Time for the final Grexit

Grexit, Grisis, Great news for eurozone; whatever your want to call it the time for a decision on Greece's future is rapidly approaching.
At time of writing there are still some hopes that a deal can be struck, however, even these are slim. The concessions proposed by the Greek government may buy them some time with their creditors but it will only be  a stop gap measure and likely to anger their own electorate.
Having campaigned on a platform of standing up to the European Union, preserving pension rights and combating austerity Greek Prime Minister Alex Tsipras and his ruling Syriza party will find it uncomfortable to explain why they are now making such a dramatic U-turn. On Tuesday it looked questionable whether he would be able to get the support in parliament to follow through on any agreement which included a concession on pensions making the plans even more unrealistic.
While the  proposal to combat Greece's mounting  debt has been greeted with cautious approval by some, including EU President Jean-Claude Juncker, others, including head of the International Monetary Fund Christine Lagarde and European Central Bank President Mario Draghi, are not even this optimistic of a solution.
Greece is hedging its bets on the idea that other eurozone countries will see Grexit as too much of a risk and therefore so long as they put on a good show of trying to compromise they will they will get what they want. Even if a bailout is agreed upon this time though it will only be a temporary measure. Unless Greece dramatically cuts its spending, raises the retirement age and curbs its more excessive tendencies then this will be just one round of a never ending fiscal game between the eurozone nations.
The issue for Germany et al though is  that having shown that they will bend over backwards to keep Greece in the zone they will have lost a key bargaining chip and created an inevitability for any future negotiations.
At this stage it could prove to be a greater risk to actually keep Greece in the eurozone. What critics of this opinion are quick to point out is that the zone was created with the specific concept that once joined it could not be left. To allow for Grexit would therefore create a dilemma for the bloc as member nations face an uncertain future, with any member potentially leaving and avoiding its responsibilities should the going get tough, examples of Spain and Portugal are thrown around considerably with this argument.
Such future exits would undoubtedly be painful and costly for the zone in the short term. If the eurozone is to survive in any format however this will be its only chance. By reducing the number of nations the remaining members will be able to create a more secure sustainable regime likely to increase productivity.
It would also not necessarily mean to collapse of the financial systems of leaving countries and the subsequent decent into anarchy and autocracy which has been predicted. The outflow from a prosperous regenerated eurozone is likely to bleed into these countries through trade and treaties, which with their new found ability to manage their own capital and current accounts more effectively is likely to help boost economies over the long term.
On a practical level the argument that should countries be allowed to leave the eurozone it would create some form of mass exodus must surely if true, which is unlikely, prove a decisive reason why it should be allowed. An economic regime which everyone wants to leave by definition has been proven to have failed and should be discarded in favour of a more effective one.
Without a real threat of exit there is no genuine means by which eurozone members can force others to acquiescence. Any negotiations will therefore prove pointless with a predetermined policy of paying an inevitability. An exit will without any question be painful, the rebuilding costly and many would sufferin the short term  Failing to allow it though would be catastrophic in the long run with the long term effects precipating a global financial crash to make the last decade seem a minor inconvenience.

Leaving Europe is a bad breakup we don't need

The future of Europe is one of those great discussions where it doesn't appear to actually matter if someone knows what is going on for them to make a contribution.
This is a good thing otherwise I would obviously be unable to wrIte about it.
In recent weeks the call from Conservative MP's to leave the EU, or at least calling for such unacceptable changes to the treaty agreement that they leave little other choice, has grown to more than 100. The Conservatives' For Britain group has appeared in a ghastly parliamentary parody of a bad boyfriend deliberately making unreasonable demand in the hopes that his girlfriend will break up with him and leave him looking like the injured party.
At the time of writing British MP's are debating the European Union Referendum Bill, the legislation required for the much heralded in out referendum to take place in 2017. As forgone conclusions go this was a safe bet. Everyone knows that it will pass. There is just too much pressure for a referendum to take place for it not to. It isn't whether we have a referendum now which matters, it is how we vote in that referendum.
The EU is far from perfect and in many ways could do with significant reform. This won't happen just because Britain stamps it's feet and cries though. It won't happen quickly and it most certainly won't happen in one go. The eurosceptics pushing for a renegotiation of the UK membership, supported by a number of disgruntled failed cabinet ministers looking to put the boot in,  know this. If they don't then they have either deluded  themselves or they really should not be allowed close to the debate. They know that the EU cannot change just because Britain says so. Likewise it won't even consider changing when there is a chance that the UK could leave anyway. International politics is a game and relies on states playing it in order to maximise their own preferences and gains.
The question which should be being debated in parliament is what is in it for everyone else. If we were serious about requesting reforms which would ensure that we stayed in the EU then we should be looking at how other states perceive their positions and what the relative gains will be. At the moment Britain had offered nothing in return for getting everything it wants.
An additional issue, and one which seems to be lost on many eurosceptics, is that leaving the EU will diminish Britain's absolute gains on the international stage. At present the United States sees the UK as a gateway into dealing with the rest of Europe. With its exit Britain's special relationship will sour quickly. This is of course something which will please the more nationalistic elements of the debate and what they are hoping for. The problem is that as the UK loses a great deal of support from America's declining hegemony it will lose its importance on the international stage.
This split will lead to a loss of trade which on its own could have been absorbed. Combined with the loss of trade and resources from Europe however it will prove crippling. Trade with China, based in no small measure with an understanding of Britain's ties to the US and its access to the EU economy, will not take long to dry up.
Britain is no longer an empire and it seems that too many people have forgotten this. We live and work in a globalised networked society. An EU exit has only one possible outcome for the UK, economic isolation and collapse. Better the long crawl to reform than the short sprint to crisis.

