Tag Archives: state expenditures

2013 – 2018 EVT – Involution (Mamominarch)

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Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. To face the various difficulties and widespread discontent, in a first scenario, Everstate’s governing bodies implement as policies the conclusions of the Mamominarch Commission: a programme of drastic reduction of public expenses over five years through devolution, privatisation and outsourcing. By 2018 EVT, the policies do not lead to a current account surplus as expected nor to a reimbursement of public debt but to a rising current account deficit as well as to the withering away of the nation’s income.

(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading – research note at the bottom of the post).

The withering away of the nation’s income would imply, under a system other than Mamominarch (minimization of state’s spending as core principle), an acknowledgement of the need for new resources and income. Here, however, considering the core beliefs upheld, this is impossible. Yet, taxes still exist, including the new, temporary ones decided back in 2012 EVT. Those should allow bridging the gap until the budget situation becomes balanced again and a large part of overseas debts is reimbursed. Now, as the overall income of the nation shrinks (added to other linked factors) and as no new resources are looked for, the overall level of resources extracted decreases, despite the 2012 EVT supplementary taxes. This, in turn, does not lead to a balanced budget as hoped, but to a renewed deficit, although smaller. Meanwhile, debts cannot be reimbursed.

Going on trying to balance the budget through the Mamominarch system will only lead to a regressive spiral of further reductions of state’s expenses, which, in turn, will mean less income for the nation, which will imply further slahes in state’s expenditures, etc.

The shrinking of the income of Everstate as a nation also impacts the power of the ruler, i.e. the nation and its governing bodies. This weakens, unsurprisingly, the bargaining position of the ruler regarding the elite and the strength of the central order. Those impacts are in line with the Mamominarch system, which promotes privatization and outsourcing on the one hand, devolution, on the other.

Another factor seriously undermines the power of the nation and of its governing institutions: the dissolution of the legitimate monopoly of violence. First, outsourcing spreads when external military pressures and threats do not relent. Meanwhile, outsourcing  added to an ever weakening central order and power means less control over the way threats are perceived, monitored, labeled and faced, while the entities perceiving, monitoring, labeling and acting on the threats are driven by profit and not by national interests.

Then, local criminality and organised crime are on the rise. In the poorest areas of Everstate, the minimal level of local public funds makes it difficult to hire the police force necessary to face rising difficulties, and impossible for private contractors to take over as benefits would be too low. Nationally, despite Novstate’s central database and communication system, the delocalisation of police force and the use of multiple private contractors makes it extremely complex to follow, analyse and understand flexible criminal organisations used to take advantage of weaknesses of central power, while coordinated action is even more difficult. As a result, spreading pockets of lawlessness develop, while Everstatans start experiencing very different lives according to  where they live.

Finally, the withering away of the nation’s income impacts Everstate’s governance.

True enough, devolution, increased reliance on the Regional Union and management by the private sector were meant to compensate such probable impacts. However, as seen, things did not work this way on the whole territory and governance increasingly becomes fragile, and less efficient.

As further example, the sudden inflow of capital and arrival of highly paid foreign executives at the beginning of the Mamominarch period led to a sharp increase in real estate prices in those areas favoured by foreign investors. As it had not been anticipated, and as, anyway, it favoured real estate owners, notably elite groups, it was considered as positive. Yet, the real estate boom also created a difficult situation for local people, as wages remained frozen considering the otherwise uncertain and even negative global context. In those cities, areas and villages where the real estate boom occurred and where prices still remain very high, demonstrations and protests take place.Yet, they are never of a national scope – as different places are impacted differently – and rarely mentioned beyond local news. Those responsible for local governments do not either report them to central authorities as, anyway, at national level, there is no one in charge of this problem anymore. Each locality deals with the problem solely according to its own idiosyncrasies, and with its own resources, which impairs the implementation of sustainable solutions.

In those areas of the East and South, which have not attracted foreign investment, unemployment rises, poverty and inequality increase and a feeling of injustice deepens and spreads. Yet, these provinces used to be rich as they were those where agriculture had traditionally been done. But now, even rising food prices do not allow smaller exploitations to live properly considering the surging cost of life, notably generated by unmitigated new resources’ conditions. Left to their own device, without any help from local administrations too poor to do anything, people migrate away to richer areas, where they are used as cheaper labour. As the situation is far from full employment, they generate hostile feelings from the indigenous populations who cannot compete. Completely new tensions, declined in nationalistic terms, start appearing, when none existed previously.

Meanwhile, some wealthy Everstatian entrepreneurs start buying land in those areas at a very low price. For example, one of them is contracted by a foreign company, Novcybio, which develops new biotechnologies, to test its products on his land for a high premium.

Everstate’s economy has grown very inefficient for the vast majority of Everstatans. The security provided to Everstatans has not only not been improved but, on the contrary, is degrading.

