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Month: November, 2011

Russian Elections Will Be Fixed in the Regions

The Russian people will vote on Sunday, but the final result has already been decided. United Russia will win 59.7% of the final vote, and the turnout will be 56%. The Communist Party, the Liberal Democratic Party of Russia and Just Russia will all scrape past the 7% electoral threshold, providing various shades of political vegetation in the sixth Duma.

Russia’s public opinion research centre, VTsIOM, published this ‘forecast’ yesterday; the methodology is revealing.  The report starts by polling 1,600 people across Russia using conventional methods. The raw data is probably a fairish reflection of Russian public opinion:  United Russia, 45%; the Communist Party, 13%; the Liberal Democratic Party of Russia, 10%; and Just Russia, 5%.

A few sleights of hand turn the opinion poll into a ‘forecast’ of the final result.  First, the raw data are adjusted to take account of predicted turnout and the likely effect of the 7% threshold.  Then the figure is amended to incorporate the deliberations of an ‘expert panel’. In the final calculation, United Russia wins 59.7% of the vote, the Communist Party 19%, the Liberal Democrats 11.3% and Fair Russia 8.8%.

The identities of the ‘experts’ massaging an extra 15% into United Russia’s vote are, of course, a closely kept secret.  But they are not relying on instinct to predict the final result.  Russia’s governors (all Kremlin appointees) have been allocated quotas determining the United Russia vote share that they must secure in their region.  Then they must deliver voters, dead or alive.

Some governors enthusiastically exceed the Kremlin’s demands.  In 2007, the Chechen governor, Ramzan Kadyrov, was top of the class delivering 99.36% of his region’s vote for United Russia.  Over ninety percent of the vote also went to the party of power in Ingushetia, Kabardino-Balkarskoy, Mordovia and Karachaevo-Chekesskaya.  It is hardly surprising, then, that Russia’s governors have been dubbed ‘locomotives’ (parovozi) because they drive United Russia to victory.

But the current government risks outstaying its welcome.  Public support for United Russia is falling and, even with ‘assistance’ from the regional governors, the party is predicted to win 50 or 60 less seats in the Duma than in 2007. Vladimir Putin, a politician who always seemed invincible, was booed at a recent martial arts event in Moscow. United Russia’s leaders are getting their excuses in early, pointing to the strong anti-incumbency mood sweeping Europe.

United Russia should face few real obstacles to gaining an overall majority on Sunday.  For the time being, Joseph Stalin’s adage remains true:  “It is enough that the people know there was an election.  The people who cast the votes decide nothing.  The people who count the votes decide everything.”

Without a Government, Belgians Innovate

After 600 days without a government, the ever-worsening euro-zone crisis finally forced Belgium’s bickering politicians to form a government.  But a grassroots movement, G1000, had already moved to fill the void.    Their idea?  That 1000 randomly selected people should gather in Brussels on 11th November 2011 and discuss a set of pre-determined proposals.  After that, a smaller group of citizens would work with experts to thrash out detailed proposals, eventually making recommendations to the whole country in April 2012.

The G1000 movement argues that elections are no longer a useful part of the democratic machinery.  They happen too regularly, and voters are so assertive and critical that politicians live in a permanent state of pre-election neurosis.  They make promises at election time, and then refuse to compromise for fear of being punished by their core support.  This problem is particularly acute in Belgium, where the electoral system means that no compromise equals no government.   However, the spectre of squabbling politicians failing to reach cross-party compromise can also be seen elsewhere. In the last few weeks, the United States’ deficit reduction ‘supercommittee’ drew a blank after several months’ deliberation, its members fearful of losing core support and big funders.  At some point, it seems, compromise and principled decision-making became mutually exclusive.

So, how did the Belgian G1000 experiment go?  Around 700 people turned up in Brussels, and 500 more joined via satellite meetings.  An impressive turnout.  The most popular proposals were fairly right wing: limiting unemployment benefits to a fixed period, lowering company taxes and compulsory integration tests for immigrants.  These ideas had all been around the political carousel a few times, but had never found a majority in parliament.  The G1000 organisers will now flesh out these proposals and report back in April.

There are obvious risks in such a system, not least that the tyranny of the majority could have a damaging effect on minority rights.  The European Convention on Human Rights would act as a strong break on worst lapses. But the inaugural meeting confirmed that 1,000 randomly selected citizens are not particularly sympathetic to the needs of the long-term unemployed or immigrant groups.  What might happen to the interests of other minorities with low political capital, for instance people with disabilities?

The central premise behind G1000, that elections are harmful in modern democracies, is an interesting one that deserves further debate.  Would politicians make better decisions if they didn’t have to answer to their electorates every four years?  Would a group of 1000 ordinary citizens, randomly selected from an electoral role, be better at making difficult decisions than career politicians?  How would accountability work in such a system?  Or do elections fail to provide accountability anyway?

This blog will follow the G1000 as it develops.  Having effectively involved new people in political discussion, it may yet become an influential pressure group, reminding politicians of the need to rise above party politics in these difficult times.  But are we witnessing the end of representative democracy as we know it?  Probably not, but it does no harm to experiment with new ways of making decisions.

