From zero sum mentality to negative sum reality

Not everything is a penalty kick –the quientessential zero sum interaction, where there is pure conflict, and no common interest among the players. In fact, most social interactions are not zero but positive sum: they combine conflict and common interest (think of a firm or a family).

A problem arises when what is a positive sum game is perceived by the main players as a zero sum game, and opportunities for mutual gain are not realized. Economist Maitreesh Ghatak from the London School of Economics uses a bus analogy: when a bus is crowded and the riders are ethnically heterogenous, instead of blaming the lack of budget for more buses, some may be tempted to blame the excess of riders from “the other” ethnicities. 

According to Ghatak and his co-author Vedier, “Economic hardship or rising inequality or slowdown of economic growth alone can create political discontent. When any two of these three aspects of economic malaise coincide, discontent turns to despair, but there is still a vent through which some steam goes of. For example, economic hardship and rising inequality may still seem tolerable if there is some prospect of economic growth, the benefts of which are expected to trickle down in the form of a higher standard of living in the future. But when long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, you have zero sum economics –when your loss is someone else’s gain. Zero sum economics turns despair into rage against the establishment and whips up a perfect political storm,” which is what Trump’s electoral victory in 2016 really was. 

“When long-term income stagnation for most of the population and decline for some go together with high rates of income growth at the very top, one has zero-sum economics and that naturally raises the possibility of using various kinds of social identities to claim a bigger share of a fxed sized pie.” They show that in ethnically or racially polarized societies this naturally leads to the salience of social identities that enable majority ethnic groups to vote for policies that exclude minority groups so that they get a greater share of a dwindling surplus.

Brexit and Trump, seven years later, have proven politically and economically disastrous, but they are not totally defeated. What comes after rage? Why don’t we see more disappointment with these proposals? A combination of economic and cultural issues keeps complicating the analysis. Biden is clearly better economically (see Freedland and Krugman) and, yet, Trump can win again. A majority of Brits regret Brexit, but no political party wants to reverse the decision.

The Brexit Project also convinced voters that they were in a zero sum game with the EU. Now citizens realize that there was also common interest with Europe and they are immrsed in a negative sum post-Brexit reality.

Journalist Peter Foster in “What went wrong about Brexit and what we can do about it” (the last book to give details about the disaster that Brexit has been, see a review here), writes this: “Understandably, Brexit played on the insecurities of communities that felt they were losing their sense of agency in face of global forces: big tech and social media; flat wages and unaffordable houses; low growth and rising job insecurity; immigration and outsourcing. Those issues have roiled all industrialised democracies in different ways, with differing results. But the original sin of Brexit was to promise that leaving the EU would make the UK better able to meet those challenges. It didn’t, it won’t –and it was never going to. Those who made those rush promises should have known better. Most of them surely did.”

The UK has decided to come back to the HORIZON European research program. As a pro-European anglophile, this makes me happy. My prediction is that they will come back to everything (including the single market at some point), but they will hardly be accepted again at the decision-making table. They will become rule-takers, (some) reluctantly accepting that the interaction with the EU is a positive sum one. So much for sovereignty.

What's wrong with football officials?

The current scandal about the sexually abusive behavior of the president of the Spanish football (soccer) federation (and member of UEFA’s executive committee), Luis Rubiales, is just the last of a series of scandals of this official in particular, and of other football executives elected by the structure of professional soccer.

In 2018, Rubiales replaced Angel M. Villar, who had gone to prison under corruption charges. That was just a few years after Gianni Infantino had replaced Sepp Blatter in front of FIFA, soon after the FBI had brought charges of corruption and organized crime against several members of the FIFA executive committee.

Infantino committed to reform FIFA, and appointed a team led by legal scholar Miguel Poiares Maduro to work on proposals to change the governance of football. After some time doing his work, Poiares resigned. He has explained his experience here and here. He concluded that football is impossible to reform from inside.

Rubiales’ behavior is unfortunately not uncommon in Spain (or other strong soccer communities). It is just that now it is incompatible with supporting the values represented by the very successful women’s national team, and the contradiction is unbearable. 