We are thus back to dynamics similar to those existing in 2012 EVT, before the Mamominarch Commission, but to those must now be added the unintended unfavourable  impacts specific to the Mamominarch system.

This is when tragic events strike.

To be continued…

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Further research

As we progress in the scenario, it becomes obvious that the initial model could be improved along at least two lines:

  1. As noted initially, if the model was computerised, we should be able to truly follow dynamically, time segment by time segment, the evolution of the situation. Here, because of the absence of such a computerised power as well as for the sake of narration, we have to take a much less detailed approach and to synthesise it by broad themes. This leads us to reflect upon the way we are used to organise and present our thoughts, more according to categories than to dynamic processes, and that could, in itself be an impediment to a proper handling of transition situations, when “everything seem to happen at once.” Research on other ways to present situations, that would nevertheless be appealing and cognitively understandable could be rewarding.
  2. Recalling the difficult problem of levels of analysis, as identified by Waltz (1959), it would be interesting to develop also the model on different layers, i.e. global, regional, central and national, local, according to the various existing layers of governance.

Kenneth Waltz, Man, the state, and war: a theoretical analysis, New-York: Columbia University Press, 1959.

2013 – 2018 EVT – A Current Account Surplus? Think again! (Mamominarch)

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Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. To face the various difficulties and widespread discontent, in a first scenario, Everstate’s governing bodies have transformed the conclusions of the Mamominarch Commission into policies. They have thus started implementing the programme of drastic reduction of public expenses through privatization and outsourcing, transfer of responsibilities to local administrations and increased reliance on The Regional Union, accompanied by a temporary increase in income and consumption taxes. The first months of reforms have been successful and the situation appears to improve.

(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading – research note at the bottom of the post).

trade exports s3

Everstate’s capacity to reimburse its debt should also come from a positive current account, fed, in part, by a positive trade balance, aggregating results in trade of services and trade of goods.

Trade balance (1)

Initially, the well-educated population and the disappearance of many positions of civil servants leads to an abundance of expert personnel. Through Novstate and its friends companies, benefiting from the positive perception the reforms undertaken in Everstate generate, the export of services skyrockets.

However, with time, it is becoming increasingly difficult to send children to school. The provinces have now to manage the education system alone or with the private sector, and the latter sees no immediate interest in funding primary or high schools.  Private schooling becomes the norm, and  weights heavily on the budget of the less well-off.

If the best-known universities find some funding with the new inflow of capital, this is restricted to specific branches, namely finance, economics, some areas of politics, war strategy and tactics thanks to Novstate, IT and some technologies of direct interest to the companies having invested in Everstate. As a result, research greatly suffers. To compensate the absence of public funding, universities triple their fees and only the most fortunate families can now send their children to universities. Scholarships almost disappear. The banks are not interested anymore in lending to students as the benefits are too small and as students, most often, have no guarantor. Local administrations send reports on this dreadful evolution to Everstate’s national representatives and to the central government, but the latter can only try to compensate through its yearly orientation paper, which has close to no effect as it is not assorted of any possibility of action. Hence, the number of well-educated and internationally competitive Everstatans rapidly dwindles.  Furthermore, those who could receive graduate and post-graduate education are trained exclusively in those approaches at one with the Mamominarch system. Hence, as time goes by, if ever the Mamominarch system is not proving to be the ideal solution expected, will they still be considered as adequate?

After the first months of euphoria and hope following the implementation of the Mamominarch policies, the educated youth finds itself in the same conundrum as previously, but with even less prospects. If new qualified jobs are created by the foreign and domestic companies investing in Everstate and by the new outsourcing contracts, those are given in priority to ex civil servants and to foreigners. As a result, already by the second half of 2013 EVT, except in the IT sector focused on online shopping and electronic payments, most young graduates and post graduates find themselves still unemployed or under-employed, taking whatever jobs they find in tourism or industry. At the beginning of the period, those with the best academic records, and who can afford it, try to migrate, but, considering the still uncertain global situation, few succeed. By 2018 EVT, the relative position of the Everstatan educative system is such that, added to the failure of their elders to escape, hardly any smart young Everstatan still tries migrating.

Overall, the export of services cannot grow anymore.

As far as the export (and import) of goods is concerned, those depends not only on human skills and workforce but also on available resources. Now, as seen, with the exception of the tourism industry, Everstate has to face domestic shortage or sharp increase in prices  (stemming among other causes of a relative decline in supply) for the resources it used to transform and to include in the goods it exports.

Furthermore, many of those resources – classical and new – needed by Everstatan producers  are not located on Everstatan territory. For example, for many high-tech companies, rare earth elements are a crucial industrial component.* However, those rare earth deposits are not present everywhere and in the same quantity, China being, currently, the lead producer.

