Leaders failing.

Leadership is an interesting concept, and I have tried to make it the centrepiece of some of my novels, without being too obvious. The leader may appear to be obvious, but recall just because someone is in front and there are a lot behind does not mean the one in front is leading. The others could be queuing up for a backstab! And the bigger the problem, the easier it is for a leader to fail. Brexit is a clear failure of leadership. In the first place, Britain was comfortable in Europe. There were the inevitable politicians who wanted out, but there was no pressing issue requiring an immediate vote. The politicians who called it really wanted to stay in, so first, why did they call it, and second, if they felt they had to call the vote, why did they not wait until they had mounted a campaign that made it much more likely they would succeed? Having called it, they then should have campaigned hard to maximise their chances of winning. Instead, they went through the motions, and seemed like stunned mullets when they lost. They then accused the other side’s campaign of being full of lies. That might make them feel better, but if it were true, why did they not point out the lies during the campaign? Did it not occur to them that when the voters voted the way they did, just maybe what the politicians and their rich friends wanted was not representing what the voters wanted?

As for how to go about it, there are at least two pieces of advice from Sun Tzu that should have gone to the top of the list: first, know thyself, and second, know the adversary. The second one is a little more difficult but the first should be mandatory. Accordingly, the first step must be to decide whether to leave, i.e.whether to honour the referendum, and whatever you decide must be final. At first sight it might look like they did that, but nevertheless a lot of the politicians have been hoping some reason will arise whereby they can flag the whole thing away and stay. What I think Theresa May should have done was to individually make each member of her own party pledge to honour the referendum, and to work for the betterment of Britain, or resign. If they refused to do either, then she needed to call an election, and ensure those who refused to go by the decision of the party were prevented from standing for the party. That could effectively be a second referendum, but it is pointless to continue when about a third of your team are busily trying to undermine you. In any case, she called an election without anything to do with Brexit, and that was not a fortunate result for her. Had she got her party to commit, when she went to Europe she could say Brexit is going to happen, no matter what. What we are now discussing is what our relations will be then.

That leaves the question of negotiation. I have done a little of this with a multinational company that lead to two joint ventures, so I have some knowledge of what is required. The very first step is to meet with your own team and get agreement on what the bottom lines are going to be. These are the things that if you do not get them, you walk away from the negotiations. It is important that these are extremely important, and there must not be many of them. These are NOT to be used to gain an advantage over the opposition, and they are not to try to force the other side to give something up. They are simply the things that make walking inevitable. For the Brexit negotiations, one of those required bottom lines might be the question of Ireland; whatever the outcome, Northern Ireland must continue to be treated the same way as the rest of the UK. That they never recognised this until apparently now meant that they have got themselves into a position where it is difficult to see how they can progress the way they wish to progress. If you tell the opposition that something is a bottom line, and it is a reasonable one, then they will accept it and try to work around it if they want to negotiate.

Which gets to the next point: each side has to see an advantage in the end position. To some extent, Europe cannot help but see Brexit as a negative, so the emphasis has to be to determine what advantages there are for Europe for what the UK wants. That means there have to be concessions, and here the UK have made many. However, there also has to be a clear point at which if the opposition wants too much, you have to be able to say no and walk. And one of the most important points is that when you represent your team, the other side must believe that all the team will stand behind you. Of course there are also times when you must say, “I must consult my team,” over something. The leader must never wing it, other than for minor issues.

The EU leaders have also failed. They have done their best to get everything they could, which is all very well, but if they demand so much that the whole becomes unpalatable, they too end up with nothing. What they have failed to recognise is the person fronting for Britain was not really leading. So far Britain has made quite a lot of future concessions regarding payments of this and that. No deal means all those billions of pounds are lost to the EU. The EU can also lose, and the tragedy is, the various failures of the leaders have most likely ended with a lose-lose scenario.

To change the subject entirely, Christmas is near, so I wish you all a very Merry Christmas, and all the best for 2019. This will be my last post for the year, and I shall resume mid January.


Why Are Countries Separating?

In many of my futuristic novels, I have selected a form of government to be in the background. Thus I have had a theocracy, a dictatorship, essentially no government (for the initial settlement of Mars), anarchy, crumbling “democracy” (i.e. our representative republic), real democracy, and finally, something else that I shall call federalism. The concept behind federalism is that a number of countries willingly join a Federation, and on most issues they continue on as they have always done, but there was also an over-riding Council whose function is to set a limited number of rules, and act as referees to make sure the various politicians in the countries behave. Another function is to provide factual information, and prevent political movements from achieving goals by lying. (Hey, I thought about “fake news” before it was popular, but that of course is hardly true either. Telling lies to get votes was bread and butter for the politicians of the Res Publica, and many of the inscriptions on the walls of Karnak by Ramses II had little relation with the facts.) This Federation also has to deal with the futuristic problems that we can see now, such as energy availability, resource allocation, climate change, etc. Interestingly enough, at least for me, the problems upon which the novels depended invariably arose from a similar source: people gaming the system. That may merely reflect my lack of imagination, but I rather fancy that any system will work well if all the people try to make it work. Most Romans thought Augustus was a great leader, even though he was effectively a dictator and probably the greatest manipulator ever.

