Last week’s summary: In 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.
(The reader can click on each picture to see a larger version in a new tab).
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.
* 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 (update 29 January 2015 – the hyperlink was removed as it led to a 404 page and no cache version could be found. Interested readers can use this link to access a list of all Greek embassies); 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.