Category Archives: World

Britain after Brexit: Singapore, Switzerland or Japan?

What would Britain become if it left the EU after the Referendum on 23 June? To most campaigners for Leave this may seem an unfair question: they are not a government in waiting. To them EU membership is inherently bad, and we should sort out what the country is to become one democratic step at a time once we have decided to leave. But to many Remainers it is the lack of a coherent and convincing alternative vision for Britain that is one of the strongest reasons for staying in the EU. So it helps to think it through. One way of doing that is to look at the example of other countries.

One of the early alternative visions put forward by Leave advocates was Singapore. This is especially popular amongst businessmen. Singapore broke free from the Malaysian Federation in 1965 (it was expelled) and has prospered as an independent state. It now counts itself as part of the developed world, unlike the continuing Malaysia, which has advanced not nearly so quickly. Singapore made itself an easy country to do business in, and developed as a trading entrepot through, for example, very efficient port facilities. Meanwhile Malaysia became bogged down with the politics and corruption of a larger state, notably engaging in the politics of ethnicity.

Likewise Leavers say that Britain is bogged down with the politics and inefficient regulation of an entity that is too big and complicated to be efficient. Why can’t we be something nimbler and more entrepreneurial, like Singapore? There are many problems with this idea, of course, which is no doubt we don’t hear so much of it now. First is that in size and complexity Britain looks more like Malaysia itself, rather than Singapore, while the EU looks nothing like the Malaysian Federation, with its autocratic leadership. The second is that Singapore is run very autocratically itself: a firmly-led one-party leadership forces through its pro-business agenda in a way that Britain’s government can only dream about. What stops Britain from being like Singapore is less the restrictions of the EU, and more its own raucous and vibrant democracy. A common complaint of Leave campaigners is that the EU is not democratic; following the example of Singapore suggests that it is in fact too democratic.

Enter a second possible exemplar: Switzerland. Switzerland is prosperous and European; it is also probably the most democratic country in the world. Referendums are a very regular occurrence; Swiss people are constantly consulted. And they rejected joining the EU (and the EEA, a diluted version that includes Norway) exactly because it threatened its democratic standards. But the Swiss example throws up a couple of interesting problems. First, the country has found that the only way to make a proper democracy work is through a level of local devolution that is alien to Britain’s freewheeling ways. The central government is weak; most of the action occurs at cantonal level. This level of local government is actually quite intrusive; woe betide anybody that runs their washing machine late at night. A number of years ago many London firms threatened to migrate to Geneva in reaction to intrusive financial regulation; they did not follow through as their staff found the city a difficult place in which to live.

Well that is more interesting than a decisive argument over Britain’s choices. It may show that many Brexit campaigners have mixed feelings about democracy, but Britain can still choose to runs its affairs differently. The second problem is more difficult: in order to prosper, Switzerland has found it necessary to participate in EU structures to secure its part in the single European market. It must comply with many EU regulations, allow the free movement of EU citizens and even pay into the EU budget. There is a tension between these things and Switzerland’s democracy (especially over allowing EU nationals in to work), but Switzerland has been forced to compromise. The Leave case to the voters is based heavily on stopping the free movement of people and on stopping EU budget contributions; it follows that the country could not follow the Swiss compromise, and would sacrifice much of its prosperity as a result.  Indeed the Swiss compromise makes little sense – why not accept the EU structures and participate in their management in a way the Swiss are unable to? it is not as if we have such democratic traditions to protect. Indeed we might find some of the European structures useful to protect our citizens from our own government, elected with very unconvincing democratic mandates.

I think a third exemplar fits much more closely with where Britain would head if it left the EU: Japan. Japan is an island nation positioned just off a continent with which it has difficult political relationships. It values social cohesion beyond economic prosperity, which means that it maintains strict controls against immigration, even though its aging population is creating a crying need for younger workers. It would rather seek solutions in robotics. It is democratic, though not in the free-wheeling way that Britain has become used to.  But a post-Brexit Conservative Party could establish the dominance that Japan’s Liberal Democratic Party has achieved. The result would not be the business-friendly wonder of Singapore, but an even denser thicket of regulations and bureaucratic meddling than Britain has now, which helps to preserve social cohesion and stability, and protect the interests of established major businesses. In principle I think most of Britain’s voters would settle for this, even as they might moan (the Japanese do that too).

The problem for Britain is that Japan’s economy is based on a strong industrial base. This is a historical oddity that would be very hard for Britain to replicate starting from where it does now (though would perhaps have been feasible starting from where it was in the 1950s). The businesses at the core of Japan’s success are mature ones, like Toyota, which has become the world’s leading motor manufacturer, alongside Germany’s Volkswagen. These businesses are not growing – indeed Japan’s economy has been in the doldrums since the 1990s, but they nevertheless provide Japan with financial security. Japan’s government is not dependent on foreign investors as Britain’s is. To replicate Japan’s success would require a rebalancing of Britain’s economy, led by a substantial devaluation of the pound, and several years of pain as living standards were squeezed.

Are Britons really up for this? The country has already advanced far further down the road of multiculturalism than Japan could conceive of – a legacy of its Imperial history rather than of EU membership. Britons have got used to their holidays in the sun, and the country’s relationship with its continental neighbours has always been more integrated than that of Japan’s with China and (to a lesser degree) Korea.

But if Britain votes for Leave – which is having the better of the referendum campaign so far – they may find themselves following the Japan road, with much less benign results than Japan has been able to achieve. That is a good reason to vote Remain.


Cuba: a lesson in the successes and failures of socialism

Australia CubaA week ago I returned from a two week holiday in Cuba. As always, there is a limit to what you can learn from a holiday, which tends to focus on the positive, and where deeper analysis is not the point. But there is nothing like seeing a place to get a clearer picture of it. So, what did I learn?

Cuba is a socialist country, following a Soviet economic model shortly after its revolution in 1959. The state dominates all activity; private businesses are allowed, but only in highly restricted contexts, such as tourist services. The state places a huge emphasis on universal services: health care, education, and a system of basic rations intended to ensure that everybody has the bare necessities. The government claims that homelessness and unemployment are rare – though overcrowding and underemployment is another matter. There is no commercial advertising; instead the are political slogans everyway, often featuring the revolutionary icon Ché Guevara, and also Fidel Castro and the late Venezuelan president Hugo Chavez. These slogans generally claim that socialism is eternally victorious. It is not just the paintwork that is looking tired.

