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2012 EVT: Material Stakes in an Outdated Worldview (The Chronicles of Everstate)

Last week’s summaryIn 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of the modern nation-state) knows a rising dissatisfaction of its population as authorities cannot anymore deliver security. The last phenomenon driving Everstatan governing bodies’ rising inefficiency in ensuring their mission is an outdated worldview that leads to misunderstanding and disconnect, which is first upheld by ideological stakes.

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The knowledge institutions and related people, which are guardians of norms and thus have ideological stakes in upholding an outdated worldview, are also motivated by material stakes in seeing norms respected, upheld and continuing. Indeed, their institutional  survival depends on the continuation of those models, for example, through funding and employment.

Even if some or most within those institutions (again with variations according to their exact normative function) are increasingly aware that models have to be revised – but how far and how deep – being the first to do so could mean being cast away and thus losing both status and income. Individuals within institutions are caught in a system similar to traders on the stock exchange in the period preceding the burst of a bubble.

Furthermore, as the lender nexus and other elite groups benefit from the new means to appropriate public power, as those appropriations are permitted by the current model and underlying norms and thrive from the lack of real understanding, then those elite groups also have a material stake in seeing the current model and norms remaining in power. This is even more the case that some of those elite groups gained status as well as income only because of the absence of adequate models. If another model of socio-political organisation existed that allowed Everstate to face the new pressures, ensure security and thus bring back the satisfaction of the population then those elite groups would lose power. They are thus most unlikely to willingly abandon their new found or reinforced privileges.

If or when new understanding and new models, possibly with the slower creation of new norms and beliefs emerge, this will create new elite groups while the discarded model will imply the disappearance of existing elite group. Those new and disappearing elite groups will not only be related to understanding and knowledge as well as needed skills but also to the disappearing and emerging needed resources, that will then be fully integrated within the new model.

Any attempt at proposing something new or different is thus, for now, either muted or remoulded in agreement with the existing paradigm. Its authors, if they are too weak institutionally, are either marginalised or bought in to the price of the novelty of their ideas. In one way or another, new ideas are not heard.

Thus beliefs outlast the situation. As beliefs constrain understanding, which in itself conditions actions, a growing disconnect takes place between reality and actions. As actions disregard reality, they may only imply further dissatisfaction and become essentially increasingly escalating in terms of tension and scope of grievances.

For example, in other countries, protests then violence had followed an escalating pattern. For the initial phases, that looks very much like what is happening in Everstate. There, the trigger had been, surprisingly for the government and the elite, an increase in food prices. Yet, such increases had been constant over the past three years. This new price rise had not even been major. People had been thought to be used to those increases that were, anyway, expected. Furthermore, people had been repeatedly told that such inflation was not that important because the prices of so many other items, including wages, were not increasing, which showed, from the economy and monetary experts’ point of view that there was no real generalised inflation. Obviously, the monetary and economy gurus had forgotten to consider that seeing constant increase in food prices while wages were remaining stable would soon become a major problem in real life for real people. They had also forgotten that despite beliefs in the law of the market, the demand for some vital goods was inelastic, and that related shortage was not an option. Those would be translated in political terms rather than nicely remain within the sole economic field. Thus, the analytical tools set up by experts were congruent with the model and the norms, but so far away from reality that escalation and tension could not only rise unnoticed, but also be dismissed. When violence exploded, it took everyone by surprise. The strength of the norm is such that quickly an explanation fitting the model and avoiding possibly questioning it surfaces: the revolutions that took place could be explained by the need to embrace the democratic model, not by any other need.* Thus, from the normative point of view, Everstate, being a democracy and having been for quite a while, can learn no lessons from those other protests and their escalation, as they bear no resemblance whatsoever with what is happening in Everstate… or so the model says.

The situation into which Everstate and the normative world to which it belongs find themselves is blocked.

The people and the nation, composed actually of the same people, are twice discontented: first, as people, they have to pay for the elite, adjust to new less than pleasant working and living conditions; second, as ruler, they are seeing their power dwindling. Furthermore, fear and anxiety starts spreading as understanding either lacks or appears by bursts, soon to be muted while meaninglessness settles.

