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Sunday, September 13, 2015

The Crisis of Humanity and the Euro-Bluffs

The massive influx of west Asian, south-central Asian and east African humanity into Europe has called a series of bluffs we customarily refer to as the European Union.

Bluff 1: 'Europe'. Obviously, there is no "continent" of Europe. That we refer to the northwestern corner of the Afro-Eurasian continent as a separate geographical unit is entirely a matter of (a highly consequential, Euro-centric) convention. The very act of trying to talk of 'Europe' as a continent is a prime example of metageographic reification. If this is not obvious to you, please follow up with Martin Lewis and Karen Wigen's very useful book, The Myth of Continents.

Bluff 2: 'Europe is a thing apart from "Asia" and 'Africa''. For thousands of years, the Mediterranean, the Balkans and (south-)east-central Europe had functioned as the veritable switchboards of the Afro-Eurasian trade system. They were what kept the system--and I mean nothing less than the interconnected world at the time, with 95% of humanity--together, not as borders. (For more on this, please consult my book, especially Chapter 1.) The current European chatter about 'Europe''s self-containedness, "thing-apart"-ness is a geopolitical fantasy, produced by way of equal amounts of selfishness (designed so as not to share the spoils of centuries of colonialism and neocolonialism), narrow-mindedness (the smaller we define "our" unit the safer we feel) and racism (if geography doesn't help, there is always the automatic, smooth turn to 'race' difference). When I hear the conversation about 'Europe' as apart / different from 'Asia' or 'Africa', I hear the voice of malicious whiteness, no matter which political corner it comes from "otherwise."

Bluff 3: 'Concerted "European" action.' The European Union's supposedly unified migration management system, named after the Dutch town of Schengen, was designed, supposedly, to provide a predictable, legally based, fair and just, pan-European supra-state framework for the movement of people from the outside. This influx of labor is absolutely necessary for the sustenance of west European capitalism, and the Schengen idea is that this, crucial inbound resource transfer ought not to be left to the whim of each of the 28, in many ways disparate and congenitally short-sighted, member states of the EU. The current immigrant wave is the first real test of the system. To put it simply, Schengen, and especially its most relevant set of rules pertaining to the processing of asylum claimants, referred to as "Dublin III", is not working. 28 separate EU member states have at least 28 separate immigration policies. (I am saying "at least 28," because the governments of some, like immigration novice Hungary, are painfully confused about both EU-requirements and their own national interests, let alone standards of common decency, and pursue several, mutually contradictory policies, more or less at the same time.) Make a long story short, there is no such thing as a common "European" response to a major humanitarian crisis, and the absence of a shared policy is powerfully exposed by the current, massive influx.

Bluff 4: 'West European Goodness'. I have written extensively about this. This bluff has two components: (1) a claim that there is such a thing as a moral geopolitics of goodness, and (2) that it resides in western Europe. Today, that western Europe which produces and spreads astounding amounts of this ideological poison, could easily show its goodness through compassion, solidarity and overall openness to the downtrodden whose abysmal conditions were produced by geopolitical-strategic wars they had nothing to do with in the first place. Instead, there is the closely watched, minutely apportioned, extremely ungenerous, legalistic "management of asylum-seekers," done almost exclusively by the law enforcement organs of west European societies. Meanwhile, vast majorities of the societies at large hide behind the police, sneer, and wish this "onslaught" of "migrants" had never happened. Politicians understand this, and give carefully measured, cryptic and deeply polysemic statements about the issue. The few pro-immigrant rallies that have taken place in western Europe involve relatively small numbers of people, typically the youngest among the most educated and those who have personal involvement with friends, partners, colleagues, etc. who had come to western Europe from somewhere else. Such rallies take enormous efforts to organize and have almost no political effect--case in point: contrast the UK marches under banners like "Migrants Welcome" and "Nobody Is Illegal" with the reality on the ground at the "Jungle" in Calais, a crisis created singularly by the UK's official anti-immigrant (and, BTW, anti-Schengen) policies. Nobody talks about the future, I suspect to a large extent because it would involve raising the question of the long-durée presence / integration / acceptance of "migrants"--a prospect seen by vast majorities of west European societies as a deplorable, threatening and overall majorly undesirable outcome. This is all the more of a tragedy as pretty much all west European societies suffer severe social care labor shortages (i.e., west European societies are increasingly unable / unwilling to take care of their rapidly aging and ailing societies themselves). So much about west European "goodness."

