover, at clearly not entitled to any say if it involves disagreeing with their Moral Betters.  Any doubt about that, and that those moral betters typically regard the white working class with deep contempt, has been stripped away by the Virtuous outrage over the win for Brexit in the UK Referendum--especially the demands that referendum result be immediately overturned. (Though the online petition calling for same had some prank element to it.)

The rhetoric of denunciation is very attractive because it broadcasts moral concern, moral superiority and moral contempt all in one go. It is also utterly destructive of any breadth in public debate and useful engagement with those outside the Virtuous magic circle. But self-righteous sanctimony has such obvious and enduring appeal, and is such a powerful mechanism for collective epistemic blockage (pdf), that it is not likely to go away any time soon.

[Cross-posted at Skepticlawyer.]

Brexit and EU failure

The 52%-48% win for Brexit in the June 2016 referendum has already been framed many ways, but what should be an obvious one (though for many it will not be) is how much of a failure for the EU this represents.

In June 1975, a deeply divided Labour Government held a referendum on the UK's membership (then 2 years old) in the European Community (EC) as it then was (known colloquially as "the Common Market"). The then recently installed Conservative Opposition Leader, Margaret Thatcher, campaigned strongly for the UK's membership. The UK electorate voted decisively for membership, 67% to 33% with a 65% voter turnout.

In June 2016, a deeply divided Conservative Government holds a referendum on the UK's membership of what is now the European Union, the UK now having been a member of its various incarnations for 43 years.  The recently installed Labour Opposition Leader, Jeremy Corbyn, campaigns (perhaps somewhat tepidly) for the UK's continued membership. The UK electorate votes narrowly for leaving, 52% to 48% with a 72% turnout.

If one ignores the sort of special pleading which, for example, suggests the 1975 UK electorate was terribly wise and the 2016 UK electorate deeply stupid, then 41 years of further experience of the EU had shifted the opinion of the British electorate by 19 percentage points against the EU. That is a considerable shift in opinion.

The EU of 2016 does, and aspires to do, far more than the EC of 1975 did: clearly, more is, in fact, less; at least in terms of inspiring popular support and confidence--quite a lot less. Though that large shift in opinion will be treated as a failure of the electorate, not of the glorious European project, by many of the Great and Good who supported EU membership. Which, of course, will be an indicator of precisely why that shift in opinion has taken place. Significant majorities in provincial England and Wales has discerned that the European Project has become deeply intertwined with a deep contempt for folk like them and they have given the finger in return.

It is worth remembering that many of the same Great and Good who took the UK's continued membership of the EU as the only proper policy were the same folk who thought it desperately important that the UK join the Euro. They were wrong on that: they will be wrong on this, and for the same reasons.

It is true that the narrowness of the result, and that Northern Ireland and Scotland voted strongly to stay in the EU, could presage problems ahead for the United Kingdom of Great Britain and Northern Ireland. That immigrants seem to have voted strongly for Remain is perhaps another point of pressure. If, however, after a likely somewhat rocky transition period, the UK actually prospers, particularly relative to the EU, then the divisions will likely fade.

An outcome I am reasonably confident will occur. The reason for my confidence in this is quite simple: the UK has voted to improve the accountability of its institutions. The democratic deficit of the EU has given it a much less accountable governing structure which will continue to produce policies which reflect that lower accountability. Particularly as the EU tries to do too much with too little commonality between its societies and economies.

The Euro has been a serial disaster because it is emblematic of all these problems -- too little accountability, trying to do too much across insufficient commonality. Even just in economic terms, as Paul Krugman's rather nice paper The Revenge of the Optimal Currency Area (pdf) points out. Nor is Britain the only EU country where popular approval of the EU is problematic.

Whatever political calculations may have been involved, David Cameron PM is to be congratulated for giving the British people a clear say on such an important issue. It is regrettable that it has also ended his Premiership, but given that the Tory electorate voted so very strongly for Brexit, and given the contestable intricacies involved in negotiating Britain's leaving of the EU, and the difficulties of the transition, it is understandable that he has decided he is not the person who should be leading either Britain or the Conservative Party through what is to come.

We live in a time of elite echo chambers and a plethora of techniques for discounting (indeed, treating with contempt) the concerns and language of ordinary folk. So it is unlikely that many who really should will see how much a failure and condemnation of what the EU has become this result is. But that is precisely what it is.

[Cross-posted at Skepticlawyer.]

Nowadays, the presence of white Americans is generally good for African-Americans

If the key problem for African Americans was white racism, then they should do better the less contact they have with whites. But the reverse is true -- African-Americans tend to do better the more they have contact with whites.

They do better in education -- lots of research indicates that minority students do better in integrated schools. Having a white mother largely eliminates (pdf) the disadvantages of being African-American, likely partly because the sons of white mothers get more access to white networks. At the most global and most dramatic indicator, applying US census data (pdf) to World Bank rankings African-Americans are the second richest sub-Saharan African so-descended population in the world -- apart from Bermudans. With much higher average incomes than West Africans. [The difference between African-American high school graduation rates and overall graduation rates by US State is strongly (-0.73) negatively correlated with the African-American share of the population -- that is, the more embedded the local African-American population is in the local white population, the higher its high school graduation rates.]

So, whatever costs contemporary white racism imposes on African-Americans (white racism that is a pale shadow of its former self), its effects are swamped by the positive effects for African-Americans of interacting with white Americans. Yet African-Americans have lower average incomes, lower levels of completing high school, entering and completing college and much higher rates of homicide and other crime than white Americans and Asian Americans.*

Interacting factors
A lot of these factors are interactive: if you are less likely to complete high school, you are less likely to enter college. If, on top of both of these, you are also less likely to complete college, then the combined effect will be lower average incomes. Especially as you will participate in various professions at a disproportionately low rate. [An effect exacerbated by the higher the level of education the more group differentiated incomes are.]

Higher rates of homicide and other crimes interfere with every stage in the above process. Whether due to increased risk of violent death or injury, increased risk of incarceration, or undermining social networks due to reduced social trust.

Given African-Americans have much the same homicide rate as a weighted average of Afro-Caribbean jurisdictions and West African jurisdictions, the elevated homicide rate of African-Americans is likely to do with their African-ness, not their American-ness. Given that African-Americans have a considerable and variable rate of non-African genes, genetic explanations are not likely to get us far. [Especially given that homicide rates vary so dramatically among Afro-Caribbean and West African jurisdictions.]