This new condition regarding resources, as explained previously, should imply increasing tasks in governing, which, themselves, demand new resources and income for the ruler and its staff (including the need for new staff).   This, in turn, would mean further and new state spending, at least until the system is stabilised. However, as supplementary state expenditures are ruled out by the Mamominarch system, then the search for new resources and income cannot even be thought and thus novel strategies of extraction of resources can even less be identified. Thus, the increasing tasks of governing can be neither planned nor carried out. Worse still, the dismantling of so many services of the state makes it impossible to monitor, record and analyse what is happening.

As, worldwide, so many industries are competing for the same resources, national policies and negotiations are more than helpful, they are necessary. However, in Everstate, businesses cannot anymore benefit from such support and each company with supply problems must fend for itself. Each is now alone to find solutions, or it must turn to the Regional Union or to International institutions or try to find other private allies, which, in a world of hardened competition, may be hazardous. Meanwhile, other companies from other countries do benefit from their government’s support. Everstatans businesses thus find themselves at a competitive disadvantage. Indeed, relatively quickly, the young Everstatan industries dealing with those materials involving rare earth elements, for example, lose to competition. Either they go bankrupt or, when their technology is interesting, they are bought by foreign companies, which then re-localise according to their own priorities. By 2018 EVT, no Everstatan industry involving rare earth elements remain.

The situation regarding energy is similar, however with even worse consequences… to be continued.

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* Among others, for interesting estimates on the whole rare earth element market, see the analyses made by the South African company frontier Rare Earth, as well as their sources. For an example of use,  see articles on the electric car and corresponding batteries (although the importance and scarcity of Lithium for Lithium-ion batteries is disputed) e.g. David Biello, “New Energy-Dense Battery Could Enable Long-Distance Electric Cars: Material changes enable a new battery to store more electricity–and could boost the driving range of electric vehicles,” Scientific American, February 27, 2012; Shane McGlaun, “Science Researchers Create Fluoride Battery, Look to Replace Lithium-ion Technology,” Daily Tech (Blog), October 24, 2011.

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Further research

As underlined in the previous post, ideally, with more resources, notably a team of researchers and adequate computing facilities, the values attributed to variables should be quantified, when the variables are about quantities.  Notably, it would be very interesting, assuming we were able to enter specific times for each link, to test the variation of those time periods according to changes in quantities, and vice versa. It is indeed possible – or even likely – that thresholds and tipping points may occur according to such variations. More broadly, such hypotheses could also be tested on qualitative variables, methodology to be defined.

2012-2013 EVT – Implementing the Mamominarch conclusions

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Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. To face the various difficulties and widespread discontent, Everstate’s governing authorities decide to follow the conclusions of the Mamominarch Commission that recommend to drastically reduce state expenditures.

(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading – methodological or research note at the bottom of the post).

The Mamominarch conclusions become policy

All governing bodies thus adopt the conclusions of the Mamominarch Commission. New laws are enacted when needed, which is easily done as the major parties seating in Parliament were part of the Commission. The constitution is even changed to incorporate the new ideals and objectives. As top-level civil servants were also either part of the Commission or represented, legislation can be executed without any major impediment. Indeed, a mix of career and organisation related incentives*, as well as normative material and ideological stakes greatly facilitate execution at all levels.

As the major elite groups, including the lenders, were also present, no elite-prompted hidden opposition exists; liquidity and the various resources mastered by the elite, including the traditional mass media, are largely made available. International and Regional support by those organisations that were included in the Commission is strongly emphasised through various diplomatic gains and prestige attention. A few more  Everstatan officials and political figures obtain high level positions in various international fora.

Papers, articles, interviews and books from the various experts, famous people, and academics having been part of the Mamominarch Commission soon reinforce mass media support. “The Mamominarch break-through: reinventing true happiness” written by Novstate’s CEO and founder becomes an international best-seller, while Hollywood starts the production of the next blockbuster on the life-story of the successful businessman.**

As the new measures are heralded as the new type of governance adapted to the reality of Everstate and allowing for a happy future, in line with the worldview and its beliefs, citizens find back meaning and hope and accept the new laws and policies, although with some worries regarding the efforts they will have to consent. A few remain skeptics but their voices are muted by the majority and by the normative deluge of support to the new system. The unions hope that renewed growth will stop unemployment.

As a result, the Occupy Everstate movement loses many of its sympathisers. Furthermore, as the Mamominarch system means less state, the part of the movement that tends to embrace anarchism is satisfied. The presence of Evernet’s CEO within the Commission quells some of the fears regarding over-regulation of the Internet and online networking. Occupy Everstate tends thus to lose even more active supporters and apparently recedes. Its most active members can do nothing else than going back home. Yet, the links between them, notably through social networking are not severed.

Remains now to engineer the reforms and notably the delicate short-term transition.

