Drisle; Good governance; Germany; and the art of Depression

The almost cloudless skies which greeted us on our arrival here on 10 August have had a 3 week spell and ended only yesterday. Today has become increasingly gloomy (the grey mist is sweeping down from Piatra Craiului), windy and drissly – ideal weather for catching up on the internet after our entertaining of the last 12 days. The first thing which I encountered was the World Bank’s People, Space, Deliberation website to which I am sent alerts every week or so. Today a blog about some jargon caught my attention. The blog and a couple of generous responses showed blogging at its best – with an interesting new development blog and a couple of papers being offered up.

I got to thinking a bit more about the distinction between the field of democratization studies and the field of good governance studies. With respect to the former, there is a longstanding and well-referenced theoretical literature pertaining to political transitions, and a good number of competing "theories of change," each with its own backers, detractors, and robust line of argumentation.
But the concept of "good governance" is a bit fuzzier when you look at it from an academic point of view. What exactly do we mean by the term? Is it democratization "lite?" Is it some combination of voice, accountability, service delivery and state responsiveness without explicit political competition? If so, what is the particular value that this construct brings to the conversation? And, as is often brought up in conversations within the Bank and elsewhere, what exactly is the "theory of change" (or multiple theories of change) underpinning this work? As far as I can tell, the bulk of the literature relating to good governance is either drawn from subsets of the democratization literature, or is made up largely of donor-conducted or donor-funded research - that is, case studies and other applied research designed explicitly to extract lessons learned and best practices to improve implementation in the field. Perhaps the field of "good governance" is significant then mainly as an applied rather than a theoretical construct - in which case it is no wonder that we often come up against the thorny "theory of change" issue.
All this was buzzing somewhat chaotically through my head when I stumbled across a ten year old IDS paper on citizen voice, Bringing citizen voice and client focus into service delivery,by Anne Marie Goetz and John Gaventa. Despite its age, the paper reads like a fresh attempt to clarify the issue of citizen voice by: a) focusing explicitly on citizen voice in service delivery; b) categorizing "voice and responsiveness" initiatives by type; and c) drawing some preliminary conclusions as to the type of political environment in which such "voice and responsiveness" issues may be likely or unlikely to succeed. The paper contains a wealth of information (albeit now somewhat dated) on various types of service delivery-citizen voice initiatives, and for the categorization exercise alone is of value to anyone seeking to better understand how such issues may be usefully broken down and analyzed. For me, though, the most interesting section is the conclusion, in which the paper frames questions for further research that hinge directly on explicitly addressing the idea of political competition and its implications for citizen voice initiatives - "Many participation and responsiveness initiatives are launched with scant consideration of their , relationship to other institutions and processes for articulating voice or engineering state response - namely, political parties and political competition," the report notes. "The research in this report indicates that political competition strongly influences the way citizen concerns are articulated and the way public agencies respond." However, it goes on to say, the relationship between political competition, voice initiatives and responsiveness initiatives is poorly understood. It is a shame that, ten years on, these statements still seem accurate within the context of applied research on "good governance." Setting aside academic theory, if we are serious about achieving results in this field, it seems we would all do well at the very least to acknowledge these issues head-on rather than hide behind fuzzily articulated concepts.

I haven’t had a chance to read the second paper mentioned in the discussions which is Managing pubic finance and procurement in fragile and conflicted settings

I’ve referred before to the great posts which Michael Lewis of Vanity Fair does about countries in the maelstrom of the financial hurricane of the past three years. He has now moved on from Greece and Ireland to the more challenging territory of… Germany with which he clearly has some problems understanding. The comments (which rightly condemn the cheapness of his remarks) are worth reading.
Because of Vodaphone’s incompetent and uncaring policies I can’t upload the paintings which I normally have adorn the blog. But let me refer my readers to a great blog posting about the highly civilised way in which the USA dealt with its last great depression. Sad that contemporary leadership cannot rise to such inspired heights.
And also a link to one of my favourite art galleries in Sofia.