The plots of these novels focused on how people were trying to get around the various rules. If there were an underlying message here, it was that rules only really work when people can see the point in them. A classic example is road rules. I suspect most of us have, at some time broken the speed limits, and while I have no intention of being specific and attracting unnecessary tickets, I know I have. I actually try to obey parking limits, but some times, well, something happens and I can’t quite make it. However, wherever I am, there is a rule on which side of the road I should drive on, and I keep to that assiduously. There is no specific preference – some countries drive on the right and others drive on the left, but a country has to choose one and stick with it, otherwise there are messy collisions all over the place. Everybody sticks to that rule because they see the point. (Confession time – once I did not. I came over a rise in Czechoslovakia, it was pitch black, and there was a little fire to my left. Suddenly, I realized the problem – there was a tank with camouflage netting parked in the middle of the road. I evaded around the left, not the right, because being in a British car I could better see the space I could use on my right, and also because I was better trained in sliding on gravel, etc, at speed and getting back on the road from that side. Must have given the tankers a bit of a fright. They would see a car first coming straight at their tank at 100k, then it would evade towards them and start sliding sideways, sending up showers of gravel from the side of the road.)

However, the point is, in general people will happily accept such rules if they see a point to them. Which side of the road you should drive on has a very clear point. The speed limit, perhaps less so. We recognize that road construction usually requires speed limits but I know that in some hilly terrain, overtaking a truck would be more important than sticking to a number. The problem with such rules, though is the rule makers seem to get carried away and think there should be rules for everything.

Some may recognize this Federal system. I made it up in the 1980s, and I was inspired in part by the European Union. You may recall at that time there was talk of the currency being the ecu, or European Currency Unit. Accordingly, in my novels I invented the fecu, however I put in one rule that Europe ignored. (They should have consulted me!!) In the novels, the fecu is used for transactions between companies and major corporations, and has a fixed value, a sort of resource standard. However, salaries in different countries, and goods in different countries, are paid in dollars, drachmas, whatever, and the average citizen never sees a fecu. I think the euro is a weakness of the EU because I don’t think you can run a common currency when countries have different economic policies.

Another question is whether the UE, through Brussels, has too many rules. Some say yes, others say no, but in the various discussions on Brexit, there is a lot of talk about untangling the thousands of rules. If that is a problem, there are too many of them. Good rules have a wide acceptance, and they could stay.

Which naturally brings me to the French election. All the commentators I have read say the French were upset over EU rules, and wanted change. So, what do they do? They elect a plutocrat, a banker! Trust the French – reminds me of “plus ça change, plus c’est la même chose” (Jean-Baptiste Alphonse Karr) which translates out as “the more it changes, the more it is the same thing”. So, how do you get rid of the rule of plutocrats? The French elect one. The British go the indirect way and try the “go it alone” way. Neither will probably work, but in answer to the title question, I think it is because so many voters have given up on traditional representatives acting in the interests of the population at large they are prepared to try anything.

Logic, and the premises behind Greece’s decision to accept greater austerity.

Greece has voted against austerity, then in a true example of democracy at work, the government has decided to accept even more austerity from the EU than they rejected. What will happen is anyone’s guess, but there are two interesting developments. The first is the IMF has apparently warned the Eurozone members that what they are imposing on Greece simply will not work. The second is that the European Commission is proposing to use the mothballed European stabilization mechanism to provide the money for the bailout. This means that all EU members have to pay to protect the Euro, irrespective of whether they use it. Great news for Britain, whose objections are being turned away by, as you might guess Wolfgang Schauble, the German finance minister. The mess was caused at least in part by German banks, Germany got the ECB to save them at the expense of Greece, and now Germany wants to spread the consequent price. A vote in the EU will mean all the euro users will vote to minimize their own payments. Truly, democracy at work, where self-interest beats the numerically inferior over the head as often as they can get away with.