Bluff 5: 'European solidarity and "soft power"'. There is another trope to the self-image that the European Union is projecting to the rest of the world, namely that of 'European solidarity.' Development assistance, technology transfer, education, health care, diplomatic assistance, conflict mediation, all these elements of the west European states' and the European Union's "external" policies are supposed to congeal into a historically new, particularly 'European' kind of global politics, sometimes referred to as "soft power." (I suppose the point is that this concept acknowledges the fact that the EU is a monster, a global powerhouse--only, putatively, a kinder and gentler kind of monster.) What could be a more appropriate and more fascinating opportunity to show the strengths of "European solidarity" by this putative "soft power" than the geopolitical development of a couple hundred thousand asylum claimants showing up on their border? Instead of solidarity and softness, the states of Europe are showing an incredibly measured, alienated, impersonal, technical kind of "treatment," in processing the inflows. Of course that is not the worst, as the government of Hungary has shown over the last few weeks (where impersonal, technical character of the state's reaction is coupled with insufficient technical preparation, substandard, unacceptable conditions, and the breathtakingly dehumanizing treatment of the masses of humanity on their territory). Given this reaction, we can rest assured: Germany's much hailed, recent declaration of accepting Syrian refugees implies that it is less likely that people from other countries will be accepted. And, as for the relatively "luckier" Syrians: They will definitely be pushed back to their war-ravaged country once the first signs of an end to the most gruesome aspects of the war currently tearing apart their homes will appear.

There is more, but this is already long.

Wednesday, September 9, 2015

Things NOT Happening With Respect to the Refugee Crisis in Europe

Here are the conversations that are NOT happening:

The European Union is not giving any clear signals just what it actually wants the Schengen states most exposed to the refugee inflows--not only Hungary, but also Greece, Bulgaria and Italy--to do. It is completely obvious that, if anybody actually cares about alleviating the crisis, they would have had to have much more of a hands-on approach to this. By NOT doing this, the EU is cynically opening space for local strong men to build their political capital through anti-immigrant propaganda.

Nobody asks what the political calculus in Brussels, Berlin and Paris is about the first-entry states and their neighbors, especially Hungary, Slovakia and Austria. Seriously nobody understands there how the EU's and the strongest EU-member states' policies are pushing Hungarian, Austrian and Slovakian politics toward the right? Is that what they really want, an openly xenophobic, (semi-)fascist central Europe?

Nobody is taking the western media to task on the breathtakingly simplistic, borderline-cultural-racist representation of the crisis. There is almost no reporting that makes an effort to distinguish the society of, say, Hungary, from the government. Nobody tries to disentangle what about the Hungarian government's behavior is /1/ willful neglect, /2/ inexperience, /3/ open racism, /4/ more-or-less accurate execution of EU law (which, supposedly, is superior to national law in issues of immigration in the Schengen area). Nobody wishes to see Hungary, or any of the first-entry states as complex societies, with enormous problems of their own, with their own histories and their own "demons." All that is basically wrapped into a breathtakingly formalistic "west=good, east=no good" representation. In the context of Hungary's EU-application and accession I called this "the rule of European difference." Again it's going on with full force. Part of the story is that the xenophobic PM is way over-featured to the expense of other, better educated people who could speak for "Hungary" in more nuanced ways. This is true not only of the US media (where this is a well known generic problem) but also for west European reporting as well.

Nobody questions the ridiculous allocation of support by Brussels to the states handling the flows: E.g., Austria, with a per capita GDP several times greater than Hungary and virtually no stationary asylum requests, has recently received more refugee-influx-related funds than Hungary. This belies every claim to rationality on part of the EU center in Brussels.

Almost nobody is even beginning to address the structural origins of the crisis. Who invaded Iraq? Who is bombing Syria? (See my previous post for more on that.) Without a clear idea about the origins, it will be difficult to leave this crisis behind.

Nobody is acknowledging the astonishing, selfless, heroic help volunteers have provided the refugees, from high school and university students to retirees, from nurses and doctors to social workers, etc. They are the people who bought, often from their own pocket money, the water, food and basic provisions. The government (represented exclusively by the police) stands idly by. The western media: blind to this heroism.

Nobody is asking the question: What if what we see now is not a short term problem, a passing wave, but a new normal? What if this is a new form of "Third World" global geopolitical action?

Nobody is asking the question: What does it mean that many of the #refugees, esp. those coming from Syria, are so highly qualified? Clearly, parts of the local intellectual elites are fleeing. Is this basically a brain drain a la Hungary 1956-57? What will this mean for the future of west Asia, and Europe-west-Asia relations?

Nobody is addressing the question of why the people who make up the current inflows so overwhelmingly choose Germany as their destination. Is it a function of the phenomenon--well known from research on labor migration under non-asylum legal frameworks--foregrounding the significance of pre-existing networks for the newcomers? Or, if not, what?

Everybody seems to take for granted the idea that a razor-sharp and definitive distinction needs (can? should?) be made between "genuine refugees" and "economic migrants." In this discussion, "economic migrants" are depicted as if the movement of labor across state borders to respond to changes in labor market conditions--i.e., satisfying location-specific demand on part of capital by providing labor--were some kind of a capital crime, an obvious nonsense.

Why is nobody in the Great European Refugee Conversation raising the possibility that Canada and the United States take an active part in solving the crisis? They do have extremely large-scale and active immigration policies, large and very developed state apparatuses to handle refugee flows, and a long history of doing so.

What does all this mean for the future of the trans-Atlantic relationship? How about the trans-Atlantic treaty? Has Europe been written off in Washington? What does Nato have to say about all this?

