Monday 20 January 2014

Shock doctrine in the headlines

Travelling on the Eurostar is bad for my blood pressure. Well, I don't know that from a doctor's advice, but I’m sure it is.
Oh, nothing to do with the quality of the journey. Or the politeness of the staff (never had to complain). No, you see, the problem is that when I travel on the Eurostar I get to see the titles of their papers and magazines selection.

Indeed, I have had so many trips that, despite taking standard tickets, I get access to the business lounge. They do have papers and magazines. But, you see, it’s a business lounge. And so, mostly, the selection largely seems to reflect what they reckon very rich people would want to read –especially in the London lounge (the Parisian one is slightly better, or at least used to be, I did not find Alternatives Economiques today). Don’t expect to find even the Guardian there –but there will be an ample choice of the Times, the Daily Telegraph, the Wall Street Journal, the Financial Times, the Daily Mail (yes, I still can’t quite believe that), the Economist…

To be fair, on the away trip, it mattered very little what the selection would be, I would just have to be appalled. Lack of web access made me unable to post before so many household names with actual readers bases did so, but even a glimpse of a title on, well, any French newspaper would have read similar, and included words such as “supply-side socialism”. You see, the French president, François Hollande, had just given his January press conference, and said that the rest of his mandate would be based on supply-side “Economics” (cut me some slack with the quotations, if you are going to put supply-side before it, especially with high unemployment, you really are saying voodoo. You have no right to pretend it’s actually Economics).

I immediately sent a comment on the European Tribune to mention how disturbing it read. And then I learnt it was actually even worse: Hollande had stated that France should produce more (in a country greatly suffering from insufficient demand, and with fixed exchange rates with its clients, no less), as the supply would create its own demand. He was adamant about that.

Wow. Say’s law (a greatly hyped name –Say apparently just wrote something partly tautological in a letter, saying that if you assumed full employment, then supply would equal demand –never deeming that an actual law, and qualifying with the full employment assumption, which makes it moot today) has been refuted for about 200 years –in fact, Say himself realised that later on. Then Keynes highlighted just how colossally wrong it was -80 years ago. You really have to isolate yourself with a crew of ideologically blinded fanatics to come up with such a howler now –admittedly, I can think of a few people in a position of power who would fit that description. But he is, remember, a nominally Socialist politician. What is going on?

To make it worse, I was told that comments in the French media had been mostly positive about his speech, and found that this particular piece of the speech has been presented as a true think that at last someone had the courage to say. Words fail me.

Anyway. That was for the French side of things. But that was not all. As I mentioned, in the lounge, they keep the Economist. Oh my. The Economist.
Well, its title at the time was about the “$9 trillion sale”, with a subtitle stating that States had to massively sell their assets to reduce debt and “boost efficiency”.
That is the Shock Doctrine writ large. For a long while, I repeatedly tried hard, having been urged by friends who insisted it was a very good magazine, to read through some issues and find something good to it (on the plus side, it was available for free so I might as well try). After a while, I became distinctly uncomfortable with dignifying propaganda leaflets by picking them and I gave up. With such a brazen title, I was unlikely to want to revisit that decision and I have not read beyond the front page.

But the front page is the problem (for a start, that is what most people will see)–in so many ways.

Interest rates are at record lows. Why should States sell assets (and remember that the private sector likes to get at least 6% of return on equity) to pay down debt that is being serviced at something around 1.5%? When you are an entity that cannot face liquidity issues, as you print the damn currency, to boot. Can you claim that this makes economic sense AND land a job at a magazine that calls itself “The Economist”? Really?
Then, please note the title the $9 trillion Sale. In January. Well, as far as I gather, this is a clear indication of the idea of cut prices. What a strange conception of the role of States to consider that it should patiently build economically strong activities, only to then sell them at firesale prices to rich investors. Admittedly, that is the very idea behind the Shock Doctrine, but in everyday English that is called looting.
Please note that the Economist is a British publications. What exactly do they reckon should still be sold on these shores? Utilities have gone. Public transport has gone. Royal Mail has gone. Public schools are either being dismantled, or actively made to fail. I have to guess that they mean universities (those that are not private yet) and the NHS. After that, what? The streets maybe, make every single street a privately owned toll-paying way. Maybe the air you breathe –you’d pay a fixed fee, plus a variable one depending on how much you exercise? (Well, they intend to sell more utilities and other companies, and mostly property –land, exploitation rights, buildings…)

And we are told that States should do that to boost effectiveness. Again, in a British publication. How much evidence do they need to revise that sort of belief? This, after all, is the country where massive privatisation have led to high-priced and low quality public services (trains and utilities did not fare well). Admittedly, some of the problems may stem from the regulatory environment, and not purely from who owns the businesses, yet the absence of a public option tends to strongly increase regulatory problems. As for land and buildings, the nature of their use is itself often changed from being in private or public ownership. Can you then meaningfully attempt to compare “effectiveness”?
What it would do is increase monetisation –things that used to be public, and often free, will become private and given a fee. They will be inserted into market mechanisms. Does that make things more efficient necessarily? Only for a very strange definition of efficient. 

When I went to Bray (a town built on a pretty section of the Thames), I found that in the entire city, there were only around 5m where you could take a picture of the river: a road that ended on it. Everything else (including paths) was private access. Not that it was in use then, we hardly saw anyone –but you found people making sure that no one would dare try to even take a picture. Access to that nice and navigable section of the river was the reason the town had been created. Now privatisation had ensured that this resource was, for the most, not used. Is that not the ultimate inefficiency? Privatisation of land is not so much about getting the best use from a resource, it is, as the name would indicate, about making it private, ie about denying its access to others. It is not immediately clear to me why that should always be encouraged.

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