The Dog that didn't bark

I delivered this morning my contribution to the special issue which the Revista 22 journal is running next week to mark the 10th anniversary of 09/11. I changed the title to "The Dog that didn't bark" (the title of a Sherlock Holmes episode)to refer to the strange inability of all those active in the anti-globalisation movement 10 years ago (so well described in Paul Kingsnorth’s One No, Many Yeses (Free Press 2003) to use the global financial crisis to present an alternative vision - let alone mobilise people for change. Previous posts carried the initial text for the article - it now continues -

Democracy requires political and administrative systems to have the capacity to make an impact on what its citizens judge to be unacceptable conditions. But it’s not only governments, corporate power and the media which are failing us – propelling us faster toward the precipice. We are actually failing ourselves. Our collective will to act as local, national and international citizens has weakened enormously over the past decade – despite our being presented in the financial crises of the past few years with the most powerful evidence for systemic change. In 1999 we had the Seattle anti-globalisation demonstrations and annual conferences. But, after the Genoa Conference of 2001, the movement disintegrated. Why? For, as the various financial scandals (eg Enron) of the 2000s culminated in the global meltdown of 2008, it seemed that the scales dropped at last from everyone’s eyes. The neo-liberal Emperor had been exposed in all his nakedness. So surely we now had the shared political understanding and will to return to the State some at least of the functions which had been stripped from it by those under the influence of dogma.
Indeed for a moment there seemed the possibility of developing greater legitimacy for alternative social visions more consistent with basic principles of democracy and collective dialogue and action. Not only did this not happen - but the high ground, amazingly, was quickly recaptured by corporate warriors who saw the State rescue of the banking system as an opportunity to “reframe” the agenda for their benefit. State debts had increased and had therefore, went their argument, to be reduced – but through the dismemberment of the last vestiges of the civilising aspects of state activities. Colin Crouch is one of the few who has recently identified and analysed the perversity of this stunning development (in his brilliantly titled book The Strange Non-death of Neoliberalism (Polity 2011) – pointing out, for example, the confusion large corporations have successfully sown in the public mind as they use the language of “the market” to defend their anti-competitive (let alone anti-social) practices. Richard Douthwaite put it very pithily in his 2003 Short Circuit The system that has emerged suits nobody: in the long run, there are no winners. Even at the highest levels of society, the quality of life is declining. The threat of mergers leaves even senior managers in permanent fear of losing their jobs. As for the burgeoning list of billionaires, try though they might to fence themselves off from the collapsing social order, they cannot hide from the collapsing biosphere. Neither social democratic nor green opposition parties offer, however, any convincing agendas for change. Such agendas are available (A draft paper Working for Posterity on my website identifies many of them) but need to be proselytised by those who recognise that the issue is not the simplistic one of greater State power but rather the need for a proper balance of power between corporations, state structures and people-driven political processes. “It was not capitalism which triumphed when the Berlin wall fell – it was balance” was the opening sentence of a powerful but neglected 2000 article by management guru Henry Mintzberg which set the European model of the “mixed economy” - of the “strong private sector, strong public sector and strength in the sectors between” - against the lack of balance and of “countervailing power” in the so-called communist societies. “The current push to privatise everything will”, he warned then, “lead to the same disease as communist societies”. It is the apparent powerlessness in the face of disaster which is the most frightening of current trends.

The new terrorists

Trying to do justice to the question of how the world has changed in the past decade in 1,000 words is, to put it mildly, rather challenging! I should probably assume that other contributors to this special issue of the Romanian journal Revista 22 will have covered the obvious issues – and try to make a couple of distinctive points. So what should my line be? I thought that I might go for a heading like “The New Terrorists” and suggest that the damage the neo-liberal ideologues and financial class have done to societies is so enormous that this is the term we should apply in future to them. I’m sure I’m not the first to have thought of this – but it does seem a powerful phrase which brings together several arguments – eg Chomsky’s “manufactured consensus” (media and state manipulation of our perceptions); that people (in the developed world) feel less secure not because of islamic terrorists but because the old certainties of jobs and welfare have disappeared; and public values, space and decency are declining. Richard Douthwaite’s most recent book put this well -