The situation is increasingly unsustainable and leads Everstate to its loss.

As the people and the nation start taking actions to express their discontent and see their goals met, their representatives begin considering changing the situation as continuing delivering security to citizens is the only way for them to still govern thus to remain in power.

But what can be done? And by whom?

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* The inspiration for this paragraph comes from the 2008 food riots, as well as from the winter and spring protests and rebellions that occurred in the Middle East and North Africa. For a very interesting article on Egypt suggesting very early a different interpretation, read, for example, Walter Armbrust: “A revolution against neoliberalism? If rebellion results in a retrenchment of neoliberalism, millions will feel cheated,” Al Jazeera English, 24 Feb 2011, This article first appeared on Jadaliyya.

2012 EVT: Ideological Stakes in an Outdated Worldview (The Chronicles of Everstate)

Last week’s summaryIn 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of the modern nation-state) knows a rising dissatisfaction of its population. The increasing incapacity of the political authorities to deliver the security citizens seek increases the risks to the legitimacy of the whole system. The first two phenomena driving Everstatan political authorities’ incapacity to deliver security are a deepening budget deficit and an increasing need for liquidity, and a related creeping appropriation of resources while the strength of central public power weakens to the profit of various elite groups. The first of this group is the lenders’ nexus. The second type of elite groups is developing strongholds focused on those resources needed by Everstate and is exemplified by an extreme form of outsourcing, crystallized by the company Novstate.

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An outdated worlview leads to misunderstanding and disconnect

As discontent settles in Everstate, with its corollary of slowly rising tension, widening scope of grievances, and creeping feeling of injustice, while people continue, in vain, to seek security, Everstatans try to give meaning to their hardship, to understand what is happening to them and why. Meanwhile, Everstate’s governing bodies also look for ways to solve the various problems they face, which demand understanding the situation.

increasingly dysfunctional models (normative and socio-political) s3

Such quests mean that the current normative models held in Everstate, and, more broadly, in the liberal order to which Everstate belongs are increasingly dysfunctional and outdated. Indeed, should they be adapted, they would provide the right framework for both efficient and satisfactory actions and meaning. Whilst now, nothing makes sense anymore and the situation worsens almost on a daily basis. The economy is growing inefficient; the political authorities’ actions repeatedly fail to ensure security; discontent increases; the formal bureaucracy of the state apparatus is questioned at many level, including by the bureaucracy itself; the state infrastructure seems to be now unable to fulfill its functions ; appropriation of public resources and power grows. Those are signals or symptoms that something is amiss in the models followed.
But then, if this is the case why has a new model not already emerged? What is happening and why?

Actually, Everstate and its fellow countries have now to face one of the toughest challenges, if not the hardest, that may confront a society. They are facing the intrinsic difficulty that goes with the need to change the various models that frame their lives and related institutions.

Currently, there is only one major model of socio-political order that frames the organisation and behaviour of most countries in the world, including Everstate: the modern nation-state, focused on the sole improvement of citizens’ material well-being, in its liberal democratic version. Other variations, such as Communism, have failed as the Cold War showed, and lessons have been learned from others’ experiences. Nothing else is available. Thus, if there is a need for change, then something new must be created, which is very difficult indeed.

normative beliefs step 3First, ideological stakes are at work. The model of socio-political order is at once grounded in the past and in increasingly deeper systems of beliefs, themselves constructed historically.*

The first layer is a system of norms or beliefs, which can be seen as an ideology (a set of ideas), and quite akin to a religious system of beliefs, with all the sacred connotations and emotional attachment that may go with it. It will also contain the culture and mores of a specific society or country.  It evolves slowly with time. From this level are derived, for example, the legal concepts applied in each country.

This layer is then included in and interacting with normative beliefs that act at systemic level and are constructed out of interactions between different systems of beliefs and actors. Here are worked out norms that rule the lives of all actors in the world, such as, for example, the existence of states that are territorial, sovereign, independent, the importance of modernisation (being modern), a norm that was constructed and imposed upon the world starting from the end of the nineteenth century.**

Then, one finds the deepest level of norms that may be called paradigmatic and will contain those values that are most crucial, deepest and most fundamental.  For example, at this level may be located fundamental ideas about life and death, about the place of human beings in the universe, about the evolution of the universe, about fundamental ethics, etc.