Nevertheless, African populations do have lower levels of patience, which is not good for institution building, long-term networking, or human capital development but does encourage more impulsive (including more criminal and violent) behaviour. African-Americans have lower average IQ (pdf) than other Americans, and lower IQ tends to lead to lower incomes, lower levels of social cooperation and higher levels of criminal activity.

Honour cultures

Discount factors measure how you value the future.

Changes over time and large variations in, for example, homicide rates between Afro-Caribbean and West African states means that we should not despair that any particular pattern is pre-determined. But it does mean that we have to look at the right places to make things better. White racism is not the right place.

The effect of honour cultures on violence is one much better place, especially as we know from European history that shifting from an honour culture to a dignity culture makes a serious downward difference (pdf) to homicide rates. That shift seems to be connected to moving out of being medieval societies, where the state simply has a dominance of organised violence, to post-medieval societies, where the state has an effective monopoly of organised violence. In the US case, that is more the shift to a post-frontier society; as on the frontier the American state very much did not have a monopoly of organised violence.

The point of honour cultures is a willingness to (if necessary) violently defend one's personal autonomy -- both physical space and reputation. (A nice summary of honour cultures, dignity or guilt cultures and face or shame cultures is here.) Honour cultures typically operate if the state is effectively absent, does not have a monopoly of organised violence, is seriously mistrusted or some combination thereof. In different ways, all three factors tend to operate within African-American communities -- the police are more distrusted and the "war on drugs" create a range of assets which are not state-protected and income flows which are state-threatened [while the very low rates of clearance for homicides within African-American communities then itself promotes the protective mechanisms {pdf} of an honour culture].

So, getting rid of the "War on Drugs" coupled with more accountable (and much less militarised and revenue-seeking) police forces with better local outreach (a model for which is provided in the successful efforts to suppress gang warfare in LA) would very likely help African-American communities transition away from a destructive honour culture amongst young African-American males.

If the protective dimension of a dignity culture is an accountable state which handles protection of life, person and property tolerably well, the income dimension is commerce. The lower the level of human capital, social capital, income and wealth among a community, the more burdensome is intrusive regulation on their commercial opportunities. So, premiums on bureaucratic approval (from occupational licensing, land use regulations, etc), compliance costs, etc need to be significantly lowered.

The third dimension of the dignity culture is a culture of personal responsibility. If you can always blame everything on "the man" then there is no path of learning, there is no path of doing better and better in relations to others and yourself.

Shrieking "racism" by those whose moral certainty exceeds their social understanding** as the catch-all explanation of different social outcomes between African-Americans and other Americans is simply empirically wrong and socially destructive. Because it not only blocks searching for other (much more important) causes but it actively gets in the way of necessary changes if things are to improve.

But that is the difference between signalling how Virtuous you are and actually being serious about improving the circumstances of those whose social outcomes make them such splendid moral mascots or sacred victims.


* The much higher rates of homicide in particular generates a major disadvantage for other Americans from the presence of African-Americans; which, even without historical legacies, would be enough in itself to generate residential segregation.
** Given how swamped we are with information and complexity, it is possible that moral certainty is acting as a substitute for, and a pretence of, social understanding.


ADDENDA The effect of the War on Drugs on African-American homicide rates in particular is worse than I thought.


[Cross-posted at Skepticlawyer.]

The EU's downward spiral

Econblogger Bryan Caplan is rightly sceptical of "it will end in civil war(s)" claims about the European Union's (EU) current travails, and is moreover prepared to put his money where his blogging is; hence he will accept bets on the issue.

Nobel memorial laureate and economic historian Robert Fogel argued that pressures over mass immigration were a significant aggravating factor in lead up to the US Civil War. Nevertheless, there is nothing remotely resembling slavery as a sufficiently explosive issue to spark civil war within EU member countries.

While civil wars within EU countries are not at all likely prospect, that does not mean that the EU is not in some serious trouble.

Kratos without demos
The EU lacks a demos; it lacks a common arena of public political bargaining encompassing the entire citizenry. Instead, it has 28 member countries, each with their own demos.

The European Parliament is, in practical terms, an arena for political display without effective political power. European voters clearly treat it as such, both in the serially declining voter turnout and the "treating it as a giant by-election" voting habits.

Lacking an EU demos, there is something of a "divide and conquer" pattern, where the central institutions of the EU -- notably the European Commission -- get elite agreement on policies and then manoeuvre their implementation with little or no effective input from voters, directly or indirectly. [As a British minister recently admitted.] Hence concern about the EU's democratic deficit. Ideas that elite folk are attached to but lack popular support (or even provoke popular antipathy) can be implemented in continual "end runs" around popular preferences.

This is such an excellent mechanism for getting things past voter resistance, that it has been expanding into a range of international organisations in the increasing internationalisation of policy-making -- not to be confused with globalisation, which is quite different. (Globalisation is the massive increase in international transactions, creating global markets and information networks.)

Broad political bargaining
The trouble with this approach is that there has been a strong tendency over recent centuries for expansion in both ambit and participation of the realm of political bargaining for good reason; such bargaining both engages broader social groups in the political process and forces policy-makers to pay attention to concerns and to factors they might otherwise discount or ignore. Such broadened political bargaining encourages policy more conducive to creating and maintaining productive and stable social orders that increase the ability of states to expropriate and mobilise resources.

So, one might expect that, if EU policy making is driven by narrow political bargaining, that there might be some tendency for policy-making to be not conducive to creating and maintaining productive and stable social orders. In particular, that there might be increasing signs of popular dissatisfaction, even voter anger.

Which is exactly what we see -- an increasing "angry vote" across EU countries. An "angry vote" which is not necessarily particularly ideological -- so it can be picked up by both "left" (Syriza, Podemos) and "right" (Front National, Sweden Democrats, UKIP, Freedom Party, Golden Dawn) political parties, the pattern depending on the dynamics of particular countries -- but which manifests in increasing support for previously not mainstream political parties and movements.