Thursday, September 3, 2015

How To Think About A Solution To The Humanitarian Crisis of Displaced Persons

As I am writing this, the European Union is discussing how to "deal" with the striking humanitarian crisis created by the arrival of hundreds of thousands of displaced persons, predominantly from Iraq and Syria in the Schengen countries of the EU. The main line of the 'European' response hitherto has been verbal attacks on "human smugglers and traffickers" (who couldn't care less) and ineffectual gestures toward an abstract category of "refugees" as a depersonalized and passive mass.

Those are  painfully inadequate reactions that do not address the causes of the crisis. Here is what I think needs to be done.

1. The European Union and NATO should jointly admit that the destruction of Iraq was a war crime, and that their continued actions--I repeat, actions by organizations that are part of 'Europe'--have led to humanitarian catastrophes in Iraq, Syria, and other parts of western and south Asia.

2. Based on that, the EU Commission should openly admit to its direct, unconditional and unlimited responsibility for the suffering of the war torn societies, including the plight of the millions of displaced persons--not only those arriving in Europe but also those who have been killed, maimed, otherwise injured, and those who have sought refuge in the neighboring countries, primarily in Lebanon and Turkey.

3. As a logical conclusion to point 2 above, the European Union (very much including Germany) should openly admit responsibility for the future of the people whose lives have been destroyed in these wars, including those who are bound for western Europe and those who are not deciding to go there.

4. The wars in Iraq and Syria must be stopped. A multinational Peace Conference should be organized, with all relevant states of the world, including all permanent members of the UN Security Council, participating and offering tangible, material guarantees for the implementation of whatever resolutions may be brought in the Peace Conference. Those countries which initiated the wars on these societies must foot the bill of the Conference as well as post-war peace building and reconstruction.

5. Immediate, unconditional political asylum to all displaced persons in the European Union. No forced quotas: They should be allowed to settle in whichever EU country they wish.

6. European-Union-wide policies and funds must be created to foster the integration of the newcomers in their new home countries, including generous settlement assistance, health care, as well as assistance in finding jobs, language training, general education, labor re-training and small business assistance schemes (loans as well as legal and marketing assistance).

7. EU-wide policies and funds must be committed to the building of new transnational institutions to create new kinds of nonviolent, non-exploitative linkages between the European Union and Iraq, Syria, Lebanon and Turkey, providing institutional vehicles for the integration of these societies in a regional system for the  flows of people, knowledge, culture, as well as commodities and capital. The main objective of these institutions should be the creation of new forms of integration, not a racist insistence on the early repatriation of the asylees.

Short of this, all the talk about smugglers and traffickers, all the tears shed for the dead adults and children, are completely inauthentic and simply not credible.

Thursday, June 4, 2015

Grexit, Euro, Drachma, and Global Geopolitical Economy

I'll make this very brief. A few basic points.

1. It may very well be advantageous for Greece to abandon the Euro and return to the Drachma. By re-gaining sovereignty over the currency, the government will be able to use a host of measures, including exchange rates vis-a-vis key foreign currencies, to make a step toward achieving fiscal balance.

2. If that is the case, it will show up the Euro as a currency--more important, the European Central Bank and, along with it, the entire political and fiscal mechanism that stands behind the Euro--as a tool that refuses to cover the costs of the "catching-up" of one of its less wealthy states. In other words, the Euro will be shown up, in sharp relief, as a quintessentially neoliberal instrument, serving the purpose of maintaining the global strength of west European large capital, with zero interest in the living standards, life opportunities, etc. of the societies that make up the EU. (Keep in mind, BTW, that Greece is not particularly large, and by far not the poorest member of the EU, i.e., the task of "saving it" would be nothing in comparison with, for instance, the subsidies west European economies received throught the Marshall Plan, etc.) Nor is the EU, and the fiscal mechanism that keeps it together, comparable to a state that has, conventionally speaking, a certain responsibility for subsidizing its poorer regions, the economically more marginal segments of its population, etc. Nothing like that. The EU(ro)'s message to its poorer, less well managed, etc., member states is, "swim or sink." The unelected officials of the ECB, the IMF, and the nationally elected leaders of the most powerful EU-member states whose most important tasks involve the suprastate, supranational exercise of power can, and obviously do, act in complete impunity vis-a-vis the societies of the smaller and less wealthy member states. Greece's "big sin" is that it has introduced welfare state provisions on par with those in the wealthy north European states. In other words, over the last decades, the Greek governments acted as if they didn't know "what Greece's proper place is." Wealthy northern Europe will not stand for that.

3. If the Euro and the technocratic elites behind it see it as their job not to help out a member state that is in fiscal doldrums, the next logical question is, "What is the point of the Euro, then?" My tentative answer based on what we can see now: It is, first and foremost, a tool of size-making for west European capital, an instrument to "share and pool" the global financial weight of western Europe's, on an individual basis, chronically weight-impaired, and endemically unable-to-grow, capital and their associated bureaucratic and state elites.

