Tuesday, April 29, 2014

YES to a federal Europe

The Union of European federalists has published a manifesto that deserves to be signed. We must say no to nationalism and yes to federalism. Campaigns for NO (in this case to nationalism) only succeed if they are constructive (saying YES to something, in this case to federalism), friendly and have a smile in the face. This is something the NO campaign in Scotland should learn fast; it is not enough to have the right arguments. Of course, it would have been cleverer to have a referendum question where the secessionist had to campaign for a NO vote (NO to staying together), and to have a campaign leader who had not been the finance minister in the time of the worse economic crisis after second world war. But it is too late for that. The prospect of independence must be really really bad if their proponents are not winning against such a bad campaign.
The federalists manifesto says that Europe is passing through a period of turbulence and uncertainty. The European Union itself is in deep trouble. The long financial crisis, which has led to economic stagnation, unemployment and political fragmentation, has exposed not only the flaws in the design of the Economic and Monetary Union and the weakness of EU institutions, but also a lack of commitment to European integration by EU states. As a result, the European Union has lost the trust of many citizens.
If the European Union is to survive for years to come, it must pursue the paths of social peace, prosperity and political unity through the business of democratic government. 
(You can read the rest of this manifesto here).

Saturday, April 26, 2014

Keeping track of Piketty's boom

Any economist with a concern for inequality and a preference for internationalism should be happy by the fact that Piketty’s “Capital in the XXIst Century” has become the best seller and one of the most debated books of these times. By the way, I was right predicting that it would be the book of the year. The videos of a debate between the author, Stiglitz, Krugman, Durlauf and Milanovic in New York, and a TV interview with Paul Krugman about the book must be watched by anyone interested in these issues. There have been additional reviews by Robert Solow, Martin Wolf and John Cassidy. Paul Krugman has explained the difficulties that the right finds in forging arguments against Piketty, and he also has developed on the controversy about the fact that Piketty uses relatively conventional methods to develop his analysis. In my view, the fact that Piketty develops his heterodox conclusions using orthodox methods reinforces his credibility. Most probably, the conclusions are more than robust to the use of more heterodox methodologies and theories. So far, an unfortunate aspect of the debate, especially in the US, is that not much attention has been paid to the issue of the decline of the nation-state as the unit where a new social contract is needed to fight global inequalities. A federal organization of Europe and international progressive taxation are key issues in the fourth part of the book, but this transnational dimension is not deserving enough attention.

Thursday, April 24, 2014

Einstein's manifesto for a united Europe

Manifesto to the Europeans, mid-October 1914

 By Albert Einstein and Georg Friedrich Nicolai

“While technology and commerce clearly compel us to recognize the bond between all nations, and thus a common world culture, no war has ever so intensively disrupted cultural cooperation as the present one. Perhaps our acute awareness of the disruption that we now sense so painfully is due to the numerous common bonds we once shared.

Even should this state of affairs not surprise us, those for whom a common world culture is the least bit precious should redouble their efforts to uphold these principles. Those, however, of whom one should expect such conviction—in particular scientists and artists—have thus far only uttered things which suggest that their desire for maintaining relations has vanished simultaneously with their disruption. They have spoken with an understandable hostility—but least of all of peace.

Such a mood cannot be excused by any national passion; it is unworthy of what the entire world has until now come to understand by the name of culture. It would be a disaster should this mood pervade the educated classes.

Not only would it be a disaster for civilization, but—and we are firmly convinced of this—a disaster for the national survival of individual states—in the final analysis, the very cause in the name of which all this barbarity has been unleashed.

Through technology the world has become smaller; the states of the large peninsula of Europe today move in the orbit of one another much as did the cities of each small Mediterranean peninsula in ancient times. Through a complex of interrelationships, Europe—one could almost say the world—now displays a unity based on the needs and experience of every individual.

Thus it would appear to be the duty of educated and well-meaning Europeans at the very least to attempt to prevent Europe—as a result of an imperfect organization of the whole— from suffering the same tragic fate which befell ancient Greece. Should Europe too gradually exhaust itself and collapse in fratricidal war?

The struggle raging today will likely produce no victor; it will probably leave only the vanquished behind. Therefore, it seems not only good, but rather bitterly necessary, that intellectuals of all nations marshal their influence such that—whatever the still uncertain end of the war may be—the terms of peace shall not become the cause of future wars. The fact that through this war European relationships have to some extent become volatile and malleable should rather be used to make of Europe an organic entity. The technological and intellectual prerequisites are given.