For jaded westerners, it is easy to see the positive aspects of this. Social welfare looks a lot better than for most poor countries. The universal services are certainly popular, and confer legitimacy for the regime. When comparing the country to its Caribbean or Central American neighbours, it is easy to see the bright side. The worst effects of poverty are ameliorated, including with very low levels of crime (compare that to Jamaica or Guatemala), though policing does not seem heavy handed (underemployment does not mean hordes of armed men everywhere, like in Egypt, for example). Health services are reputed to be better than many richer countries.

But a second reaction leaves you confronting the fact that the country remains very poor. The sight of people occupying crumbling buildings in Havana is quite shocking. Most rural dwellings have hardly moved on from shanty-towns. And the flip side to that is that productivity is woeful. We saw ploughs still being pulled by oxen, and horses were a common means of transport in rural areas. Every toilet has its attendant to hand out meagre supplies of toilet paper (and expecting a tip); workmen always came in groups; guards, often scarcely awake, watched over things that hardly needed guarding.

And the productivity is much worse than the use of too many people to do simple jobs. Whole businesses have collapsed, most visibly in agriculture. Perfectly viable land is untilled; factories are derelict. We visited a sugar plantation (called Australia) that has ceased to function as anything other than a tourist spot, offering short rides on steam trains. (That’s where the picture is from, of people sitting outside a derelict factory building – quite a good metaphor for the Cuban economy, I thought). Those trains were the only functioning ones we saw – yet there were plenty of railways.

Agriculture, infrastructure and industry are not the only places where work is not being done. Many apartment blocks in Havana look close to collapse – though many were clearly once magnificent. And new homes are not being built. A country that has a vaunted system of education, that can turn out good quality medical staff in quantity, can surely do much, much better than this?

The official blame is heaped on America, and its extensive system of sanctions that make it very hard for any western business to trade with it. That excuse is not without merit. Doubtless many critical bits of equipment or services became unobtainable directly, and indirectly through lack of foreign currency from exports. For a couple of decades the Soviet Union was able to partially make up for this – but its products were sub-standard, except for weaponry. When the Soviet Union collapsed, Cuba nearly followed it. It says much for the strength of the Cuban regime that it has survived.

Survival in the 21st Century, in the face of US sanctions (which remain as the Congress must approve their lifting) has become much easier, however. China has developed an economy which is not beholden to the US, and Cuba has taken advantage. Our perfectly functional and modern tourist buses were Chinese made. China has also enabled many other parts of the world economy become less beholden to the US – and the influence of other countries (notably Spain) is visible.  There is a viable non US eco-system.

But Cuba clearly wrestles with a much deeper problem: the complete failure of a non-capitalist system to be able to do more than a very few things at a time well. It is to Cuba’s leaders’ credit that, unlike the Soviet Union, they chose universal health care over weaponry as the state’s top priority, but that only gets you so far.

The Cuban state must embrace capitalism if it is to improve its citizens’ lot. There are already role models out there: China and Vietnam, which show that you don’t have to scrap the socialist planned economy at the same time, contrary to western conventional wisdom of the 1990s. (Experts used to say that an economy couldn’t be half capitalist like a woman could not be half pregnant; Russia followed that advice with catastrophic consequences; China ignored it). And Cuba has started to do it, allowing the tourist industry, in particular, to grow. Private bed and breakfasts, restaurants and tourist shops abound, and show that Cubans have plenty of commercial flair. Less than vibrant, but successful enough, the Cuban government has set up joint ventures with commercial companies to build and run large hotels (though it must be added that individual members of hotel staff were generally very helpful, even if the system as whole never quite worked as it was supposed to).

But these developments need to go much, much further. They must embrace large enterprises, in the building industry, and export industries, including agriculture. Of course, Cuba needs to be careful here. Big multinationals can hollow countries out with soulless plantations that add very little human value while syphoning away most of the cash. But the country still needs commercial efficiency on a large scale. Which means less government interference. The government seems divided on how to go forward.

Would an embrace of capitalism lead to a political opening? China and Vietnam seem to show that this not necessarily the case. My guess is that the success of universal services (surely at least as good as China’s?)  will leave the communist regime with enough political legitimacy to survive, so long as these do not fall into decline.  That will be a challenge, of course, as rates of pay in public services will have to rise as the private sector competes for jobs. Medical professionals are paid pathetically little. Cuba’s populace, like China’s, may have grown out of the communists’ political rhetoric, but neither would they see a compelling need to rock the boat if the economy was successful.

It would, of course, be much better if Cuba could embrace political reform too. While they have much to learn from China, no doubt, they should also cast a glance to Costa Rica, much closer in size and geography. That country has shown the virtue of keeping the Yankees at arms’ length, while adopting many of their ways.

And as a holiday destination? Thoroughly recommended. It is a beautiful country, much of it unspoilt; its people know how to make you welcome; notwithstanding the dead hand of government, it is a cheerful and vibrant place. But think about the time of year. In May it was already getting a bit hot and sticky. February is probably best, but that is also peak tourist time.




The Oregon protest shows how different America is from Europe

What if a group of armed citizens seized a bird reserve in the Lake District and proclaimed their right to cut down trees and graze cattle on public land for free? It is actually unthinkable, on so many levels. And yet this is more or less what has happened as a militia group led by Ammon Bundy seized the Malheur National Wildlife Refuge in Oregon on 2 January. They’re still there, as the law enforcement agencies deal with them gently, letting pressure from local residents undermine the occupiers’ resolve. Such incidents are rare in the US, but not unthinkable, and that reveals a lot about the difference between our nations.

Of course Oregon is not like the Lake District. In the US West the Federal government owns huge tracts of land, and regulates, and charges for, its use by farmers and loggers and many others. In our National Parks the government places onerous regulations on private landowners. But that is even worse, probably, from the point of view of the Oregon protesters. They are building their case on an American idea that citizens should be self-sufficient, and that government agencies are violation of basic rights and freedoms.

That idea, of course, comes from America’s frontier history. Back in the 19th Century, and earlier, the settlers mostly did have to be self sufficient. The whole appeal of film dramas such as Westerns builds on this.  These frontiers have only formed a minority of the American nation, of course, and yet they command a special place in the American soul, for those of European (i.e. white) heritage. We may imagine how those of native American or African, and even Hispanic heritage work on a different version of how America came to be what it is. The European settlers came out to America to be free of oppressive governments. It is hardly a coincidence that movements like the Oregon protestors are white, and tend to have racist tinge.

Descendents of the Europeans who stayed behind have an utterly different outlook – though that racist tinge is there too, overlaid by an often intense nationalism, which has been subsumed by American nationalism in their descendents. For us government is part of our everyday lives. For some it represents the democratic will of the people; for others it a perhaps regrettable necessity. But we crave the order governments create, and feel that such things as welfare safety nets are part of what it means to be civilised.