Implementing the Mamominarch policies 

state and ruler expenditures s3

The variable upon which the Mamominarch Commission plays is “ruler and state spending” (see below methodological and research note).

The drastic reduction of expenses will reduce the deficit, stop borrowing and thus stabilise the interests, notably those paid abroad as a large amount of the debt is held overseas. However, the existing debt must also be reimbursed. This should be made possible overtime and as quickly as possible, notably with a positive current account.

First, Everstate must organise a temporary increase of resources extracted to meet the existing expenses, waiting for those to disappear or be significantly reduced. It must do so without impacting either the lenders’ nexus or the elite groups. However, as the overall situation has not yet changed (see 2012 EVT: Budget Deficit and Liquidity), the only way, as recommended by the Commission, is to sensibly increase taxes on personal income and on consumption, the latter being favoured as it is said to be less felt by citizens. To underline the temporary character of the effort a special contribution is created, “the salvation tax,” which will affect all tax payers incrementally and progressively and is perceived on all incomes (rate between 8% and 12%), will be paid as soon as 2013 EVT. Meanwhile a new tax on consumption of 3% on top of the existing ones, “the anti-debt tax” is applied immediately. Those taxes will be suppressed in five years.

The drastic reduction of public expenses is planned over a five-year period. All public services related to infrastructure will be decentralised and sold to the private sector within the next six to twelve months. All heath care related activities, and the whole pensions and retirement sector will similarly be privatized over the next two years. By 2017, aiming at  reducing the central civil service by 50%, whole sections of ministries will be priced and then sold, if the mission of the unit is seen as economically viable and better externalised, or transferred to a local administration. Services will then be paid either by the state or local administration through contracts following the outsourcing method, or directly by people, according to cases. Within the central state administration, the management of outsourcing is reinforced on an interagency or interministerial basis, while exchanges with The Regional Union for analysis and direction are increased. The education and university systems are considerably privatised and localised; Everstate, working hand in hand with the Regional Union, will keep only a mission of orientation and accreditation.***

With cuts equally divided in 5 steps, one per year, the foreign and diplomatic services, defense, intelligence and police budget are further reduced. Most operations of cooperation and aid will be the responsibilities of volunteer organisations and private firms within the year. Only the bare minimum of diplomatic presence will be kept, while analysis increasingly will rely on both private contractors and The Regional Union. The army will be further reduced across all functions, with a staggering increase in the use of private contractors, mainly operated by Novstate. The new cyber-division that was about to be created is contracted to a Novstate’s friend company. Police forces become localised and use of outsourcing through private security companies must become the norm. Novstate offers a centralised access to information and communication, besides operating many local police posts.

Within a year, state expenditures are already strongly reduced, but not sufficiently. As hoped, Everstate is upheld as model for having so efficiently and swiftly solved the problems that plague so many countries. The debt has been reduced through the flow of money generated by the privatizations. Income, notably taxes, is still insufficient to pay for  expenses, but the deficit is on its way to be reduced.

The success and the favourable environment attracts foreign capital, notably new banks, insurances and financial institutions developing new products, as well as foreign companies taking over some of the state services of Everstate, when those are not provided by Novstate and its friends companies. They mainly settle in Everstate’s capital. Foreign capital is also very active in allowing for the privatization of Everstate’s state infrastructure. CEOs, who think it would be more interesting for them to produce part of their goods in the Western provinces of Everstate, start building factories and hire local people. Meanwhile, medium to high-end tourism, notably in the snowy and mountainous North and on the coastal areas, is flourishing. Interestingly, the seaside area also attracts internet companies specialised in online shopping and electronic payments.

Unemployment, by mid-2013 EVT seems to be stabilised, even if it is not reduced. However, the brutal change of system has introduced a rampant fear, yet compounded by hope, in Everstatans as they see their income reduced and have to adapt to the new healthcare, pension system and to the whole new now privatized services. The answer to fear is a new harshness and selfishness in social relationships as each compete to try to earn more.

After those years of worry and stagnation, a real boom is starting to appear possible for Everstate, and its growth rate, although still low, is above those of its neighbours.

To be continued…

* See for an example of the way those incentives can interact, Nolan, Janne E., and MacEachin, Douglas, with Kristine Tockman, Discourse, Dissent and Strategic Surprise Formulating U.S. Security Policy in an Age of Uncertainty. Washington, D.C.: Georgetown University, Institute for the Study of Diplomacy, 2007; Chester A. Crocker, “Thirteen Reflections on Strategic Surprise,” Georgetown University, 2007.

** For dynamics between national security issues and apparatus and the movie industry, see Jean-Michel Valantin, Hollywood, the Pentagon and Washington. Anthem Press, 2005.