Each layer of norms results form past evolution and past norms and has emerged out of collective efforts to face past historical situations. Each layer evolves at a different speed and the deeper it is, the more difficult to change it, the more threatening any potential change, and the more chattering the experience of changing it, at both collective and individual level. However, as the more superficial level – the socio-political model in its specific Everstatan guise – is embedded within the others and includes elements of them, then any change similarly involves dread.

Besides the human cognitive difficulty in revising models in front of new evidences***, ideological stakes to keep the model of socio-political order are thus strong considering the difficulties and consequences of altering it. Finally, as those models are normative, questioning them generates a fear to be cast away by the group, with all the internalised dread related to the impossibility to survive alone if one were excluded from the group. Thus, new evidences that could question models are either not seen or consciously and unconsciously dismissed. The likelihood to see this denial happening increases with the depth of the set of beliefs that is touched.

universities, knowledge institutionsThe knowledge and understanding institutions  act as guarantor of the ideological and normative system. As such, and according to the norms they uphold and represent, they also provide legitimacy to the governing bodies within society. They tend, at least initially and according to their specific normative position, to further forbid questions and to stop the emergence of new ideas and new models. Meanwhile, prompted by the rising disconnect between reality and the norms and the dysfunction and hardship it generates, a demand for another understanding, one that would be adapted to  the current reality, is voiced increasingly loudly, and lends strength to the rise of alternative purveyors of knowledge or to a major renewal within traditional ones.

Considering where Everstate stands historically and normatively, the knowledge and understanding institutions are mainly located within the academia, especially those departments where the latest models of socio-political order have been designed and upheld: economics departments and business schools, with the support of some of the most liberal and economically minded political science studies, as well as some divisions focusing more exclusively on technology and applied science.

Everstate has very good quality universities and those last 60 years they have provided increasingly recognised scientific knowledge and understanding, notably in the areas of main normative concern, such as economics, business and technology. They have educated generations of civil servants and also play the role of think tank. The analyses thus provided are widely recognised throughout the country as being explanatory and providing good advice to the ruling institutions, contributing thus to good governance and sanctifying the legitimacy of the state. Those universities are enmeshed in the global academic network and Everstate scholars travel extensively and can be heard in international workshop, while they contribute to global knowledge.

Interestingly in Everstate, the scientific institution cannot be seen as a single body anymore, that would, as a single actor, protect all norms. The organisation in disciplines that took place over the last centuries, and that played in the hands of those upholding a modernising and materialistic division of the world, giving power to a few, also contains within itself the seeds of a potential renewal. Indeed, as demand for a new adequate understanding increases, if norms must be revised, if some beliefs must be discarded, then the separation in disciplines means that the complete demise of  science is not necessary, only part of it will have to be revised or even discarded. This also means that in the near future battles are likely to be played within universities, in Everstate but also at global level.

Some churches, at least those which  adapted to the more materialistic part of modern life, can also help upholding norms. However, as Everstatans are relatively uninterested in religion, churches’ influence is so far marginal. One notices, nonetheless, a revival of some religions as citizens look for meaning and understanding, an understanding that mainstream beliefs do not bring anymore. It is thus likely that churches will play an increasingly important role in the years to come, notably if sciences cannot be renewed when needed.

International institutions, such as the IMF, the World Bank or the United Nations agencies, being born of the latest systemic norms and to sustain them, also contribute to enforce their universal, orthodox character. The latest born global institution is private, a powerful global association of companies that influences even heads of states. It upholds all the norms related to business. Efforts towards further or different regional and global governance  let expect the appearance of new actors at this level and of coming related normative battles. Any attempt to question or change the norms upheld by those organisations will be fiercely combated.

To complete the structure, we find professionals trained in those institutions and having thus acquired those skills that are so crucial to the functioning of this system created for past conditions also act as guardians of the norm. For example, business consultants or high level executives coming from the corporate world, notably in areas linked to finance, act as unquestioned and unquestionable gurus. Novstate, considering its hybrid character is particularly active in the normative field, from the specific funding of research programs within universities and think tanks to full use of its friend networks, notably within mainstream media.

