RELAUNCHED, VOLUME I ISSUE I, JANUARY 2014
Old Front, New Facade - French and Roma: Incompatible Identities? - Uneconomical Nomads in the Negev - The Great Stagnation, and the End of Growth - Passing the Buck: Can Democracies Ever Handle Debt? - Bitcoin: the Future of Currency? - Uruguay’s Clasificadores - From the Chilean Jaguar to the Chilean Leopard: Silence and Weariness in Chile’s last Presidential Election - Bon Appetit: Capitalism, with a Side of Fair Trade.
CONTENTS 2
Old Front, New Facade Raffi Salama
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French and Roma: Incompatible Identities? Joseph Voignac
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Uneconomical Nomads in the Negev Mossy Wittenberg
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The Great Stagnation, and the End of Growth Matthew Ridley
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Passing the Buck: Can Democracies Ever Handle Debt? Lucy Wark
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Bitcoin: the Future of Currency? Alasdair Phillips-Robins
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Uruguay’s Clasificadores Ben Weisz
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From the Chilean Jaguar to the Chilean Leopard: Silence and Weariness in Chile’s last Presidential Election Marcos González Hernando
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Bon Appetit: Capitalism, with a Side of Fair Trade Aanjalie Collure
EDITORIAL TEAM
Editors-in-Chief Alasdair Phillips-Robins Lucy Wark Director of Finances Ravi Solanki Print Design Ella Jackson www.ella-jackson.com Publicity Director Cara Foster Senior Editors Eylon Aslan-Levy (Politics) Matthew Ridley (Economics) Writers Aanjalie Collure Alasdair Phillips-Robins Matthew Ridley Raffi Salama Joseph Voignac Lucy Wark Mossy Wittenberg Marcos Gonzรกlez Hernando Ben Weisz
Find us online at: www. cambridgeglobalist.org @ tcglobalist
A WORD FROM THE EDITORS
Welcome to the first print edition of The Cambridge Globalist. We are very excited to be relaunching the publication after a few years of dormancy. Together with our partners in the Global 21 network, we are dedicated to publishing the best of student writing on politics, economics and culture. In this issue we explore a wide range of subjects. A running theme is the problems raised by adapting to a rapidly changing world. Mossy Wittenberg and Joseph Voignac consider the Bedouin and Roma, marginalised populations in Israel and France respectively, while Ben Weisz has travelled to Montevideo, Uruguay to meet the clasificadores, whose way of life is being threatened by modernisation. On the economic side, Matthew Ridley wonders whether the world is entering a period of stagnation (and how we might cope if it is), while Alasdair Phillips-Robins explores the ultra-modern and rapidly expanding world of digital currencies. Both Raphael Salama and Marcos Gonzรกlez Hernando consider particular political transformations in France and Chile, while Lucy Wark juxtaposes the American and Australian responses to the Western crisis du jour, rapidly increasing state debt. To finish off, Aanjalie Collure discusses the contradictions in our notion of fair trade. The Globalist is privileged to have many talented writers, and the pieces included here are just a selection of those featured on our website and radio show - we heartily recommend these as well! We would also like to express our gratitude to the wonderful Ella Jackson, who designed this print edition. Thank you and enjoy! Alasdair Phillips-Robins & Lucy Wark Editors-in-Chief
All pictures used in this edition are licensed under the Creative Commons License 3.0. The original images can be found on Flickr.
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OLD FRONT, NEW FACADE RAFFI SALAMA PHOTOGRAPH by RÉMI NOYON
“She is young enough for the young and old enough for the old. In a country which maintains many sexist prejudices, her femininity gives her an acute vulnerability allowing her vivaciousness to come across as a warm accessibility”
The magazine Minute is not in the business of playing devil’s advocate. As the unadulterated mouthpiece of the French extreme right, it is regularly and deliberately embroiled in controversy. Its most famous debacle came in the run up to the 2006 FIFA World Cup, when it ran an article by politician Georges Frêche posing the question, ‘are there too many black players in the French team?’ Reassuringly, in the wake of the ensuing scandal, Frêche was expelled by the Parti Socialiste. Yet, as so often occurs after such an event, the populist public uproar against the comments left the country with a sense that the problem was limited - confined to one incongruous oddball who clearly had no place in the République française. Even though Mr Frêche’s public life has been frequently punctuated by similar comments, he remained in office as mayor of Montpellier for 27 years, and at the time of the Minute article, was also president of the Languedoc- Rousillion region. Majorities of French people have continuously voted for Frêche, and he cruised to the retention of the presidency in 2010, gaining twice as much of the vote as his nearest challenger from the UMP. In light of his political longevity, it is clear that in spite - or perhaps because - of his egregious views, the French people really did want Frêche. In a more recent episode, a Front National candidate for the municipal elections of Rethel in Ardennes, Anne Sophie Leclère, used her Facebook page to compare Christiane Taubira, the black FrenchGuyanese Minister of Justice, to a monkey. In the post, she juxtaposed an image of a monkey captioned ‘18 months’ with a photo of Taubira captioned ‘now’. Somewhat disconcertingly, the reaction could be directly paralleled to that of the Frêche article - a suspended politician, a lot of other politicians keen to strongly denounce the post and a disbelieving yet idle nation. Of course, Minute had to provoke further damage as they headlined the front cover of their latest publication, “Taubira retrouve la
banane”- “Taubira finds her smile again”. But this version is the argotic translation; the more common translation of “la banane” as “banana” means that a reader would first envisage the behaviour of a monkey. Minute is not a niche publication. Its most recent available circulation statistics are misleading; they date from 2006, when it had only 40,000 readers a week. Let us bear in mind the fact that in 2007 the Front National won 3.8 million votes in the Presidential election, and 5 years later they managed 6.4 million. Whilst the increase is not symmetrical, it is highly likely, considering the consistency between the views of the two entities, that Minute’s circulation figure has also undergone a sizeable increase. A commensurate estimate would be around 70,000 readers. Crucially, France has relatively low newspaper readership when compared to the UKThe Sun has an estimated 2.4 million readers while the highest selling paper in France has barely over 500,000. For that reason, the sway of 70,000 readers of Minute must not be understated. For most of its existence, the Front National has found itself in a similar position to UKIP’s several years ago, when David Cameron described Nigel Farage’s party as being full of “fruitcakes”. Until 2011, the Front National faced an image crisis, perfectly embodied by its past and present leaders. Jean-Marie Le Pen has the demeanour of a crusty xenophobe. Perennially stained by his apparent denial of the Holocaust, and his status as a relic of some anti-EU cult, he personified European right wing politics. But when Mr Le Pen retired from the helm of the party, his position was taken by his daughter Marie who, other than her political views, could not be more unlike her father. She is young enough for the young and old enough for the old. In a country which maintains many sexist prejudices, her femininity gives her an acute vulnerability allowing her vivaciousness to come across as a warm accessibility. She knows that in order to
achieve genuine change, mere ceremonial acts will not suffice. As Jean-Marine’s lingering echoes slowly dissipate into the party’s history, a new crop of spritely youth is moving in to fill the void. This batch is spearheaded by 31-yearold Florian Philipot, the party’s vice-president of strategy and communications, and Laurent Lopez, the 48-year-old former boxer who stormed to electoral victory in the canton of Brignolles this October. On the evidence, Ms Le Pen’s attempt to give a fresh face to outdated principles is working. The latest IFOP poll has her party leading in voting intentions for the European elections of 2014, while the growth in the party’s membership has become exponential; there has been a 400% increase since 2009. Catalysts are mounting for even stronger figures in the new future. As France’s economy teeters on the edge of recession and youth unemployment remains nestled at around 26%, Ms Le Pen has undertaken an amalgamation with Geert Wilders’ Partij voor de Vrijheid of Holland. The collaboration will play on the worries and fears of ordinary people who feel under the cosh, attempting to convert their angst into an increased offensive against the European Union - the fashionable scapegoat currently in the far-right’s crosshairs. Any extension of François Hollande’s ludicrously high taxes will not only push many out of the country à la Depardieu, but force some of them into the hands of the extreme right. Contrary to what Mr Hollande believes, if pressed hard enough, France’s bourgeoisie bubble will burst - not spreading wealth and altruism into every corner of l’Hexagone, but splattering money into the coffers of the Front National and its municipal election campaign. At this rate, the Front National’s new-found darling Mr Lopez may be right in saying that the public will continue to lose “their inhibitions about the Front National”. Raffi is an undergraduate student at Queens, reading French and Spanish.
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French and Roma: incompatible identities? JOSEPH VOIGNAC PHOTOGRAPH by MELANIE DAVIES
Never has public debate in France been more focused on the question of Roma integration than during the last few months. It all started on the 24th September, when the French Minister of the Interior, Manuel Valls, made some very questionable declarations about the Roma in France. He declared that the Roma have a way of life “extremely different from ours”, which often “comes into conflict” with the neighbouring population. He then stated that “there is no other solution” than to dismantle their settlements and send them back to their country of origin. These remarks elicited fierce criticism from fellow members of the government, and the press. The controversy was followed a few weeks later by a new national polemic, sparked by the arrest and expulsion from the country of a young Roma girl, Leonarda Dibrani, while she was participating in a school trip. Following the revelation of the circumstances of her arrest, student protests were organised in Paris, and a plethora of incendiary articles came out in the press denouncing the government’s actions. As a result of popular agitation, the President, François Hollande, was forced to offer Leonarda an opportunity to return to France, although without her parents, which she rejected. The Roma have a long history of settlement in France. According to Angus Ferguson,
author of an authoritative history of the Gypsies, a census was taken in March 1895 of all “nomads, Gypsies and vagabonds” in France. It put the total at over 400,000, and among them the number of “nomads travelling in groups and in caravans” was assessed at 25,000. Most of them were not expelled from France; on the contrary, most were given citizenship and integrated well in French society – some, like Roma guitarist Django Reinhardt, are even celebrated as monuments of French culture. Today, according to Amnesty International, there are about two million French citizens of Roma origin. The Roma who are targeted by the government’s policy of expulsion are the 15,000-20,000 Roma immigrants from Romania, Bulgaria, the Czech Republic, Slovakia, Moldavia, Serbia, Croatia and Kosovo, who do not have French citizenship. In his public declarations, Manuel Valls did not refer to an objective category of individuals, such as nationals of a particular state, an age group or profession; he invoked instead an ethnic category of people – the Roma – including both French citizens and foreigners. The fact that a French minister can resort to such categorisation when defining whom a policy should affect, is extremely confusing and troubling. His declaration, if translated literally into law, would be unconstitutional and illegal. According to
“According to Article One of the French Constitution, the French Republic “shall ensure the equality of all citizens before the law without distinction of race, origin or religion”.”