*** Some countries within the OECD are currently downsizing their civil service sector and  using privatization, with noticeable variations according to countries, see, for a study on the EU members, Forward Planning and International Affairs Bureau (B2), General, Directorate for Public Administration and the Civil Service, “Administration and the Civil Service in the EU 27 Member States: 27 country profiles” Republique Francaise, MINISTÈRE DU BUDGET, DES COMPTES PUBLICS ET DE LA FONCTION PUBLIQUE, 2008. With the 2010-2011 renewal of the crisis, downsizing in the public sector has increased, as for example, in the UK; government statistics on civil service employment since 1902. However, compared with the scenario used here, those changes have been or are  implanted over longer periods of time. For example, in Austria “The number of federal administration employees has fallen from 300,000 in 1985 to 133,000 at present” (2008). Further research on variations in the speed of the reforms and their impact would need to be undertaken.

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Methodological and research note

Working backward with ego networks

The method remains to use ego networks as previously. However, the model has been created in a forward manner, using existing work on state-building that takes as assumption an increase in needs and resources. Here the decisions taken in the scenario answer to a slightly different logic, as underlined in the previous post: they do not consider needs or state-building, but only a reduction of expenses.
We shall thus, in terms of ego network, sometimes have to work backwards, following the arrows from target to source to identify the value the source node could have, given the value attributed to the target node (this may also be seen as a variation on the method known as backcasting.)

Further research

Ideally, with more resources, notably a team of researchers, the values attributed to variables should be quantified, when the variables are about quantities. This will become even more obvious with the next posts.  Notably, it would be very interesting, assuming we were able to enter specific times for each link, to test the variation of those time periods according to changes in quantities, and vice versa. It is indeed possible – or even likely – that thresholds and tipping points may occur according to such variations. More broadly, such hypothesis could also be tested on qualitative variables, methodology to be defined.

2012 EVT – Scenario 1 – Mamominarch: Off with the State

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Last weeks’ summary: In 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of governance and of the modern nation-state) knows a rising dissatisfaction of its population. Plagued with a deepening budget deficit and an increasing need for liquidity, a related creeping appropriation of resources while the strength of central public power weakens to the profit of various elite groups and with an outdated worldview that promotes misunderstanding, disconnect and thus inadequate actions, the political authorities are increasingly unable to deliver the security citizens seek and risks to the legitimacy of the whole system increases. Alarmed by the rising difficulties and widespread discontent, the governing authorities decide to do something. Three potential scenarios or stories will be told: “Mamominarch: Off with the State,” “Panglossy: Same Old, Same Old,” and “Genuisy: the Making of History.”

(The reader can click on each picture to see a larger version in a new tab – a navigating map of posts is available to ease reading).

The Mamominarch Commission

Considering the difficulty of the problems at hand, and the need for a consensus among powerful elite groups, as well as regional and international actors, to see the array of measures applied, once they would be identified, Everstate’s government convenes a high level commission that must find out what has to be done.

The highest level of the government thus hand-picks to participate in the work: high level government and state officials, the latter representing civil servants, parliamentary representatives of the major parties, who had been in power alternatively for the last seven decades, famous economists Everstatan and foreign, the director of the Everstatan School of Liberal Politics, management experts, business leaders, notably the CEOs of Novstate and its friends companies, the CEOs of the largest banks and largest financial funds, business consultants, experts in new technologies, high level officials of the IMF and WTO and of the Regional Union. All powerfully stand for the normative order to which Everstate belongs and for the major entrenched elite groups. As an exception to this rule, the CEO of a very performing high-tech Everstatan company, Evernet, is also invited to represent the emerging elite group related to computing and networking.

After two months of intense debates and work, most often done by the staff of those personalities that participate in the high level working group, the Mamominarch Commission, as it is now known, reaches the conclusion that the root cause of the problems is an impossibility to match public expenses with public income, even in times of economic growth, and thus that the obvious solution is to drastically lower public expenses.

Structure of general government expenditures 2008 (OECD 2010)

Of course, this solution is designed in terms of expenses and not of needs, but is it really a problem? The normative model of the time, which has been just so successful into bringing wealth and growth, upholds free entrepreneurship, free trade and free market as ideal. Meanwhile, the state and especially its bureaucracy tend to be seen as expensive and inefficient, obviously unable to adapt to the new conditions as the deteriorating situation proves, and furthermore unable to contribute to ensure its primary mission, the security of its population as, again, the protests and the increasing tension shows. It thus makes complete sense to push the normative order one step further and to finally apply it fully: to rely on free entrepreneurial forces and on the market to provide for goods and services as much as possible, to always work in this direction, while the state must wither away. After a short period of adaptation everyone will be happy and definitely better off as balance will have been restored and this time permanently.

What will be more delicate to engineer is the short-term future, when further efforts in terms of income will be asked from the population, as existing debts must be reimbursed and interests paid. But, the difficulties will only exist for a very short period of time, as the renewed growth will rapidly make the effort painless.