And this is as true of the English as it is of their French and German cousins. Some English like to think that they are culturally apart from the rest of Europe (a delusion that their Scots compatriots in Britain tend not to share). We hear talk about common law and Anglo Saxon freedoms. And it is true that the English and British are different in many ways from other Europeans. But then so are the French, the Germans, the Danes, the Spanish, the Czechs, and so on. The idea that the British are uniquely different is a misconception. And a huge amount of history and culture binds us together as Europeans, and separates us from the United States in particular. Our attitude to the role of the state demonstrates that more clearly than anything else. Remember that many Americans feel that free ownership of military weapons is a fundamental right, and a vital protection. Europeans think that’s nuts.

That gulf between Europe and the US is clearly seen in US politics. Republican politicians only have point to Europe or Canada (which follows many European attitudes) to scare their supporters. To them these places are self evidently awful places to live in. Which puzzles, Europeans and Canadians profoundly. What is so wrong which lower levels of poverty, better health outcomes, longer holidays, and a lower chance of dying a violent death? We (and they) just don’t get it.

But two notes of caution for Europeans. First is that the US is not monolithic. I have already pointed out that many Americans do not share this anti-state vision – and the proportion of non-whites in the country is rising. That, perhaps, explains much of the violent polarisation in the country’s politics at present. Most Americans think that the Oregon protestors are crazies; that includes most people who live near Malheur. It’s always a good rule to avoid national generalisations; that is as true of Americans as it is of anybody else.

The second note of caution is that there is a positive side to this American idea of self-sufficiency, alongside its delusional aspect. It makes Americans more entrepreneurial and innovative. Americans can rightly point to their extraordinarily strong economic performance. And I think it helps to question what state agencies do and what they are for – though, I should add, I don’t think that US government agencies are any less inefficient than European ones.  Closer scrutiny does not necessarily lead to improved performance.

But personally, I am very comfortable in my European skin, much as I admire so much about America. And those Oregon protestors sum it up why quite nicely.


High morals v low pragmatism: what on earth to do about Syria?

Do we let British forces join their US and French allies and intervene in Syria against the forces of Islamic State (IS)?This is now the biggest issue in British politics.  it is not an easy question.

So often we are urged to take such important decisions based on high moral principle. In this case, do we attack those who have, in effect, declared war on us on principle? This seems to be the French view. Or do we rule out the use of violence, outside strict self-defence, on principle? If such moral principles are your guide, then deciding about foreign interventions becomes much easier. Take your moral stand, and if it doesn’t go well, then it is somebody else’s fault. And if the place of the intervention is remote it is somebody else’s problem too. Such reasoning is commonplace amongst the politically engaged – but it is a cop out. Actions (and non actions for that matter) have consequences, and we can’t escape responsibility for them as far as they are foreseeable.

And, of course, the closer we get to the place of intervention, the muddier it all seems. For us the big issue in Syria is the progress of IS. And yet, with the exception of the government of Iraq, this is not top of anybody else’s agenda. This can be seen from last week’s episode with the shooting down by Turkish forces of a Russian bomber aircraft. The story presented by neither side is convincing. The Russian bomber looks as if it was attacking a Turkomen force that is nothing to do with IS, but which is resisting the official Syrian government of President Assad. The Turkomens seem to have the covert support of the Turkish government. Russian actions have been high-handed and directed at supporting the Assad regime, under the cover of fighting “terrorism”. The Turks seem to be telling them to keep away from their protégés in the only language the current Russian regime seems to respond to.

To my mind it is the conflicting agendas of the local middle-ranking powers that is the most frustrating aspect of the Syrian situation: Turkey, Iran and Saudi Arabia in particular. To them IS seems to be of rather tangential importance, whose main use is as a hook to draw in Western powers on their side, taking the pressure off them to resolve the conflict. The West still suffers from a post imperialist idea that it is the world’s policeman, and that the local powers should be treated as unruly children rather than accept responsibility for the maintenance of peace and order in their neighbourhood.

It doesn’t get much better when you look at IS itself. For some reason this organisation likes to project an image of undiluted evil. It seems to help it draw in foreign recruits to its cause – who see moral clarity where we see evil. But its support base is clearly much wider than that. The local Sunni populations, in both Syria and Iraq, have lost faith in their official governments, and with good reason. Rule by IS seems preferable, and nobody is offering a credible alternative. Remember that the standard Western answer that you set up a democratic government has been tried in Iraq – only for it to be abused by unscrupulous power brokers intent on their own enrichment. Why should it work better next time?

All this fog points against the high moral case for Western intervention, and so against further British involvement. How can it be effective? And arguments of this type are seized on by opponents of intervention. But they too strike a high moral tone. They organise protest rallies; Jeremy Corbyn justifies his stance on the basis of the opinion of political activists, and urges these activists to lobby their MPs. Such tactics can only be driven by high moral purpose, not by a pragmatic weighing of the options.

This high moral purpose seems to be driven by a loathing of two things. The loathing of the use of military force in pretty much any capacity. And the loathing of Western capitalist governments, and especially that of the US, and all their foreign interventions. How these two loathings balance varies widely between individuals. But such moral arguments are clearly suspect. In Syria we have had years of non-intervention, or limited intervention, by Western powers. That has left the country in an appalling stalemate, which has now created a refugee crisis that is placing huge strains on European civic society. Surely this threatens Western interests sufficiently for some kind of intervention? Are we being too dismissive of intervention, and using the clear practical difficulties as cover irresponsible inaction?

Building a pragmatic case for intervention runs something like this. The US and France are already heavily engaged. By joining them as a full member of that alliance (Britain already provides  support in Iraq) may not make a huge difference to that joint effort immediately, but a three country alliance would have considerably more diplomatic weight than the current incomplete one. Britain’s current half-hearted contribution is almost useless on that basis. This alliance of Western nations, which joins up with local Kurdish forces, would then be able to bring pressure on other actors to work towards a new settlement of the Greater Syria region (i.e. Syria, Iraq, Lebanon and Jordan) than can form the basis of future peaceful development.

But any such settlement must face up to the central challenge of what can replace the current IS regime? Neither the Assad regime, nor the Iraqi one looks up to the job, though changes in leadership might help. Trying to create new government institutions from nothing is what went wrong in Iraq. Everybody says that it would be impossible or immoral to negotiate with the IS regime, and looks a fair judgement based on its current leadership. But might a successor emerge from within, amongst its clearly highly competent military leadership, with whom negotiation might be possible?

