The debate of 2015 (and beyond): what federalism?

The big debate of 2015 (and certainly beyond) should be and I believe will be (although perhaps not with these words) "what federalism?." That is, in front of enormous problems at a global scale and the insufficiency of the nation-state to solve them, and also in front of the populist identity movements that ignite local grievances, how to manage diversity, and how to build large democratic aggregates will be a major issue. Of course, there are different ways to do this, and the solutions will differ across the continents. There are different solutions to square the formula of divided power, degrees of consociativism and malapportionment in the represenation of hypothetical or real territorial chambers. It is not easy to respect asymmetries, without creating privileges (in Spain, the UK, Europe, America, Africa, the Middle East, Ukraine...), but it can be done, and it is being done. How to avoid the slippery slope of local and regional powers that opportunistically use their resources to promote secession is a big problem. But we must solve problems at its optimal level. We must decide things democratically, respecting the laws of time and space. That is, not everything can be decided at the same time (because there are time-inconsistency or commitment problems) and not everything can be decided at the same level of spatial aggregation: I'm sorry for Catalan secessionists, but climate change will not be fixed with an independent Catalonia. I insist: issues must be governed at its optimal level. Some are optimally decided at the household level, others at the building level. Many issues can be managed at the municipal level, while others at larger levels of aggregation. Increasingly, issues have a continental or global dimension. And I am not the first to believe that one day this optimal level will become, for some issues, universal, that is, encompassing outer space. And you don’t even need to incorporate alien creatures to the argument (with them, Star Trek already had a role for federations: this is a place where someone has gone before). Happy new year.

Miami, December 17th 2014

By chance I spent some hours in Miami airport with my family (in transit to Chile) just the day that Presidents Obama and Castro simultaneously announced an agreement to re-establish diplomatic relations, release prisoners and start a new era of dialogue. When I was at the airport, I understood that something was going on, but I failed to appreciate the historical dimension of the event. Local people watched TV screens, and airport workers from Cuban origin (most of them?) talked about the topic with a mixture of doubt and excitement. Subsequent polls have shown the division in the Cuban exiles in Florida about the agreement. In my modest opinion, there are reasons to be cautiously happy about it. Although I consider myself a left wing European, I believe that the European left has not done enough to criticize the Castro regime. No degree of equality justifies the lack of respect of human rights in the island. The left should be about social justice and freedom, both of them together. Today justice and freedom require action at the regional, continental and even global level, for which it does not make any sense to keep walls between peoples. The Berlin Wall fell 25 years ago, and it is about time that the Caribbean wall falls as well. Obama is right that the embargo has failed and has been counter productive. Perhaps trade and the Internet will do more for freedom than the embargo. I also hope that the Americans do not just wish to buy a Caribbean Island with their money, but that they act in coordination with other American countries to promote freedom and welfare in Cuba and elsewhere, and also that they facilitate a peaceful democratic transition that makes it possible to perpetuate the many good aspects of the Cuban society.

A History Manifesto against the short run

I studied history before studying economics, and I remain interested in history. This History Manifesto is a summary of the great trends of this discipline in the last 50 years, and how it was too immersed in the short run for too long. The authors argue that we should pay much more attention to the long run, so as to appreciate the possibilities of broader perspectives and of a reformist contribution by historians to society. The book begins like this: "A spectre is haunting our time: the spectre of the short term. We live in a moment of accelerating crisis that is characterised by the shortage of long-term thinking. Even as rising sea-levels threaten low-lying communities and coastal regions, the world’s cities stockpile waste, and human actions poison the oceans, earth, and groundwater for future generations. We face rising economic inequality within nations even as inequalities between countries abate while international hierarchies revert to conditions not seen since the late eighteenth century, when China last dominated the global economy. Where, we might ask, is safety, where is freedom? What place will our children call home? There is no public office of the long term that you can call for answers about who, if anyone, is preparing to respond to these epochal changes. Instead, almost every aspect of human life is plotted and judged, packaged and paid for, on time-scales of a few months or years. There are few opportunities to shake those projects loose from their short-term moorings. It can hardly seem worth while to raise questions of the long term at all." The weakest part of the book is an excessive corporatist defence of historians, that contradicts the arguments of the book against too much expert specialization and scientific niches, as argued in this review. But before it's too late, perhaps you should also read this manifesto against presentism (it can be downloaded for free).