Narrow bargaining as dysfunction
The narrow-bargaining policy dynamics of the EU helps explain why the EU tends to be dominated by a combination of bad ideas of the left with bad ideas of the right. Start with labour markets regulated to protect job-incumbents, creating labour market insiders and outsiders. Import migrants not chosen for their ability to contribute to their new societies -- who are very much labour market outsiders -- while resisting notions that they adapt to their new societies (bad idea of the left). Add in monetary policy which obsesses over non-existent inflationary dangers and cannot tell the difference between hard money and sound money (bad idea of the right).

The interaction between these policies then amplifies their negative effects. Said negative effects, and the patent disregard for popular concerns, then amplifies voter alienation -- especially as European countries are very much not settler societies and there is a lot of popular scepticism about, or even antagonism to, immigration.

Healthy polities have mechanisms for correcting surges in angry votes. Thus Australia experienced an  "angry vote" upsurge in the Pauline Hanson/One Nation phenomenon. A mixture of making the case to voters (notably by Tim Fischer, head of the National Party), attack politics (led by an outraged Tony Abbott, who felt deeply personally betrayed when it turned out one of his staffers had also been organising for One Nation) and de-fanging policy adjustment (John Howard's "But we will decide who comes to this country and the circumstances in which they come" rhetoric and stop-the-boats policy) popped that particular "angry vote" surge.

This successful strategy may have worked with the voters, but generated a great deal of antipathy among progressivists. Since the fundamental principle of much contemporary progressivism is I am morally superior to you because I am more committed to equality than you, by the perverse dynamics of virtue signalling (see also here and here for earlier analyses), blocking popular preferences when they contradict the demands of such signalling have also become part of contemporary progressivism -- which makes contemporary progressivists in general ill-equipped to deal with "angry votes" but quite good at generating them. (Which then gives them even more people to signal superior Virtue against.)

Discounting popular sentiment
But the EU is not a health polity in the above sense, and not only because it is not fully a polity at all. The original motivating idea of the EU is that nationalism is the great sin and problem of European history. It is quite false: Europeans have never lacked reasons to kill each other (religion, class, ethnicity, language, ... ).

The great problem of European history has been unaccountable power. The solution to which is accountable power; political bargaining which encompasses the entire citizenry and makes those holding power in the state agents of said citizenry.

But if one diagnoses nationalism as the great sin, and given that nationalism is a popular sentiment, then popular sentiment is "the problem" and so one creates mechanisms for frustrating "dangerous" popular sentiments.

Or, in other words, another form of unaccountable power. Which has all the attractions of arrogance, status and convenience that unaccountable power offers its possessors.

So, we get policy making by an insufficiently accountable elite who regards popular sentiments as a source of dangers. This leads to policy making that generates "angry votes". The elite can then say to itself "see!, popular sentiment is dangerous -- look who people are voting for".  This derision of popular concerns, and continuation of "unaccountable business as usual", continues the pattern of policy making which annoyed many voters in the first place, which then increases the "angry vote", and so it goes.

This is a downward spiral that is not going to end well.

Unless some corrective mechanisms finally kick in. If they don't, then, while civil wars are not likely, the EU itself fracturing will become increasingly likely.


[Cross-posted at Skepticlawyer.]

Open and closed state systems: the geography of regional unification

Recurring periods of unification were a notable feature of the history of China; notably the Qin-Han (221BC-220), Sui-Tang (589-907), and Yuan-Ming-Qing (1271-1912) periods of unification. (The Northern Song [959-1126] arguably do not count as a full unification, since they never controlled the northern regions, which was under the control of the Liao dynasty [907-1125].) Indeed, of all the major civilisation centres, China was unified more frequently than any other.

Conversely, Europe was never unified and the Mediterranean basin was unified only once--under the Roman Empire. So, why was China repeatedly unified, while the Roman Empire was a one-off?

Unification propensities

The first thing to note, is that we are looking at different propensities to be unified. There were centuries-long periods of Chinese history when it was not united: nevertheless, compared to other civilisation centres, it showed a relatively high propensity for unification. Conversely, the Mediterranean basin had a low propensity to being unified (it was unified once) and Europe as a whole effectively no propensity to being unified (as it never was).

Size of largest and second largest empire.

Note also that propensity to unification is not the same as any more general propensity to large states or mega empires. The former is about the propensity for a specific region to be ruled by a single state, not mere state size or capacity. (Though, of course, state capacity matters in the sense that the region has to be within the possible ambit of control by a single state, given the level of organisational capacity achieved by states in a particular time period.)

Both historical demographer Peter Turchin (here) and historian T. Greer (here) have posted on the contrast between China and Europe. Both of the them reject what Greer calls the fractured land hypothesis, which Greer describes thus:

... they suggest that China's political unity and Europe's perpetual disunity are reflections of the unbroken terrain of the first and the disparate geography of the second. Two prominent examples can be found in Paul Kennedy's Rise and Fall of the Great Powers: Economic Powers and Military Change, 1500-2000 and Jared Diamond's Guns, Germs, and Steel: The Fate of Human Society.

Turchin and Greer both argue that the geography of China is more similar to Europe's than the hypothesis requires.

I completely agree with them, the fractured land hypothesis is not at all a satisfactory explanation of the different propensities to unification. Greer concludes his post with:

A close examination of the geography of East Asia suggests that there is no geographic feature capable of explaining the divergent paths of European powers like Germany, France, and the Netherlands that cannot be found in China. Chinese unity did not come because of its geography. It came in spite of it.

While completely agreeing with the unsatisfactory nature of the fractured land hypothesis, I completely disagree with Greer's wider conclusion. China's geography does explain why it had a relatively high propensity to unification--provided we look at in terms of the interaction between geography and state systems.

State systems: how bounded?

In using the concept of a state system, I am adopting the terminology and definition of historical sociologist Charles Tilly in his seminal Coercion, Capital and European States: AD 990-1992:

States form a system to the extent that they interact with each other regularly, and to the degree that their interaction affects the behaviour of each state (p.162).  

To explain varying propensities to unification, we have to examined how open or closed, how bounded, a particular state system is. A state system is completely open if it has no borders without effective states (or power projection by states). The contemporary global state system is completely open, it has no such geographical borders. But we have not always had a global state system: in fact, far from it.

A state system is completely closed if it is bounded on all sides by borders without effective states (or power projection by states). Apart from some early periods of state formation in various regions, this has essentially never been the case. A state system can be relatively closed, however. If, for example, all but one border is without effective states (or power projection by states).