So there you. The pragmatic arguments against intervention have real weight. There is no clear game plan to bring matters to resolution. But the Syrian war is causing damage at continental level. Can we really just walk away and hope for the best?


To understand the politics of Islam you must look at its history

Islam has become one of the hottest topics in politics worldwide.  And yet the religion is little understood by non-Muslims. Instead ill-informed narratives gain currency, even amongst the better educated. It is a hard subject to get a grip on, but BBC Radio 4’s The World This Weekend, on Sunday broadcast an excellent item on combating Islamic State (IS). Each of the three introductory interviews was illuminating, but that with Washington Islamic history expert Haroon Mughal made things a lot clearer to me.

As with most areas of current politics, we need to get a historical perspective. Most educated people will know that Islam has two main denominations, Sunni and Shia, which arose from a split in the 7th Century over who was the prophet Mohammed’s successor as caliph. That, of course, remains an important fault-line, as followers of the two sects (and variations within) are intermingled in Iraq, Syria, Lebenon, Saudi Arabia, the Gulf and Yemen, to name the main hotspots. The split may be compared to the Christian split between Catholic and Orthodox, but geographically it is much messier. Apart from in Iran and, to a lesser extent, Iraq Shias are in the minority – but they are politically more coherent because there have reasonably clear hierarchies and, perhaps, they are used to a greater level of challenge.

The Sunni realm too used have clear hierarchies and orthodoxies, sponsored, in early-modern times, by the Ottoman Turks, who held sway across most of it; there was even a (nominal) caliph, until the Ottoman Empire fell in 1922. But this orthodoxy was subject to challenge, and a Reformation of sorts took place in the 18th Century, led in particular by Muhammad ibn Abd al-Wahhab. Like the Christian Protestant Reformation, it urged a back to basics creed, that rejected the corrupt ways that orthodox Sunni religion was practised. There are two key things to know about Wahhabism, which is now the orthodoxy in Saudi Arabia. It emphasises the separateness of true-believing Muslims; others are condemned to hellfire and not worthy of consideration. The second is that it takes inspiration from the customs of early Arab days, most notably in its strictures on sex, women and crime.

Mr Mughal’s critical insight was that, unlike for the Christian Reformation, there was no Counter Reformation – a reinvigoration and counterattack by the orthodox. At this time the Ottomans were on the wane, and the orthodox structures were too weak to mount such an effort. That leaves a vacuum at the heart of Sunni Islam. There is a huge amount of scholarship which can be used to counter Wahhabism, but efforts to do so are weak and disjointed. Imams tend not to be up for the sort of intellectual challenge required. Meanwhile the Wahhabists have a clear message and are expanding their appeal. The ground has been prepared through official Saudi sponsorship of mosques and schools, which has spread throughout the world, and undermined orthodox teachings. Now more sinister forces are promoting Wahhabi ideas to the disaffected, in ways that a re socially corrosive.

There are two important groups of Wahhabist derivatives, both of which have a clear political agenda, that some refer to as “Islamism” . There are the violent ones (I don’t want to call them “Jihadis”, since it is important to preserve non-violent aspects of jihad, just as there are non-violent uses of “crusade”, a very similar idea), promoted by terrorist movements like al-Qaeda and IS. They have a millenarian interpretation of the scriptures: that the end of the world is nearing. They extend the Wahhabist ideas of separateness to the practice of violence against non-believers, not least Muslims that do not share their binary world view.  There are enough sacred texts and historical episodes from Islam’s formative years to allow a coherent narrative – even if their practices go against a mass of Islamic scholarship. This narrative of violence has a clear appeal to the disaffected looking for some kind of heroic way out of their dead-end lives. The second group is known as Salafists; they share much of the millenarian credo of the terrorists – but they are non violent. They advocate the withdrawal of believers from any non-Islamic political structures. Salafists are much more numerous than the terrorists, with a lot of strength in Egypt and Tunisia, but their doctrines of withdrawal reduce their political weight. Some politicians have tried to play them off against the terrorists, since they are able to argue the case for non-violence from a Wahhabist perspective. But this serves to entrench the basic, and socially corrosive, ideas of Wahhabism.

The critical question is whether orthodox Sunnis can organise themselves into putting together a vigorous, international counterattack on Wahhabism, and to win back the battle of ideas. The hope is that a confident, cosmopolitan orthodoxy can be established that offers a middle way between a godless  materialism that denies Islamic heritage, and the backward looking ideas of Wahhabism. This seems to be what Mr Mughal was advocating.

But such a Counter Reformation faces formidable challenges. The first comes from political power. One group that would love to promote such a “respectable” version of Islam are the military backed regimes of Arab countries, like Egypt. And yet the incompetence and corruption of these regimes is one of the things that gives the Wahhabist creeds a lot of their appeal. Any Counter Reformation has to keep its distance from such willing official sponsors. Another challenge, of course, is the rejection of Saudi sponsorship; we may hope that low oil prices will reduce this malign influence.

But the biggest challenge surely is to develop ideas that are compatible with the modern, cosmopolitan world. This means rejecting the paternalism of the current order -allowing young people more freedom to consort with the opposite sex and choose their own marriage partners, and to offer women more freedom and power all round. To say nothing of more tolerant attitudes to gay sex. This is a huge jump for many, older Muslims. To them the paternalist ways are something worth fighting for, and their religion is bulwark against dissolute modern ways.

Is their anything to learn from what has happened to Christianity? In Europe established churches are fighting a losing battle with materialism. They cannot find a viable middle way between an empty modernism and being perpetually behind the Zeitgeist. They remain the standard bearers for socially conservative values – which is perhaps why they have a strange obsession with sexual morals. This has parallels with modern Islam.

Still, in America it is a different story. Somehow American churches are able to find compatibility between traditional beliefs and the modern world. We may associate them with conservative strictures on abortion and gay sex, but they have moved on in the question of love and marriage, and the empowerment of women. American churches are fragmented and highly competitive. They have no choice but to adapt to the modern world, or else they will lose out to neighbouring churches, constantly juggling a mix of social conservatism and modern values. To my knowledge Muslim imams and mosques haven’t taken on such a competitive approach – but I don’ think there is any institutional barrier to it. This bottom-up way offers more hope, surely, than some kind of top-down institutional one based on learned scholars and high level conferences.

But, assailed by an ultimately futureless and destructive Wahhabism on one side, and the temptations of godless materialism on the other, orthodox Sunni Islam must change itself somehow.