So much for predictions

POLITICS is always likely to throw up some surprises, however, the twists and turns of the General Election would have confused the writers of Broadchurch.

For months the polls showed the same picture, well the ones which were published that is. The election was supposed to be too close to call. The Conservatives and Labour were running neck and neck, the Liberal Democrats would take a mauling, but only just enough to teach them a lesson, the United Kingdom Independence Party would become a key player and the Scottish National Party would rise from the ashes of the referendum to be a greater threat to the union than ever. Something was meant to happen with the Green Party but to be honest no-one was really paying that much attention.

The plan was set. The Tories would be forced to enter a second coalition with the Lib Dems, who having suffered at the hands of the electorate and able to manipulate the threat of an SNP/Labour opposition would be firmer and stand by their principles. It was meant to be a coalition which would see the growing far right of the Conservative party mitigated by the left of the Libs. Nick Clegg would step down and Vince Cable or Danny Alexander would step to the fore.

Of course there was a risk of a Labour/SNP coalition but it was unlikely, particularly after the categorical statements of Ed Milliband. Clearly the main threat was just fear mongering on the part of the Conservatives in what turned out to be an incredibly divisive move who has put the Union at greater risk than the SNP ever could have.

Of course Labour and Conservatives both claimed that they would win a majority but no-one really took them seriously, queue much eye rolling from Dimbleby, Robinson, Marr et al whenever they said it. 

Well that was the plan. There was however one slight flaw, no-one followed it. From the minute Big Ben struck 10 it was obvious something had gone drastically wrong, possibly not entirely obvious to former Lib Dem Leaders Paddy Ashdown comment that he would eat his hat if his party lost 47 seats, as it was they lost 49. Political commentators who had been gearing themselves up for days, possibly weeks, of coalition negotiations now faced the prospect that the Conservatives may do far better than expected, and that the Lib Dems and Labour would do far far worse. As the night wore on and it became clear that there would be a Tory majority government without the restraint of the Liberals people started to realise what a hideous mistake they had made. 

By the morning people woke up to a new, far righter wing, Britain. Big names had fallen, Cable, Balls and many more had been thrown unceremoniously out on their ears. Liberal Democrat leader Nick Clegg and Labour chief Ed Milliband both stood down in the wake of the results, as did technically UKIP leader Nigel Farage only to spring back a few days later into the role. The Scottish National Party had swept Labour from Scotland to become the official third party. 

Simply put the political map of Britain changed and not necessarily for the better. It wasn't all bad though. The turn out was far higher than expected which just goes to show that the one safe bet I made on the election was just as wrong as every other prediction.    

Money talks, politicians lie

AS THE General Election campaigns continue to roll on in Britain it is become clear that politicians are willing to forgo economic sense in favour of votes.

Even the simplest concept, don't spend money you don't have, seems to have been forgotten as the number of unfunded manifesto pledges increases.

It is common knowledge that manifestos are wish lists which should be viewed with a sceptical lense. This doesn't mean however that parties can put anything in them in the hope that no-one notices that it is fiscally irresponsible.

Governments do have the option to borrow if necessary to fund policies if they feel it is worth increasing the national debt to push them through, so perhaps it is unfair to write off policies which appear unsustainable at this point.

What is most worrying is the way in which policies appear so focused on grabbing votes that they have ignored the potential long term harm that they will cause. Possibly the most noticeable of these is the minimum wage. For many people seeing that a party is prepared to offer a £10 minimum wage sounds like a winning idea, after all who doesn't like the idea of more money in their pocket. The problem is that it won't actually mean more money for individuals. 