To be continued

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* The organisation in four layers of norms and beliefs is only sketched here as a hypothesis. Each of them may be constructed as a complex system and more research would be valuable on their interactions, the way they are born and evolve.

** See notably, Bull, H., The Anarchical Society: A Study of Order in World Politics, (London: MacMillan,1979); Bull, H. and A.Watson, The Expansion of International Society, ed. (Oxford: Clarendon Press, 1984); Gong, G. W., The Standard of ‘Civilization’ in International Society, (Oxford: Clarendon Press, 1984), Lavoix, Helene, ‘Nationalism’ and ‘genocide’ : the construction of nation-ness, authority, and opposition – the case of Cambodia (1861-1979) – PhD Thesis – School of Oriental and African Studies (University of London), 2005; for modernisation, see, among others  Giddens, Anthony, The Consequences of Modernity, (Cambridge: Polity Press, 1990).

*** Richard Heuer, Jr., Psychology of Intelligence AnalysisCenter for the Study of Intelligence, Central Intelligence Agency, 1999, defines cognitive biases as “mental errors caused by our simplified information processing strategies” stemming “from subconscious mental procedures for processing information. A cognitive bias is a mental error that is consistent and predictable.” Chapter 9. At work here among other biases would be the bias known as the “Persistence of impressions based on discredited evidence (difficulty to discard the initial causal model created). – also called Belief persistence after evidential discrediting” Anderson, Craig A., Mark R. Lepper, and Lee Ross. “Perseverance of Social Theories: The Role of Explanation in the Persistence of Discredited Information.” Journal of Personality and Social Psychology 1980, Vol. 39, No.6, 1037-1049.

 

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

Last week’s summaryIn 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.

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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: Public Resources and Lenders (The Chronicles of Everstate)

Last week’s summaryIn 2012 EVT, Everstate (the ideal-type corresponding to our very real countries created to foresee the future of the modern nation-state) sees a mounting discontent of its population because it has become insecure considering the impact of the new still misunderstood conditions. Three related phenomena drive Everstatan political authorities’ incapacity to deliver security. First, Everstate faces a changing set of resources implying an income that is relatively too low while costs and expenditures resulting from accumulated threats and pressures rise inexorably. Added to an Inability to understand the situation and a use of past recipe, this leads to both a chronic and deepening budget deficit and an increasing demand for liquidity. Individually, citizens face the same challenge, which heightens the need for liquidity. 

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The need for liquidity and the “lender’s nexus” elite group

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 need for liquidity of Everstate on the one hand, and, on the other, the uniformity and interdependence of potential lenders not only within Everstate but also worldwide, resulting in their relative scarcity, gives “the lenders’ nexus” a strong power and elite status. Banks, rating agencies, and various funds as well as those working for them thus find themselves in an immensely strong negotiating position vis-à-vis the ruler, i.e. the people, the nation and its representative government and assemblies.

In turn, this bargaining position allows for a new type of appropriation of public power by this lender elite group: a huge amount of national income, financed through an already insufficient tax income, is transferred to this lender establishment worldwide, including to what is called the shadow banking system, through borrowing – and over borrowing – made on the market whatever the interest rates, payment of those interests, gifts in terms of deregulation and favourable monetary policies, guarantees of protection in case of bankruptcy or more largely whatever the risks taken by those private lenders, favourable tax policies, etc.

Worse still, as the situation deteriorated over the years, with an ever rising  need for liquidity, some of the resources of the nation will have to be sold or transferred through long-term lease and various legal means to those who have the necessary liquidity: private elite groups, domestic or foreign, or foreign governments. If such arrangements will hopefully bring short-term relief, on the medium to longer term, they are more than likely to accelerate the vicious circle into which Everstate finds itself: fewer resources (what has been sold or long-leased) may only mean less income later on and thus a need for more liquidity.* Such abandon of national resources also implies a loss of international prestige, which is geopolitically prejudicial. Finally, such arrangements can also be seen as a further appropriation of public property, which will weaken the central power and thus open the door to even more appropriation of public power.