How this European order is to be brought about should not be discussed here. We wish merely to emphasize as a matter of principle that we are firmly convinced that the time has come when Europe must act as one in order to protect her soil, her inhabitants, and her culture.

We believe that the will to do this is latently present in many. In expressing this will collectively we hope that it gathers force.

To this end, it seems for the time being necessary that all those who hold European civilization dear, in other words, those who in Goethe’s prescient words can be called “good Europeans” join together. After all, we must not give up the hope that their collective voice—even in the din of arms—will not trail off entirely unheard, especially, if among these “good Europeans of tomorrow,” we find all those who enjoy esteem and authority among their educated peers.

First it is necessary, however, that Europeans get together, and if—as we hope—enough Europeans in Europe can be found, that is to say, people for whom Europe is not merely a geographical concept, but rather a worthy object of affection, then we shall try to call together a union of Europeans. Such a union shall then speak and decide.

We wish only to urge and appeal; and if you feel as we do, if you are similarly determined to lend the most far-reaching resonance to the European will, then we ask that you sign.”

Saturday, April 19, 2014

Running out of time with climate change

Although the last report of the Intergovernmental Panel on Climate Change has been criticized by The Economist because of too optimistic cost calculations about climate change mitigation, its message is clear once more: unless we act now, the rise in temperatures in our planet by the end of this century may be catastrophic and completely change life as we know it. If The Economist is wrong and the report is right, the costs of acting now are affordable, which means that the global economy may keep growing without causing lasting damage. That is in principle possible: economic growth, as Paul Krugman explains, is not incompatible with respecting the environment. We may grow without consuming material resources, but grow in valuable services, ideas and knowledge. As long as the cost of mitigation is lower than the cost of adaptation without mitigating, which everybody assumes that would be prohibitive, the things to be done demand the creation of institutions adapted to the challenge. These include international cooperation and cooperation at unprecedented levels and the setting up of an international carbon price, be it through taxation, through the exchange of emission permits, or both. These issues will increase in importance in our lives in the next years and decades, and everybody should become knowledgeable about them. Understanding is the first step for action.

Monday, April 14, 2014

Olof Palme interviewed by David Frost

The Internet has remarkable treasures. In this wonderful interview from 45 years ago, the late British TV journalist David Frost talks to the Swedish politician Olof Palme, who was tragically assassinated years later. Towards the end of the interview, Palme is asked about what we are on earth for, what is the purpose of our presence in this life. He says that "leaving aside the metaphysics of the issue, as we are doomed to be in this earth, we should try to make life as decent as possible. To achieve that we need some common values, such as equality and community. That is the basis of my political ideology." It is difficult to come up with a better definition of social democracy. Besides this, the interview uncovers a very honest politician, very different from the artificial characters that have led western politics in the recent decades. It is not that I subscribe to the idea that politicians are always worse (Obama is clearly better than Bush, for example), but one cannot avoid thinking that some authenticity has been lost.

Friday, April 11, 2014

More reviews of Piketty's book: Krugman, Galbraith...

Important economists and commentators have contributed new reviews of the book by Thomas Piketty "Capital in the Twenty-First Century," to be added to the review of Branko Milanovic published some months ago. Of all the reviews, the most critical is the one by James K. Galbraith, who takes issue with the notion of capital used by Piketty. Galbraith argues that the French economist confuses a physical notion of capital with a financial notion of it. He also questions the originality of using data on inequality different from survey data. Finally, he deems Piketty's proposal of a global wealth tax "futile," although he says nothing of the more feasible one of a European version of a progressive tax on capital. Overall, I don't think that the criticisms of Galbraith question the idea that capital is becoming increasingly and dangerously concentrated and that this can and should be dealt with by international policies that go beyond the nation state. Although Paul Krugman fails to emphasize the important international federalist dimension of Piketty's proposal, he is much more positive about the book. His only criticism is that the book has no deep explanation about the increasing inequality of salaries in the US due to incredibly high executive pay. The last words of Krugman's review are these: "Piketty has transformed our economic discourse; we'll never talk about wealth and inequality the same way we used to."