The closed and controllable state systems of China

Which is precisely the situation that China was in for most of its history. Until the C19th, no state projected significant state power across its coasts. With the exception of the relatively brief Tibetan Empire (618-842)*, no state projected significant state power into China across a South-to-West-to-North arc from the Vietnam border to the steppes. For most of its history, the only open border for the projection of state power into China was the steppes border.

The interaction between the people of the plough (the Chinese) and the people of the bow (the pastoralist nomads) has been central to Chinese history. But it has been central to Chinese history precisely because, for the overwhelming majority of Chinese history, it has been the only open border across which external state power was projected into the farming lands of China. And that was most emphatically been a product of the geography of China. That its agrarian heartland is a series of river valleys bordered by coasts, jungles, mountains and deserts across which state power was not seriously projected from outside (with the above noted relatively brief Tibetan exception) and by the steppes, across which it was. 

Why does that matter for the propensity to be unified? Because the area that is so bounded was able to be controlled (given the transport and communication technology available) by a single state. So, in a period of disunity, if and when one state gained a military advantage over the others, the geography of China meant that the period it needed to sustain that military advantage to roll up the other states in the bounded state space was relatively short. Short enough to generate China's relatively high propensity to be unified. And, since there was effectively only one border across which rival state power could be projected, there were considerable economies of scale in military effort to be reaped once unification was achieved.

As we are looking at the interactive dynamics of state systems--that is, their movement through time--both military and administrative technology matter. In particular, what level of resource mobilisation states in the relevant state space have the organisational capacity to do, matters. It may take considerable time before one participant develops the organisational capacity to overwhelm the other states in the relevant state space. Hence centuries of disunity even in the case of China. Since we are looking at varying propensities, while geography remains essentially a fixed constraint, only explanation in terms of dynamics--specifically, state system dynamics, given that we are looking at the propensity for the state system to evolve into a single state--has any chance of explaining the pattern.

The Roman exception

If we look at propensity to unification in terms of characteristics (and the dynamic possibilities and patterns therefrom) of state systems, we can see why Europe had effectively no propensity to unification. Once state formation had spread beyond the Mediterranean littoral, it was never a closed state system in the above sense. There were too many borders across which state power could be (and was) projected into too large an area for establishing and maintaining unified control. Which meant too many directions from which unity could be blocked and (especially) military dominance blocked (as a series of would-be hegemons found).

The centuries earlier Mediterranean world that the Roman Republic confronted was quite different. There were no states beyond the Mediterranean littoral, except in the East. The forests of Europe, the deserts of the Sahara, were either empty of states or too much of a barrier for effective projection of state power. Only eastwards--in particular, the Iranian plateau--were there state(s) able to project state power into the Mediterranean littoral. Which was not enough to block Mediterranean littoral unity if one state had enough of a military advantage for long enough. 

The Mediterranean littoral was a large area, even given the utility of the Mediterranean itself for transport and communication. So, a state had to sustain a significant military advantage for a significant period of time to roll up all the other states and unify the Mediterranean littoral. But, if a state did, then the only border confronting significant state power was with the Iranian plateau. A geographical pattern which could generate significant economies of scale in military effort, if and when unification was achieved.

Which it was, because the Roman Republic did sustain such a military advantage for a long period of time, winning every external war for about three centuries. Long enough, indeed, to roll up every other Mediterranean littoral state and unify the entire Mediterranean littoral under one state.

Success that blocked replication

But the very success of Rome ensured that such a unification was a one-off, as the example of Rome spread the techniques of state formation beyond the Mediterranean littoral, which never again became a closed state system.  The Umayyad Caliphate and the Ottoman Empire made notable attempts at unifying the Mediterranean littoral, but it was precisely the Sahara-flanked region of the Mediterranean littoral--not that bordering the now too-deep European state system--which they united with the Middle East. Though neither controlled the entire African coast of the Mediterranean for as long as the Romans did.

So, I agree, the fractured land hypothesis does not explain the relatively high propensity for unification of China and the effectively zero propensity for unification of Europe; or why the Roman Empire was a one-off. But the interaction between geography and its effect on the dynamics of state systems does very definitely explain those patterns.

Geography matters in history; particularly before the Growth Revolution (to use T. Greer's nice phrase) from the 1820s onwards: for geography provided powerful, continuing constraints on human affairs. Only with steamship and railroads, from the 1820s onwards, (along with the development of telegraph systems from the late 1830s onwards) did humans develop any significant technological capacity to overcome the constraints of geography. It is not surprising that a recent study found that, prior to said Growth Revolution, geography appears to have dominated institutions in explaining the average long-run incomes of regions.

China was a relatively closed state system, with blocking boundaries, so had a high propensity to unification. The Mediterranean basin stopped being a relatively closed state system, so never repeated the Roman unification. While, once there was a European state system, it was never sufficiently bounded to be unified. All the results of the interaction of state system dynamics with geography.


[Cross-posted at Skepticlawyer.]

* The period of the Tibetan Empire coincided with the Sui-Tang unification, so China was already unified.

The hollow states of Islam

Reading Norman Davies's Vanished Kingdoms, it struck me how much Islamic states--across most of the history of Islam--resembled the fluid warlord states of Europe in the centuries immediately after the collapse of the Western Roman Empire, but did not resemble the institutionally resilient Christian states of the later medieval period. These divergent paths came from the very different internal dynamics of Islamic and Christian states, particularly, the very different roles of law within the two civilisations.

Subjects but not participants
Once the Abbasid revolution (750) had broken the link between the Arab tribes and the Caliphate, by establishing the common status of all believers, Islamic states became very poorly linked to the subjects they ruled. Law was overwhelmingly the province of Islamic scholars, so Islamic states could not use law as an integrative mechanism. Sharia mandated the division of inheritance among heirs, which blocked the creation of substantive warrior aristocracies or powerful merchant families. Sharia did not recognise juristic persons, which blocked the creation of corporate bodies able to bargain with rulers. As law was overwhelmingly the province of Islamic scholars, but derived from the words and example of Muhammad, that meant there was no group of people who could sit down and change the law.

So Islamic rulers did not face powerful interest groups outside the state apparatus with whom they could bargain (or be forced to bargain) while what they could putatively bargain over was hugely attenuated. Thus Islam remained dominated by ruler-and-agents states where political processes and decision making were essentially entirely interior to the state apparatus.