Article One of the French Constitution, the French Republic “shall ensure the equality of all citizens before the law without distinction of race, origin or religion”. Another source of concern is the unequivocal judgement the minister passed on the Roma – i.e. that a majority of them do not want to integrate into French culture – without explaining how he came to it. The official verdict was pronounced without any reference to consultation, or expert enquiry, relying instead on an assumption.
An unusual political consensus What was perhaps surprising to most commentators, however, was that these declarations were made by a senior member of a Socialist government, rather than by a member of the UMP, the conservative party of former President Nicolas Sarkozy, who was notorious for his harsh stance on Roma integration. In 2010, then President Sarkozy made an infamous speech at Grenoble, inaugurating a series of forced expulsions of illegal Roma immigrants from France, which led to an official condemnation by the European Committee of Social Rights. At the time Sarkozy received almost unanimous criticism from the Left for his stance on the Roma. Today, however, there is a broad political consensus around the view that Roma immigrants cannot be integrated in France and have to be expelled. In response to the dismantling of a settlement of 35 illegal Roma immigrant families in 2012 in Hellemmes, near Lille, the Green Party Regional
“Today, according to Amnesty International, there are about two million French citizens of Roma origin. The Roma who are targeted ... are the 15,000-20,000 Roma immigrants ... who do not have French citizenship.” Councillor of the Nord-Pas-de-Calais, Dominique Plancke, declared, “At least under Sarkozy the Roma were safe, [because] the Left was there to defend them.” The current consensus at the top of the French political echelons about the impossible integration of the Roma in France seems to reflect the views of a great majority of the French public. A BVA poll commissioned by the newspapers Le Parisien, Aujourd’hui en France and the TV programme CQFD in September revealed that 93% of the respondents believed that “the Roma are not integrating well in French society”, and 77% agreed with the Minister of the Interior’s view that “integration can only apply to a few families and there is no other solution but the dismantling of camps and expulsions from the country”.
The last victims of political incorrectness An example of how pervasive the view that the Roma cannot be integrated in France has become is an eight-page report on pickpocketing in Paris, published last March in the popular French magazine, Paris Match. The magazine is not known for holding particularly right-wing views – in fact, François Hollande’s current partner, Valerie Trierweiler is a regular contributor to the
magazine – nor has it clearly advocated a discriminatory policy to deal with Roma immigrants. Yet, the report was full of anecdotes and photos describing techniques used by young Roma children to steal from candid tourists and Parisians. Here is an extract from the magazine: “a café waiter shouts: ‘go away’ in Romani. ‘It is the first thing you have to learn when you come to work at a Parisian café’, he tells us, ‘they are here all day, trying to steal our clients’ mobile phones, cigarettes, and wallets. It is a plague! Only in Paris can you see tourists being harassed in that way!’” By exclusively choosing to focus on crimes perpetrated by Roma children, the report implicitly suggested that there is a link between belonging to the Roma ethnicity and resorting to petty crime, hence giving credence to the view that Roma identity is incompatible with French values. After reading the report, I googled the title expecting to find shocked responses, but the only related item I found was an article by the British Daily Mail rehashing the report on 17th July. If political correctness, which includes a wariness to overtly stigmatize a group based on religion or ethnicity, seems to be an accepted staple of our contemporary Western societies, it certainly does not apply to treatment of the Roma.
Could they be right? But before rejecting the ethnic stigmatisation of the Roma as a matter of principle, I wonder whether there is a possibility that the diagnosis shared by so many Frenchmen, that Roma identity is incompatible with integration in France, could be correct. The one aspect of Roma culture that is singled out as being incompatible with French integration is nomadism. Nomadism could be understood to clash with French integration both from a cultural and economic perspective. Since the nineteenth century, the free and secular public school – the Ecole de la République – has occupied an important symbolic place in French republican ideas of the nation, as the space where French children from all social, political and ethnic backgrounds meet and learn together to be active citizens. Hence disqualifying oneself from participating in the central republican institution by following a nomadic lifestyle does not help in making a claim to French identity. However, self-schooling is possible and legal in France. Therefore a nomadic lifestyle is not necessarily an uneducated one. The first article of the French Constitution opens with the line: “France is an indivisible Republic”. France tends to be paranoid about internal division. The French have always been suspicious of religious or cultural communities developing separate institutions and solidarity networks outside the state. The belief that in France there should be no other community outside of the national community is very popular. A nomadic lifestyle is seen as threatening within that
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context, as the nomadic family or families are suspected of developing a strong connexion between each other, at the expense of creating bonds with a local community – and by extension the nation.
“Dominique Plancke, declared, ‘At least under Sarkozy the Roma were safe, [because] the Left was there to defend them.” Economically, the nomadic lifestyle does not seem sustainable either, because most remunerative professions require going to a physical workplace. However, as a journalist from the magazine Le Tigre remarked, the most successful businessmen spend their lives travelling across the globe, often moving further and more frequently than most gens du voyage, without ever being referred to as nomads. Although the fear that a nomadic lifestyle might pose a threat to perceived French cultural and economic interests can be understood to an extent, sedentary life is not a condition for French citizenship. France tolerates nomadism, and even created a special legal category for nomadic people, the gens du voyage. However, the gens du voyage are subject to special administrative treatment. Since 1969, they have to have a
livret de circulation on them at all times, which is checked regularly by the police (sometimes every month), and have to choose a socalled anchor-town, where they can vote, get married and pay taxes. Amnesty International is campaigning against this special administrative treatment, which, it believes, impedes the freedom of movement of the gens du voyage. It has called upon the French government to put into practice the Besson law of 2000, which obliges towns of more than 5,000 inhabitants to provide space for nomadic citizens to settle. But, crucially, the Roma are not even necessarily nomadic. The majority of Roma in France, and in the world, are sedentary. According to the blog La Voix des Rroms, only 4% of the global Roma population is nomadic. The Roma therefore are not defined by their nomadism; rather, as French scholar Marcel Courthiade points out, the strongest element of Roma identity is a shared knowledge of the Romani language, as well as, according to Angus Fraser, a common historical memory and strong family ties.
Fixing France’s immigration policy Since the Roma explicitly targeted by current government policies, public declarations, and everyday stigmatisation are illegal immigrants – as opposed to the majority of the Roma
in France, who have French citizenship – I am tempted to conclude that the perceived problem of Roma integration in France is not a culture clash between two opposite value systems, but simply a symptom of France’s immigration policy. Most of the problems encountered by Roma immigrants stem from the fact that they are illegal immigrants. As illegal immigrants, they cannot purchase or rent property, making it difficult, for example, for children of Roma immigrants to go to school and lead a normal childhood. Moreover, given France’s high unemployment rate (10.5% in 2013), Roma immigrants have virtually no chance of obtaining stable sources of income, as it is illegal even for those few employers who might have the ability to employ illegal immigrants to do so, and illegal immigrants cannot subscribe to official employment agencies. Even the Roma who have Bulgarian or Romanian citizenship, and who should, as EU citizens, be allowed to reside in France, are not legally permitted to stay in the country. Bulgaria and Romania were forced to accept special transitory measures when they joined the EU, forbidding Bulgarian and Romanian nationals to reside in other EU countries without a work permit. France instituted a list of professions open to Bulgarian and Romanian citizens and imposed a special tax on employers recruiting them. These
measures were slightly relaxed in the summer of 2012, but still constitute a clear barrier to the economic integration of Roma immigrants of Romanian or Bulgarian origin. However, these transitory measures will expire in January 2014. The government’s recent stigmatization of the Roma may also be related to France’s immigration politics. Indeed, many Left-wing voters have defected to the Right because the government is not seen as granting enough protection from immigrant competition. But because the Left’s electoral base includes many Frenchmen from immigrant backgrounds (according to Ined statistics), the government prefers to assert its protectionist credentials by attacking Roma immigrants, who are less represented in the French electorate, than on immigrants from elsewhere.
Helping Roma immigrants to integrate What then can be done for the Roma immigrants to integrate into French society? Most importantly, France needs to clarify its immigration policy. It is obviously impossible for France to welcome all of the world’s immigrants, especially if it wants to maintain its strong commitment to social equality through welfare measures. It might have to diminish its immigration quotas and impose stricter border controls around
the Schengen Zone, but it should in no way impose ethnic criteria for immigration – as current official declarations suggest with regard to Roma immigrants. Expulsion is currently the government’s preferred policy to deal with illegal immigrants who have managed to settle in France. Although expulsions of illegal immigrants are legal, they are morally dubious – as was made evident in the Leonarda affair. Although the Roma are the immigrants who are perceived by the political class and general public to be least likely to integrate in France, the Roma are in fact the easiest category of immigrants to integrate. Firstly, they are relatively few; there are 15,00020,000 Roma migrants in France in total, as opposed to about 100,000 new immigrants arriving in France every year from elsewhere. Secondly, the EU, notably through the European Social Fund, has earmarked approximately €4bn (£3.35bn) to help France integrate its Roma population. Some French municipalities have started to use these subsidies to great effect. The municipalities of Gardanne, near Marseilles, and Aubervilliers, near Paris, have set up official settlement camps for illegal Roma immigrants, providing water and electricity. These initiatives have given the occupants the stability needed to send their children to school, and to make concrete steps to clarify
PHOTOGRAPH by SERGE MELKI “The majority of Roma in France, and in the world, are sedentary... only 4% of the global Roma population is nomadic.” their immigrant status and find work. The mayors of both towns hope that their initiatives will be replicated around the country, and that the state will do more to encourage local initiatives like theirs. But the most pressing measure that needs to be taken to facilitate the integration of immigrant Roma populations is to combat the widespread prejudice and discrimination against the Roma in France, by educating the public about Roma culture and history. This conclusion is shared by the Senior Civil Servant in charge of the coordination of housing and access to housing of homeless people, Alain Régnier, who claimed last July to be “preparing very concrete communication actions with commercial clips, billboards… to promote success stories in order to escape from this image of ‘Roma equals failure’. I believe a lot in the cultural dimension as a lever for action”. Joseph is studying for a History MPhil at Sidney Sussex
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UNECONOMICAL NOMADS IN THE NEGEV MOSSY WITTENBERG PHOTOGRAPH by DANIELA HARTMANN
In September 2011 the Israeli government embarked on a fiveyear economic development programme aimed at the Bedouin, a traditionally nomadic Middle Eastern people with a significant population in the country’s Negev Desert. Israel claims that the Prawer-Begin Plan will raise living conditions, improve access to services, and help the long-term prospects of what has long been one of the country’s most impoverished communities. But one of the tenets of the plan is major urban resettlement, and human rights organisations are up in arms, with some even claiming that it amounts to “ethnic cleansing”. Certain UN bodies have called for Israel to withhold its implementation, and it was condemned by an official resolution of the European Parliament.