The journalist Simon Kuper’s book “Barça. The rise and fall of the club that built modern football” explains (p. 370) about Joan Laporta, the president of FC Barcelona (the team that had 11 players in the final of the World Cup, 9 in Spain, and 2 in England): “There was trouble on election day after he (Laporta) told a young woman with whom he’d pose for a photo: ‘Call me when you’re eighteen’. The only female member of his campaign slate was sent out to explain that he’d meant he’d be signing the girl to a Sports contract”. In the next few pages, the author expands on the Laporta style, including his inclination to appoint relatives and friends and get rid of professionals in executive positions.

Poiares has also explained that women are discriminated in their access to positions of responsibility in the structure of football. The Assembly of the Spanish Federation that Rubiales has called to organize his defense, only includes a symbolic presence of women.

Corruption, sexism, arrogance, lack of transparency, are well-known characteristics of the governance of football, even more than in other Sports, because of the immense power of their governing bodies, itself the result of the global success of the sport. Transparency International has this thread on the structural features that facilitate "sextortion" in sport. FIFA is a global unregulated monopoly. Only the power of public opinion (like with stopping the European Super-League) and perhaps the action of large democratic jurisdictions (like the US or the EU) can constrain them. But success is even then only temporary. For example, the US Attorney General that led the case against FIFA in 2015 works now for a law firm hired by FIFA and has spoken recently favourably of the efforts of the institution to reform.

There are clearly serious governance issues behind a democratic façade. Those who elect the executives depend on the favours of the elected. This unaccountable power can only be stopped by popular pressure, affecting the decisions of sponsors and large democratic jurisdictions.

In previous scandals, Rubiales first line of defense was that attacking him endangered the award of the 2030 World Cup to Spain (with Portugal and Morocco). Independently of whether this World Cup is necessary for Spain, now Rubiales’ resistance to resign is the main reputational obstacle to organize the event. But if Rubiales resigns, the same governance structure and culture that put him in command (and Blatter, Infantino, Laporta) will remain in place.

I have written more about these topics in my book (in Spanish) "Pan y Fútbol" and briefly in my Introduction to IEB's Report on soccer and economics (in English, Spanish and Catalan).

Wilson's mistake

After the first World War, US President Woodrow Wilson promoted a number of steps (the “fourteen points”) to facilitate a durable peace. One of them was interpreted as the so-called right of the peoples to self-determination.

The Fourteen Points were a proposal made by the President in a speech before Congress on January 8, 1918, outlining his vision for ending World War I in a way that would prevent such a conflagration from occurring again (in that sense at least, he failed, as it did occur again). They also were intended to keep Russia fighting on the Allied side, to boost Allied morale, and to undermine the Central Powers.

During World War I, U.S. President Woodrow Wilson promoted the concept of "self-determination," meaning that a nation—a group of people with similar political ambitions—can seek to create its own independent government or state. The idea is also alluded to in the fifth of his Fourteen Points, although the words "self-determination" are never explicitly used.

Point fifth says: “A free, open-minded, and absolutely impartial adjustment of all colonial claims, based upon a strict observance of the principle that in determining all such questions of sovereignty the interests of the populations concerned must have equal weight with the equitable claims of the government whose title is to be determined.”

The principle does not state how the decision is to be made, nor what the outcome should be, whether it be independence, federation, protection, some form of autonomy or full assimilation. Neither does it state what the delimitation between peoples should be—nor what constitutes a people. There are conflicting definitions and legal criteria for determining which groups may legitimately claim the right to self-determination. The United Nations has enforced the concept for groups under colonial control, but not for regions of developed countries with a significant number of secessionists.

According to Wikipedia, since the early 1990s, the legitimatization of the principle of national self-determination has led to an increase in the number of conflicts within states, as sub-groups seek greater self-determination and in some cases full secession. The 2000 United Nations Millennium Declaration failed to deal with these new demands, mentioning only "the right to self-determination of peoples which remain under colonial domination and foreign occupation."