In other words, a Greek exit from the Euro would reveal--perhaps a tiny bit more than it already has--the global geopolitical-economic essence of "European integration." (For more, please see my book on the topic of just what the EU is, and why that matters.)

BTW, the fact that the EU(ro)'s character would be more clearly revealed doesn't mean that it will, in the long run, succeed in saving / promoting west European capital. But it does suggest that we are looking at a potentially very significant increase in geopolitical-economic uncertainty and re-organization: In geopolitics, there is no such thing as a peaceful vacuum.

Sunday, May 31, 2015

FIFA, Geopolitical Economy and World History

Global inequality expert Branko Milanovic has recently published a very smart and provocative blog post, putting FIFA partly in the context of a geopolitical-economic perspective on global history. It works so well that I can't resist making a comment 8)--a few points actually.

1. As for the "aristocratic" era of FIFA leadership, I love this portrayal. Also puts in perspective the double victories by the Hungarian national team over England (6-3, 7-1), the first one in Wembley... (To make it more humiliating for the "aristocratic" opponent, the Hungarian side was largely based on a single team, the Army club Budapesti Honvéd. Mainly peasant and working-class kids from war-torn Hungary, reeling under Stalinism.) This was well before my time of course--but I know that men in my parents' generation memorized the lineup of the Hungarian team and recited it as a form of public prayer afterwards (until well after the entire team of Budapesti Honvéd, including Army Major Ferenc Puskás, their superstar, defected to Spain in late 1956--but that's another story, albeit also illustrative of the intertwining of geopolitics, sports, and the entertainment business.)

2. That FIFA under Rous was "aristocratic"--well, maybe, although it is a little difficult to see, for instance aristocratic, "old-worldly values of decency and gentlemanliness" in his decision to authorize a match between Chile and the USSR in Chile's National Stadium, of all places, in November 1973, i.e., 2 months after the mass murderous military coup. To me that sounds perhaps a wee bit less aristocratic than simply the work of a west European white man who just doesn't get it.

3. The processes that led to Havelange's election, the election itself, and the subsequent "Havelange-era" could not be understood without taking into account two facts.
  • First, that was the era of a huge number of recently independent states, in the process of being transformed under the global geopolitics of neocolonialism, into "the Third World." This Milanovic' article alludes to. 
  • There was something else important about the context: the extreme propaganda struggle between the two, rivaling, high-modernist "sides" in the Cold War. Arguably, the great "scandal" of Havelange's emergence to power, seen from the perspective of the west, was not his inherently "corrupt" character (he was a white Brazilian, a lawyer with a doctorate, son of a Belgian weapons dealer) but the fact that /a/ a non-west European was elected (Pelé campaigned for him), /b/ with very strong Soviet-bloc support to boot. The Soviet-bloc connection is crucial (although of course we should not forget the role of the German sports multinational Adidas in FIFA history, having "sponsored" the games and the FIFA elections, including pretty much all candidates, as well).
So, as a quick summary, Havelange was hated and widely badmouthed in the "west" because he beat Stanley Rous (a west European), because he was from outside western Europe, because he was supported by the "Third World" almost unanimously, and because he also had, for whatever reasons, the Soviet Bloc behind him. The latter is of course true even though Havelange had no problem authorizing the World Cup in Argentina under the dictatorship of the Colonels. Whether that worked to weaken the dictatorship or to consolidate it, is open to interpretation. My hunch: as often is the case in history, it's probably both.

4. As for the current events (here comes, not so much a disagreement with the post by Branko Milanovic, but my offer of a slightly different interpretive frame), I would put Blatter's "corruption," if that's what it is, in the context of that very characteristically central European variety of historical social form characterized by the combination of corporate state with a highly, openly informal variety of capitalism. If you look at the way FIFA is run, and Blatter's demeanor and management style, it radiates a certain highly conventional, conservative male pattern, a conduct of intense power wrapped into all-smiles and all-cuteness. This conduct could be used as a very powerful teaching tool to illustrate something that is referred to, in popular writing about Austrian social history with the untranslatable term "Gemütlichkeit." It is the conduct characteristic of men whose job it is to manage, in an endemically informal manner, an unmanageably complex contiguous empire. My guess is that, had he been born a century or so before, Sepp Blatter would have been a tremendously successful administrator of the Habsburg Empire--wrong timing, I guess. Now he has to contend with the world--of FIFA. The pattern he exudes is of course very, very "white," operating from a position of corporate power and unbreakable security, the world of Habsburg statecraft based on police spies, archconservative policies, a structure rotten to the core. But we might want to remember that what I am calling, somewhat imprecisely, the "Habsburg statecraft" was the institutionalization of a staunch geopolitical opposition to Anglo and north German interests.  From that posture, this not-too-tall, fast talking, Gemütlich quasi-Habsburg prime minister of world football turns around--and there you have it: the likeable bureaucrat, "nice and kind" to everyone, from inside his tower of power. Even self-deprecating sometimes. The sensibilities that go into this demeanor are light years away from the, at least purportedly, highly formal, distant and rigid, "Anglo" / north German style of management and overall conduct.