Post Imperial thinking on the Iraq-Syria troubles needs to be challenged

Last week I watched BBC Question Time. Not something I do often, and not something I would care to repeat. It’s what happens when news is treated as entertainment. Three politician panellists put forth their careful platitudes, but at least showed some grounding in reality (none of them were in the Donald Trump school of politics). No doubt to spice things up the BBC added two journalists to the panel. They proceeded to spout a lot of provocative rubbish, in the way that you can when you are unaccountable for what you say. The audience chipped in with their own angry views. There was no time to unpick anything anybody said. It was all anger and provocation; there was no time for truth or solutions.

Syria came up as a subject, in the context of whether the RAF should extend its bombing to Islamic State targets in that country. It was striking that everybody seemed to think that Syria’s troubles were both our fault, and that it was our responsibility to sort them out. “Our” in this case being a rather fuzzy conflation of the the UK and the West generally. It is an attitude that I will call “post imperialism”. It is an advance on imperialism but shares much the same view of the world. It should be challenged.

The imperial era was at its height before the First World War broke out in 1914. In these times people in Britain and in other leading nations divided the world into three camps. On the one hand were the civilised countries, being the major powers: Britain, the USA, France and Germany at a minimum. Then there were the uncivilised or semi-civilised ones. The former had a positive duty to civilise the latter, and the favoured method was through colonisation, or other inclusion in an imperial domain. Then there were the countries in between: Russia, Turkey, Japan and so on, who were bit-players of different levels of importance.

Apart from a general mission to civilise, the major powers felt that empires were a good thing for the imperial powers themselves. This was mainly a matter of prestige, but various other economic and military benefits were widely touted. Failed states and political vacuums were therefore regarded as opportunities for imperial expansion. The main risk was of clashes between the rival powers. So the leaders of these major powers, and most of their people too, felt that what went on in any part of the “less civilised” world was their business. The doctrine of non-interference with the internal affairs of other states only applied to other major powers. China had particular reason to be aggrieved, as the major powers felt they could do what they liked, from grabbing port facilities to promoting the opium trade.

Post imperialism is definitely an advance. We now recognise that imperial possessions are more trouble than they are worth. Failed states are regarded as threats rather than opportunities. But there is still an attitude that the world is their business from the old colonial nations, and the US, and its implicit division of the world between the civilised and less civilised. It follows from this that practically any disaster anywhere in the world, outside a select group of stronger nations, is somehow the responsibility of these powers, and blame should be pinned on their political leaders. China and India are among the few big nations that reject this notion, with perhaps some marginal exceptions in their near-abroad. Russia shares the post imperialist attitude, but is bitter at being left out of the post imperialist club. The defeated powers of the Second World War, Germany and Japan, have more complex attitudes, it must be added and it wouldn’t be right to label them as post imperialist – though Japan’s Prime Minister, Shinzo Abe, wants to be.

But the trouble is that these post imperialist nations have no idea how to establish peaceful, thriving polities amongst the “lesser” nations. Do they back military strongmen, like Colonel Gadaffi, to preserve at least some semblance of stability and a functioning state? As soon as they do, these dictators push the limits to see how oppressive and corrupt they can be before they are rejected. This often leads to a catastrophic breakdown. Do they carry out “liberal interventions”, set up a new government and leave? But successes are rare (Sierra Leone perhaps) and the failures even more catastrophic (Iraq and Afghanistan).

So what we are left with is an incomplete “do something” idea, which involves finding some villains and hitting them with advanced weapons while keeping as few servicemen as possible in harm’s way. This has never worked, of course. But even some quite respectable people, like the Economist magazine, seem to favour it as better than nothing, which is a doubtful proposition.

So what do I suggest? We should step back and not assume that the great powers are ultimately responsible for any political mess that arises. There are plenty of more local people that can take the blame for the rise of IS, for example. Iraq’s Nouri al-Maliki for his combination of malign neglect and downright oppression of Iraq’s Sunni tribes. The leaders of Iran, Saudi Arabia and Turkey for stirring the pot without any interest in establishing a stable alterative. And Bashar al-Assad, who, though more competent than Mr Maliki, knew no other form of governance than outright oppression. And yet, with the exception of Mr Assad, criticism of these figures in the west is muted. It is much more fun to blame Tony Blair or George Bush. The record of both these men is atrocious, but it really isn’t helpful to keep blaming them as if they were the only grown-ups in the room. All that does is encourage the local powers to keep stirring the pot in the hope they will get western arms – or prestige from defeating them.

In the long run, the situation will only improve when the local powers start to practice mature statesmanship. The should be establishing diplomatic solutions with each other rather than fighting proxy wars and seeking to get outsiders involved. That will only start to happen when the western powers let go. No doubt limited humanitarian interventions will still be needed. But at some point we must grow up and admit that we are imperial powers no longer.


Barcelona: Europe’s capital of modernism

The outside of the Sagrada Familia, approaching its Nativity Façade,IMG_3083 was extraordinary but somehow familiar. It has become Barcelona’s most famous landmark. But I was not ready for the inside. The soaring columns; the vaults like a giant forest canopy; the different coloured light coming in through the stained glass windows. This basilica seems little more than half-finished but it completely overshadows the city’s fine and (mainly) medieval cathedral. And that is evident from the numbers who go and see it. That sums up Barcelona very nicely.

Last week was my first visit to the city. What struck me most was how at ease the place is with the modern. Two eras stand out. First was the later part of the 19th Century and early 20th. This was the when the Sagrada was started, and, in common with many major European cities, Barcelona exploded in size. The genius of architect Antoni Gaudi stands out, but the general self-confidence and exuberance of the architecture is striking. By comparison London building of the era seems obsessed with past forms, from medieval Gothic, to classical to, even, old Venetian architecture. Meanwhile Gaudi’s naturalistic forms foreshadowed Art Nouveau, and now look timeless. For much of the 20th Century, when Fascists and Communists held the initiative, brutal straight lines and right angles held sway, in an effort to show the superiority of human endeavour over the natural world – and Gaudi’s modernism looked whimsical and irrational. And yet there is nothing whimsical or irrational about natural forms. Gaudi’s architecture is functional and his forms resolve to simple mathematical principles. Nowadays we understand this better, and the Sagrada’s interior looks uncompromisingly modern. Such vision, lasting over such a stretch, is rare. London never truly embraced this sort of modernism. Paris dismantled much of its wonderful Art Nouveau pieces, like its Metro station entrances. Viennas’ Secession movement fared better, perhaps, but the surviving examples have the air of museum exhibits.