The terms of the plan can be roughly divided into two categories. The first are those terms which aim to resolve long-standing land disputes between the Bedouin and the Israeli government, and include the recognition of a number of towns which the government had previously considered illegal. In the long run, these will be provided with the transport links, electricity, mains water, and other amenities that they currently lack. However, up to 35 unrecognised villages, of around 40,000 Bedouin (almost 0.5% of the country’s population) in total, will be demolished, and their residents relocated to approved government townships. For those Bedouin who agree to the relocation, compensation of up to 50% of the value of the land is available. However, this decreases to nothing over a period of five years if the residents refuse to move, or otherwise delay the process.
The second category of terms aims to improve the economic situation of the Bedouin. It is largely substantiated by the fact that the new government townships have ready access to the amenities and services that those in unrecognised villages lack. The government has also pledged NIS 1.2 billion (£210m) to promote employment and professional training for the Bedouin, focusing particularly on women and youth.
What is Israel thinking? The problems, however, are not necessarily in the detail. Two statements in the introduction to the official document best outline the major points of contention, and shed light on some of the factors that underlie Israel’s controversial position. The first such statement is the claim that “the development of the
Negev is one of the most important national tasks in the coming decade and the government has decided to advance it in various ways”. This is a statement of an ideology. It evinces significant continuity with the famous statement of David Ben Gurion, Israel’s first prime minister, that “the future of Israel lies in the Negev”. These 16,000 square kilometres of desert represent over half of the country’s total land area and, in a country of Israel’s size and rate of population growth, the importance of “making the desert bloom” (also Ben Gurion) is obvious. The second point of interest is the insistence that “the Bedouins in the Negev...are citizens with equal rights in the State of Israel and as such are entitled to an economic‐ social framework that will enable them to realize the
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opportunities for growth that are available to citizens of Israel”. This revision to the plan by government minister Ze’ev Begin, made in response to accusations that the original draft described the Bedouin in “degrading terms”, alludes to the deeply troubled historical relationship between the Bedouin and the Jewish state. Issues relating to land have always been at the centre of this tension. No doubt in the same vein of pioneering Zionist sentiment that prompted the lines quoted above, it was Ben Gurion himself who organised the first relocation of the Bedouin, directing their removal to the Siyag (enclosure) zone of about 1,000 square kilometres in the north-east of the Negev in the 1950s. Many of the settlements they left were then turned into Jewish kibbutzim and moshavim (the agricultural communities). Policies such as this have long fuelled the claims of human rights organisations that the government considers the Bedouin to occupy too much land, which could otherwise be used for Jewish development. These accusations are not unfair and whilst such a viewpoint is unspoken beyond the more extreme wings of the Israeli parliament, it certainly exists. Those in favour of the plan, then, argue for the tactical economic development of a vast, currently underutilised region, suggesting that forced resettlement is justified by the Bedouin’s impoverishment. Critics depict a
“Issues relating to land have always been at the centre of this tension.”
state engaged in Westernisation – or worse, “Judaization” – which has misunderstood and is destroying a traditional way of life as it bulldozes its way towards progress.
Whose land is it anyway? The other fulcrum of the dispute is the intractability of Bedouin land claims. Deciding whether or not a specific group of Bedouin can prove ownership to the land they claim, and whether they ever registered such claims with the relevant authorities, can involve more than a century of legal history, beginning under Ottoman rule and running through the British Mandate into Israeli administration. But the problem is broader than questions of legal documentation. Over the past century, the Bedouin have been adapting slowly away from a totally nomadic lifestyle, and it is therefore very difficult to know what a ‘genuine’ land claim might look like, or whether it is even reasonable to expect the Bedouin to have made one when given the opportunity (by the Israel Land Administration (ILA) in the 1950s). The issue is further complicated by the poverty of the Bedouin - some 66% live below the poverty line. This needs to be addressed as an issue in its own right, but it has been linked by policymakers with the legal debates surrounding land claims. To some extent this is understandable; disputed villages have an even higher average poverty rate of 80% because they are not provided with amenities, services or transport links.
“The issue is further complicated by the poverty of the Bedouin: some 66% live below the poverty line.” Indeed, a high-level bureaucrat recently stated that “If you take an aerial map, you’ll see hundreds of Bedouin settlements. They would like these to be recognized as townships. It would be impossible for the Israeli authorities to bring infrastructures to their current locations and maintain them.” But the link is not only practical. The clear duality of purpose of the Prawer-Begin plan suggests that the government perceives a “Bedouin Issue”, and has set out to solve it in a single pass.
Al Araqib’s vanishing act In July I visited the desert village of Al-Araqib, which has now been destroyed 59 times by the Israeli government in order to clear the land for afforestation – even though legal disputes over its land claim are still in progress. The inhabitants had recently received a bill of NIS 1.8m (£320,000) for the costs incurred by the government for the demolitions, which involved helicopters spraying poisonous chemicals over the village’s lands to kill off crops. The leaders of the Abu Mediam and Abu Jabber families described their lifestyle before the demolitions; reliant on small-scale agriculture, it certainly didn’t make them prosperous, but it was secure, sustainable and, perhaps most importantly, traditional. Now,
where their fields once were, are young trees, planted by the Jewish National Fund (JNF) as part of its programme to make the desert arable. Al-Araqib’s inhabitants described these in almost Macbethian terms as “soldiers holding guns, surrounding the village” — an image reinforced by the daily presence of JNF trucks watering their saplings, whilst the village itself has no access to running water. Stories like this make it difficult to accept claims, such as those made by the ILA, that “Israel has its citizens’ welfare at heart, particularly the welfare of the Bedouin”. The government’s announcement, in October 2011, that it would be establishing new Jewish towns on the land of existing Bedouin villages, darkens the picture even more.
The Bedouin: Israel’s Roma? But the Israeli government is not unthinking, nor do I believe that the Prawer-Begin plan is especially nefarious. Consider, for comparison, the public reaction to the eviction of Travellers from the Dale Farm site by the British Government two years ago. The claim that this represented a threat to the Gypsy way of life held little currency with
“Stories like this make it difficult to accept claims, such as those made by the ILA, that “Israel has its citizens’ welfare at heart, particularly the welfare of the Bedouin”.
the British public, and the group’s rejection of government housing in favour of Traveller sites led to a number of outraged headlines. Westerners clearly struggle to comprehend a nomadic way of life, and their sympathy is especially low due to the understandable links between these impoverished communities and crime and anti-social behaviour. Moreover, there is a reactionary element to the Bedouin opposition to the plan. After all, it may well bring prosperity to a people long passed over by economic development. Begin argues that “by moving to a formalized settlement, even one that is located a few kilometers from their present place of residence, the families will make it possible for their children to leap in time into the midst of the twenty‐first century”. Campaign groups claim that this comment is patronising, and they have a point. But there are legitimate questions over whether any group has a right to deny its children access to better services. The Prawer-Begin plan is not, then, all bad. It accurately highlights the issues that need to be resolved and makes positive suggestions about how to combat them. But its all-in-one approach — its attempt to sort things out once-and-for-all — is its primary flaw.
Revising the Prawer-Begin Plan The government could attempt to remedy this by removing the clause which steadily reduces compensation available for land from 50% to nothing over a five-year period. Careful legal procedures surely take time, and both the timeframe and the percentage are
arbitrary. It is also important to bear in mind the huge disadvantage of the often poorly educated Bedouin in fighting legal battles against the state itself. The plan might be further improved by being more specific in its discussions of unrecognised villages. Currently the terms are general, and no one village is named explicitly. But no two land claims are the same, and some are significantly more substantial than others. In a matter of such legal complexity, it seems reasonable to work on a careful case-by-case basis. Similarly, both the plan’s public image and moral standing could be improved by ditching features that provoke accusations of favouring the Jewish majority. Building Jewish towns on the ruins of demolished Bedouin villages, as is happening with the replacement of Umm el-Hieran with the new Hiran, is unwise. Finally, the callousness demonstrated by the government in the case of Al Araqib is clearly unacceptable. But even to presume to make such proposals is to ignore one of the most difficult aspects of the issue. Though not the mainstream, there is undoubtedly an extreme “Judaizing” wing in the Knesset, and its views are reflected, with decreasing intensity, through Israel’s political spectrum. It is therefore important to include, if only as an afterthought, the fact that a government-sponsored vote on the original findings of the Prawer Commission was postponed after some members objected that the terms were “too generous”. Mossy is an undergraduate student reading English at Corpus Christi
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Sussex
THE GREAT STAGNATION, AND THE END OF GROWTH? MATTHEW RIDLEY PHOTOGRAPH by PAOLO RESTIFO
“PREDICTION IS HARD. PREDICTIONS ALWAYS TELL US FAR MORE ABOUT THE PREDICTORS THEMSELVES THAN THEY DO ABOUT THE FUTURE.”