Major problems remain defining "peoples" (or deciding which authority will decide who constitutes a people and who does not), respecting the rights of minorities, and dealing with distributive dilemmas when seceding groups are relatively rich and contribute financially to the welfare of other groups. "Partitions" are not like assembling and disassembling Lego pieces, as once said the economist Branko Milanovic. A meaningful application of the right of self-determination, interpreted as the right to secede, requires that the Planet be populated by non-overlapping well-defined “peoples” or “nations.” This assumption does not hold in practice. They are not well-defined and, to the extent that sometimes they are, they do overlap in many cases.

The written Constitutions of well-established democracies (all of those in the EU, for example) do not accept the right to secede of parts of a territory.

Israel and Yugoslavia are examples of the contradictions that are inevitably reached when real communities try to apply Wilson’s principle. Northern Ireland, instead, reached a (so far durable) peace agreement under different principles, faclitated by the existence of the European Union, and put in danger by Brexit. Ethnocratic temptations in India, in the US, in Russia (think of Putin’s referendums) are further reminders of the risks of projects that underestimate the practical difficulties and the moral dilemmas of creating new nation-states, expanding the current ones, or rejecting minorites from them. Federalist roads not taken in Africa or Latin America have degenerated into fragmented continents, but are a reminder of a better possible post-national future.

Orwell and truth, today

 “The Ministry of Truth,” written by Dorian Lynskey, is a “biography” of George Orwell’s book “1984.”

It is a biography of a book, in two parts. In the first part, it explains how Orwell wrote the book in the 1940’s and which were the motivations for him at that time. The author had been in the Republican front line in the Spanish Civil War (he writes about that in “Homage to Catalonia”) and became a fierce critic of Stalinism from the left. “1984” is a dystopia of what could happen in the extreme if totalitarian regimes took over the world, with the fresh memory of Hitler and the contemporary experience of the Soviet Union in mind. Orwell focuses on how the totalitarian regime would manipulate the truth and the mind of individuals.

In the second part, the book discusses the influence of the book after the death of its author shortly after he finished writing it. That is the most interesting part of the book. Although in the real year of 1984 things did not look as Orwell had predicted, Lynskey shows then that many aspects of the current world (where nazism has been long defeated and the Soviet Union no longer exists) are not that different from what Orwell had warned about. After all, we are in the times of post-truth and intrusive social media.

The book starts and ends with a reference to Donald Trump. In January 2017, the book explains, the new president took the oath of office and his press secretary later said that it was “the largest audience to ever witness an inauguration.” He could not prove his preposterous lie and described the statement as “alternative facts”. Over the next four days, US sales of “1984” rocketted by almost 10.000 per cent, making it a number one best-seller.

The afterword of the paperback edition finishes with a reminder of the speech given by Donald Trump after the election he lost against Joe Biden, in which he alleged, without any evidence, that there was widespread election fraud and that he was, in effect, the victor. Between 2016 and 2020, Trump had told thousands of well documented lies. Those following him, believeing or not his lies, staged a coup on January 6th 2021 and are trying to put him again at the highest office in 2024, trying to learn from the mistakes that prevented them from winning in 2020.

Other examples of the manipulation of the truth are provided by China’s President, Xi, and by Vladimir Putin. Orwell was a democratic socialist who was critical of any form of totalitarianism, from the right or from the left. His most famous books are a criticism of Stalinism (“Homage to Catalonia”, “Animal Farm”). In his most important political experience, the Spanish Civil War, he sided with POUM, an anti-stalinist marxist Catalan group.

But the lesson today in democratic societies, according to the author of this great book, is that the biggest danger lies mostly with the radical right. Please, read “The Ministry of Truth”.

 

The Chicago Boys and the separation between politics and economics

Sebastian Edwards tells a fascinating story about “neoliberalism” and the Chicago Boys in Chile. The Chicago Boys are the Chilean economists trained in the University of Chicago who had important responsibilities during the Pinochet dictatorship and beyond. They were strongly influenced by economists such as Friedman, Hayek or Harberger, who advocated an expanded role for markets, and a very limited role for governments. Edwards is very well positioned to give a very complete and balanced account of the somehow unpleasant story of the participation of prestigious academic economists in the economic management of the military dictatorship of Augusto Pinochet in Chile between 1973 and 1989. He was trained in Chicago University, but is not a Chicago Boy. Instead, he was a socialist activist opposed to the dictatorship in his youth. He shows empathy both for some of the economists involved, American (such as Friedman or Harberger) or Chilean, and for those who opposed the neoliberal model on occasion of the students’ demonstrations that ultimately led to the election of Gabriel Boric, a student leader, as President of the Republic in 2021.