The History Manifesto is a call to arms to historians and everyone interested in the role of history in contemporary society. Leading historians David Armitage and Jo Guldi identify a recent shift back to longer-term narratives, following many decades of increasing specialization, which they argue is vital for the future of historical scholarship and how it is communicated. This provocative and thoughtful book makes an important intervention in the debate about the role of history and the humanities in a digital age. It will provoke discussion among policymakers, activists and entrepreneurs as well as ordinary listeners, viewers, readers, students and teachers. - See more at: http://historymanifesto.cambridge.org/#sthash.xQTq20se.dpuf

How should historians speak truth to power - and why does it matter? Why is five hundred years better than five months or five years as a planning horizon? And why is history - especially long-term history - so essential to understanding the multiple pasts which gave rise to our conflicted present? The History Manifesto is a call to arms to historians and everyone interested in the role of history in contemporary society. Leading historians David Armitage and Jo Guldi identify a recent shift back to longer-term narratives, following many decades of increasing specialization, which they argue is vital for the future of historical scholarship and how it is communicated. This provocative and thoughtful book makes an important intervention in the debate about the role of history and the humanities in a digital age. It will provoke discussion among policymakers, activists and entrepreneurs as well as ordinary listeners, viewers, readers, students and teachers. - See more at: http://historymanifesto.cambridge.org/#sthash.xQTq20se.dpuf

How should historians speak truth to power - and why does it matter? Why is five hundred years better than five months or five years as a planning horizon? And why is history - especially long-term history - so essential to understanding the multiple pasts which gave rise to our conflicted present? The History Manifesto is a call to arms to historians and everyone interested in the role of history in contemporary society. Leading historians David Armitage and Jo Guldi identify a recent shift back to longer-term narratives, following many decades of increasing specialization, which they argue is vital for the future of historical scholarship and how it is communicated. This provocative and thoughtful book makes an important intervention in the debate about the role of history and the humanities in a digital age. It will provoke discussion among policymakers, activists and entrepreneurs as well as ordinary listeners, viewers, readers, students and teachers. - See more at: http://historymanifesto.cambridge.org/#sthash.xQTq20se.dpuf

Jean Tirole: "I'm a big federalist"

These words came after a question by the BBC journalist Zeinab Badawi to the 2014 Economics Nobel Prize asking whether it was true that Tirole was a federalist in favor of a European state. It was in the context of the "Nobel Minds debate" in BBC World during the past week-end. Badawi's question in turn came after two questions by young ladies, the first of one by Maria asking whether it would be easier to regulate small terriotries like Catalonia and Scotland instead of Spain and the UK. Maria spoke with a Catalan accent (I know about this particular accent). Tirole's answer perhaps came as a surprise to Maria: "I'm a big federalist," reminding the audience that the objects that must be regulated are more and more international in nature: banks are multinational. Google, climate chnage, all have to be regulated at the global or at least European level. Tirole emphasized that he tries to be politically neutral, but he also left clear that he has little patience with the "horrible" policies of extreme parties. The euro zone institutions are weak, said Tirole, unlike the US: "I would like to have a common budget and a common law." Hopefully that will come, he argued, although "My ideas seem to be against the current because we don’t learn the lessons of history." The French economist defended the idea of a strong EU budget and a EU federal government that operates with higher transfers of sovereignty from the member states and that looks for coordinated solutions to the current economic crisis. It is therefore not only Thomas Piketty and Branko Milanovic who discuss federalism in their work among the economists. Now it will also be this year's Nobel prize.

