The rise of the faux democracies

What the recent spy scandal says about big and small government

I hate to sound like a libertarian, but there seems to be a problem with democracy and the problem is government. Unfortunately, the debt crisis afflicting much of the industrialized world has focused the debate on whether government is too big or two small. I am a firm believer that there is no such thing as big or small government: a government can be too big in all the wrong places, but also too small in areas where society would benefit hugely from its presence. Indeed it seems to me that Western democracy (particularly its Anglo-Saxon variety) has swayed too far into this inefficient equilibrium, one which – to use a domestic example – appears scarily like the father who leaves their kids out on the street all day, and then abuses them when they are at home. It doesn’t take a genius to see what kind of children/citizens this noxious type of paternity creates in the long run.

Big brother is blinding you

Big brother is blinding you

Leviathan is alive and kicking

The US and Britain are undoubtedly the poster boys for this new kind of two-headed government: one which is a true leviathan in the ways that its all-powerful security apparatus puts a stranglehold on society, but at the same time retreats from its socio-economic responsibilities. It justifies the former attitude by the claim that they are at war with “terror”, however laughably ambiguous this concept is. To be fair, that these countries are in the cross-hairs of terrorist groups is unquestionable; according to the NSA, the data captured through its PRISM program managed to thwart 50 terrorist attacks. Perhaps this is true, perhaps it’s an exaggeration. But this has left some serious questions on the legal and constitutional mandates that such espionage programs rest upon, and most importantly, whether a democratically elected government has effectively been given a blank check to spy on its own citizens. The West, including the US and UK, has criticized Turkey’s prime minister, Tayyip Erdogan, for his wild claim that “winning three elections” gives him the mandate to rule as he wishes. But how is justifying domestic and global espionage in the name of the war on terror any different? How to justify even more blatant abuses such as spying on diplomatic missions, even from military allies? Considering the filth that just two whistle-blowers (Bradley Manning and Edward Snowden), have uncovered about these programs, one can only wonder what appalling and outright criminal acts these two self-described standard-bearers for democracy and freedom have done or are capable of doing. Continue reading

Europe is losing the growth race

A simple chart shows how austerity is leading to stagnation
Holy stagnation, Batman!

Holy stagnation, Batman!

For the better part of the past four years, I’ve been tracking the way the world’s leading industrialized economies have performed since the 2008-09 global crisis through a chart which shows real GDP relative to their pre-crisis level. The beauty of this chart is that it shows the post-crisis recovery as a sort of race between the various economies as they struggle to regain the lost output from the crash. For those who find reading Excel charts to be akin to reading a manuscript in Aramaic or Swahili, allow me to explain. The chart takes the peak pre-crisis level of real GDP as “100” and tracks quarter-on-quarter growth from there. So the first data point (“100”) for each country is the quarter before the crisis when real GDP peaked, this being Q1 2008 for most (Q4 2007 for the US where the crisis began, and Q2 2008 for Spain whose crisis began later). As you can see, the paths of these countries have diverged considerably since bottoming out during the 2008-09 crash. Some of the hardest-hit countries at the beginning like Germany and Japan are doing better, while some of the lesser affected ones, like Spain, now appear to be on a death spiral with no end in sight.

It doesn’t pay to be frugal

Perhaps the first obvious conclusion from this chart is just how bad the Eurozone is doing, and how the continent’s on-going crisis is dragging down even its star performer, Germany. Germany, until quite recently (Q2 2012), had been the best performing among the “trillion-dollar” economies and along with the US, the only to have managed to exceed its pre-crisis output. But it just goes to show how even a hyper-productive economy like Germany’s will feel the pinch if its trading partners get mired in recession which is what has been happening over the past year. This further makes the case that even if bailing out the continent’s basket cases may not be “morally” right from the frugal Germanic perspective, it makes perfect economic sense in order to keep your own economy from sinking in the same ship. Continue reading