This is as true for generations as it is for individuals; when those in past eras tried to forecast the technology that would exist today, they invariably extrapolated from the technological developments of their own lifetime. Occasionally this can lead to surprising accuracy (witness the prediction from 1910 that in a century’s time we would all carry “cordless telephones” ), but more often people get it wildly wrong. The late 1960s — a time that had recently witnessed the invention of the jet engine, the motorway and space travel — abounded with predictions that we would have flying cars and colonies on Mars by now. Looking back on such predictions with the arrogance of hindsight, it is easy to chuckle at the over-optimism of previous generations. Yet perhaps the extrapolations of people in the 1960s were not so wild, given their experiences, and it is subsequent generations — we — who have let these people down. Many of those alive in 1970 had seen extraordinary change within their own or their parents’ lifetimes — not only the invention of the television, air travel and antibiotics, to name but a few, but the transformation of indoor running water, electric power and the car from luxuries to necessities. The stream of inventions from the late 19th century to the early 20th that changed life in such dramatic fashion is often called the “Second Industrial Revolution” . Such transformative inventions still make a huge difference to our lives today. Leave out electronics, and consider everything you own or use, most of it will have
been invented in the Second Industrial Revolution, and reached the mass market in the fifty years before 1970. Sure, computers and the internet make a big difference to your life, but has anything invented in the past forty years really had the same impact as the inventions I listed above? No, says a growing and vocal school of thought. Many economists now support an idea which economist Tyler Cowen dubs ‘The Great Stagnation’, a theory consisting of three broad hypotheses: •
Firstly, that living standards in the developed world have not been improving as fast as they once were.
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Secondly, that this has little to do with policy mistakes, or China taking our jobs. It is because of slowing innovation, and other fundamental constraints on the ability of our modern economies to grow further.
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Thirdly, that this slowdown suggests that steady economic growth is not the birth-right of the rich industrialised world. Growth is lumpy and, barring unforeseen and spectacular innovations to rival those from a century ago, will be slower in future in the developed world.
The first point has much data on its side. It really is true that in the US and Western Europe, incomes have not grown as fast since about 1973 as they did before, in the post-war
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era (some European countries were still catching up to the rich ones in 1973, but when they did so they slowed down). In the US, median wages have almost stagnated since then. What’s more, growth in total factor productivity – a measure of the economy’s efficiency and a useful proxy for technological advancement – has also slowed significantly in the Western world since the early 1970s. And because of the growth of government in the economy, the productivity figures may be even worse than they look – government productivity often tends to be overstated. If the data do not lie, then we are not growing as fast as we once were. On to the second point – why not? In the views of the “stagnationists”, innovation since 1970 has been simply less revolutionary than what came before. Robert Gordon, one of the most radical proponents of the ‘Great Stagnation’ hypothesis, poses a question to audiences whenever he gives a lecture: would you rather a) give up all technology that was invented in the last ten years – no Facebook or smartphones – but keep everything else the same, or b) keep all recent technology, but give up running
water and indoor toilets? I do not need to tell you which option the audiences choose. Yet, when everyone plumps for a), they have in Gordon’s words “been trapped into recognition that just one of the many late 19th century inventions is more important than the portable electronic devices of the past decade on which they have become so dependent.” Other explanations are more prosaic but no less effective in underscoring the inevitability of the decline in growth. Cowen and Gordon restrict their focus to the US economy, though their points are also relevant to other rich countries. Cowen argues that in the hundred years before 1970 we picked a lot of ‘low-hanging fruit’ that we cannot pick again — for instance, almost entirely rural populations became mostly urban, and access to education expanded from a small minority to almost everyone, both of which could produce a huge one-off gain for living standards. Many dispute these explanations, of course. A popular argument from the left is that income growth and
PHOTOGRAPH by MEG LESSARD
“... would you rather ... give up all technology that was invented in the last ten years – no Facebook or smartphones – but keep everything else the same, or ... keep all recent technology, but give up running water and indoor toilets?”
productivity have slowed because of rising inequality and the adoption of free-market policies that give the state a lesser role in promoting innovation and managing economic growth. Almost as popular on the right is the idea that growth has slowed because of the increasing size of government and regulatory thickets that slow innovation.
We cannot say who is right, because, almost by definition, innovations and their impact cannot be predicted accurately. However, a more interesting question is what we think future growth will look like. Both the optimists and the pessimists view growth as lumpy, driven primarily by a few big innovations, with incremental improvements to existing technology largely a sideshow.
Unfortunately, neither policy explanation is quite satisfactory. The left should squirm at the fact that most of the inventions of the Second Industrial Revolution were brought about in a world of states far smaller and more laissez-faire than today (and growth from 1945 to 1970, when interventionism had its heyday, came mainly from the widespread adoption of old inventions rather than new innovation). The right would do well to remember that even if environmental regulations, or government spending on health and education, do hurt growth and innovation — which they might not — most people would still regard their overall living standards as higher because of such interventionism.
If this view is correct, it could have profound implications for the way that society is organised. The steady productivity growth of about 2% that we enjoyed before 1970, around which Western societies built welfare states, may not be here to stay; whether it does depends on the largely unknown factor of lumpy innovation. Entitlement systems built on the assumption of continued stable growth will have to be reformed.
The third point that I raised above is about the future, not the past, and so leaves room for the most argument. In the extreme pessimist corner, Robert Gordon thinks it possible that by the end of this century the US will grow no faster than Britain did in the Middle Ages (0.2% per annum, if you were wondering). Others think that a renewed acceleration in growth driven by new and exciting innovations is just around the corner.
I don’t know that, of course, because prediction is hard. In the end, perhaps the whole debate about future growth really tells us more about the debaters, and about the time we live in, than about the future. It is little wonder that ‘stagnationist’ ideas have gained influence at a time of such economic hardship in the West. With short-term growth slow and faltering, it is easier to believe pessimistic ideas about growth in the long run. They absolve us from the need to find solutions to our current economic malaise. So when future generations, however rich or poor, look back at this period in history, perhaps that is what they will chuckle at. Matthew is an undergraduate student reading Economics at Trinity.
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PASSING THE BUCK: can democracies ever handle debt? LUCY WARK PHOTOGRAPH by MIKKO SAARI
The ability to raise capital by issuing debt is a double-edged sword for democratic governments. Sovereign debt can finance nation-building investments, or buy immediate popular support by putting off painful fiscal choices. The line between the two can be difficult to draw. However, recent American paroxysms over the debt limit, and the rolling Eurozone debt crisis, demonstrate the dangers of getting it wrong. Many economists argue that a moderate amount of productive sovereign debt is rational. That said, the painful social consequences of forced debt reduction make it clear that running up a huge bill, and putting off repayment until the point of crisis, doesn’t make sense. Research shows that voters unanimously agree a balanced budget over the long term is the best option. So why doesn’t it happen? Political science seeks to explain the seemingly irrational growth of damaging levels of debt in many nations. In the post-WWII era, it has become unusual – and almost politically incorrect – to question the superiority of democracy in mainstream discourse. It can be seen as elitist to imply that the electorate’s collective wisdom is sometimes less than brilliant. Cloistered in academia, political economy theorists rarely feel such reticence. The majority view is that democracies are structurally vulnerable to debt binges, in a way that non-elected governments are not. Debt is seen as the soft underbelly of democracy – an Achilles heel, even. Public choice theory - an approach that imports the assumption of a ‘rational individual’ from economics and uses models built on this to predict things about politics – advances this view most frequently. It postulates that self-interest in the competitive environment of politics drives public officials to pursue higher personal ‘political incomes’, at the cost of the public interest in avoiding debt. Specifically, it envisions several mechanisms by which democracy might lead to debt accumulation:
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The same research which shows voters prefer balanced • budgets hints at why they fail to vote for spending cuts and tax increases. Everyone likes balanced budgets when they don’t know which group of voters they’ll be in – the one that enjoys deficit spending or the one that pays for it. Once the ‘veil of ignorance’ is removed, voters support parties which shift the burden of taxes on to other groups • in society and give them greater benefits. Lower income voters support left-wing parties who expand the welfare state; higher income voters support right-wing parties who lower taxes. Individually rational, but collectively irrational. Democracy encourages ‘clientele politics’; the beneficiaries of new spending receive concentrated benefits and mobilize to resist their removal, often targeting individual politicians, while the costs of new spending are diffused across the broader public.
Regular elections mean that governments tend to respond to short term incentives to spend or reduce taxes, rather than the long term needs of public finances. In fact, many theorists believe that indebted nations may require a major crisis in order to overcome their aversion to addressing debt. When budget-setting power is held alternately by parties with opposing beliefs about the role of government and effective fiscal policies, there is the possibility that they may each increase the deficit in different ways. If one favours spending increases and the other cutting taxes, they may implement as much of their agenda as possible before the political cycle turns, while failing to undertake the unpopular step of undoing their opposition’s policies.
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Figure 1: Comparison of projected government net debt for selected economies, 2011-2017. (Australian Government Budget Paper No 1, 2012)
The public choice theorists make a strong case that democracies are structurally incapable of avoiding debt problems. It is certainly striking that attempts to resolve the European and (to a lesser extent) US debt crises have sought to sidestep or dilute elements of democracy. The appointment of apolitical technocrats as political leaders, the reliance upon the unelected European Central Bank, and the creation of a Congressional ‘super-committee’ followed by automatic spending sequestration, are just a few examples. However, such conclusions are a little hasty. While a tendency toward excess debt accumulation may exist, the forces of democracy can also channel countries in the opposite direction. The relationship between democracy and public debt depends on the country in question - and a range of factors can intervene to influence how it works.
A Case Study: the United States and Australia Compare two democracies with very different experiences of debt: the United States (US) and Australia. The American position is poor, and despite the recent Murray-Ryan budget deal, there are few signs that meaningful long-term debt reduction is in sight. •
US federal debt was 100.8% of GDP in 2012.
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The 2013 government shutdown, the 2012 ‘fiscal cliff ’ debate and the 2011 federal debt ceiling stand-off illustrate the seeming incapacity of the political system to take the measures required to consolidate federal debt.
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Debt projections suggest that without reform, interest payments will become the biggest expense in the federal budget, and the debt-to-GDP ratio will reach 200% by 2020 and 400% by 2040. Even assuming entitlement reform is accomplished, with gradual fiscal improvement, sovereign debt will reach 200% by 2040.
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In contrast, Australia’s public debt is negligible and falling.