The Coase theorem meets global federalism

I just explained to my MAREB students the Coase theorem yesterday, and today I read this post by Branko Milanovic. I told my students that the theorem (if property rights are complete and transaction costs are zero, the parties to collective problems reach efficient solutions) had been used to justify massive privatization, and other policies such as trading in pollution permits. Of course, the theorem is a theorem and not a description of reality. Like the two welfare theorems, the Coase theorem gives the false impression that efficiency and distribution can be easily separated, but they are not. Plutocracies create inefficiencies. The particular distribution of property rights in Russia is linked to the failure of democracy, and the failure of democracy makes it difficult to develop a modern well functioning economy. The expectation, as Milanovic argues, was that the oligarchs would demand the protection of property rights through the rule of law, as the rich did in the US in the past, but the oligarchs moved their resources to other countries (where no one asks them about the origin of their wealth), because that is easy to do with globalization, so they do not need to demand the protection of property rights in Russia. It is utopian to think about a democratic global government that regulates global capitalism and redistributes at a global scale, but it was also utopian to think about a Europe without borders in 1945. Markets need rules and redistribution, and today markets are global, so rules and redistribution should increasingly work at the global level. In 1945 rules to constrain capitalism were mostly a national work in progress, Europe was a dream and global federalism was not even a proposition. Today nation states have done most of their work and are increasingly obsolete, Europe is a work in progress and global federalism has moved from nothing to a dream. That's some progress.

Political Bubbles

I am reading the book "Political Bubbles" by three American political scientists, about the failure of the political system in the US that led to the financial crisis of 2008 and that failed to react quickly and deeply enough to it afterwards. The authors explain how economic market failure was accompanied by political failure to a large scale. This failure was the result of what they call the three "i's": institutions, interests and ideologies. Interests are those of wealthy members of the financial community that spend resources in trying and sometimes achieving to capture the political system. Ideologies are those of unfettered free markets, but also those of egalitarians that content themselves with the use of imperfect instruments. That is the case when redistributions is pursued by selling houses, in a coincidence of interests with those members of the financial community and with those conservatives that work to create an "ownership society." Interests and ideologies can work against the interests of the majority when institutions favour gridlock and the status quo. Some degree of commitment to past policies is desirable to promote stability, for example when there are valuable sunk investments. But sometimes flexibility and adaptation is needed, especially when social disasters are growing in likelihood. Something similar may be happening today with climate change. The three "i's" explain why the popular response to the crisis has been so moderate and why outrage has been unable to transform itself into a wide movement for deep reforms. They contribute to explain why in the face of the absolute disaster of free market policies, Barack Obama still only won by a small majority against John McCain in 2008. Or why the Occupy Wall Street movement only lasted briefly and had a small impact on mainstream politics.

Evolution and the technology of nationalist movements

During 99% of the evolution of the human species, our ancestors were hunter gatherers fighting for survival in the African savannah. In that technological and environmental context, cooperation among members of the same group and distrust of members of outside groups was an optimal adaptive strategy. As a result, the human mind developed preferences that reinforced the own identity by opposition to other identities. These preferences have survived to our days, and can be seen in nationalist movements and in the emotions and sometimes dangerous tendencies of sports fans. The problem is that today the environmental and technological context have completely changed, and therefore a sharp distinction between "us" and "them" has become maladaptive to the majority of humans. We should cooperate more, at a larger scale. Of course, it is still useful to some people, for example those that benefit from the weapons of mass distraction that are nationalist movements, in Europe, Israel, Asia and many other places. Elites benefit from the  mobilization of ethnic and religious feelings, as was predicted by John E. Roemer in an article where he explained why the poor do not expropriate the rich in democracies (because the rich are good at keeping the poor busy with identity clashes). Then the relatively poor (a good fraction of the majority) provide the labour factor in nationalist movements in the form of demonstrators and voters, and the elites, usually with the massive opportunist use of the resources and propaganda machines of rich regional governments (as in Quebec in the 1980s, or Scotland and Catalonia today), provide the capital. Of course, human capital also helps, especially where the labour factor is augmented by the power accumulated by well trained middle classes which, although being a minority (perhaps a cohesive and culturally homogeneous 30%), thanks to the structure of electoral laws, civil society and local institutions, may control the key nodes of society. Then, having a society mobilized on nationalism, but paralyzed on everything else, is perfectly possible. Political movements are the result of ideologies (beliefs), institutions and interests. But evolutionary forces and technology should not be underestimated.