No doubt, FIFA is a multinational corporation, a giant operating in the entertainment business. (Check out the television viewership figures for some media markets during the last World Cup final in Maracana Stadium here.) That there will be "corruption" in that business should not surprise us. That's the nature of the game. That's what multinationals, especially entertainment multinationals, do for a living anyway. They use their transborder operations, intransparent operating rules, lack of the slightest hint of any sense of political democracy, by definition shady finances and extraterriotoriality to maximize profits. For share holders and management alike. The entertainment business is particularly prone to unfair competition, bribery, favoritism, etc.

Branko Milanovic argues, "[l]ike every populist who wants to create a more inclusive society and displace the old elite, Blatter had to create his own constituency. He created it by spreading the new soccer wealth to the associations in Africa, Asia, and South and Central America. But the conduits for this wealth redistribution were local caciques who would support Blatter and the top nomenklatura of FIFA only if their federations got some money and they themselves were allowed to keep some too.

I'm not sure I agree with the fastness of the blanket characterization of local football officials, all of them world-wide, as "caciques." That's a very strong claim, I'd be careful to thread there. But, more to the point of my post, my question is this: How is this different from global transnational business overall? Is there any, I repeat: any large-scale business transaction in the world today that takes place without a significant percentage of the deal going to officials, "to grease the wheels," to make sure that things will go smoothly? Is there global capitalism without "corruption"? 

Is this the way the mafia operates? Well, maybe--although I am not seeing the gratuitous violence that marks the boundary-making function of the mafia with respect to FIFA. But if that's what it is, that produces an extremely broad definition of "the mafia," something that definitely includes, I would argue, all crossborder economic transactions today. The world economy is "mafia business," then. I am actually willing to entertain this thought, especially in light of the origins of both modern states and modern business in organized crime--by now a common formula in historical sociology of large-scale power, thanks to Charles Tilly's brilliant formulation as well as insights from global history tracing the links between modern business enterprise and colonial violence, piracy, or the holocaust. It is somewhat hypocrytical, however, for the entire mainstream Anglophone media to single out FIFA and be conspicuously silent about the same "corruption" that takes place, minute-by-minute, everywhere world-wide. But that's just a side remark.

5. So, given the long history of "corruption" in the multinational corporation called FIFA, which has been totally obvious to anyone with half a brain who has the slightest interest in the sport, why are they getting so beaten up in the western press today (and not ten years ago, or ten years from now)?  My hunch is that that is happening for two main reasons: 
  • First, by not awarding the game to the US, his FIFA stepped on the toes of very, very big US corporate interests in promoting football/soccer in the US. We are not only talking about the projected windfall of profits directly from a world cup; we are also talking about a giant opportunity for promoting yet another BIG SPORTS game--third to American "football" and basketball--domestically. In other words, the missed world cup will cost US entertainment capital truly significant losses of profits simply because of the lost opportunity to create a large-scale process of cultural change, establishing a new product, "soccer," in the huge entertainment market that the United States is. That would of course require some changes for the game--e.g., interruption of game time for commercials--but there would be time and opportunity for that, once the giant un-tapped market of the US were to turn toward "soccer."
  •  Second, the Anglo / north German modalities of capitalism and statecraft has always had a problem relating to this Gemütlich management of capitalism. The combination of informal capitalism and corporate statehood is "unpredictable" (because too many things hinge on personal relations, too many things "wiggle"), it is too "personal," and its highly adaptable, fast-moving, personable character can put a more formalistic, more rigid, more directly power-assertive, more unambiguously aggressive kind of business conduct at a bit of a disadvantage. Consequently, journalists schooled exclusively on the US / British / Nordic patterns of business as "normal" will inevitably see corruption, corruption and corruption. 
Remember Commodore Perry and the opening up of Japan for trade by military force? Or the various Opium Wars in which the western powers' main "justification" for wreaking havoc on imperial China was the latter's resistance to penetration of "western" capital interests via "free trade"? Of course opening up football ("soccer") to large-capital interests the US entertainment business is an issue that is infinitesimally smaller than the global significance of forcing Japan and China into the ambit of global capitalism. But the logic--the logic is quite similar.

Just a somewhat distant, and provocative, analogy to think about.

Wednesday, March 11, 2015

Informality Meets Deregulation: The Toxic Brew of Post-State-Socialism


  • as much as 62 billion HUF, i.e., about two-thirds of the funds missing from the accounts of the recently shut-down Buda-Cash consortium (at today's rate, just over 200 million EUR) were "transferred," by one of the deputy CEOs of the brokerage, to a single fictitious account "owned" by a non-existing person. In other words, the media info (how accurate it is, I don't know of course) is that the missing amounts were expunged from the books through major fraud, not simply careless "mismanagement" (the question is still open about the extent to which anybody personally profited from this or these were just techniques to make losses that had already happened because of bad management disappear--I'm not sure which is worse), and that
  • the wrongdoing began as early as 1997, ergo the fraud has been going on for 17 years, almost a generation, without the intervention of the financial regulatory authority agency. Whether the authority's agents had actually noticed it and ignored it, or the agency "simply" remained clueless is also an interesting question. There are conflicting reports about this. Again, I'm not sure which is worse. It seems we are witnessing a structural feature of post-state-socialist east (central) European capitalism, not to be attributed to any of the two political "sides" (both "sides" in the Hungarian political system had been in power at various points during the 17 years elapsed since 1997). What is in common among the two, when all the dust settles, is their fundamental belief in neoliberal market deregulation. Both "sides" have worshipped the market, Margaret Thatcher as its prophet, and subscribed to her TINA approach to policy. Makes things simpler in the short run, perhaps--but also dead wrong. How wrong--I'm afraid we'll see that in Hungary soon.