***
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Federal government net debt stood at 6.0% of GDP in early 2013.
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This debt was incurred through stimulus packages and the operation of automatic stabilizers (such as unemployment payments) following the 2008 Global Financial Crisis.
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The return to a surplus budget occurred in 2013.
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Two similar episodes of debt accumulation in the 1980s and early 1990s were also followed by periods of successful reduction through budget surpluses.
The US and Australia are politically similar in many ways; both are federal democracies with industrialised economies, and as former British colonies, they possess a common Western liberal heritage. So what are the factors that shape how they handle debt?
Constitutional Structure The contrast between these two countries’ constitutions is important. In an American-style Congressional Presidential system, checks and balances are achieved by distributing power across different branches of government. Political economy theorists Persson and Tabellini argue that, all other things held equal, this separation of powers should work in the voters’ favour. The competition between branches of government and parties makes them hyper-vigilant towards waste and pork barrel spending. However, this assumes both a high level of political engagement and voters who are unanimous in their preferences on spending distribution – without this unanimity, particular voting blocs can capture separate parts of the government and increase spending overall. In contrast, the Australian Government aligns more with the Westminster tradition; the House of Representatives is controlled by one of the two major parties, generally in conjunction with control of the Senate, and without obstruction from the purely ceremonial position of the Governor-General. This gives fiscal policy more unity, removes the ability of parties to direct blame at coalition partners, and removes the need to give expensive concessions to maintain coalition unity.
Figure 2: Australian debt as Percentage of GDP, 1940-2009. (Di Marco, Pirie & Au-Yeung, 2009).
Electoral Rules
Polarisation in the United States
Australia is one of only ten countries where compulsory voting is actually enforced, and the only large industrialised democracy among them. Its participation rates are upwards of 95%, and Australian politicians aim to persuade the ‘silent majority’ in the centre, meaning there is a greater agreement between the two major parties on the proper role of the state and balanced budgets. For instance, there is a greater long-term consensus around sustainably funded welfare programmes in Australian politics; while US Social Security will be bankrupted by the retirement of the baby boom generation without reform, in Australia this demographic problem was avoided with a system of self-funded superannuation accounts, based on compulsory salary contributions.
Political polarisation is probably the most important new contributor to the United States’ inability to reach consensus on fiscal consolidation. The population’s opinions on the effectiveness of the state have diverged sharply in recent years (Figure 3) and the polling gap between Democrats and Republicans on the federal government’s proper scope has quadrupled in the last 25 years (Figure 4). The polarisation has been asymmetric, with a greater shift to the extremes among Republicans than Democrats. Furthermore, because the Republican Party contains twice as many conservatives as the Democrat does liberals, a shift of equal size in underlying belief produces a much greater effect within the GOP. This dynamic is accentuated even further by party supporters’ uneven willingness to compromise. In a 2010 poll, Democratic voters supported compromising in order to get things done – liberal Democrats 58% to 16%, moderate Democrats 64% to 17%. However, the conservative wing of the Republican party, which represented the overwhelming majority, favoured sticking to policy beliefs 45% to 26%. And thus we have the Tea Party.
In the United States, participation rates range from 10% of the electorate in primaries to 50-60% in Presidential elections, so there is a greater focus on turning out the partisan base. This often leads to divisive issues being highlighted to emphasise the gap between the parties.
Figures 3 and 4: Views of Government and the Federal Government’s Reach. Red: Republicans, Blue: Democrats, Green: Independents. (Pew Research Centre for the People and the Press, 2012).
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Relative consensus has been supplanted by disagreement over fundamental issues, reducing the capacity for bipartisan compromise as envisioned by the system of checks and balances. Such compromises have certainly occurred in the past; look at the 1983 Reagan-O’Neill agreement on saving Social Security, and the 1990 Bush Sr.-Democrat deal on raising taxes. While polarisation may simply lead to greater swings in policy between governments in countries like Australia, in the US it exacerbates the clashes envisioned by the constitution in a counter-productive way.
‘Surplus fetishism’ in Australia Australia’s idiosyncratic political trend pushes its party leaders in the other direction. In Australia there is a powerful political stigma attached to indebtedness. The Labor Party have historically been perceived as weak economic managers, partly due to the natural tendency of left-wing parties to support bigger government and counter-cyclical spending, and partly due to past episodes of high deficits and inflation. Recognising this weakness, since the 1980s both Labor and Coalition (conservative) governments have made a point of seeking budget surpluses. Notably, Labor’s victory in the 2007 federal election relied on then Opposition Leader Kevin Rudd’s frequent self-definition as a ‘fiscal conservative’. Fiscal competence and the government’s supposed indebtedness were also central issues in the 2010 and 2013 federal elections, despite the internationally recognised strength of the budget and the economy. Surplus fetishism doesn’t stop on election night. The pressure for balanced budgets distorts government policy-making too; for the Labor Party, an out-of-date promise to deliver a surplus in 2013 trumped economic reasons to slow the rate of fiscal consolidation, such as falling tax revenues and weakness in non-mineral sectors of the economy. Consequently, the 2012-13 budget was actually Australia’s sharpest fiscal U-turn since 1951. It was predicted to remove at least 2.6% of GDP from the economy in 2012-13 (based on Treasury estimates) and ran the risk of pushing Australia into recession.
Economic drivers: comparing the Australian and US economies Political context is important, but economic differences also have a role to play. The United States has a greater ability to borrow than any other country, partly because of its founding role in many institutions of the global economic system and partly because of the US dollar’s status as the world’s reserve currency. On the other hand, Australia is a much smaller, highly trade-exposed economy dependent on net imports of capital. The country’s reputation in international credit markets is therefore crucial. It has also historically been very vulnerable to exogenous shocks, so it has to be very cautiously run. The Australian dollar is said to go ‘up the stairs and down the elevator’, because of the tendency for investors to flee to safer currencies at any sign of global instability, reducing the dollar’s price below a true reflection of the economy’s strength. These factors explain the stronger impetus for caution and fiscal conservatism observed in Australian politics. That said, the Australian economy has also been enormously insulated from global economic problems by the mining boom of the last two decades, and has been able to reap huge budget royalties from this trade. This has meant that Australia has been able to run surpluses without confronting many of the difficult choices facing other advanced welfare states. So it seems clear that the relationship of a democracy to debt is also shaped by the nation’s unique economic characteristics.
Political leadership and the experience of other countries The Australian experience mirrors that of other countries which challenge the conventional wisdom about democratic debt. Posner and Blondal record dozens of episodes where advanced and emerging economies reduced their primary deficit by more than
7% of GDP; for instance, many such adjustments occurred in the run-up to the European Monetary Union, as well as in Sweden, New Zealand, Canada, Finland, the United States and the United Kingdom in the 1990s. Most of the nations which successfully reduced debt faced incremental market pricing pressures rather than a sudden crisis, contradicting academics who argue that the electorate make this impossible.
economic concepts fuels damaging political dynamics, even though these operate in opposite directions. This is not a new problem – for instance, the clash between democracy and the technical complexity of governance is one identified by America’s founding fathers over two centuries ago. In 1787, John Adams wrote to Thomas Jefferson that:
The really fascinating insight is this – voters “irrationally” reward politicians for debt reduction in many countries. A study of OECD nations, spanning 164 elections from 1960 to 2003, found that reducing state debt actually significantly increased the chance of re-election, after controlling for economic conditions. The crucial difference lies in political leaders’ abilities to frame fiscal consolidation as a necessary economic policy, often using the spectre of anticipated credit market responses to act pre-emptively. The announcement of consolidation packages can often create a positive feedback loop of lower interest rates. Work by Pierson also suggests successful strategies for political leaders, such as compensating ‘losers’ in cuts, hiding the visibility of changes, phasing in cuts and systematic retrenchment through technicalities or indexing.
“All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit, and circulation.”
In contrast to these cases of politicians taking political risks to cut debt, many US commentators see problems with a genuine lack of political leadership. Most representatives are in favour of reducing the debt in principle, but fail to do so in practice when their priorities are threatened.