It is not that the Everstatan government and Parliament really want to choose this solution, but what other solutions are available to them?

As for the current strategy of extraction of resources, if the past pattern is to be followed, most of the extraction will have to come from the population. However, as the population is under increasing pressure, it is more than likely that what will be extracted will be insufficient to cover the growing need for income and liquidity. Furthermore, as Everstatans are increasingly dissatisfied, and feel relatively deprived, then it is more than likely that they will resist more taxes by all means, if they do not see their situation improving or to the least stabilising or do not believe such positive evolution is possible.

Most countries that have been in a similar situation before Everstate have adopted this type of policies. As it is a very recent phenomenon, the real impact of such policies cannot truly be evaluated, but Everstate’s governing bodies reason that if this policy has been chosen before, it means that it cannot be that bad.**

Furthermore, from the Everstatan’s governing institutions’ perspective, moving from a public government of the commons to a private management of goods may only be the right solution, as it is in line with the liberal model of socio-political organisation (in its “neo-liberal” – end of the twentieth century, beginning of the twenty-first century – version). Does this model not underline how inefficient the state is compared with the private sector? Has this not been shown times and again, and notably with the collapse of the Soviet Union? Anyway, there is no other model available. Thus, the Everstatan governing bodies feel that they are not only solving temporary problems, but also doing what is truly right for their country and that they should, maybe, have done before.

Considering the expected result of past classical strategies of extraction of resources in the current conditions of needs that stubbornly remain, something else has to be done too: to turn to those who possess what is needed and to ask for their cooperation, i.e. to turn to elite groups. The difficulty is that entering into negotiations with those groups automatically increases their power and their status, which in turn reinforces their elite group status or even, potentially, creates it if it did not exist beforehand. A new episode in the age-old struggle between elite groups and ruler – here as the modern state, the elected governing bodies and the nation – is about to start.

To be continued

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* The case of Greece was obviously the inspiration for the narrative of this paragraph, written during Spring 2011. See, for example, Elena Moya, “Greece starts putting island land up for sale to save economy,” The Guardian, 24 June 2010; George Petalotis, Letter to The Guardian, “Greece is not for sale,” The Guardian, 29 June 2010;  The Telegraph, “China ‘set to invest billions in debt-stricken Greece’,” 15 June 2010;  Press Office of the Embassy of Greece, Washington DC, “Chinese COSCO takes over in Piraeus Port,” 01 October, 2009; Dredging Today, “Greece: COSCO Will Spend US$707 million to Upgrade Piraeus Port Facilities,” 15 July 2010.

** This paragraph also uses the principle of homogeneity of Fred Halliday, Rethinking International Relations, (London: Macmillan, 1994); for more on Fred Halliday’s contribution to international relations and political science, see, Alex Colas and George Lawson, “Fred Halliday: Achievements, Ambivalences, Openings”, Millennium, Vol. 39(2) 2010.

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

Last week’s summaryIn 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.

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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.

The Red (team) Analysis Weekly No27, 22d December 2011

No27, 22d December 2011

Weak signals of polarisation are emerging regarding the interactions between the new opposition nexus and political authorities, and prospects for further and more widespread instability rise, notably in India – no need to mention Europe anymore. In the meantime, international tension does not abate with Iran, and now a transition going on in North Korea. Meanwhile cybersecurity was very much spotted as being increasingly a concern, but nothing new here.

Nevertheless, a Merry Christmas or Season’s Greetings to all!

The Red (team) Analysis Weekly No26, 15th December 2011

No26, 15th December 2011

Rising tension with Iran, Syria, disaster in Durban and more largely on the ecosystem front, China’s multi-dependency and the continuing financial Armageddon. Meanwhile, the paradigm slowly changes: in the U.S. higher taxes for the richest are discussed and …applied (not really on the agenda in ultra-liberal Europe?), while the structure of understanding/knowledge production is being reworked. Interesting times, not for the faint-hearted!

The Red Team Analysis Weekly No17, 13 October 2011

No17, 13 October 2011

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