BTW, when MT made the horrific claim that there was "no such thing as society," she was formulating an argument against the (British) welfare state (i.e., her point was that individuals and families "should be responsible" for their well-being). That, in itself, is a monstrous thing to say in a modern society, characterized, as basically everyone not afflicted by symptoms of antisocial behavior disorder knows, by the breakdown of familial ties and the loneliness / helplessness / resourcelessness of vast crowds of people, on a scale previously unprecedented.

However, MT's east European epigons--again, remember, that's the entire political spectrum since 1990, at least until the last year or two--took it one step farther, and "un-did," or failed to develop, the regulatory power of the state, invented for the single purpose of protecting society at large from fraud. And they did that in a post-state-socialist society where the stability of capital markets is very questionable to start with, and the entire system, so far as the smaller, domestic portion of their market was concerned, hinged on the unwaivering trust of the small investor (and, as in the Buda-Cash case, by the run-of-the-mill holder of bank accounts) that her money will be handled safely and in a trustworthy manner by the financial institution to which she hands it over.

So, to state the obvious, the two clues above signal that the deregulatory-neoliberal political consensus systematically neglected the state's fiscal responsibilities vis-a-vis society. The crisis is structural, not a matter of "a few bad apples." The studied carelessness of the political system enacting a neoliberal ideology was exacerbated, of course, by a very strong culture and social practice of informality--something I have been talking about for decades (see, for instance, hereherehere and here, not counting my various studies on managerial elite selection in the post-state-socialist context and the numerous Magyar versions of the same studies). Considering those structural features, the appearance of a few crooks super-eager to make a quick buck in the cracks and crevices of the lax regulatory environment, and assuming, for 17 years accurately, that they can get away with it, is, frankly, quite predictable. The question is "when," not "whether."

Strong contextual institutions of informality resist regulation and control anyway; coupled with the neoliberal delusions concerning "the market" that would, by itself, introduce "automatisms" that will prevent, find and eliminate such wrongdoing, it's a toxic brew. In this regard, of course Hungary is not particularly different from some other central European societies, Austria, Italy, even Greece come to mind: In all of them, we have generations of scholarly and other literatures highlighting the historic power of informality in economic, political, cultural and social life. The question is how it was possible for political forces, in the post-state-socialist context, to design fiscal rules and procedures that so woefully neglected that power of informality, i.e., how the white-gowned technicians of supreme market rationality unlearned their own histories, and acted as if they were from the moon. For that, we have to turn to another discussion altogether, the picture of east central Europe as a neoliberal experimental laboratory, with virtually no concern for the fate of the lab animals (a.k.a. local societies). The experiment succeeded, the animals are dying.

That this should happen in the society in which the social sciences, and specifically the discipline of sociology, were developed, among others, by none other than Karl Polányi, the author of both the social embeddedness argument that allows us to see how social relations are "always already there" in economic action, and The Great Transformation, a classic devoted to diagnosing the ills of a socially and politically un-checked, run-amok market, is just one of the vicious ironies of our time.

Tuesday, March 3, 2015

Recent Destruction of Hungarian Airline Becoming a Point of Discussion Again

Thanks to a partly successful Freedom-of-Information request on part of TASZ, the Budapest-based Society for Liberal Rights, the collapse / gross mismanagement / (my hunch: systematic destruction in preparation for a takeover on the cheap by domestic capital groups) of Malév, the erstwhile Hungarian Airlines, is now subject to sporadic media reports in Hungary (e.g., here, here or here--thus far, only in Magyar 8(). For the benefit of those reading Magyar, TASZ has even published the entire batch of documents on the internet. Kudos!

Given the government's precipitous drops in the polls over the last few months, its loss of an recent by-election, not to mention a host of un-answered accusations of widespread corruption in Hungary made a few months ago by the then head of the US Embassy in Budapest, it is feasible that some meaningful, interpretable facts might come out in the open about the scandal of the disappearance of Malév, the airline that was, a little over one generation ago, one of the world's most profitable businesses in its size category.