Democracy: good cop, bad cop or just the messenger? Clearly, democracy can be a force for good or evil in regard to debt cause for hope, perhaps, but not too much. Experience suggests that in most countries, an informed national discussion about debt and the size of government is an unrealistic ambition. Both Stateside and Down Under, the electorate’s poor understanding of complex
Until a moment when public understanding of debt is sufficiently developed for voting choices to align well with the national economic interest (and that sounds like something of a pipe dream), democracies may be forced to rely on skilled political leaders and non-partisan technocrats. Ironically, it seems an element of aristocracy may represent democracy’s best hope of managing the impact of state debt. Lucy is an undergraduate reading Politics at Trinity
PHOTOGRAPH by EPSOS.DE
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BITCOIN: the future of currency? ALASDAIR PHILLIPS-ROBINS PHOTOGRAPH by ANTANA
It seems you can’t turn your head these days without hearing about Bitcoin. Featured in The New York Times, The Wall Street Journal, and the Financial Times, as well as being reported on by the BBC and many other news organisations, the crypto-currency is becoming increasingly widely known. However, for most it remains as mysterious as ever. Everyone is talking about it. The Winklevoss twins — of Facebook and rowing fame — are on a personal crusade to promote it. Richard Branson has announced that Virgin Galactic will begin accepting it. The official news agency of the Chinese government, Xinhua, has endorsed the transformational properties of Bitcoin. Even Ben Bernanke, the chairman of the Federal Reserve, has kind words for Bitcoin. Writing to senators before a hearing on Bitcoin he suggested that it “may hold long-term promise, particularly if the
innovations promote a faster, more secure and more efficient payment system.” Bitcoin appears, at first glance, to be a next-generation currency. It relies on a decentralised network of private computing power to first generate it and subsequently authenticate the integrity of all its transactions. Thanks to its freedom from any central authority and ultimately limited quantity, its advocates claim it can escape the dangers of state failure, government intervention and rampant inflation. Certainly inflation has been far from a problem for Bitcoin, as its value has soared from less than $0.01 to a peak of over $1200 during the past two years. The economic principles on which Bitcoin is based, however, are far from new. The Great Recession has caused a resurgence of agitation for the gold standard from some libertarians
afraid of the effects of the quantitative easing — essentially pumping money into the economy — being undertaken by many central banks. They foresee a combination of massive inflation and the dollar losing its reserve currency status as the perfect storm which will wipe out the savings and livelihoods of most Western consumers. The answer, in their view, is the independent, deflationary Bitcoin, a kind of digital gold for the twenty-first century. The problem with the structure of Bitcoin is that it essentially precludes it from becoming the widely-adopted means of exchange that its proponents envisage. It is often stated, in defence of the abstract nature of Bitcoin, that all modern currencies have no inherent value, and are simply maintained by the shared belief that everyone will accept them in exchange for goods and services. Bitcoin’s advocates further point out that over 90% of the world’s currency
does not exist in any physical form, and so Bitcoin simply follows the current trend by getting rid of wasteful physical money altogether. This ignores, however, the fact that all currencies are also supported by the willingness of governments to accept them in payment of taxes and the ability of those governments to enforce those taxes. No government could ever accept Bitcoin as its national currency because to do so would be to give up control of its monetary supply. The disadvantages of even partially losing control of monetary policy are clear from a glance at the economies of Greece or Spain; these disadvantages would only be greater in the case of Bitcoin. The current value of Bitcoin is wildly unstable. Its price is based almost entirely on speculation by those greedy for short-term profits, or true believers who hold that someday Bitcoin will gain widespread use and their coins will be immensely valuable. The awkward truth is that Bitcoin is essentially a solution looking for a problem. Whether the financial crisis and ensuing recession was a failure of policy, markets or something else, it was not a failure of currencies. It turns out that the current international system of currencies works fairly reliably. Problems are introduced by governmental policy and regulatory failures, but are not inherent in the system. When it becomes clear that Bitcoin will not replace traditional currencies, the speculative bubble will burst for the last time. This is what will happen if Bitcoin is nothing more than a new currency competing with traditional ones. But Bitcoin is not just a rival currency and it would be wrong to remain stuck in a 20th-century economic view which sees it as such. As with the internet in its early form, we know very little about what applications might be found for this innovation. It might, in fact, be more helpful to think of Bitcoin not as a currency, but as an international payment system. By allowing anyone the ability to transfer payments to anywhere in the world instantly, for very small fees, Bitcoin could potentially revolutionise retail banking. Even the smallest business could sell products to a global market without expensive currency exchange fees, and payments between individuals, previously prohibitively expensive, would be made far easier. Bitcoin also has the potential to revolutionise online publishing and content creation. By allowing consumers to pay authors and artists directly and securely for their work, the democratic potential of the internet could be more fully realised. Already on reddit — a
content aggregation and discussion site — users now have the ability to securely send Bitcoins to each other, a process known as ‘tipping’. The tips given are generally small, around $1 or $2. However, in April, during the second great Bitcoin bubble, a user who went by the name of “Bitcoinbillionaire” started giving out somewhat larger tips and in one day had handed out over $13,000 in Bitcoins to a few stunned redditors. Although the practice of Bitcoin tipping is at present a niche one, it certainly has the potential to completely change the way we pay for content online.
Bitcoin remains significantly ahead of all its possible competitors — the total value of all Bitcoin is several billion dollars while only one rival, Litecoin, has broken a hundred million. Yet, despite its head-start, some investors are already announcing the demise of Bitcoin. In a recent New York Times article Lawrence Blankenship, a software engineer from Missouri, said that “looking down the road 10 years from now, I definitely see Bitcoin being ousted, everyone’s going to start switching to other coins, and hopefully PeerCoin comes out ahead in that.”
Crypto-alternatives
Another payment system positioning itself as an alternative to Bitcoin is known as Ripple. Taking a slightly different approach from Bitcoin and its rivals, Ripple is not primarily a currency, but rather a digital payment system. It works on identifying and building networks and pathways of trust in order to transfer money globally, using its own internal currency, ripples, as a medium of exchange. Ripple has begun to win more mainstream support thanks to its big Silicon Valley backers and greater transparency and ease of regulation. Both the Ripple system and its creators have still faced criticism for being less ambitious in scope than crypto-currencies and for retaining over half of the Ripples created in the hope that they may gain value.
The fact remains, however, that Bitcoin may well not be the best of such exchange systems even though it is the first. In its wake a number of other crypto-currencies have sprung up, hoping in various ways to capitalise on or emulate Bitcoin’s success. Most of these, like TigerCoin, LuckyCoin or GlobalCoin, are simply pump-and-dump schemes designed to allow the creator to mine vast quantities of coins and then sell them at prices which, although still very low, create a large profit for those who hold enough coins. There is even a coin, DogeCoin, based on the popular ‘doge’ internet meme, which, despite its explicit basis on a joke, reached a nominal market capitalisation of over $4 million. However, not all the alternatives to Bitcoin are to be easily dismissed. One of the most promising alternative coins, or altcoins as they are known, is PeerCoin. PeerCoin is a crypto-currency which, though created on a similar basis to Bitcoin, has a few crucial differences which could well give it a long-term edge. As well as changes to the technical architecture to reduce the likelihood of one group controlling the network, PeerCoin has no hard limit on the number of coins which will ever be produced, and the developers aimed to create a system of transaction fees and and mining process which would result in long-term inflation of about 1%. Additionally PeerCoin is designed to be more environmentally friendly than Bitcoin. At present creating Bitcoin is an expensive process, costing miners an estimated $20 million in electricity every day. PeerCoin, by using a much less energyintensive process, aims to be far more sustainable for miners. Even so, PeerCoin is not without its faults. Its relatively high 0.01% transaction fee means that it would be impractical for use in everyday personal transactions or any high-volume market, and its system of rewarding those who hold large quantities of the currency has led to accusations that it unnecessarily favours early adopters.
For the moment, the greatest challenge facing Bitcoin, PeerCoin or any other digital currency is the high information barrier required to use them safely. Although these currencies are, thanks to their roots in cryptography, secure if used with the proper precautions, they can be very vulnerable in the hands of those who do not fully understand what they are using. The process of creating and using a Bitcoin wallet is, at present, fairly cumbersome and sufficiently opaque that there is ample room for scammers to exploit less experienced users. There have already been several large thefts of Bitcoin as well as numerous smaller losses. Last year 24,000 Bitcoins were stolen from the exchange site BitFloor, a sum worth over $16 million at the time of writing. As the currency gains increasing attention, such thefts will only become more lucrative. Bitcoin or one of its rivals needs to find a way to take the currency out of the geek world, and make it safe and easy for everyday consumers to use. While no one knows which crypto-currency (if any) will finally become dominant, whichever does rise to the top is likely to be a lot closer to PeerCoin or Ripple than Bitcoin, and the ‘Winklevii’ may just find that, once again, they backed the ConnectU rather than the Facebook of digital currency. Alasdair is an undergraduate reading History at Trinity
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URUGUAY’S CLASIFICADORES
It’s a typically chilly July afternoon. Traffic on one of Montevideo’s busiest streets is gridlocked by dozens of horse-drawn rubbish carts. Pulling up outside the Palacio Municipal, home to Montevideo’s regional government or Intendencia, the rickety carros and their drivers cause quite a stir. These clasificadores steer their carts through the streets of Montevideo, collecting rubbish from households and more often than not, rifling through bins and dumpsters to salvage valuable detritus. They make their living by re-selling what others throw away. The Intendencia’s new proposals pose a serious threat to their way of life. Restricting rubbish collection to “duly authorised” concerns is raising fears among the community of clasificadores that only private companies will receive ‘due authorisation’. Furthermore, in three districts — the Ciudad Vieja (old town), Centro and Cordón – the carros will be banned entirely.
“Nobody in Uruguay seemed to have bothered to ask the clasificadores themselves what their lives are actually like.”
Faced with this threat, entire families converge on the building – young mothers, tiny toddlers, teenagers and old men, united in anger in front of the Palacio. This wasn’t just a show of solidarity. It’s a family business – with little boys helping their dads on the carts, and little girls helping their mothers sort the detritus in the family home when it returns from the rounds. While the horses and donkeys choose to protest by relieving themselves on the pavement, their owners opt for more traditional methods. Waving national flags and banners, they pontificate from a rusty but powerful PA system strapped to the roof of a clapped-out Volvo. There is a fighting mood among the clasificadores. There is almost no in-depth coverage of the clasificadores in the Uruguayan media. Yet they are not an insignificant group - according to a conservative estimate by the Intendencia, there are 3,188 operating in the city. (UCRUS disputes these figures, putting the number of carts at 7,000 – though assuming a family of four runs each cart, and taking into account the many who can’t afford a cart to collect rubbish in shoulder-slewn sacks, the number of clasificadores may well lie above 30,000). Despite this, only the most occasional column-inch records the passing of a protest,
and politicians mention them in passing in the odd interview. Nobody in Uruguay seemed to have bothered to ask the clasificadores themselves what their lives are actually like. In the month following the protests, I endeavoured to do precisely that – and discover whether the clasificadores’ lifestyle was a sustainable one. In doing so, I uncovered a community engaged in a practice which meant far more to them than work, yet whose days seemed numbered. Worryingly, I also discovered that those seeking to modernise have little idea of how to do so, and scant regard for those thousands it would affect. In true Uruguayan fashion, the clasificadores have their very own union – UCRUS. A few days after the protests, I found myself on the impoverished Camino Corrales. Chilly and basking in the mid-winter drizzle, I stood opposite a tiny breeze-block hut with a corrugated tin roof. Behind the modest façade was UCRUS’s nerve centre. Gathered round a table, six members plotted their next move. I was ushered into the ‘library’ – a store cupboard heaving with union propaganda, Marxist theoretical treatises and other syndicalist light reading – to speak with Walter Rodriguez, their president. A softly-spoken man in his late 50s, Walter nevertheless took no prisoners. His
BEN WEISZ
PHOTOGRAPH by VALERIO PILLAR was a story of a City Council who didn’t care about the poor. He painted a picture of a prejudiced society, where clasificadores were easy targets for majority abuse. He told me how clasificadores routinely had to put up with heckling from the public, labelled as ‘thieves’ and worse while they went about their work. Any concern about child labour among the clasificadores could be put down (in large part, at least), to prejudiced outsiders trying to smear UCRUS and those it represents. In truth, I left that meeting more confused than when I started. Walter’s were pretty serious allegations – but what was the life of a clasificador actually like? Needing to find out first-hand, I returned to the Camino Corrales once more, to wait for Caio, a 40-something clasificador. On the corner of a busy junction, I saw half a dozen other carros weave in and out of the buses before my ride pulled over. “Hop in!” And with that, we were off. Lurching forward, feeling every pothole through the rickety metal-and-wood contraption Caio had fixed to the back of his horse (a lovely Appaloosa called Indio), I chatted to him about his life while he did his rounds. I’d just asked my first question when we ground to a halt. We ’d reached our first
container, and with that Caio broke off mid-sentence, hopped down, propped open the lid with an old tyre and dived in headfirst, legs dangling precariously. This wasn’t going to be an orthodox interview. A few moments later, Caio returned with some cardboard, plastic bottles, and some food scraps — “There’s always a nice little amount because despite social problems, rich people have a lot of food.” As he said it, the ‘rich people’ he gestured towards gazed disapprovingly from their windows; windows in an austere-looking block of social housing in one of the poorest areas of Montevideo. As we rode from container to container, I got a feel for how Caio saw his work. It was more than a job for him. “It’s a way of life which comes from the earliest days of our culture. ‘Culture’ is an important word here, because Uruguayans have a long history of working and living with horses.” He spoke of the freedom of setting your own hours, and also of those rare days when you hit the jackpot. “We have a friend who was called over by a famous salesman of antique coin, who called him over on 18th July Street, he yelled “Hey! I’ve got something for your cart!” and he brought out four large crates — the kind you see vegetables sold in — four large crates full of coins.”