As individuals, we face increasing insecurity in our working lives, on our streets and even within our homes. As societies, we face a ruthlessly competitive global economy, the threat of armed conflict, and a biosphere stressed to the point of collapse. Why is the world's climate becoming ever more unstable? Why is democracy slipping away, and ethnic conflict, poverty, crime and unemployment growing day by day? The root cause of all these problems often evades even the most intelligent and well-intentioned examination

.A fundamental question, of course, is how we notice and measure “change”. Any list of the ways in which the world seems to have changed in the last decade would include -
• The scale of migrations – caused by both economic and military circumstances
• The scale of natural disasters
• Breakdown of the international financial system
• Changes in social behaviour caused by the internet
• The rise of China
• Increased disillusionment with political action (due to the continued grip of Neo-liberalism )
• Growth of inequality and insecurity

There are, however, several problems with such a listing. First this is a rather partial and ethnocentric picture. The list refers mainly to disturbances to the comfortable western (mainly European) world. The net needs to be cast wider – to recognise, for example, that many countries in South American and Africa have seen positive political and economic developments since 2001. Hundreds of millions of people have also been lifted from poverty throughout the world (although the squalid and fragile urban conditions in which most of them live might lead some to question the significance of this index). The Arab spring may have challenged the view many had of Arab and Muslim fatalism but we have become less optimistic about the onward march of democracy. It is not just that the various tulip and other revolutions of the 2000s stalled; it is also the growing disillusionment with democracy in Europe
The metaphor of the fishing net takes us to the second issue – the way we measure change. Our view of the world is determined both by the images we get from the frenetic global media and by our fixation on the familiar. The deeper the change, the less we are likely to notice it. Historian EH Carr put it this way –

facts are like fish swimming about in a vast and sometimes inaccessible ocean; and what we catch will depend partly on chance, but mainly on what part of the ocean we choose to fish in and what tackle we chooses to use - these two factors being, of course, determined by the kind of fish we want to catch. By and large, we will get the kind of facts we want

.We have become fixated in the last decade on indices – for example about “good governance” and, even more recently, “happiness”. But just think of the process by which statistics about such crimes as rape and “domestic assault” have developed. When I was a magistrate in a Scottish working class town the early 1970s, “wife beating” was accepted by most circles as a natural behaviour of hard-working and drinking men (particularly unemployed or on casual work). And the incidence of rape depends on social inclinations to report it – which are lower in traditional societies than in modern cities.

Travails, conversations and travels

A new nip in the air last Wednesday night and Thursday morning – and a strong breeze. Excellent weather for scything. And I was initiated into the real scythe sharpening – with a small, very tough iron anvil as the base on which the scythe blade is held as it is hammered by a small hammer. For the serious professional, working 14 hours a day (for 30 euros), this needs to be done at least 3 times – depending on how many molehills there are! For the first time, I had a family team to help the process - with great chat ("crack" for the Irish) afterwards.
Saturday I took the kids back to Bucharest via Campulung, the apple valley and Tyrgovishte – with a brief tour of the flat and the People’s Palace. Sunday was relaxed with a visit to The English Bookshop; the usual friendly reception (unsolicited cups of coffee) and, this time, two great books - the first volume of John Fowles' The Journals; and a 2006 paperback edition of Faber's superb 1992 "Twentieth-Century Scottish Poetry" edited by Douglas Dunn. This is THE collection whcih not only does justice to the voices of that century - but contains a highly informative (and poetic) introduction.
And, while on the subject of Scottish writing, here's a nice discussion on the subject of contemporary Scottish writing - if a bit superficial and ahistorical

what changed in the naughts?