Some civil servants will have to be laid off but as services will be taken over by the private sector, they will certainly find work again very rapidly, on the model of Novstate. Such a move may even enhance their career, as the economy will certainly be greatly boosted by this new system.

The Shadow Banking System, Conceptualized, designed and created by Zoltan Pozsar, The Federal Reserve Bank of New York, November, 2009

Furthermore, selling whole parts of the state, as has already been started, will bring in more money that will be used to reimburse debts, thus helping stabilise taxes. There will be no need to find really new taxes, except, maybe, for a short period of time, and especially no need to truly start thinking about ways to make the lenders’ nexus pay more tax – which is, anyway, something really difficult to craft as the whole financial system has become so complex, and would ask for international treaties, which would demand too long to obtain, assuming it were possible.*

Finally, as many members of the Commission underline, this will be good for business, attract investment, and put Everstate in rank to compete with the top financial and businesses orientated places in the world.

Only a minimum army and police will remain at state level. Most of the police force will now be under the responsibility of local towns, as, anyway, criminality has to be solved by proximity actions, on the ground, and through a better understanding of criminals. Operations against existing national threats will be shared between what remains of the defence forces, with a rising use of private contractors. Novstate’s CEO has pledged during the debates that his company and its friends businesses would do their utmost to fulfill any need Everstate would have in this matter.

PR, communication and advertisement specialists, as well as lobbyists, are now brought in to make sure that the conclusions and message of the Mamominarch Commission are delivered at best so that they become policy decisions adopted by Everstate’s governing bodies.

Everything goes indeed very smoothly and all Mamominarch’s conclusions are adopted.

To be continued…

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References

* Zoltan Pozsar, Tobias Adrian, Adam Ashcraft, and Hayley Boesky, Shadow Banking, Federal Reserve Bank of New York Staff Reports, no. 458, July 2010; “According to one measure of the size of the shadow banking system, it grew rapidly before the crisis, from an estimated $27 trillion in 2002 to $60 trillion in 2007, and remained at around the same level in 2010.” Financial Stability Board (FSB), Shadow Banking: Strengthening Oversight and Regulation, October 2011, p.1;  Brook Masters (2011-10-27). “Shadow banking surpasses pre-crisis level”. The Financial Times. accessed 2012-02-10.

 

2012 EVT: the Power of Novstate (The Chronicles of Everstate)

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Last week’s summary: In 2012 EVT, the deepening chronic budget deficit and the rising need for liquidity of Everstate (the ideal-type corresponding to our very real countries created to foresee the future of the modern nation-state) give an increasing power to the lenders elite group, allowing for new forms of appropriation of public power. Everstate sinks into a vicious circle.

(The reader can click on each picture to see a larger version in a new tab).

On the difficulty of cooperating with elite groups

The second phenomenon driving Everstatan political authorities’ incapacity to deliver security is a related creeping new appropriation of public resources and a weakening of the strength of central public power to the profit of various elite groups, the first of which was the lenders’ nexus. As many needs beyond liquidity remain, Everstate’s rulers (the modern state, the elected governing bodies and the nation) have no other choice than to turn to those who hold the resources needed, the elite. The need for cooperation with the elite is increased because the new pressures on Everstate mean that new staff is necessary for governance.

Meanwhile, the intensification of the various kinds of pressures implies a renewed need for manpower, which has been so far used by various elite groups (manpower includes here military, police and civilians part of the monopoly of violence of the state; staff includes all other civil servants). For example, the strengthening of cyber threats and the new cyber security field, as Everstate wants to preserve its monopoly of violence, implies that IT specialists and experts that were up until now mainly working for IT multinational groups are now also needed and recruited by the state. Similarly, all military techniques impact the need for manpower of the state. Meanwhile, the capability of the governing bodies to meet this need affects the performance and the size of the army.

Because elite groups seek to protect and increase their power, status and resources, this need for cooperation with the elite has led and is still leading to series of negotiations between Everstate’s government and Parliament on the one hand, and the elite on the other. The result of those negotiations impacts directly the army’s size and performance, the formal bureaucracy of the state, as well as, of course, the various ways to appropriate public power.

Since the 1990s EVT, Everstate has regularly lost to its elite, notably through an extreme form of the phenomenon known as outsourcing. Although, for a state to contract private firms and experts is not a new phenomenon, and is indeed necessary,a delicate balance must be maintained. In Everstate, outsourcing started taking a new dimension during the 1990s. Entire areas directly related to governance are now in the hands of private firms, notably the powerful Everstatan Company Novstate, specialised in strategy and technology consulting. Year after year, Novstate is awarded the same contracts, which end up being seen as almost proprietary, and wins new ones. Yet, a legal bid system to compete for and be awarded public markets exists and is respected. Even the direct security apparatus of Everstate is not anymore fully public, as a few private companies, Everstatan and international, play there an increasingly crucial role, from multi-involvement in the army, which is challenged by its reduced size, to various security functions such as logistics or the screening done at airports.