Firstly many small businesses already struggle with minimum wages as it is. An increase, particularly such a dramatic one, does not mean the companies sales will increase so income is unlikely to change immediately. This means that to pay the new wage the business needs to increase prices, or lay off staff. 

Where prices stay static, lack of willingness by customers to pay increased prices for example, then unemployment will rise. As unemployment rises there are less people willing to pay increased prices, and so the cycle goes on. The argument that minimum wages should meet cost of living is likewise limiting the scope. If minimum wages are increased then people earning above the minimum wage, quite logically, will want an increase in pay, after all why work in one job if you can earn the same money doing something which requires less skill or stress. As these wages increase the cycle begins again driving up prices as larger and larger firms raise prices to meet the new wage costs and maintain profit margins.

Then there is the toxic issue of the foreign age budget. One party in particular seems to determined to develop the argument of "why are we giving money to foreigners?"  The simple answer is that you spend money to make money.

No matter how it is wrapped up and packaged foreign aid is aimed at stabilising the international system, allowing for development, and gradually through many steps leading to a flowing import export market. It is not a purely philanthropic matter no matter what some people may think. Quite simply the foreign aid budget brings more money into the country than goes out, it just does it in a roundabout and not always clear manner.

When parties try and explain how they are going to fund a policy they think only of the short five year effects on the treasury. The danger is that they forget that in a market economy the knock on effect for inflows and outflows will linger for many more years than this.

A developing issue of aid

The critical condition in Vanuatu once again has brought the issue of aid to the forefront of the global consciousness and with it the same old problems.

While the devastation reeked upon the country by Cyclone Pam has destroyed what little infrastructure the country, considered as one of the poorest in the world, it seems unlikely that the international community will do much more than symbolic handwringing.

Based on the economics principle of game theory to maximise stability in the international system it is better if all countries invest. If only one country invests then stability does increase slightly, although not as much as the accumulated investment of all. For an individual state therefore it makes sense not to invest as stability will still be increased. The issue arises however that if all states decide to not invest, thinking that the others will, then the level of instability will remain in the international system, and potentially in the face of such an emergency as in Vanuatu increase.

The barrier to effective aid therefore is that states will act in their own interests if they believe that another state will shoulder the burden, essentially free riding.

Over repeated games however if all states invest then it may occur to each state to decide that as stability will be increased whether or not they invest it makes sense for them to stop donating development aid and invest that money elsewhere. As each state only has the same information though this would logically lead to all  states stopping investment.

For a positive distribution of development aid to be determined using game theory players must be playing a coordination game, whereby they cooperate with each other while still potentially receiving different payoffs. When players in a coordination game have reached a mutually agreeable decision they will gain nothing by defecting from it. For the purposes of development and aid programmes this could mean that despite disagreement in putting together a proposal once it has been agreed upon all players will either remain with it or leave it all together. This has been seen in the way states have continue working towards achieving the Millennium Development Goals despite initial differences of opinion when they were being created.

An alternative form of game however can see individual states defecting from an agreement if they feel that they can increase their gains. Such a game may reduce the trust among other actors however and therefore make future long term cooperation harder. If all players in a game know that any of them may leave an agreement at any point if it benefits them then it can reduce the legitimacy of the agreement as a whole. This distrust amongst actors will prove a lasting barrier to global governance.

Vanuatu's problem, aside from the near whole scale destruction of its economy, is that it does not pose enough of a risk through instability to be of concern to much of the international community. It is unlikely therefore that there will be a coordinated effort among donor countries to provide a concerted and long term approach to development aid. The issue is instability is not strong enough to create an atmosphere of global governance, as few countries will feel their own interests are threatened by an destabilised Vanuatu. It would seem likely that it's richer neighbour Australia, fearing perhaps an influx of refugees among others, will be the only country to see the need to help, and even then it will only be through preservation of its own self interest.  

Language of terrorism is Schrödinger's Cat of security

THE announcement by the Nigerian terror group Boko Haram that is has aligned itself with the self proclaimed Islamic State has led to dire warnings by experts but how seriously should we take it?

The announcement, as with most issues surrounding terrorism, is a speech act with little impact other than that which we bestow upon it. Until Boko Haram made the announcement it may or may not have been allied to IS, it took a public statement for it to happen. A speech act is the Schrödinger's cat of securitisation, it may be both or neither until it is spoken at which point it becomes a reality.