— the lack of fixed income, the inability to retire, the lack of access to sources of credit. The high vet bills for those with horses (when Indio last took ill, Caio had to pay £100 for antibiotics and couldn’t work while his horse was sick), and the even harder manual labour for those who pull carts by hand. I also learned that some went out of their way to give clasificadores a bad name. “We have to take special care to make sure it’s clean around the container. That is, there are people trying to ruin our relationship with the City Council. We’ve seen people throwing all the rubbish out of the container, and they ask us ‘who did this?’ and they have prejudice against those of us who drive carts because they blame us for it.” So, on to the million dollar question – are tales of children working on the carros a nasty myth invented to smear the clasificadores, or a serious problem the group needs to address?
“He painted a picture of a prejudiced society, where clasificadores were easy targets for majority abuse.”
I learned about the challenges the work poses
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“It’s a way of life which comes from the earliest days of our culture. ‘Culture’ is an important word here, because Uruguayans have a long history of working and living with horses.” “Of course, there are those who go out after school because clasificadors don’t have fixed hours and they go out when they want to. The family of clasificadors is realising that children in the streets isn’t ideal, that they should have their chance to study, that they should have their chance at a childhood, which is another very important thing.” Caio stressed that UCRUS itself was officially against child labour.
means that parents and children are both very keen to hide their involvement. Secondly, if clasificador children are disruptive in lessons, or miss work through non-attendance or dozing off, it is easier to expel them than it is to tackle the problem. Inside, I saw an older class making wooden toys for the younger children to use. I started chatting to a group as they worked. They were generally happy that Gurises Unidos was in the school, and told me how the school’s atmosphere had improved through the three years of its involvement. The walls, once stark and concrete, had been painted according to the children’s own designs. Violence in the playground had, they told me, reduced significantly.
Someone who attempts to answer that question is Lía Fernandez, from Gurises Unidos, a Montevideo-based children’s charity. She agreed to let me accompany her team to one of the schools it runs outreach programs in.
Halfway through a conversation with one boy concerned about my knowledge of Luis Suarez, I was subtly tapped on the shoulder and ushered out of the classroom. The volunteers wanted me to meet a little girl, no more than 7 or 8 years old. Her dad used to have a cart, but had recently moved up in the world, scraping together enough to buy a ‘depository’, allowing him to become the middle-man to whom the clasificadores sold their finds. She told me how she used to enjoy going out on the cart, since it was a chance to bond with her father, and presented her with her only chance to leave Piedras Blancas and see other, exciting parts of Montevideo. Never was it clearer that for many children who work in this sector, their tasks don’t seem like work — to them or to their families. Indeed, collecting waste in the carts is a big day out, while sorting the rubbish in the house or in the yard is considered just another family chore, no more pernicious than doing the dishes.
She tells me a little about the school we’ll be visiting. “Primary School #119”, to be precise — with over 1300 pupils, half of whom attend in the mornings, the other half of whom attend after lunch. This doubling-up is common in Uruguay’s chronically understaffed state schools. Furthermore, as the area is so poor, many of the children will be from clasificador families.
Yet against the odds, this little girl was going places. She’d come top of her class in various school subjects (she took great delight in reciting all of the marks from her most recent report card – very high figures all round). I asked her what she wanted to do when she grew up. “Well, various things. I’d like to be a footballer. And then a police officer.” Perhaps the cycle could be broken, after all.
Lía explains how to identify which children are engaged in clasificador work. “The child turns up tired, many times they can fall asleep in the classroom. Also, hygiene, health issues, parasitosis, respiratory infections, cuts in their hands, because when they go out to the skips they often cut themselves. These are physical issues which are really obvious, those and the tiredness, that they fall asleep.”
On the way home, Lía and her team shared more horror stories. They told me of a singleparent family they had worked with a few years ago. As the single parent was a mother, it fell to the fifteen year old eldest son to provide for the family. He was a “very handsome child.” One day, a politician noticed this boy riding a cart, and offered him more money than he could make in a week to perform acts which the volunteers couldn’t bring themselves to describe. The harsh realities of these children’s lives shows that child labour is still a problem among clasificadores.
Later that evening, I came across a 12 year old, driving a cart by himself – illegally of course. However well-drafted the rules are to protect children from the worst kinds of labour, those rules are clearly circumvented. According to a report published in 2009 by CETI – the National Committee for the Eradication of Child Labour – there are around 2000 children in Uruguay who undertake work as clasificadores. What can be done for them?
However, even if a teacher spotted these signs, there is often no child protection plan to facilitate intervention. First, there’s the social stigma surrounding clasificador work, which
This visit showed the complexities of trying to tackle it. Many children who work this way don’t think of what they’re doing as work, and those who do fear stigma and so hide it from those who could help them. Yet it was clear that many who do involve their children in their work do so, not out of economic necessity, but because this sort of activity is simply part of their family life. Change that, and clasificador work could, in theory, carry on without child labour. However, it turns out that child labour is not the only gripe with the clasificadores. To find out why, I return to the Palacio Municipal. Halfway up its imposing edifice sits the 9thfloor window of Nestor Campal. Nestor is in charge of Montevideo’s transport infrastructure. He’s run into the clasificadores several times over the last few years, and is an outspoken critic. In a wide-ranging interview with the national daily El Pais in July, he even called for the “elimination” of the clasificadores’ carts from the streets of Montevideo. What was the source of Nestor’s ire? Many Montevideans, in private at least, want rid of the clasificadores. As well as the prejudice they may harbour towards these extremely visible signs of dirt and poverty in their city, they are rightly concerned whenever they see children on the carts. This was clearly a touchy subject for Nestor. I started by asking him about that quote in El Pais. What did he have to say to those clasificadores who saw their lifestyle, not as something to be eliminated, but as an important part of Uruguayan culture, there to be preserved? Nestor didn’t pull his punches. “Not only is it not important to preserve that lifestyle, but it’s actually important to profoundly alter it.” First up, Nestor lashed out at what he felt was a ‘something for nothing’ attitude among the clasificadores. “The clasificador wouldn’t exist if there weren’t other people in society who constantly obeyed its norms.” He criticised the clasificadores for making use of the city’s rubbish infrastructure, its containers, without paying anything towards their upkeep. Worse, he ripped into the clasificadores’ frequent claim that they are good for the environment. While they may remain Montevideo’s most widespread form of recycling, the net effect on Montevideo’s environment was negative. “The main environmental problem which Montevideo has nowadays is associated with the ‘rechazo’ which the clasificadores produce — in other
words, the items they take home but decide to throw away after sorting them. That is to say, if I have waste in a skip and a lorry comes on its rounds to dispose of it adequately, and we compare that with the situation where rubbish is rejected and thrown away behind the clasificadores’ houses, into the Miguelete stream, into any of the water courses, or even into the sanitation system…to keep this system working, and to prevent the clasificadores themselves from drowning in waste, society has to intervene – paying ten times as much to retrieve waste from water sources as it would have paid to retrieve them from a container.” Nestor also voiced difficulties with the way the carros complicated the city’s road network. “The movement of horses and carts, which don’t have adequate lights, which can react unpredictably to a siren or a car horn…this all generates a situation for transport which cannot be maintained.” But what was Nestor’s solution? “We need to change the current situation, where a clasificador works in the street, to prepare him for a different set-up, with uniform, protective gloves, suitable footwear, working fixed, regular hours.” Nestor believed that it was high time for the clasificadores to give up their carts for the European-style waste sorting plants that UCRUS so detested. However, it is here that the much-disputed head-count of Montevideo’s clasificadores becomes key. The Veolia recycling plant
which serves the European city of Leeds will only need to employ 45 full time staff when completed . Leeds is a city of 751,500, just over half the population of Montevideo. Even if we take the Intendencia’s implausibly conservative estimates about the number of clasificadores, it is difficult to see 3,188 of them squeezed into 90 jobs. Even if the plant were designed to be deliberately less labour-efficient than European equivalents to create more jobs, it seems downright ludicrous (not to mention unaffordable) to design a plant over 33 times less efficient. As for the timescale? Despite the fear the proposals had instilled among the clasificadores, there isn’t one. Nestor was shocked that I’d even asked. In Uruguay, with its post-guerilla, shoot-first, aim-later brand of politics, it’s common to make sweeping policy announcements before drawing up the vaguest plan of how to implement them. When pressed, Nestor suggested that it’d be peachy to have it in place at the end of his term in office – 2017 – but nothing more specific.
“if clasificador children are disruptive in lessons, or miss work through non-attendance or dozing off, it is easier to expel them than it is to tackle the problem.”