Everstate’s formal state bureaucracy is powerless to struggle against this new type of appropriation of public power unless it should be seen, as many Everstatans believe as “achieving an efficiency that can only be obtained with private management.”. Indeed, first, this bureaucracy was created and established to face bygone conditions. Then, as it became progressively impacted by outsourcing and as the overall power of the ruling bodies of Everstate weakened, it came to see outsourcing as the norm, even as the sign of a renovated and forward looking bureaucracy. This was even more the case as some of the nation’s representatives, politicians, and political appointees, on the one hand, some of the senior level civil servants, on the other, increasingly often joined those outsourcing companies. By entering this system, they legitimate this extreme form of outsourcing as they are still endowed with the status of their previous position when they make their choice. In this way, those entering the extreme outsourcing system keep their previous status as they continue participating in the country’s governance, while they gain new status, resources and privileges by joining the private sector. As such, they constitute a specific elite group.

Meanwhile, as the same people keep the same functions without allowing for the usual generational change to play its role, entire age classes of younger Everstatans, despite their high level of education are neither incorporated within the political authorities apparatus, nor even, fairly, within the outsourcing one. Volunteering and unpaid internships are promoted and almost the only way new highly educated youth can access to experience and work, even if this increasingly leads only to other internships. As a result, a crucial element of the upward social mobility in Everstate is stalled. In the meantime, the formal modern bureaucracy that had characterized Everstate for so long is nothing else than starting to disappear, even if it keeps its name and pretence.

As renewal and rejuvenation are blocked, outsourcing companies that are also meant to be in touch with new ideas and the evolution of society cannot anymore play this role. How could it be otherwise as Everstatan elite groups that have achieved power are certainly not ready to accept to see any of their privileges diminishing? Any idea that could imply, really or apparently, a loss of relevance would be relenting of the possibility to disappear as elite groups and this, they cannot accept. On the contrary, they are building ever-larger and stronger strongholds based on those resources that gave them, initially, their elite status. For example, Novstate does not only advise governance bodies but also supplies governance services, often in areas where there are also advisors, as it unites in its network of “friends’ companies” – a new business concept derived from social networking – small security firms, quasi armies, high tech start ups, biotech laboratories, etc.

Hence, any new negotiation between the governing bodies and the elite groups is a rush for more appropriation of public power and enlarges the elite groups’ strongholds.

Meanwhile, these struggles for the benefit of exclusive groups just add further pressures on the overall society.

Everstate is in a situation similar to what happened with liquidity, but with different elite groups, even if sometimes connections exist between groups notably through “friends networks.” If the ruler’s power continues to grow weaker than the elite’s power, then the elite will go on appropriating part of public power in a manner that is only hidden by the existing socio-political model and by the way it gets around the still existing norm on the separation between public and private. As a result, the new resources extracted will most likely remain insufficient, with consequences on the state’s infrastructure, on governance and on the army’s size and performance thus on the monopoly of violence of the ruler (the nation, the government and assemblies and the state that assists the former in their tasks), as well as on budget deficit.

Negotiating in such increasingly difficult conditions with elite groups  only leads to an appropriation of public property, to a further weakening of the central power and thus to an increased power of elite groups, in a vicious circle. Yet, no other option seems to be available.

As a result, the dissatisfaction of the population increases. The very legitimacy of Everstate’s system has already started suffering. If nothing changes the risks to legitimacy will only increase.

To be continued…

2012 EVT: Budget Deficit and Liquidity (The Chronicles of Everstate)

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Last week’s summary: In 2012 EVT, in Everstate (the ideal-type corresponding to our very real countries created to foresee the future of the modern nation-state), people seek security as they increasingly feel the negative impact of various pressures and threats on their life. Henceforth they turn to their political authorities and even start trying to compel them to provide this security. Through those actions, Everstatans start to remember that, as part of the nation, they are also rulers of Everstate. Yet, the situation is growing worse because the tasks of governance have grown more complex while the governing system and the polity are not yet adapted to the new conditions.

(The reader can click on each picture to see a larger version in a new tab).

Deepening budget deficit and increasing need for liquidity

The first phenomenon driving  Everstatan political authorities’ incapacity to deliver security is a deepening budget deficit and an increasing need for liquidity.

The resources that participate into obtaining the income necessary to govern have started being impacted by the novel threats and by the evolution in general a few years ago. However, this change happened unnoticed by most and is still largely ignored as new pressures are yet to be recognised. In general, the focus of awareness is on forthcoming so-called resource wars*, generated by the probable end of cheap abundance that is likely to affect natural resources such as water, oil or minerals, and the scrambling for components in new substitutes such as rare-earth elements.