Barcelona’s second period of modernist self-confidence started in the 1980s, after the pall of civil war and fascism was lifted, and was revealed to the world at the Barcelona Olympics of 1992. This second period has not ended. Apart from accelerated progress on the Sagrada, and its successful integration of Gaudi’s vision with modern engineering, there is a lot of confident modern work. This is most visible on the coastal part of the city. This stretches from the beach-side facilities and marinas with their focus on leisure, to the highly impressive modern port facilities. And in the suburbs there are modern residential areas, smart modern factories, and sweeping roads and bridges. Barcelona is an old city. At its heart there are ancient buildings and narrow medieval streets, all built on Roman era foundations. But I have not seen such an ancient place wear its modernity with such ease.

What of Barcelona’s politics? It is hard for a tourist to say much based on a week’s visit, simply looking tourist sites. The Catalan independence flag, the Estelada, was everywhere though. The evident strength of the Catalan independence movement draws an obvious parallel with that of Scotland in the UK. But I was struck by its different historical origins.

Catalonia is an older political entity than Spain itself, but has never had a period of full independence. Its spell as part of Moorish Al-Andalus was brief; its political origins were as a frontier region of Charlemagne’s Christian empire, and as such it looked to France for political and cultural leadership. This was not the case with all of modern Catalonia, it must be said, as the southern regions remained under the Moors for much longer, but it was true of Barcelona, which emerged as the area’s principal city. The connection with southern France was much diminished after the crushing of the Cathars in the 13th Century.

Catalonia developed its own political structures in the medieval periods, including a proto-parliament, and became part of the wider political entity of Aragon. It flourished as a trading entrepot, until it was eclipsed by ports with better access to the New World.  In the 15th Century, with the Moors being pushed back towards Granada, Aragon and Castile were united to form the basis of modern Spain. Spain in turn formed part of the wider Habsburg empire. These political entities were sensitive to local political structures,however – more resembling the union of British crowns under the Stuarts in the 17th Century than the United Kingdom of the Act of Union. But the Spanish Bourbon monarchy which replaced the Habsburgs in War of Spanish Succession, and in particular the crushing of Barcelona on 11 September 1714, after a long siege, brought an end to that. Catalan patriots date the era of Spanish oppression from this infamous date. Catalonia regained a degree of autonomy in the 19th Century during Spain’s political turmoil, and when industrialisation took off. This was crushed by General Franco’s Nationalists in the Spanish Civil War of 1936-1939.

But, of course, the picture is complex one. Barcelona drew in migrants from all over Spain. Its cosmopolitanism no doubt contrasts with the rural conservatism of Catalonia’s Pyrenean villages. I can’t begin to predict how Catalonia’s future will play out. What I can say is that Barcelona’s modernism, and its whole feel, is very different from the rest of Spain. It feels closer to the heart of Europe. And it is a wonderful place to visit.



The Chinese test the limits of a state managed economy

Political commentary on economic growth operates between two poles. On the one side the right argues that the state should get out of the way, and allow entrepreneurial businesses full scope to do their thing. On the other, the left says that growth is driven by investment, much of which must be directed by the state to be effective. Both are right, of course, and the balance depends on the circumstances. But China offers a fascinating case study in this discourse.

Until the rise of Deng Xiaoping in 1978, China offered a good example of a failed, state-led economy, alongside the Soviet Bloc amongst others. The economy was made up of state owned enterprises (SOEs) and state directed cooperatives, operating according to production quotas, all part of a state plan. But the economy took off as the shackles of state control were released.

This seems to follow the right’s playbook, but what happened was in fact much more subtle. The state quotas and SOEs remained in being, but a private sector economy was allowed to flourish alongside it. This contrasts with what happened in Russia after the collapse of the Soviet Union in 1990. There, following the advice of right-wing US economists, the state system was dismantled, with SOEs sold off and production quotas abolished. You can’t be half-pregnant, these advisers suggested. That was disastrous, of course. The SOEs were acquired by well connected crooks, who formed a governing oligarchy. Essential state support systems collapsed. A flourishing economy did not emerge until a natural resources boom saved things.

Meanwhile, China’s pragmatic approach delivered spectacular growth, which led to a rapid diminution of poverty. After a first phase in which private enterprise transformed agriculture, a growing private sector flourished in producing manufactured goods for export. It was one of the most brilliant acts of economic government the world has ever seen. They took no advice from westerners. But the Chinese governing elite was left with some difficult questions. Sooner or later the SOEs and political structures would present limits to growth, and would have to be reformed. Commentators, inside and outside the country, confidently predicted that the Communist Party would have to release its grip. But that is not how things have played out.  The Party did reform SOEs to make them more responsive to market economics, but they did nothing that would threaten its own monopoly of political power.

Instead, as the 21st Century has progressed, a new model of growth has emerged. Alongside a vigorously competitive private sector, a massive programme of state-directed investment has sustained growth. That meant growth rates of 10% or so, even through the world recession of 2008/09. Something like 35% of Chinese national income is directed towards investment, much of it through SOEs. This has now swung towards the left-wing model, and those suspicious of capitalism and democracy have taken inspiration. A wise government, unconstrained by the petty-corruptions of democracy, has led the way to continued spectacular advance – and throwing out all that austerity nonsense too.

But, as Martin Wolf writes in the FT this is all coming into question.  The Chinese economy is slowing down. To an outsider this might look like an orderly transition. Growth rates of 7% are still high by almost anybody’s standards; the government’s aim of moving to an economy led by consumption rather than investment looks natural enough – this will improve the wellbeing of the Chinese people. And yet deep flaws in the Chinese model are being exposed. China has rather little to show for years of massive investment – at least in terms of economic returns, rather than monuments in steel and concrete. And behind the investment lurks piles of debt – representing the savings Chinese people. Chinese productivity has been static.

And slowing the growth rate from 10% to 7% may sound easy, but it creates real strains on financial systems, with all the time lags built into it. It implies a much larger dislocation. But with a stock of useless investments, SOEs who are not used to making themselves more efficient and effective, and a financial system threatened by excessive debt, doubts are growing about how feasible even 7% is as a growth figure. And since China plays such a big part in the world economy, it is no wonder that financiers across the globe are getting jittery.

This has some resonance in domestic politics in the developed world. The left’s criticism of austerity policies since 2008 has been virulent, and joined by many respectable macro-economists. Surely, they suggest, the state should have shored up demand with a programme of investment. Labour leadership frontrunner Jeremy Corbyn’s economic proposals are thick with this sort of thinking. But this only works in two circumstances. First is that the pre-crash economy was sustainable, and can be revived quickly, so all that is needed is to cover a temporary lapse in demand. In this event it hardly matters if the investment itself is useless (digging holes and then filling them in, and so on). But in Britain at least there was good reason to question the sustainability of the pre-crash economy: a large current account deficit, a structural deficit on state finances, a bloated finance sector, a declining oil and gas sector. Besides it is all now a bit late.