Hence, until the late C19th, Islam never moved (with the exception of the Ottoman Empire, of which more below) beyond the fluid warlord states analogous to those of Christian Europe in the centuries immediately after the collapse of the Western Roman Empire. For example, there was continuously a state in Egypt; the Fatimid, Ayyubid and Mamluk states from the Fatimid conquest in 969 to the Ottoman conquest in 1517. But the ruling dynasties, their soldiers and warriors were all overwhelmingly (and continually) foreign. There was a state in Egypt, but there was no Egyptian state.

Which was the typical Islamic pattern, especially anywhere slave soldiers were used in significant numbers (mamluks, ghilman, janissaries). But not only there. Thus, whenever the dominant Islamic state in Iberia collapsed, it would fracture into the small taifa states. There was none of the institutional resilience or continuity of a kingdom of England, or France or, for that matter, a kingdom of Castile or Aragon.

Which gave the Christian states a decisive and continuing advantage over the Muslim warlords, hence the Reconquista. But Christian rulers dealt with warrior aristocracies, continuing merchant families, legal persons, had states with specific laws and could bargain with all the former over the latter.  Of course the Christian states were much more resilient; they had far deeper institutional links with the societies they ruled.

Ottoman (partial) exception
The Ottomans were able to develop a state that balanced sipahi tax-collector mounted armoured warriors with royal sipahi household cavalry and Janissary slave soldiers. The Janissary corps was founded in 1383 and abolished in 1826. It was primarily recruited (until 1683) by the devşirme child-levy.

The Ottoman state was organised in its internal operations by Kanun (state law operating in the silences of Sharia). The combination meant that the Ottoman dynasty and its agents could organise a state large and durable enough to successfully compete with Christian states. So successfully, that the Ottoman Empire advanced steadily into Europe until the disastrous Battle of Vienna in 1683.

Especially by using ghazis on the borders to continually soften up Christian borderlands by raiding (including slave raiding) them. Once the population and revenue of the Christian borderlands had been degraded or driven away, invasion and incorporation into the Ottoman Empire would follow. Whereupon the ghazis moved to the new border and the cycle would repeat.

Which worked fine, until the Serene Republic of Venice and the Habsburg Monarchy recruited grenz Serb peasant militia to hold the border, the Military Frontier. After that, the superior institutional power of the Habsburg monarchy (and the Romanov monarchy) were able to continually push the Ottomans out of Europe. Eventually, even relatively minor European states could do so. Processes which essentially replicated the dynamics of the Iberian Reconquista, except that the Ottoman state never fractured.

Note that I am not claiming the Ottoman state was more or better institutionally engaged with its subjects than other Islamic states; merely that the Ottoman state apparatus itself was more capable and resilient than was normal for Islamic states. Indeed, a recent paper (pdf) found that being ruled by the Ottoman Empire after the signing of the Treaty of Karlowitz (1699) has persistent (negative) effects today in higher rates of corruption and lower economic development.

Institutionally attenuated
All of which meant that Islam did not indigenously develop the institutionally resilient, social bargaining states of Christendom. Indeed, significant strands of Islamic thought reject the entire approach. In the words of the most prominent Salafi scholar of the C20th, Muhammad Nasir-ud-Din al-Albani (1914-1999):

Elections according to democracy are unlawful, and parliaments that do not govern in accordance with the Qur’an and the Sunna [orally transmitted traditions of Muhammad], but rather on the basis of the majority’s arbitrariness, are tyrannical. Parliaments cannot be recognized and Muslims can neither seek nor cooperate to found them, for they contend (combat) God’s revelation. And they are a Western technique made by the Jews and the Christians, who cannot be legally emulated (p.37). 

It is harder to develop democracy when the entrenched habits of social bargaining are, at best, only weakly developed and significant strains of belief reject the entire enterprise. The point is not whether many Muslims support democracy--they do, which is precisely what horrifies and enrages the Salafi. The point is whether the social habits and institutional patterns exist to support the politics of broad social bargaining and how strongly.

Not very, which does much to explain the serial conflicts and tyrannies of the Middle East. Though the examples of Malaysia, Bangladesh and Indonesia all suggest that Islam can get there, eventually.


ADDENDA: Not only was law not a mechanism that Islamic states could use to integrate their societies, it tended to work against such integration because the actions of rulers were often seen as against the letter or spirit of Sharia, of God's law. As the great Muslim thinker Ibn Khaldun wrote in The Muqaddinmah:

Royal authority … requires superiority and force, which express the wrathfulness and animality (of human nature). The decisions of the ruler will therefore, as a rule, deviate from what is right (p.154).

Lacking means to engage in compensating social bargaining, this tended to encourage withdrawal by pious Muslims from political life. Historian Daniel Pipes argues that the conflict between what Muslim rulers did and what Sharia rule was supposed to entail encouraged the development of slave warriors (pdf) by Muslim rulers, as they could not induce systematic loyalty from local Muslims. I would argue that the gulf between rulers and subjects had broader causes, but would agree that said gulf did encourage developing slave warriors: warriors whose scale of use, and status, were very much distinctive to Islam.

[Cross-posted at Skepticlawyer.]

The Rotten Heart of Europe

Bernard Connolly's The Rotten Heart of Europe: Dirty War for Money is a jeremiad against European monetary union first published in 1995. Its publication led to the author's sacking from the European Commission, where he had been senior monetary and foreign exchange economist. This is not, as Connolly a matter of saying the "Emperor has no clothes" but that, in his words, the Emperor is "ugly and sickeningly malodorous".

It is entirely within keeping with the book's analysis that the European Court of Justice referred to the book as:

aggressive, derogatory and insulting.

Apparently the Court took, in the words of the above news report:

particular umbrage at the author's suggestion that Economic and Monetary Union was a threat to democracy, freedom and "ultimately peace".

While the Court did not ultimately go there, the Court had been invited to consider the book analogous to blasphemy. (No, I'm not making this up.) Europe, with a capital EU, really is a substitute religion, a secular Faith.

A new of edition of The Rotten Heart of Europe was issued in 2011, with a new introduction. The ongoing Eurozone crisis puts Connolly in the position of Robert Conquest (at least as suggested by Conquest's friend Kingsley Amis): I told you so, you fucking fools. The author notes in said introduction:

That no-one dared to attack the book's economic analysis but that the book's author was subjected to a concerted campaign of vilification says much about the nature and purpose of monetary union.