Malév's case is remarkable for a number of reasons. First of all, tourism has been a major revenue source for the Hungarian economy for a long time, (even during much of the state socialist period, Hungary was right "up there" with Austria in turning incoming foreign tourism into major--in the case of Hungary, mainly informal-sector--revenues, if viewed as % of the GDP), and the existence of a "national" airline, with a hub in Budapest, is generally regarded as an excellent producer of revenue multiplier effects (see, e.g., here). A few years before Malév's bankruptcy, Budapest Airport was sold to foreign corporations under requirements that they invest majorly into a 21st-century infrastructure, which they did. The collapse of the national airline with a Budapest hub affected Budapest Airport's business in a very negative way.  It also forced the airport's owners to shut down Terminal 1, an architectural landmark building. Thanks to a jump in discount flights, last year's arrivals seem to have been up to pre-Malév-bankruptcy levels, suggesting that, conceivably, had the collapse of the moderately-priced national airline been averted, Hungary's tourism sector would have benefited much more than today. A case in lost profits, in the immensely competitive tourism business.

More broadly, the case is iconic of the immense, ugly and very chaotic post-state-socialist struggles concerning the property of the erstwhile-state-socialist-state that reflect just about any and every interest in society except for the interests of the owner, society as a whole. All this happened in the context of the resounding failure of the post-state-socialist project of "catching up" with western Europe . The end result is, of course, what we see today as the embarrassing geopolitical marginalization of east European states and other actors alike. To make this even more profound, political meddling around the socialist-state-owned, privatized (to KLM), returned, privatized (to Alitalia), returned, partly transformed (with the--within China, relatively small--Hainan Airlines), repurchased, partly transformed (with a Russian investor), bought back, and finally bankrupted airline involved political parties on both "sides" of the political aisle.

If you are interested in some background to the case, I wrote bits and pieces about the de-development-bankruptcy-cum-takeover scenario here and tried to follow the subsequent, grim and absurd saga here, here, here and here.

Thursday, February 26, 2015

Hungary's Brokerage Crisis: How Far Will It Reach?

Hungary's National Bank, in its capacity as financial regulator, has recently suspended a Hungarian brokerage firm by the name "Buda-Cash" for major irregularities. The claim is that the infractions unfolded over a period of more than ten years, and the estimate of the magnitude given by the regulator exceeds HUF 100 billion (approximately USD 371 million at the time of the announcement). That may not sound as a lot of money in the world of Big Finance, but it is quite significant in small, semiperipheral Hungary. An inter-agency crisis group has been set up to deal with the fallout.

The charges include guaranteed returns, unreasonably long lock-in periods (effectively preventing clients from being able to cut their ties from the brokerage), both of which could be seen as clues pointing at a possible Ponzi scheme (where returns on earlier investments are paid from new revenues, rather than earnings).

The shutdown includes the brokerage itself and four small local banks in Hungary that are owned by the brokerage, typically involved in managing finances for municipalities of small towns and villages (which in turn include salaries for municipal employees as well as public public works and aid programs), and tiny-to-small, typically village- or small-town-based, local businesses. As of the announcement of the closure, none of those actors have been allowed access to their monies, threatening major wage arrears and a financial deadend for many. The Tax Office has announced that they will treat those whose monies are frozen in the crisis "with leniency." What exactly they will put on the table, as of tomorrow--nobody knows. State guarantees for small deposits--a requirement for an EU-compatible economy--will kick in once the investigations into the wrongdoing are over, which could be, in the most unfortunate case, years.

Estimates of the number of those affected go up to 100 to 120 thousand accounts (that is, approximately 3 to 4 % of households). Not a small problem, by any measure. A more recent report suggests that about 70% of the funds are missing from the four smaller banks; the rest from the brokerage itself. At least one of the four banks in trouble is the leading financial service institution in Southern Baranya county (south of the city of Pécs, on the Hungarian-Croatian border), one of Hungary's poorest rural areas. In that context, inability to access money could easily mean no food on the table for families.

A couple of things stand out as remarkable about all this.

First of all, it is the job of the National Bank as regulator, the authority that now claims major wrongdoing on part of the brokerage, to catch such wrongdoing. Either the regulator--which now says the scheme may have been going on for more than a decade (!)--"fell asleep at the wheel," as Lajos Bokros, former neoliberal austerity-finance-minister and former member of the European Parliament has commented, or the brokerage has operated a--hitherto--airtight, fully double bookkeeping system, one for itself, another for the regulator's benefit. The latter would involve a mind-bogglingly complex operation--essentially the re-doubling of all operations at the brokerage. This is not very likely, partly because of the inordinate costs, partly because of the high risk of being caught. Nevertheless, the head of the regulatory agency thinks that is what happened.

Either of those is the case, what is strikingly interesting is that, apparently, the regulator did not "discover" the irregularities at all; index.hu, a usually reasonably reliable investigative web portal reports that the case broke because somebody from the brokerage reported the irregularities to the National Bank--i.e., s/he made it impossible for the regulator "not to notice" them. The regulator fiercely denies that claim (i.e., it argues it "discovered" the wrongdoing by itself.) It's really difficult to see clearly in this regard, particularly because it is, clearly, in the interest of both sides to claim a story that puts them in a less damming light.

Given all that, what nobody talks about are some additional logical possibilities. I will list some of those I can think of, in no particular order. (This is not an exhaustive list, obviously.)