Faute de mieux, I have received an invitation to write a short article for the prestigious Romanian journal Revista 22 on "the world ten years after 09/11”. I will use the blog for some brainstorming in the next few days – and would very much appreciate some comments from my readers.
The attack on the Twin Towers certainly provided the opportunity for the security interests in leading States (adrift after the collapse of communism) to regroup and increase their budgets and power. "Counter-terrorism” became the slogan behind which the State increased various surveillance and control measures over its own citizens. Defence (aggression) budgets and actions boomed; powers of detention without legal redress were increased; a generation of young muslims radicalised; and cultural tensions increased.
But the 2011 attack was by no means the only significant event over the decade. Arguably, indeed, governments and media have used the threat of terrorism to distract us all from vastly greater threats to our security and social harmony which have developed as neo-liberalism has grown apace and threatened to destroy the democratic model which was so painfully constructed in the the 20th century.

medieval Brasov

One of my daughters is visiting me (for the first time) in my Carpathian mountain house at the moment; and this has taken me into the heart of medieval Brasov for the first time for some years – seeing it not only in its new splendour but through new eyes. I normally sweep round past the Central Station on the circuit road to one of the large consumer outlets (god forgive me) but this time I took them up past the Saxon houses on Strada Lunga to the elegant square and the huge Black Church (with its Ottoman rug collection) and back via an equally graceful old road. A later walk uncovered a terrific German bookshop at the Black Church where I was able to buy many excellent guides to the area – particularly to the fortified churches. When I first visited Brasov in 1991, it still boasted 2 German newspapers and I could hear German spoken in the streets. But Kohl’s financial blandishments to the Saxon population sadly emptied the villages around here – the vaccum being filled by the gypsies. The old houses are only slowly being rescued – a visit to a winery gave the chance to see the lovely courtyards and cellars which grace the Saxon houses.

back again

Return to basics! When I’m a hermit in the mountain house, I focus on my thoughts – and home repairs don’t appear in my daily schedule. But "she who must be obeyed” identifies very quickly the tasks needed to keep the house purring (and of my lack of practical skills). Wednesday it was tree planting and a visit to a traditional, derelict Romanian house between Sirnea and Pestera which is owned by our old neighbour - who wanted to show us the various heirlooms (clothes and wooden instruments); today it was sawing planks to make an extension for the table – and then doing the work. First thing in the morning required transporting the empty gas canister to the shop for a replacement (which is quite a challenge for the uphill carry!).
Apart from the physical labours (including scything), my time has been taken up with reading Paul Mason’s marvellous study of the financial crisis – Meltdown; the end of the age of greed And here's Mason in full flight.
Haldane, in a Bank of England discussion paper today, compares the situation with the one facing Roosevelt in 1938, when Congress forced him to rein in stimulus, prompting a double dip: he ripped up bank regulations and forced banks to LEND. Policy "went macroprudential" and the recovery took off.
Fisher, as quoted in an excellent post by the FT's Isabella Kaminska , says:

Non monetary factors, not monetary policy, are retarding the willingness and ability of job creators to put to work the liquidity that we have provided… Those with the capacity to hire American workers - small businesses as well as large, publicly traded or private - are immobilised. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can't access cheap and available credit.
"Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy... According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decision makers frozen in their tracks.

Paul Mason comments on his blog -

Jeff Sachs in today's FT flays the global rich for their capture of fiscal policy, condemns the outcome of globalisation and issues a plea for a policy u-turn: The path to recovery now lies not in a new housing bubble, but in upgraded skills, increased exports and public investments in infrastructure and low-carbon energy. Instead, the US and Europe have veered between dead-end, consumption-oriented stimulus packages and austerity without a vision for investment. Macroeconomic policy has not only failed to create jobs, but also to respond to basic social values too."
There is, as the elite stare out of windows of business class at the blue skies and do some thinking, something big starting to change. Let's dissect it into bullet points:
• By deciding to bankrupt states instead of banks we avoided a Great Depression
• But some states can no longer take the strain
• The recovery is faltering in the West: in the US, UK and Eurozone. It could easily become a double dip
• Monetary policy has been now, publicly, tweaked towards semi-permanent QE and zero interest rates (except in the Eurozone where as Sachs points out policy is in the hands of dysfunctional institution and has basically had to go free form)
• There is no more money for fiscal stimulus
• The option of inflating away debts, public and private, is being quietly pursued but its impact is to flatten consumer demand
• Thus those who dream of a return to consumer and house-price led growth are being disabused.