The book reads very much as an insider expose, because Connolly was very much an insider. It is fairly obvious he can describe various meetings and events so vividly because he was there (or worked with people who were: as a former policy bureaucrat, I can testify such folk are incurable gossips).

The book is an enlightening, if depressing, read. Depressing for an outsider living in an economy which has avoided so much of this nonsense; if you and yours actually had to live through the ill-effects, it might make you as angry as the author.

The book does lurch into hyperbole at points (particularly in the introduction written for the 2011 re-issue). But hyperbole is the vice of the impassioned, and the author has plenty to be angry about. Since it is about monetary policy and the effects thereof, the book could have done with an introductory primer--following the balance of payments, interest rates, etc interactions is a bit of an ask for a lay reader, even though Connolly is a clear writer and, if you persevere, explanations are generally forthcoming.

ERM as Euro precursor
The book covers the rise, operation and collapse of the European Exchange Rate Mechanism (ERM) and the use of the ERM as a springboard to Monetary Union--i.e. the Euro. It is a "how did we get here?" book, for the ERM, in its creation, reason for existence and operation was completely the precursor to the Euro: monetary union was always the aim. The ERM was the Euro, mark 1: the Euro is the ERM, mark 2. All the problems, failures and difficulties of the Euro were already on display with the ERM; but not as bad, because the Euro is far more constraining and the democratic deficit now bites even deeper.

The Euro is far more constraining because, while one could leave the ERM with a press release, leaving a common currency is much harder, as the Greeks are wrestling with. But that made the Euro more attractive to the Europeanising networks, not less, for it insulated their power-and-connection games against external disturbance.

A floating exchange rate is an economic shock absorber, a fixed exchange rate an economic shock transmitter. The stability of the Australian economy since the Reserve Bank of Australia (RBA) adopted a broad inflation target in 1992-93 has been based on the ability of (changes in) the exchange rate to absorb economic shocks, making it much easier for the RBA to keep total spending on goods and services in the economy on a fairly even path.

That is why Optimum Currency Area (OCA) theory considers what alternative shock absorbers economies have (specifically factor mobility and fiscal coverage) in examining how suitable territories are to share a common currency. That is why economist Paul Krugman entitled his paper on the Euro debacle Revenge of the Optimum Currency Area (and added financial integration to needed shock absorbers). As Connolly writes in his 2011 introduction:

The great ... mistake ... was that monetary union simply converted currency risk (the risk that a certain government's bonds might be devalued, in terms of another currency) into credit risk (the risk that a government might simply be unable to pay its creditors).

Hence the Greek tragedy.

The European Faith
The "coordinated" exchange rates of the ERM again and again magnified economic shocks, to the detriment of participating economies. Rather than the failure of the ERM leading to a rethinking of the project, the European elite "doubled down", going all the way to the Euro. Creating, if somewhat delayed, a much worse set of difficulties, problems and failures. Fairly clearly, they will not willingly abandon the Euro project, but want to "double down" again, using the ongoing crises to create an even higher level of policy, financial and political integration.

All of which is based on a deep interweaving of faith and interest. The faith is A Single Europe; the interest is the status, career paths, financial handouts and poorly (or simply un)accountable power the EU system provides. What Connolly refers to, in his 2011 Introduction, as:

a self-serving transnational nomenklatura made up of interlocking political, bureaucratic, business, financial, academic and media elites.

The book makes it clear, as it had long been to those with eyes to see, that the European Union's democratic deficit is not a bug, but a feature.

Connection uber alles
One of the perennial questions amongst folk who prefer their economic policy to be of the liberalising kind is how does France manage it? It seems to continually "break the rules" yet create a successful society and economy (well, mostly successful; let's ignore the suppurating social sores of the les banlieue). Reading The Rotten Heart provides useful basis for understanding how it is managed; through technical excellence, insider meritocracy, and corporate life operated as one vast insider trading exercise.

• If the French builds something, it works.  This simple technical capacity provides a pervasive advantage and support for the broader system.
• Their grande ecole system produces extremely well-trained, skilled and self-confident (indeed, somewhat ruthless) bureaucrats. Bureaucrats embued with a deep belief in, even reverence for, the State.  A reverence that easily translates into faith in Europe and the European superstate being built.
• Networks and connections are keys to corporate life. The return to information (particularly regarding policy action) and certification comes from connection. As does ability to affect policy decisions in advance. 

Which is why the masters of the system tend to loath the "Anglo Saxons": not merely their success but their "casino markets" and excessive democracy.

It is not merely, as Connolly rather savagely puts it, that:

the French Establishment has never forgiven the Anglo-Saxon world for liberating the homeland from the Nazi occupation their incompetence and decadence had permitted (Ch.9).

(Just as, as their moral pretensions swell, the European elite cannot forgive Israel for the Holocaust.)

The 2005 riots: many local unpleasantnesses.

The combination of "Anglo-Saxon" economics (accepting the dynamism of open markets) and of "Anglo-Saxon" politics (governments as seriously responsible--British version--or accountable--Washington version--to their voters) is doubly subversive to the French elite's entire modus operandi. The "Anglo-Saxons" provide an identity to define oneself against and, in the case of the US, a counterpoint to seek to surpass. (One cannot really say "rival" because the US fails to feel threatened by European unity--indeed, actively promotes it; which is, if anything, even more infuriating.)

Open markets tend to dissipate the advantages of connection. Closed or restricted markets can accentuate it. For example, the difficulty in dismissing employees under French law raises the risks of employing new people and thus increases the advantage of certification and being in the correct networks. As Connolly writes of the French technocratic elite:

For them, economics is not only a subject invented and developed by Anglo-Saxons, it is a subject fit only for Anglo-Saxons and their decadent liberal democratic societies. The servants of the enarque state have no need of economics: they possess power instead (Ch.12).

I wonder if an Anglo-Saxon economist of working class origins found dealing with the such folk a bit wearing. On the other hand, he is talking of folk he dealt with professionally, for years. His is an informed antipathy.