  1. Personal collusion between regulators and the brokerage (i.e., bad old-fashioned corruption);
  2. Informal personal ties between regulator and brokerage owners/management that would increase trust on part of the regulator to beyond-acceptable levels (remember, this is a tiny economy in which essentially everybody knows everybody else, from the time they entered the Finance Department at the economics university as first-year students, clearly a "small-size market" problem, the impossibility of normative processes under advanced informal linkage structure);
  3. What we see is the end of a political protection racket operation: something that would have prompted the regulators to "take it easy" on this particular brokerage for more than ten years,is now over;
  4. This is just the latest turn in the Simicska-Orbán mudslinging fest; 
  5. There is no crisis, all this is "foreign meddling," "provocation," an artificially induced crisis, designed to destroy trust in the Hungarian financial system, the government, etc.;
  6. There really wasn't anything unusual about this particular brokerage: this kind of irregularity, lack of accountability and transparency, the rampant spread of corruption is the "name of the game" when it comes to conducting business in post-state-socialist, semiperipheral, EU-member east-central Europe;
  7. Business-as-usual for the neoliberal post-state-socialist context wherein the regulator (falsely portrayed as a representative of "the state," instead of what it is supposed to be, a trustee of society at large) "takes it easy" on large market actors, especially big capital, and even more specifically big finance capital.
Next, there is a major question concerning the ripple effects of this crisis. Giving away both the slowness and the lack of proactiveness on part of the media sphere in Hungary, as yet, nobody is really talking about this there. I will mention three points here.

  • Crises exactly like this are known to have major negative effects on the well-being of national economies. Since Hungary is not a member of the Euro, its currency is not protected against crisis-driven devaluations. If the Forint were to lose its value precipitously--partly because of the adverse effects of this crisis on other economic actors that have been connected to Buda-Cash, partly due to the usual "moral hazard," i.e., the predictable sudden drop in trust in the Hungarian economy by actors both in- and outside, that would further increase the relative power of foreign investors in Hungary and slightly improve the foreign market conditions for Hungarian exporters, while placing a major burden on all actors whose incomes accrue in local currency but wish to consume, at least partly, abroad / in foreign currencies, e.g., in Euros (i.e., pretty much the entire capitalist class, the educated middle classes, and pretty much everybody else that wish to purchase basic staple commodities, given that the small Hungarian economy is extremely exposed to such imports).
  • Another, superbly interesting question is how far the crisis would go beyond Hungary. By virtue of its small size, lack of natural resources and the last generation's transformation into an export-oriented, second-tier semiperipheral manufacturing economy, Hungary has intricate economic ties with many of its neighbors. There are no checkpoints on the Slovak-Hungarian, Austro-Hungarian, Slovene-Hungarian and Croatian-Hungarian borders, it is extremely easy for actors on each side of those borders to engage in economic activities, including work, investment and even residence, on the other side, and, given the presence of ethnic Magyar populations in the remaining neighbors (Ukraine, Romania and Serbia) who even have a (Hungarian) constitutional right to a Hungarian passport without permanent residency in Hungary, not to mention the, by now over three-decade-long informal integration of a segment of the seasonal labor markets of the latter societies into the Hungarian economy, if there should be a major financial breakdown, all of the neighboring states might be adversely affected.
  • The third point is a scholarly / intellectual question regarding the extent and the structure of what is commonly referred to in the literature as "European integration." Hungary is a member of the European Union (without Euro-membership as mentioned above). Essentially, this implies that the density of the economic ties, from investment to the presence of labor migrants, that bind Hungary to the European Union (and, empirically, we can safely say that the densest ties are with Germany, Austria and the UK) is greater with the EU than elsewhere, say, with the US. In what ways, or whether, the coming crisis, should it happen, will affect those economies--say, major investors like Germany and Austria, or major recipients of outflows of Hungarian labor (remember, btw: all these flows are not only legal under EU rules, they are explicitly encouraged by all the rules and regulations guiding the European Union) including Germany, Austria, the UK or the Netherlands, will tell us about the character of "European integration." For, if it should happen that the Hungarian economy goes down the drain (or: at least sinks perceptibly) because of the possible effects of this crisis AND the crisis will not affect the rest-of-the-EU, or more specifically, Austria, Germany, etc., in any noticeable way, that might suggest that "European integration" is, for instance, perhaps, a tiny bit more asymmetrical in terms of the risks its membership implies than what the EU-literature is willing to discuss. (As an interesting aside--honestly, I'm not sure what to make of it, but it's definitely relevant: neither the Guardian, nor the Frankfurter Allgemeine Zeitung, nor Süddeutsche Zeitung, nor Der Standard, nor Die Presse--i.e., none of the major mainstream news outlets in the countries I have mentioned have--reported about this crisis up till this moment, i.e., 10:46 am Eastern Time, 16:46 CET, on February 26, 2015). (Still no news in the major European press as of 00:17 CET, February 28, 2015.)

cover page of the book

cover page of the book
image used for the cover design by Anannya Dasgupta