There is, in short, a zombified situation well known to small businesses and households. Nobody wants to spend, or invest because they cannot predict the future.
Large numbers of businesses are being kept alive because banks cannot afford to declare them busted, or the liabilities rush onto the books. Ditto for many households - Haldane points out 35% of unsecured debt in the UK is with zombie households.
Fisher of the Fed is pointing to the same problem: businesses are awash with cash but - as all orthodox monetary economists know from reading Milton Friedmann - this can become a bad thing. In 1933 the build-up of unspent cash in the economy, as the money supply fell, provoked the final crisis. So what to do?
It is strange to see Jeff Sachs, the man who unleashed neo-liberalism onto East Europe, calling for a global version of the New Deal, but that is effectively what is emerging as the option.
To reorient tax policy to protecting the poor, raising their skills, focusing the investment flow towards green energy etc you would have to do something approaching a political revolution in the US: because from K street to Capitol Hill politics is set up to deliver the opposite.
The Bank of England's Andy Haldane prefers the realm of the possible - the new boss of financial stability policy in the UK is musing publicly about a "macro prudential" intervention into banking policy - effectively encouraging the banks to become more risk prone, throwing off fear-induced aversion to lending.
But this rather runs counter to the wave of regulation being forced onto the banks (let alone the proposed Financial Transaction Tax That Will Save The Eurozone). And since Haldane is still speaking the Bank of England's riddle language, where nothing is ever concrete, we will have to wait and see.
One interpretation is that he has given up the idea of forcing a major shift in power between banks and states (Andy Haldane, Pittsburgh 2009) in favour of forcing the banks to once again act like Masters of the Universe.
What everybody is toying with is the idea of a big, government-led structural change within capitalism: whereby the priorities are re-oriented so that private sector growth does not return at the price of impoverishing developed world consumers and workers.
At times like this I always come back to Hyman Minsky, the unorthodox neo-Keynesian economist who predicted the crash and whose work contains the kernel of what a 21st Century structural change might look like.
Minsky, who has followers on both the left and right, argued: socialise the banking system, rip up regulation for the private sector non-financial economy so it can grow, and abolish welfare, making the state the employer of last resort but forcing the unemployed to work.
By socialise, he meant: reduce banks to the basic function of collecting and lending the savings of the population, in a variety of non-speculative businesses. Today that could be mutuals, nationalised banks, Landesbanks, credit unions etc. The difference between this and Glass Steagall is that you actively discourage the existence of a financial speculation sector.
We have come to call the crash of 2008 the "Minsky Moment" - but in hindsight it wasn't. Not until something big goes bust, and millions of people lose their money, is it really a Minsky Moment. Everything policymakers have done since 2008 has been designed to delay the reckoning.
So why is the thinking beginning to change?
One of the most brilliant observations in Alistair Cooke's memoir Six Men concerns the difference he observed in Edward VIII's mien, with and without access to intelligence briefing. Cooke wrote:
"Daily possession of 'the papers' is, in fact, the main and most deceptive perquisite of high office". (Cooke A, Six Men, 1977)
Without them, Edward would fume as they hustled him onto a plane at the outbreak of war: "We know damn all about what is happening."
That is the situation for most of us today. I interpret the sudden flurry of blue skies thinking as a sign that those who do get "daily possession of the papers" are bracing themselves for more trouble in the autumn - banking trouble, real-economy downturn trouble and political protest trouble.

For more on the crisis see here, here and here.
And a good comment on the Uk riots

Finally an excellent case study of the disease of privatisation

contrasts

So hot in Bucharest on Tuesday (at least 35) that the petrol vapourised and the engine came to a halt just 200 metres short of the flat. Fortunately the next day was wet and we managed the run to the mountain house with no difficulty – despite a surprising traffic jam (for a Wednesday) at the 10 kilometres’ bottleneck at the Sinaia-Busteni stretch. And today we have high wind, rain and 8 degrees – the precise measurement thanks to the small (birthday) barometer I have just erected on the balcony. Ideal weather for the usual house clean-up – and dipping into the dozen or so books waiting for me. These include Colin Crouch’s The Strange Non-Death of NeoLiberalism ; and Fukuyama’s new opus The Origins of Political Order