This works both ways. For Boko Haram they can now claim allegiance to a vast terror network. The reality of the situation is that it will make very little difference though. In the 70's and 80's groups such as the Irish Republican Army were suspected of training in Libya and allegedly supplied weapons by the then Soviet Union. The IRA didn't need to pledge allegiance to Gaddafi to gain support they just had to have mutually beneficial aims. The same is true for Boko Haram and IS. Neither side needed to pledge allegiance to the other. They both are drawn from the same pool and are already likely to have been providing support where applicable.

The news has however given those on the right of the political spectrum a field day in spreading their own element of fear for their own ends.

 “By Boko Haram pledging to the Islamic State, Shekau has secured a safe haven for Boko Haram's leadership. Even if the current Nigerian offensives are to succeed, a temporary escape could be made to another IS stronghold from where Boko Haram's life cycle can be maintained irrespective of distance,” claimed Veryan Khan, editorial director of Terrorism Research & Analysis Consortium (TRAC), speaking to the American right wing Fox network.

Here lies an example of how a speech act can be used to promote what is known as securitisation, the concept that something is a security issue. The pledge doesn't in itself give IS or Boko Haram a foothold in the other's territory. By changing the perspective of the situation however this is what Khan has managed to allow without IS even having to accept it. Terrorism is about ideology, twisted as it may be, ideology is spread by words, the violence is just there to back them up. These words have very little power in and of themselves until they are given credence. 

By using particular language those who claim to be fighting the idea of terrorism are able to achieve their own ends and launch further military actions, as was seen by the disastrous intervention in Iraq, which rather than stabilising the Middle East directly led to a rise in Islamic fundamentalism. 

Likewise Boko Haram is no more likely today then it was last month to work with IS. Now they have said that they will, rather than doing so anyway, they have created a security issue which was already alive it was just still in its box.

The madness of nuclear non proliferation

ISRAELI Prime Minister Benjamin Netanyahu's speech to US congress this week and American President Barack Obama's announcement of a landmark deal with Iran have reawakened old animosities, and questions.

The issue here isn't whether or not Iran has nuclear weapons, we know they don't and we know that no matter what the rhetoric spouted is they are unlikely to do so in the near future. The issue is the hypocrisy within the international system regarding the acquisition and maintenance of nuclear weapons in general.

The five permanent members of the Security Council America, Russia, France Britain and China are all signatories to the treaty on the Non-proliferation of Nuclear Weapons (NPT), as is Iran for that matter. Israel, which has an outstanding if not just a little bit redundant policy of "deliberate ambiguity", is not. Neither are Pakistan and India, two other nuclear states, or North Korea which withdrew from the treaty, essentially showing how pointless the whole thing is.

The five original nuclear powers have long maintained an argument that they should be the only ones entrusted to possessing nuclear weapons as they are the only ones which can be trusted to maintain peace in the international system. The fact that the U.S. is the only country to have used nuclear weapons in an aggressive act seems lost on the current policy makers.

Iran voluntarily signed up to the NPT without any actual need to do so, and has remained with it despite an inability among other signatories to do so. Meanwhile Iran's greatest opponent, Israel, is known to have nuclear weapons and refuses to sign the NPT, they also refuse to allow independent inspection of non military nuclear facilities however that is an entirely different issue. Unlike the renowned realist academic Kenneth Waltz I do not believe that Iran getting a nuclear weapon would increase the stability of the Middle East, an argument being that it will create an element of mutually assured destruction, MAD, the same principle argued between Russia and the West during the Cold War. The fact is though that if stability is to be maintained within the international system there must be an equality of action and reaction between states, e.g. Israel cannot complain about one party developing nuclear weapons outside of international oversight when they are doing the exact same thing. 

In the cases of Iran et al there is an additional issue of 'dual use' technology, the ability for a crossover of non-military nuclear applications, such as power generation. Germany, Japan and South Korea all have the capability from their nuclear energy industry to start a nuclear weapons program, they are known as 'recessed nuclear weapons states'. If we are to argue that Iran should not be allowed any nuclear capacity then does this mean that we are going to force these countries to dismantle their power stations? 

A nuclear free world is a lovely idea but it won't happen. The genie is well and truly out of that bottle and no amount of good intention will shove it back in. The only alternative is to find a common ground. Global governance of the nuclear sector is a possible course, however, so long as countries such as Israel continue to develop nuclear weapons as refuse to acknowledge it this will not happen. At the end of the day only one thing can be done, treat each state equally, allow for trust within the system and pray that each state understands the consequences of its actions. Mutually assured destruction may be MAD but it is the only way to peace we have.