The question then is, why did Greece not simply pull out of the Euro? Logically, it should do whatever it can to better its situation, but it seems to have done the opposite. I saw an item on the web by Dimitrios Giokas that claimed there would be twelve devastating consequences if Greece returns to the drachma, and perhaps this sort of reasoning led to this form of stupidity. Let us look at these devastating consequences.
1. Rapid devaluation of the drachma against other currencies. The answer to that is to let it float. Yes, it may drop dramatically at first. In the mid 1980s, a New Zealand government under financial strain (although not as bad as Greece’s) floated the dollar and in an hour or so, it lost over a quarter of its value. Basically, the speculators piled in and shorted it. But, at a later date, they have to cover their bets, so within a month, it started to rise again. Note that none of the speculators will have drachma, so they have to cover quickly.
2. The devaluation will lead to skyrocketing inflation. That is sheer speculation, and it depends on government policy. Hitler defaulted, introduced a new currency, and there was no inflation. On a milder side, when the New Zealand dollar lost a quarter of its value, yes, there was some inflation, but not excessive inflation. On the bad side, as one commentator noted, Greek governments are not very good at doing things, so this one is up in the air. It is not necessary, but it could happen.
3. Capital flight and a sharp increase in non-performing loans. First, there will be no significant capital flight, because it has already flown, and in any case, that can easily be stopped. As for non-performing loans, who owns them? If weak companies go bankrupt, that is sad, but does anyone seriously think that more austerity from Merkel is going to save them?
4. In such an eventuality the wage and pension freeze payment will be inevitable. Not necessarily because the money to pay wages have to come from somewhere, but so what? As for a pension freeze, Merkel the merciless is imposing pension cuts. The author says there will be social unrest. There will be social unrest if there is more austerity. There is no way it would be worse with the drachma, and it might be better. The real danger is with greater austerity the pain level is too great and Greece has a military coup to put in more effective policy implementation. (Whether it will be is beside the point; coups always believe they are the solution, even if they are not.)
5. Gross domestic product will likely shrink to about 2/3 of the current level. Why? Where did this figure come from? I cannot help thinking that this author made up figures to make his case. In any case, bowing to austerity will greatly increase the debt load, and GDP has been calculated to drop by at least 10% of current by respectable economists.
6. The public debt of Greece, totaling 322 billion euros, will increase automatically. Um, if you default, the debt vanishes. Yes, you do not get credit, but so what? The interesting thing about 322 billion euros is, if you are going to default, you do not have the problem: the other banks do. They get nothing if they impose conditions on you that make it impossible to pay back anything.
7. Even if, after bankruptcy, a partial debt restructuring follows, it will not be painless. It will be accompanied by a new rescue package (only from the IMF now) and very burdensome fiscal adjustment measures. Not if you default. Certainly, you get no credit, but remember, you were always in a no-win situation.
8. There will be an equal increase of private debt through the skyrocketing of lending and depositing rates in an effort to control inflation. Interest rates will have to be high, but who is lending? You cannot lend drachma if you haven’t got any, so euros will have to return. There will have to be controls, and some of the regulations will not be pleasant for some, but stamping down on speculators will probably keep this under control.
9 Suffocation of import business due to a weakened market and lack of credit. Certainly, but this is to some extent what is required to get the Greek economy back on its feet, and it is hard to see greater austerity leading to an import boom.
10. Failure of imports will bring shortage of essential items on the market. The “essential items” noted are food, and this is serious. If other countries absolutely refuse to provide Greece with any access to foreign currency, it is in a serious mess, but do countries want to be known as the countries that are starving the Greeks out of spite?
11. Invasion of predatory foreign investors. Not a problem. Prevent them from taking advantage of the situation. Note also that under Merkel’s proposal, 50 billion Euros of Greek assets will be sold. Why is this not a predatory invasion?
12 Diplomatic and economic isolation of Greece, and a problem with defence. Certainly there will be consequences, but defence is not a problem. Greece will remain a member of NATO, and even if Germany would be reluctant to help, can you think of any neighbor that is just aching to take on the US military?

To summarize, in my opinion, people who think like Giokas are stuck in thinking that Greece has to follow their rules. That does not have to be the case. Recall that Germany defaulted several times in the 1920s, then Hitler stabilized it. Quite simply, foreign predators were told to leave, now. Repayments of debt were not paid. Inflation did not go rampant, in fact rather dramatic inflation was stopped. There was no capital flight, and no businesses were allowed to suffocate. Capital flight did not occur, fraud stopped, speculation more or less stopped, and everyone played by the rules to stabilize the country. Of course, this was in part because there was Oranienburg for those who refused to cooperate, and that might be a step too far for Greece, but even under lighter enforcement of rules, you can get out of this. Argentina did. It is not easy, and if the Greeks want to live well, then they will have to accept work and taxes, but there will also be new opportunities. The Greeks have to take them when they arise.

The real problem for Greece is that it has to persuade the Greeks to work competitively and to pay their taxes. There has to be a stop to consumption based on borrowing, and replaced with consumption based on work. There has to be investment and Greece has to develop a more education-based economy. That is the real problem for Greece, but austerity is not going to help in the slightest.