Admirers of the Bundesbank might also profit from reading his informed, but jaundiced, view of its operations and performance. Having read Richard Hetzel's two (pdf) articles (pdf) on the history of German monetary policy in the C20th, I found Connolly's critique plausible but not surprising, though his observations on how much the Bundesbank relied on essentially managing (and stunting) the Frankfurt financial market were striking. (Which would make it somewhat similar to--but not, on Connolly's description, as bad as--the way the Japanese Finance Ministry does the same to the Tokyo financial market.)

Continental European corporations more generally have a level of state support and political cushioning that American corporations strive to achieve but ultimately fall short of. In Europe, particularly continental Europe, connection trumps, and generates, money. A game the French technocratic elite plays better than anyone else because they are so well trained to play it and believe in it so passionately.

EU as French state multiplier
The pattern of connection trumps, and generating money, is extended and reinforced by the EU; partly because said elite labours so mightily to make sure it does. As Connolly notes:

For France (as for Germany), a "level playing field" in the Single Market had always meant a slope steeply in their favour -- the result of the ERM and the Social Charter impositions, both intended to keep the 'peripheral' countries of the Community in a state of economic weakness and political dependency (Ch.13).

Flexible exchange rates allowed countries to evade the anti-competitive effects of the Social Charter and other EU regulations by devaluation. The ERM, and even better Monetary Union, cut that option off. As Connolly writes:

For the French elite, money is not the lubricant of the economy but the most important level of power (Ch.1).

Moreover, the less say the general public has over important matters of policy, the higher the return to connection and insider status is. So, elections are managed so both sides of politics (with the occasional backsliding) play the key games the same way.

(One of Syriza's fundamental flaws is that they actually want to play the same game too--that even more be done via state networks is not subversive, it is the pretence of it--yet the massive Greek indebtedness which brought them to power also casts them as supplicants; they get the attention of the Top Table folk, but not in a good way. Margaret Thatcher was more threateningly subversive of the EU than Alexis Tsipras could ever hope to be.)

Hence we get 'Corporatism in One Continent' as Connolly nicely labels it (Ch.2). Something which favours the established but provides no avenues for the up and coming (Ch.3). Hence also the attraction of monetary union:

Fix the exchange rate, neuter monetary policy, and then use the fear of macroeconomic instability as an excuse to stifle the dynamism of the capitalist process (Ch.3). 

Thus the effort invested in the ERM then and the Euro now. If reversion to independent floating currencies occurred:

... more than just 'monetary Europe' could be lost to France's corporatist, fonctionnaire, industrialist and financier class: 'Europe' itself, with its promise of 'Corporatism in One Continent' in which bureaucrats, indigenous multinationals and trade unions could hold at bay the tide of the Anglo-Saxon market economy could be at risk (Ch.9) 

The creation of a remarkably unaccountable central bank, as the European Central Bank (ECB) is, was very much not a defect of Monetary Union: despite differing conceptions of final outcomes between German and French EU-elites, they both found that highly desirable.

First the French manage the Germans (and vice versa) and then they manage everyone else, for:

The Franco-German axis is the Community, and the role of other members of the European Council is to give a ceremonial benediction to what the French and German leaders want to do (Ch1.).

One of the themes of the book is other countries trying to be "core" and not "periphery". But that is a status decided by the Franco-German connection, according to the interests thereof.

Accountability (or, rather, the lack of it) is at the heart of the problem. Particularly when one gives such power to an unaccountable central bank:

... politicians have at some point to confront the consequences of their mistakes; their unaccountable central bankers do not (Ch.10).

While the ECB embraced inflation targeting originally pioneered by New Zealand, the full New Zealand model of an explicit (indeed, performance-based) contract between central bank and elected government horrified European central bankers. Connolly warned:

... the trend toward greater interference by central bankers in explicitly political affairs, set in train by Maastricht, will be hard to arrest as long as the fools' paradise of EMU beckons (Ch.10, fn10).

The fools' paradise has arrived, and so has the predicted pattern. A pattern that has not fully run its course, and which Connolly feared, for:

an ECB would be a totally anti-democratic institution that hastened the decaying of political life in 'Europe' and a probably precursor to an authoritarian reaction to mounting chaos (Ch.13).

We are not there yet, but nor has the working out of the implications ended. Connolly summarises the ERM thusly:

The rules of the system were, from the outset, more important than its results, for the framing and interpretation of the rules determined the distribution of power between and within -- perhaps even over -- the Community countries (Ch.11).

As with the ERM, so also with the Euro.

Another theme of the book is that Britain can never really be at "the heart of Europe", in part because of a seriously divergent political culture:

For most people in Britain, politics is seen as providing a framework within which the constant balancing of the interests of different groups, or for that matter of different regions or countries, can proceed in legitimacy and reasonable harmony ... That idea of politics is, literally, foreign to French technocrats. What they are interested in is power -- first imposing their will on France and then imposing their conception of France's will on everyone else (Ch. 14).

The Church of EUrope
Reading this analysis of how the EU works, one is reminded of late medieval ("Renaissance") Catholic Europe and its interplay of doctrine and interest. Now the doctrine Is Ever Greater Union, and heretics (such as Connolly) are to be hunted down, denounced, and thrown into the outer darkness. (Actually, in Connolly's case, he seems to have had a nice post-Eurocrat career as a exchange rate analyst.) As Connolly puts it in his 2011 Introduction, the EU has no demos but

'Europe' has a right to arise because of its supposedly superior ethos and supposedly necessary telos.  

Nor has his righteous anger abated:

the absence of a European demos implies, given the strains produced by the efforts to create and maintain a monetary union, a ruthless, deceitful, malignant anarchy-imperial ethos reflecting a telos devoted to destroying law, democracy, accountability, legitimacy and to emerging victorious in a 'clash of civilisations'.

Go on, tell us what you really think.

Meanwhile, in counterpoint to the Church of EUrope, the Eurosceptics and enraged nationalists are the oikish Protestants, daring to want to decide things for themselves. Of course, those damned Protestants actually did rather well for themselves; as, in the long run, the combination of more open cognitive systems, nakedness before God and personal sovereignty created increasingly more dynamic societies.

It was a bit of a revelation to discover that "growth-positive fiscal austerity" was originally ERMonomics, just as it has now become Euronomics. As an aside, countries such as Australia, Norway, Denmark, the UK have unusually downwardly redistributive (pdf) welfare states: fiscal "austerity" implies something rather different in such societies than it does in the upwardly distributive Mediterranean states. (The share of GDP spent by government on welfare is actually a very poor measure of how redistributive a welfare system is.)