In the 1990s and early 2000s (not before), there were great results to be shown for “the model.” But what was the model then? Actually, the best results took place in the years of the transition to democracy, when the democratically elected presidents belonged to the center-left coalition of La Concertación. The book explains very well that the center-left continued many of the neo-liberal aspects of the model (becuase of its success, because of lobbying from the elites, and because of constitutional constraints) with a more human touch, after the neoliberal model of shock therapy, privatizations and minimal government (except for law and order) had experienced an accute crisis in the early1980s.

Edwards explores three mistakes of the Chicago Boys: the failed pension system, the decision to fix the exchange rate by Chicago Boy Sergio de Castro that resulted in 25% unemployment in the early 1980s, and the narrow focus on extreme poverty instead of expanding it to inequality. The first and the third of these mistakes were among the topics on which the demonstrators focused in 2019 with the social revolt.

The book does not shy away from the moral responsability of the Chicago Boys and their American mentors. Sergio De Castro argued that when taking a job in the military government he was obbeying orders, and that politics and economics should be separated. Some economists easily find excuses in that things can be separated (politics and economics, technical and political issues, efficiency and equity…), when these matters come together in the real world. How could they not know that there were human rights abuses? They were in a government that was a human right abuse in itself, a government that had the original sin of starting by bombing (not precisely in secret) the official palace of a democratically elected president that, independently of his mistakes, had respected the Constitution of Chile.

Friedman and Harberger intervened for individual prisoners when they were requested to do so, but they never condemned the nature of a totalitarian government that did not respect elemental freedoms. These were great economists that contributed to reinforcing a crime.

For a while, they won the war of ideas, but this war was easier to win with guns and powerful lobbies. Now they have to fight it in an open, albeit imperfect, democratic society.

Sovereignism

I’m spending a few days in Lleida, one of the four province capitals in Catalonia, located in the northwest of the region. In the hotel where I’m staying, the very kind receptionist that welcomed me and my daughter when we arrived is from Eastern European origin. In the hotel’s neighbourhood, most shops, bars and restaurants appeal to the mostly African immigrant population. This is not uncommon in today’s Catalonia, a small open economy in the core of the euro zone.

Near the hotel, I spotted a VOX (the far right party, which has a small presence in the local city council of Lleida) election campaign poster: it shows the face of its leader and the word Fronteras (“Borders”), next to Lo que importa (“What matters”). Other things "that matter," in related posters, are “family” and “security.” Besides a conventional far right set of messages, VOX –a party that is reaching regional agreements across Spain with PP, the more conventional conservative party- also calls for the prevalence of Spanish justice over European justice, like the Brexiters, and a call to close borders to stop immigration, which to them is related to crime (according to data and facts, it is related to economic growth and prosperity).

An influential VOX in the Spanish government after the July 23rd election would mean the undoing of Spanish and European federalism, with a more centralist Spain in a more fragmented Europe. Wikipedia defines Sovereigntism, sovereignism or souverainism as the notion of having control over one's conditions of existence, whether at the level of the self, social group, region, nation or globe. Typically used for describing the acquiring or preserving political independence of a nation or a region, a sovereigntist aims to "take back control" from perceived powerful forces, either against internal subversive minority groups (ethnic, sexual or gender), or from external global governance institutions, federalism and supranational unions.

The world of parties like VOX is a world that would be frozen in time, with less diverse populations and harder borders, a world fragmented in ethnocracies and “pure” populations. Of course, that is almost impossible in today’s Europe, but that is what many sovereignist forces are calling for.