Tuesday, April 8, 2014

Romario keeps scoring goals

The former Brazilian soccer player and current member of Parliament in his country, Romario, has spoken at BBC World about corruption in the organization of the World Cup in Brazil. He was a legend on the pitch and he is not disappointing off the pitch. During his brief spell at FC Barcelona in 1993-94 he marvelled with his goals and the transparency of his behaviour and his ideas. Once he was asked if he was under stress, and he answered "how can I be stressed with the money I make?" After one and a half years in Barcelona, following the 1994 World Cup, he decided he had had enough of Barcelona, said it, and left for his country, where he has lived ever since. In the interview with the BBC, besides denouncing rampant corruption, he says that he wishes that the standards that are required for FIFA demands would be applied to things such as hospitals, schools and other public goods. When asked about his opinion about Pelé, the other soccer legend in Brazil and famous for his cronic proximity to power, Romario says that he respects him but that he is an imbecile because he does not respect peaceful demonstrators who are against corruption and in favour of social policies.

Monday, April 7, 2014

Scientists for Europe and against nationalism

I just signed a manifesto promoted by Italian scientists in favour of progress and the United States of Europe. I encourage you to sign it. Among other things, it says this:
"The world is changing rapidly. The status quo, once considered established, has been greatly redesigned by society and the economy of knowledge. Economically depressed areas have acquired, in short time, great potential of development and growth. Knowledge, culture and innovation represent today, more than ever, the push toward the future.
To the contrary, the West and some aspects of its development model, have entered into a deep crisis. In particular, Europe appears to be not only affected by serious problems, such as unemployment, crisis in productivity and substantial reduction in welfare, but it is also apparently incapable of solving them. After only a few years from the official birth of the common currency, there is now the danger that the dream of a Europe made of people devoted to the idea, not only of a new larger Nation, but one also more open to civil rights, intrinsic human values and widespread opportunities, will be shattered. Walter Laqueur, the American historian, has spoken about “the end of the European dream”.
The responsibilities for this situation are many and varied including, to be sure, the excessive timidity in facing the process of creating a European political entity. The future should be built on the basis of political, cultural and social horizons rather than adhering to the bookkeeper’s aspiration to keep “accounts in order”. Hence, we have now a Europe of merchants and bankers, of limitations and inflexibility, a sort of gendarme that imposes often-foolish rules rather than widen horizons and promote future development.
Because of this, we are witnessing, in connection with the present crisis, an alarming growth of provincial egotisms, based on narrow self-interests, if not real outright nationalism. These phenomena often are intentionally created for exploiting real unhappiness and suffering, with the risk of causing reactions that would be directly opposed to what Europe needs."

Sunday, April 6, 2014

An article on the economics of nationalism by Albert Breton, 50 years later

In 1964, the Public Choice Canadian economist Albert Breton published a classical article on "The Economics of Nationalism." The main thesis of the article is that nationalism is an investment in nationality or ethnicity that has a very low or negative social return but that has significant distributive implications in favour of the elites or leaders of a particular national or ethnic group. His examples come from the case of Quebec, where in those times a nationalist movement that later became secessionist was becoming more and more powerful. One of the sub-themes of the article is that the left was an ally of this movement, because one of the expressions of nationalist governments in the province of Quebec was the nationalisation of electricity companies and the creation of other "national" public structures. The article has all the flavour of the public choice: the assumption that all economic agents are rational and self-interested (both market participants and policy makers), and a bias against the left. Policy makers are not benevolent agents who act to promote social welfare, but individuals that have individualistic preferences like everybody else. Therefore, most initiatives of governments are self-interested, which is the origin of a distrust of interventionist doctrines in general. What has changed today? Today, the public choice dogma has been replaced by a more balanced (not necessarily anti-left) political economy, where certainly there are no intrinsic differences between different economic agents, but where some improvement can be achieved through collective action by governments or communities. Additionally, agents are recognized to be not always rational, but affected by biases and behavioural anomalies, both in the market and in the political domain. On nationalism, the left in democratic countries will hardly benefit from selfish policies that do not address the international dimension of social problems such as inequality, financial instability or climate change. What survives today from the insights of Breton is the idea that nationalism in democratic countries is a strategy (today accompanied by all kind of behavioural tricks) that has a low or negative social return, but that benefits the elites of some national or ethnic groups.