Though the blogosphere metaphor of Calvinism (i.e. rigid theologising) to describe those who insist that everyone is to blame, and everything is to be done, except examine the role of the ECB and the entire Euro project, comes across as even more appropriate. Connolly argues that an underlying notion of the ongoing General Will is used to trump mere elections. Hence the response to the (narrow) rejection of the Treaty of Maastricht by Danish voters in June 1992:

The Treaty of Rome be damned, they said in effect, a few thousand Danish votes one way or another could not be allowed to stop the March of History, to frustrate the General Will as decided by the political bosses in the countries that really mattered (Ch.6).

Framings for ignorance
Reading Connolly's book, I am struck by the power of Scott Sumner's point that so many people--including policy makers--simply do not understand monetary economics:

... monetary policy failures are not about special interest politics. There is an almost mindboggling lack of understanding of monetary theory at the top levels of government. The entire world economy is resting on the hope that a few sane people like Haruhiko Kuroda can keep their head and keep NGDP chugging along while the rest of the political establishment careens recklessly from one extreme to the other.

But policy makers do have framings through which they view the world, so they just apply the framing to matters of monetary policy that makes sense to them on other grounds. 

So, in the absence of genuine understanding, those who worship at the altar of the state apply those framings to monetary policy. Those who get wrapped up in signalling Virtue apply that framing to monetary policy. Supporting the ERM and Monetary Union was the way, par excellence, to signal what a Good European you were.

Hence also conservatives tend to instinctively go for hard money policies, because it fits in with their social order concerns--they naturally think that devaluing money (so undermining proper order) is the worst thing you can do to it. (Not even close to true, but then you would have to understand monetary economics to realise that hard money and sound money are very much not the same.) There is quite a history of economically liberalising (or at least liberal) right-of-centre governments being brought down by hard money obsessions.

Which is part of the story Connolly has to tell--how Thatcher's otherwise very able Chancellor of the Exchequer (1983-89) Nigel Lawson's obsession with having the Pound Sterling shadow the Deutschmark stoked the boom-and-bust that helped fatally weaken Thatcher's Premiership. Connolly clearly admires Lawson, who comes across as the tragic hero of the story.

Margaret Thatcher, who proved to be entirely correct about the problems of the ERM and of the proposed Monetary Union, is the book's fallen hero and martyr, since her fall made the path to disaster all but inevitable (and, Connolly argues, was at least partly engineered by Europeanising networks). Bundesbank President (1991-93) Helmut Schlesinger is admired for his commitment to German national interests, sense for German public opinion, and his strategic skill (particularly as he used it to effectively destroy the ERM).

The book has too many villains to count. Though Banque de France chief Jean-Claude Trichet is treated with thinly veiled contempt and Thatcher's successor John Major with open contempt.

As an Australian reader, the constant political and policy dramas, the twists, distortions (and at times outright lies) engaged in to "defend" some particular exchange rate just seems mad. Which, if your goal is good economic policy for people in your society, it is. But the combination of portentous ignorance, faith and self-interest operating in a milieu of sabotaged accountability produced this madness, fed on it, and spiralled it up to even grander madness. Leading to the Eurozone having to beware of Greeks bearing debts and forcing deals which not only won't work, but can't, even in theory. But what is elementary economic and fiscal logic to Faith in Europe?

Though some mordant humour is to be had:

The Bonn summit was a classic example of international economic 'coordination': one country agrees to something that is bad for it on condition that another country does something equally bad for it (Ch.2).

Or, on the Major Government's ultimately failed attempt to be in the ERM:

Instead, the government resorted to the tried, tested and failed methods of the 1960s and 1970s: bravado, declarations of undying and irrevocable commitment to the parity, insinuations that sterling would soon enter narrow bands, sneering denunciations of anyone who suggested a change in policy on the exchange rate (Ch.6).

Needless to say, the final outcome was--a change in policy on the exchange rate (ejection from the ERM and a floating exchange rate).

But, as Connolly notes of international coordination:

'The masters of the world' inevitably prefer 'coordination' to competition as a way of arriving at the desired result, simply because the processes of international 'coordination' increased their own influence, prestige and insulation from political accountability (Ch.7).

Not that Connolly was a perfect predictor. The ECB proved to be much tougher on inflation than he expected, and much more independent of the French politicians than he (or, for that matter, folk such as Mitterand) expected. But that was the outcome of French and German elites managing each other.

Cognitive closure
What comes across strongly in the book (and the history of the Euro since) is what a disastrous engine of cognitive closure signalling Virtue can be. Conservatism is prone to its own forms of cognitive closure: in recent decades, they have tended to matter much less since conservatives have so little role or influence over educational, academic, cultural, literary and intellectual life. In the case of the ERM and the Euro, many conservatives were very much wrapped up in signalling being Good Europeans, so ended up helping to build bricks in the wall of cognitive closure.

A wall of cognitive closure from which a constant public barrage was mounted, leading Connolly, in his introduction to the 1995 edition, to quote political scientist Leonard Schapiro's famous analysis of propaganda:

the true object of propaganda is neither to convince nor even to persuade, but to produce a uniform pattern of public utterance in which the first trace of unorthodox thought reveals itself as a jarring dissonance.

And dissent against Virtue is wicked, so need not be engaged with, merely denounced as signs of a deformity of moral character. As Connolly writes in the final sentences of his book:

On this question, as on every other question about the ERM and monetary union, the propaganda steamroller attempts to flatten analysis. For analysis can only mean dissent. And dissent cannot be tolerated.

Cognitive closure indeed. And yet, all those Virtuous Europeans were so wrong, and Margaret Thatcher was so right.

But only if you care about economic consequences; particularly the way mass unemployment blights lives.* But the Good Europeans clearly don't (or they care about others things a whole lot more). The have their Faith and their Connections and that is clearly more than enough for them.

If you want to see their ugly and shockingly malodorous world in operation, then The Rotten Heart of Europe is a guided tour therein.  The book is 20 years old, but still explains so much of what is happening in Europe now.

*A lot of which is caused by supply-side restrictions, but they are also part of the EU game, as played variously in different countries. And post-2008, by the policies of the ECB.

[Cross-posted at Skepticlawyer.]