The second way in which investment can shore up an economy is if that investment produces decent economic returns in due course, allowing debts to be repaid. The unfolding problems in China are showing what happens if investment is badly directed. There are plenty of other examples (Japan is another good one). The trouble is that the more you try and turn investment on and off like a tap, to regulate the macro-economy or in an explicit drive for growth, the more likely investment is to be wasted. The money is directed according to political imperatives, not economic ones. This is something that macro-economists, who don’t like to look behind their beloved aggregated and averaged statistics, often miss. In the UK the criticism that the government did not invest enough after the crisis remains a valid one – but it would not have been easy to pump in the sort of funds that the wider economy needed to keep on an even keel.

Time will tell on China. Its leaders are not to be underestimated. But they are demonstrating that you can have too much state direction for a healthy economy.


Is the Euro worth saving?

Anglo-Saxon economists were always sceptical. And so was much of the British establishment, though less so in the early days. But sponsors of the European dream were determined. And at first European Monetary Union defied the sceptics. But now the dreams are vanished and the only people defending the union seem to be those that have face to lose. Is it all over for the Euro?

It is Greece that seems to prove the scheme’s futility. The Greek government cannot repay its debts; its banking system depends on a bankrupt government for solvency and the European Central Bank (ECB) for liquidity. Greece cannot print its own money to inflate its way out of the hole. Instead European institutions and the IMF have to bail it out, and they are demanding conditions that add up to a loss of the Greek government’s sovereignty over its economic policy. Both sides blame the other, and the more the blame game goes on, the more trust and solidarity break down. The Euro is tearing the union apart, when it was supposed to bring Europe’s peoples together.

It doesn’t take hindsight to see what went wrong. Mostly the scheme’s weaknesses were pointed out at the start. Its supporters (who included me) just thought that this time it would be different.

Monetary policy is set at continental level, and yet there isn’t a great deal of economic integration. In order to adjust to local business cycles and local economic shocks, national governments have only a very limited set of tools. And the most important, fiscal policy, is constrained by the Stability & Growth Pact. This was instituted to try and prevent member governments becoming insolvent, a contingency that the zone had no process to deal with. This made it quite unlike a federal system, like the US, the only comparable monetary system that most knew. In the US there is a strong federal level of government, which draws substantial taxes from all parts of the union, and can make big fiscal transfers between the union’s members to compensate for the lack of monetary flexibility.

Funnily enough the problems with this set up did not play out in the way that most critics foresaw.  They thought that different business cycles or local shocks in different parts of the union would be the big problem. This happened – especially when the central economies of Germany and France endured recession, while peripheral economies, such as Spain and Ireland fizzed. But these were not the main cause of the crisis that emerged following the global financial meltdown in 2008.

The first problem was that investors assumed that member governments could not go bust, and that if they got into difficulties somebody would bail them out. As a result, it became much easier for the peripheral governments to borrow, and this allowed them to run their economies with a looser hand than they should. This was most egregious in the case of Greece, who produced misleading economic statistics, which put their government into a completely unsustainable position. And when it was clear Greece could not repay its debts, the system had no set of processes with which to manage the crisis.

Perhaps Portugal and Italy were guilty of something similar without the fraud, though Italy has not needed a bailout. But the other bailout cases (Spain, Ireland, and Cyprus, though I am less confident that Cyprus follows quite the same narrative) the main problem was not government finances, but a reckless private sector that fuelled property bubbles. What added fuel to these bubbles was cross-border flows from elsewhere in the Euro area, and especially German banks. The Euro system had greatly facilitated such flows. When the bubble burst, it brought down the countries’ respective banks, and this in turn draw their governments down with them. Governments couldn’t let the banks go bust, since they controlled local payments systems and economic chaos would have resulted. Like Greece these countries then needed external support and bail-out.

The important point to make about this series of crises was that they were to great extent “endogenous” as economists like to say – they have to do with the way the system itself operated – and not exogenous – the external shocks and uncontrollable factors which most economists thought was the system’s weakness. That suggests that bad systems design was a large part of the problem – and that, in theory, could be fixed. Most suggest that it implies a fully federalised system, with a federal government, supported by federal taxes and federal debt. An alternative route would have two main elements: a national insolvency regime (a bit like US states, but not Puerto Rico, which is on the path to creating a US version of the Greek crisis); and banking reform to produce a more federalised banking system firewalled from member governments.

But either route would leave member governments facing a grim reality. The Euro offers a straitjacket for government finances, and not a liberation. In the fully federalised case, the scope of government responsibilities would be curtailed and handed over to a federal government. In the alternative governments would be heavily restricted by their ability to borrow in financial markets (which would do away with the need for the Stability & Growth Pact). This latter is, in fact, what many supporters of the Euro (including me) envisaged all along (though in my case I completely failed to grasp the difficulties of managing the banking system). It was rather a Thatcherite project. But others thought EMU would be a step along the path towards a federalised Europe. It was the unresolved conflict between these two visions of the Euro that got the system into its current mess.

And this conflict is still unresolved. But the federal vision is losing ground; there simply isn’t the political support for it. That doesn’t stop people in the European Commission from quietly pushing for it though. But those who aren’t convinced by the federal idea, aren’t convinced by the multi-state currency area alternative either. Why opt for a straitjacket? Wouldn’t it be more democratic and easier to say goodbye to monetary union altogether and let each country go its own way with its own currency?

And I don’t have the answer to that. One thing I will say is that the quality of economic commentary in the media is pretty dire. From this you would think that the advantages of having a floating currency make doing anything else foolish. But all Economics students are asked to do an essay on the pros and cons of floating currencies, and frankly it is not that obvious that either route is a winner. As a rule, the smaller and more open the economy, the more there is to be said for a fixed currency regime – which is why the Euro is popular with so many smaller EU members. Floating currencies reduce the effectiveness of fiscal policy, especially in such small and open economies. The rather loose fiscal policy of the Britain’s government in the 2000s caused the exchange rate to be too high, leading to a trade deficit and a hollowing out of British industry the country still have not recovered from. By contrast Germany has been able to maintain its industrial base within the Euro, albeit with some painful restructuring.

And a floating rate does not prevent banking bubbles. Iceland had one in parallel with Ireland, with its own currency. Recovering from the bust best no less painful for Iceland than for Ireland, though arguably not really any worse either.