Sovereignism is a popular word in Catalonia, to many positively associated to the right of self determination (defended by many self-proclaimed leftists), interpreted as the right to secede, something that the Spanish Constitution (or any written democratic Constitution) does not allow. But it also defines the principles of VOX, Netanyahu and his allies, Modi, Meloni, Orban and many others.

There is also an openly xenophobic Catalan pro-independence party now, called Catalan Alliance, which is the party of the new mayor of Ripoll, the town where the yihadist terrorists of the Ramblas terror attack of 2017 came from. This party has reached the top job in the town because of the abstention of the more conventional separatist conservative party, Junts (“Together”). They plan to expand at the regional level.

Sovereignism is a key component of national-populism, both in the extreme left and the extreme right. The chair person of the Chilean conventional assembly that tried to draft a new Constituion last year, someone associated to left wing populism, and a representative of the Mapuche historically discriminated ethnic group, boasted in an event the support of Carles Puigdemont, the leader of Junts, last year. Nationalism, identitaranism or sovereignism are probably the most effective drivers of national-populism beyond traditional ideological divides.

Brexit and Rodrik’s trilemma

Michael Funke and Doudou Zhong do a great job at exploring empirically the famous Rodrik trilemma, by which there is a tension between hyperglobalization, national sovereignty and democracy, so that countries must choose two of the three corners of the trilemma (Rodrik himself explains it here). Using standard measures of globalization, national sovereignty and democracy, they confirm the relevance of the tension.

In explaining their contribution, they give useful examples of jurisdictions that take up different prototype corner solutions in the “two out of three” trade‐off. “For example, China sticks with global economic integration and national sovereignty. To this end, the triangle's third vertex, democracy, is sacrificed. At the other end of the spectrum, we see countries that have opted for deeply integrated markets and democracy vertices. Prime examples include EU countries which have transferred essential competences and jurisdiction to European institutions. The Euroland (common currency) subset of EU countries sits even deeper in this integration and global governance category.”

Funke and Zhong then relate Brexit to the trilemma: “The political priorities revealed by the Brexit referendum are national sovereignty and democracy.” The same message is given in the “official solutions” to exercises in chapter 18 of the CORE Project’s e-book “The Economy:” “voters supporting Brexit did not approve of the trade-off depicted in the bottom row of Figure 18.22. The vote reflected a popular movement that sought to increase national sovereignty that voters believed was sidetracked in pursuit of the benefits of hyperglobalization at the European level. The top row of Figure 18.22 also captures the preferred trade-off for those voting for Brexit,” meaning that British voters chose democracy and national sovereignty to the detriment of hyperglobalization.

Funke and Zhong implicitly accept that this statement is problematic, though, when they also use the trilemma to try to explain what they call the “third wave of autocratization” in recent years. Almost one‐third of the world's population lives in countries undergoing autocratization—a substantial decline of liberal democracy. Inter alia, these countries include Brazil, India, the United States (“America First”), as well as several Eastern European countries. Moreover, the world's leading autocracies, China and Russia, have influenced other countries to adopt their disdain for democracy. But it is well known that Farage (who had links with Russia during the campaign) and Johnson used some of the tools of the national-populist illiberal democratic leaders. A referendum full of lies where people did not know what they were voting for, an erosion of representative democracy and a crisis of Parliament, problems between the judicial powers and the executive… are not a sign of a healthy democracy. Besides, the leaders of Brexit where always clear that they did not want to leave globalization, but did not like the (pretty democratic by the way) European kind. Some comentators have used the metaphor of a “Syngapore on Thames.”

The authors accept that “populism supporting nationalism and restricting globalization, as well as the shift to more autocratic regimes is not an advisible policy prescription.” I agree. In a footnote, they write “Political economists have always been interested in the differences in the economic and political institutions across countries. That is reflected in the widely known “Varieties of Capitalism” debate investigating the cross‐national institutional variations of advanced economies. By analogy, a “Varieties of Globalization” debate is warranted.” And also one on “Varieties of Democracy.” Why some mainstream parties and elites have promoted nationalism in the recent past in some very important countries (the UK, the US, Israel, India…) to erode democracy (but not necessarily globalization) is something that we should keep studying.