Collapse of Baltic Banks not Eurozone Crisis Related

UPDATE (2nd December): The Lithuanian government will need to find up to €1 billion next year to cover deposit insurance after its 5th biggest bank, Bank Snoras, filed for protection from its creditors on 24th October.  This will put great pressure on government budgets, leaving no reserves to refinance maturing debt.

Meanwhile, Vladimir Antonov, who owned 68% of Snoras (and Portsmouth Football Club) has appeared in court on asset stripping charges.  Both Mr Antonov and his business partner, Raimondas Baranauskas, were released by Westminster Magistrates’ Court, London, on conditional bail.

 

The collapse of the Lithuanian bank, Snoras, and it’s Latvian subsidiary, Latvijas Krajbanka, has been widely reported in the UK media within the context of the worsening euro-zone crisis.  The reality of the situation is somewhat more dramatic.  The Lithuanian authorities have issued an arrest warrant for the former shareholders of the bank, Vladimir Antonov and Raimondas Baranauskas, who are suspected of large-scale misappropriation of assets.

The Lithuanian authorities had hoped to bail out Snoras but, as the extent of the false book-keeping emerged today, it became apparent that this would not be possible.  The Latvian government, which is currently preparing an austerity package to reduce its budget deficit, was unable even to consider bailing out Latvijas Krajbanka.  The collapse of these banks is a further setback for the Latvian and Lithuanian economies as they struggle to recover from deep recessions.

Can Germany Quash the Euro-Zone Fire?

The Financial Times has described Germany as the ‘only first class passenger on the Titanic’, lamenting its reluctance to fire up the European Central Bank’s printing presses to prop up the euro-zone.  But German reticence is hardly surprising, given that German voters are overwhelmingly against this move.

From the beginning of this crisis, the necessities of politics and economics have been at odds with each other.  Economists argue that voters simply don’t understand the gravity of the situation.  That is true.  Some of the financial games that have been played out through the last two decades of lax regulation are, indeed, almost beyond comprehension.

But the real sticking point is more fundamental.  It’s a classic collective action problem. Even if the benefits of cooperation were guaranteed (which is far from the case), ordinary people find it hard to understand why they should pay to solve other people’s problems.  This is even more the case when it is perceived that the poor are being asked to bail out the rich, and that it is perceived that the problems have been caused by profligacy.

The FT writes that the ECB will not print money until countries threaten to leave the currency union and customers line up outside banks demanding their money back.  Maybe they are right, but I’d be surprised if Germany takes this action in any circumstances. Public tolerance for propping up other countries has now reached its limits, not just in Germany but in other less-indebted countries. 

The markets should not hold their breath for closer political and economic integration.  It may be essential if the euro in its current form is to be saved, but the politics suggest that many countries’ voters would sooner consider losing the euro, regardless of the short-term consequences.  In that case, the fire of the euro-zone debt crisis will continue to burn until it runs out of fuel.

Democracy and the Eurozone Crisis

I’m quite heavily invested in the idea of representative democracy.  Everyone has a chance to have their say, everyone agrees to live with the result.  There is no need to lock up dissenters.  When leaders pass their peak after two or three terms, democracies have a mechanism to replace them.  This ruthless cull ensures that almost all political leaders’ careers end in failure.  But things seem to have changed.  These days, politicians want to win votes so they can’t take tough decisions.  Or else the people are stupid and keep voting for idiots like Berlusconi.  That appears to be the logic behind installing economists to run Greece and Italy.

The installation of ‘technocrats’ is supposed to be a temporary solution, designed to push through austerity measures that democratically elected politicians have shirked.  On paper this sounds like a plan, but some dangers lurk in the small print.   Tough austerity measures taken by unaccountable economists, who many blame (rationally or not) for causing the crisis, may push voters into the arms of radical populists.  And there is no guarantee that technocrats will successfully introduce austerity where democrats have failed, at least not within a year.  But, most worryingly, it sends the message that some situations are too urgent, or too serious, to be left democratic chance.

In much of Europe, the bond markets and the credit ratings agencies have been setting the pace, leaving little time for debate.   According to the inexorable logic of the debt trap, a ten percent pension cut is more than swallowed by a rise in interest rates on government debt.  How does a democratic government try to sell that to its people?  Alternatively, how does a new democracy like Slovakia, admitted to the euro-zone only recently, persuade its people that they should bail out a relatively wealthy country like Greece?  It is hardly surprising that democracy is facing its biggest challenge in three generations.

Three euro-zone governments (Slovakia, Greece and Italy) have fallen in recent weeks.  Economic problems are starting to have political consequences, and this is only the beginning.    The most optimistic scenario is that adversity will revitalise democracy, and that both leaders and citizens will rise to the challenge.  The most pessimistic scenario roughly involves a re-run of the 1930s, something that should be concentrating minds more than it seems to be at the moment.  As ever, the most likely outcome is somewhere in between these two extremes.  This blog will track political developments across the European Union, analysing the interplay of politics and economics as the eurozone crisis runs its course.

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