Yet, the problem is more complex and also far worse. Some of the resources that used to generate income in the past have dwindled.  For example, when Everstatan industries delocalised, related income disappeared. Meanwhile, changes impacting other resources on the one hand, and the emergence of new resources on the other are not yet integrated within the public framework. All affect income.

Governing bodies should be on the watch and receive adequate warnings regarding the need to take in-depth actions. 

However,  the resources extracted from the polity that have usually generated income are taxes levied mostly on the population, through taxes on personal income and social contributions (direct taxes) or through taxes on consumption (indirect taxes). Hence, the negative impact on resources could not and cannot be directly and immediately felt, and thus goes unconsidered. It is mediated by time and by economic activity as well as by impact of the general evolution of society on the wealth and consumption behaviour of people.

Yet, as new pressures pile, most of them without any awareness and thus unattended, while  resources and ecological conditions evolve, an increasingly larger impact on the resources of the nation is to be expected, unforeseen, thus unmonitored and, consequently, without any kind of planning to face it. Very real consequences on the nation’s income, even if they are delayed, are in the making.

Meanwhile, the simple fact to try to make sense of some of the new pressures, those that are already perceived, comes with a cost. To fight constantly against such new military threats as terrorism or such unconventional dangers as cyber-threats uses a lot of the available resources and related income.

The increasingly numerous extreme weather events that are occurring, if they are not always evaluated in such a way, also takes its toll on resources: damages imply a net loss of wealth, while most events such as floods, tempests, or snowstorms immobilise economic activity. The accumulation of those localised and sometimes hardly noticed events has a direct domestic cost that increases expenditures, while it diminishes income and sometimes reduces resources.** Furthermore, when natural catastrophes and extreme weather events hit other countries, Everstate is also impacted through aid and various contributions, lowered trade, potential global ecological impact of disasters and levy on citizens’ savings (which then become unavailable for domestic borrowing, investment or consumption), with further consequences as reduced contribution to taxes.

Everstate is thus faced with a relative (compared with what would have been, had those changes and evolutions not taken place) lowered income, while more resources to face rising expenditures are necessary and increasingly more so, when those new and rising pressures also mean that the task of governing has become harder, which too has a cost, at least initially.

The nation and its governing bodies thus imperatively need to find new resources and income, as well as related new staff, which increases state’s expenditures, which in turn will increase the need for new resources and then income, until a new balance, adapted to the current and foreseeable future conditions, is found.

Solely keeping the system running as in the past is counterproductive because this directly and immediately impacts governance, lowering its efficiency. Being unable to understand what is happening and thus to find the necessary new resources and income means that a satisfactory way to plan for the increasing tasks involved by governance cannot be achieved. This, too, lowers the overall efficiency. As a result, the security that Everstatans seek cannot be ensured. Furthermore, the system is increasingly unable to do so.

Be it perceived and understood or not, this need for new resources and income is very real and upon Everstate. It implies that cash or liquid assets are demanded by Everstate’s governing bodies. First, they have to pay to face all the pressures  identified, to assume impacts’ costs when pressures are not identified, and to finance the usual tasks of governing, when Everstate’s income is insufficient as new resources and income have not yet been found. A new adapted strategy of extraction of resources (for the income of governing bodies) would reduce the need for liquidity, but it has yet to be designed.

In Everstate, as in many other countries, this situation has lasted for quite a while already. However, Everstate’s government and Parliament have dealt with it as if nothing new had happened. They thus used past recipes. As a result, the budget deficit has become chronic. In turn, as deficit is now regularly bridged by debt, on the one hand the cost of the debt further increases the deficit, while the need to borrow further heightens the need for liquidity.

Meanwhile, Everstatans’ quest for security in those gradually more difficult conditions also contributes to increase the demand for liquidity as people still need the now lacking or diminishing resources. Thus, the demand for those resources does not recede. On the contrary, for some of them, it increases as usage of those resources is fully integrated within the developed way of life of Everstatans and its expected improvement. For example, some of those resources have to come from further way or, when possible, have to be created or transformed out of other resources, which implies a further demand for liquidity. This situation also contributes to intensify the demand for understanding and meaning, as Everstatans, as any human beings, need to make sense of their perceived new hardship, so contrary to the promises of the materialistic normative order in which they have lived all their lives.

To be continued…

* See, among others, Michael T. Klare, Resource wars: the new landscape of global conflict, Henry Holt, 2002.

** See, for example, Holly Riebeek, “The rising cost of natural hazards,” Nasa Earth Observatory, March 28, 2006, accessed April 14, 2011; Munich RE NatCatSERVICE: Natural Catastrophes in 2010, 2011, Geo Risks Research, NatCatSERVICE ; and corresponding press release, accessed April 14, 2011.