But setting up a more secure banking system across the Euro area is no small thing, and its feasibility is an unknown. Against this, taking the Euro apart would be a huge undertaking, so there is there is much to say for trying to make it work on a rather less ambitious scope. Inertia is on the side of the Euro. But the starry-eyed enthusiam is gone




Greek crisis: the problem is loss of trust

The leaders of Greece’s Syriza government are clever people. They include university academics, well versed in modern economics, including game theory and the theory of negotiations. After yesterday’s decisive No vote in the referendum on settlement terms, these negotiators now feel they have a strong hand. I don’t share their optimism.

Unless you believe the conspiracy theories that Syriza’s real aim is to create a Venezuela in the Mediterranean, they appear to think that their EU counterparts and the IMF will be forced to negotiate because the consequences of not doing so are dire. What they seek are two things. First is that the level of government debt be reduced through forgiveness. The second is that the Greek government has a free, or freer, hand to follow an economic policy of its choosing, supported by fresh funding, primarily in the form of support for the Greek banking system by the European central Bank (ECB).

On the face of it neither of these requests is all that unreasonable. The moral case for debt forgiveness is a sound one. In the modern age more responsibility needs to be pinned on creditors to lend responsibly, and to suffer losses otherwise. The lending made to Greece before the crisis was not responsible, although misinformation from the Greek government contributed. This moral case is softened but still stands after two things. The Greek debt has already been substantially restructured so that the country’s interest rate burden is proportionately less than even Germany’s; the net present value of Greece’s debt is not nearly as high as you might assume for its nominal size. And now the debt has been taken over mostly by government agencies; the private sector banks that originally lent the money have mostly been paid off, after significant losses were forced on them.

And as for economic policy, the nominal Greek aim is to set up a virtuous circle of increasing demand that will help the economy to recover, so that its banks can repay the ECB, and that other lending becomes more sustainable. There is a familiar, Keynesian demand management logic to this. I think this is why so many respectable economists (especially based far away in the US)  support the Greek government’s standpoint. There is also a powerful argument about democracy – surely a democratic Greek government should choose its own path to a sustainable economy? The sight of so many unelected functionaries dictating terms to the Greek government has angered not just Greek citizens. I have seen many comments this morning about how the Greek referendum vote was a blow for democracy. The People have spoken!

So what’s the problem? International leaders are masters of fudge and pragmatism. Surely some kind of face-saving formula can be found that will be better than the consequences of a collapse of the Greek banking system? This is now a clear and present danger. Greeks having been withdrawing deposits from their banks, making the system insolvent. Since this looks like a temporary problem, the ECB has been prepared to prop the system up with emergency funding, awaiting the return of those deposits once a new deal has been struck. But last week this support was cut off, as the confidence of European governments was shaken about the ability to do any deal, when the Greek government called the referendum. With the referendum done the outgoing Greek Finance Minister, Yanis Varoufakis, suggested that this funding would return while a new and more reasonable deal was in prospect. Mr Varoufakis, who had taken to lecturing his European colleagues on basic economics, even resigned to make such a deal easier to negotiate.

But all negotiations are built on trust. You have to believe that your counterpart will stick to their side of the deal. And this has always been the problem with Greece and its creditors. What these creditors fear is that the Greek government do not put their economy on the path to true sustainability, and that it and the country’s banks will continue to need injections of foreign money without any real prospect of these being repaid. And this further support will have to supplied or underwritten by fellow European governments. There is little feeling of solidarity with the Greeks from other European electorates. Better off countries, like Germany, Finland and the Netherlands are outraged about the prospect of more taxpayers’ money being sent to countries that they see as feckless. Many east European governments, like Slovakia or Lithuania, are poorer than the Greeks overall, and see no reason to let the Greeks off; in some cases they have been forced to endure harsher austerity regimes than the Greeks were. Governments in other countries that have been subject to bailouts, Spain and Portugal in particular, do not want to give an easy victory to Syriza, lest it encourage similar movements in their own countries.

And why isn’t the Greek economy sustainable? This is a familiar combination of corruption, clientalism and ineffective government. Tax collection is inefficient; many benefits are too generous; there are too many meaningless publicly funded jobs. Many Greeks are entrepreneurial and hard working, but overall the economy does not pay its way – consumption is sustained by net imports. To create something more sustainable would require a programme of reforms, most of which would be politically unpopular. They would also suck demand out of the economy in the short term, i.e. they involve what has become known as “austerity”. Some theoretical economists, like Joe Stiglitz and Paul Krugman, seem to think that economic reform programmes can be designed without austerity. But this requires a favourable context and an efficient government – which does not apply here. The commonest way for such reforms to be imposed is through the government following a programme designed by outsiders, such as the IMF. Or else it is the threat of such an intervention that forces governments to act. These outsiders become convenient scapegoats, but in the longer term the reforms may be popular, as they deliver a healthier economy.

But the hidden background to the current crisis is that the Syriza government has not offered any convincing programme of reforms, while reversing reforms enacted by its predecessor. You wouldn’t guess this from listening to their smooth-talking spokespeople on the international media. But the Syriza movement contains many with more extreme, anti-foreigner views, limiting the government’s ability to act. The IMF in particular have found their plans utterly unconvincing. Politically they seem happy to go after rich people to tax them more. But rich people’s money is a notoriously elusive quarry; and the government is unwilling to take on any other reform with a political cost.

So what are the European governments to do? They are the critical parties on whom a deal depends. They have been humiliated by the referendum. Their electorates are telling them to not throw good money after bad. Their expert advisers suggest the Greek offers of reform are unconvincing, which means that the crisis will simply repeat itself. Over the years they have increasingly embraced an idea that had been unthinkable: that countries may be able to drop out of the Eurozone. The political costs of a negotiating failure have never been lower.

So what might happen? This depends in some measure on how well-prepared the Greek government is for this moment. If they have in their back pocket a credible compromise deal that saves some face for the European governments, we might pull back from the brink. Mr Varoufakis’s resignation is a good start, it has to be said.

What are the ingredients of such a deal? The Greek banking system must be at its heart. The banks must be recapitalised using external capital. They need to be insulated from the Greek government – in other words the money supplied by outsiders shouldn’t be simply channelled into government debt. Something needs to be offered to reduce the principal of older debts – though perhaps the interest bill can be kept intact. The Greek government can then be left to work its own way out of its short-term economic problems.

Such a deal would point towards the sort of reforms that might make the Euro more sustainable. Separating the banking system from government, with a more centralised regulatory and ultimately deposit insurance scheme. A resolution system for insolvent governments that means debts can get written down quickly. More nominal freedom for government fiscal policy – with discipline forced by bond markets, not EU agencies.

Such a deal would be a way forward. But it still needs trust. Alternatively the Greeks will have to create a quasi-currency of their own to keep their banks afloat – a first step towards the Euro exit. I am not optimistic.