While one can appreciate Nestor’s problem, his solution (that of the Intendencia) is ill thought-out, clunky and totally fails to appreciate the complexity of the situation it seeks to address. Yes, it is probably too costly, in both financial, environmental and human terms, for clasificadores to continue as they are. However, magicking up a pipe-dream of improbably overstaffed recycling plants, completely banning the use of horses so central to the clasificadores’ identity, and leaving it up to NGOs to work out how to sever the link between work and family life is not only inadequate, but actively damaging. On my rounds of the lives of the clasificadores, one word was used, time and again — precario. The clasificadores are a socially marginalised and materially impoverished group, for whom everything is rigged so as to actively avoid seeking a way out from this form of subsistence. Simply announcing that you’re going to end their livelihood, with no concrete plans for a replacement, is recklessness of the highest degree. So what next? Neither Intendencia nor UCRUS seem willing to compromise on their positions. With the tentative 2017 deadline for implementing the new proposals looming, the clasificadores find themselves engaged in a struggle for their way of life. The protests in July likely herald more drastic action to come. Ben graduated from Trinity in 2013 with an MPhil in Philosophy, and is now working for the BBC.
PHOTOGRAPH by JÜRGEN KLUTE
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FROM THE CHILEAN JAGUAR TO THE CHILEAN LEOPARD: silence and weariness in Chile’s last presidential election MARCOS GONZÁLEZ HERNANDO PHOTOGRAPH by MATT HINTSA
With the results of the Chilean elections in December 2013, Michelle Bachelet has secured a timeless place in Latin American politics and its collective imagination. However, her decorous appearance, the sympathies she provokes and her electoral successes conceal an ambiguous political figure – very far from traditional caudillos but also sharing some of their traits – in an ever more unclear scenario for the country she leads. In many senses, her figure, in and of itself, embodies the contradictions of the current climate. But in order to understand what she means for Chilean politics, a recap is necessary. In March 2006, already sixteen years under Concertación’s rule (the by-thenfatigued centre-left coalition that followed Pinochet’s regime) she became the first female Chilean president. A member of the Socialist Party, agnostic, divorced and a direct victim of torture during the dictatorship (her father died while illegally detained), her election was a landmark in the history of this very conservative country. Later that year, Santiago saw the most impressive student demonstrations since the 1980s, demanding better education standards and lower fees. She handled them by organising a technocratic commission and a cross-party agreement. A ceremony where politicians of all parties held hands and celebrated a very meagre policy change signalled the end of the unrest in the streets, but not of the mistrust it expressed.
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Five years later, now under a right-wing president, this discontent would return with a vengeance. Even more radical student mobilisations against policies mostly inherited from his predecessor put Sebastián Piñera’s government on the ropes. As a result, opposition to the for-profit motive in higher education and to unsustainable levels of inequality – and ultimately to the very economic and institutional framework inherited from Pinochet – gathered impetus. Although the 2011 student movement did not achieve its explicit goals, support for its aims and diagnoses became widespread, along with a growing scepticism towards the political class; this in a country that joined the OECD in 2010 and is usually regarded as an example for the region, both economically and politically. During these events, as president of UN Women in New York, Bachelet declined to comment on Chilean affairs.
Michelle Bachelet: Round II In December 2013, although silent on her country’s politics until April of that year, Bachelet secured once again the presidential election with over 62% of the vote against Evelyn Matthei, the government’s third-choice candidate, in an unsurprising second round with historically low turnout. Her coalition — rechristened “New Majority” — now includes the Chilean Communist Party and some of the student leaders who denounced her policies in 2011. Four of them even reached Congress, which allows for the approval of many (but not all) of the reforms that the student movement propounded and that the New Majority now shares, at least rhetorically. Meanwhile, the right-wing coalition is in tatters, riven by internal strife — especially around Pinochet’s legacy — even after years of enviable GDP growth. The country remained amongst the worst in the OECD in most healthcare and education measurements and its Gini coefficient continued to be unacceptably high. Although Chile is a developed economy according to the World Bank, that development has yet to reach most of the population. Promises of further growth were, apparently, not enough for the majority of Chileans, who do not feel part of the Chilean economy politicians and news outlets describe. In this sense, the right’s fear campaign against Bachelet, depicting her as an inept and populist leader who would take Chile away from economic soundness, could only but fail. Were one to take these events at face value, it would be easy to think that either Michelle Bachelet has extraordinary political aptitude or that Piñera lacks it completely. But although this is true to a degree, it is also true that she did not need special rhetorical skills: the race was, to a great extent, already won before she started running. What is more, even late into her campaign she led a programme filled with silences, ambiguities and reversals on important policy issues, including matters as significant as
changing the constitution and providing free higher education. However, somehow these political opacities worked to her advantage against a more defensive and inflexible opponent. To understand this, one has to put Bachelet’s strategy in the context of a growing weariness of the political climate. The first round of the race saw nine candidates, representing most sectors of society: from entrepreneurs to the urban poor, from ecologists to partisans of local government, the radical left and the traditional “duopoly” of the two major coalitions.
The fulcrum of Chilean politics However, none could unite Christian democrats, communists, liberals and social democrats under the same umbrella as Bachelet could, and she could only do it through silence and a transfiguration. Both she and the Concertación have experience in this: they governed through what was dubbed the “democracy of agreements”, rarely attempting to reform an uneven playing field, as this would lead to conflicts reminiscent of the preceding dark period. This in practice meant negotiating with an over-represented opposition under an institutional model inherited from the dictatorship. Nonetheless, now agreements will depend ever more directly on her, as she is the central link supporting the New Majority in a context of weakened political parties, particularly on the right. Meanwhile, the most vocal on the left are understandably cynical about Bachelet’s programme; a newly formed think tank, Espacio Público, threatens to capture the policy-formation process under the guise of a multi-party technocracy, just like in the days of the Concertación. But it is also true that the Communist Party and the student leaders who now support her cannot concede too much to the old guard and that she cannot afford to merely duplicate her first period. Because of the way her campaign and roadmap were structured, and the people she managed to bring together, she is bound to disappoint. She has to fulfil a disparate and incoherent set of aims: to maintain security and growth, strengthen the parties that support her and assuage social movements while carrying out thorough reforms. She also needs to expand the welfare state and restrict the sway of the market without distressing foreign investment or alienating party donors. At the moment, the direction her government will take is uncertain, but a mild calm — which might prelude heightened polarisation — reigns, mostly because even where her propositions are most radical, it is hard to believe their radicalism. The climate has changed and now conservatism is seen as utopian. Maybe Giuseppe Tomasi di Lampedusa said it better in The Leopard: “for everything to stay the same, everything has to change”. Marcos is a Sociology PhD student
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BON APPETIT: CAPITALISM, with a side of Fair Trade AANJALIE COLLURE PHOTOGRAPH by THOMAS FITZGERALD Recognizing the “fair trade” certification symbol on a favourite supermarket food item is often cause for a mental pat on the back for more ethically-minded consumers. This is because the symbol comes with a Fairtrade Association promise that the item in your basket has been produced with “better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world.” However, there are additional implicit promises intertwined with the fair trade certification; namely that upon purchasing the product, you - the consumer - are automatically going to feel better about yourself, proud of your positive everyday contribution to poor farmers, and perhaps even a little judgemental of other shoppers who (probably to save a dollar or two) chose the non fair-trade-certified chocolate bar instead. Indeed, in a global food market which is primarily driven by consumer demands, that is arguably why fair trade certification exists in the first place: to appeal to a niche of ethically-minded consumer tastes.
We need to delve deeper into the political economy of fair trade food to show its mixed impact on local food producers in developing regions. Interestingly, within a highly-asymmetrical value chain of food production, it is farmers, and not food retailers, who bear the major costs of fair trade certification. For poor farmers in developing regions, already tremendously vulnerable in a volatile global food market, these additional costs of doing business are far more unsustainable than many suspect. Before delving into the impacts of fair trade certification – a relatively recent trend in global food production – it is important to explain what the international food market looks like in the first place. To many consumers in economicallysuccessful countries, the dynamics of international food value chains are more-orless invisible: we merely catch glimpses of it when we peel the shiny “Made In” stickers off our produce. Most of us are blissfully unaware of the fact that many of our groceries have passed through a complex “value chain” - a process whereby multiple interconnected firms each performed unique tasks to produce, transport, process, market, and ultimately sell each item at our local grocery store. The coffee industry perfectly illustrates this complex value chain system embedded in the global agri-food business. In the coffee exporting industry, while farming, picking and simple processing of coffee beans occurs in developing countries, the shipment, wholesale selling, roasting, marketing and retail of coffee typically occurs in economically successful countries that import coffee beans from their intermediary firms in countries like Ethiopia and Colombia. Income inequality between different agents in this value chain is staggering. Shipping and production processes at the top of the value chain, typically occurring within developed countries or intermediaries, tend to attract the highest profit margins. In contrast, farmers and cooperatives in developing regions are dependent on already-low commodity prices and are also extremely vulnerable to volatile market fluctuations in coffee prices. For example, in 2000, when real coffee prices sank dramatically to a decade-long low, many growers in Ethiopia, Guatemala and Kenya were hit so sharply that
“It is interesting to note the powerful lobbying pressure for ‘fairer traded’ foods did not come from farmers and growers in developing regions, but from consumers themselves” they began burning coffee harvests for fuel. In this environment, it would be reasonable to expect developing countries to want to establish their own firms higher up the coffee production value chain. However, this would be a futile exercise. The top five coffee production firms (all of which are firmly headquartered in developed countries) possess such strong oligopolistic control of the shipment, roasting and retail of coffee that a newcomer from a developing country would be slaughtered in this intensely competitive, highly concentrated market. Coffee is not an outlier either; this sort of distributional deficit is the norm in the global agri-food business. Lesser-developed states also face political barriers which keep them from specialising in higher value-added production. World Trade Organisation (WTO) regulations, for example, permit state investments in research and development (typically more relevant for high-income states with higher-value production processes), but prohibit subsidies for ‘industrial upgrading’. Similarly, the IMF’s structural adjustment programmes have imposed the abolition of agricultural marketing boards in lower-income countries. This deprives lower-income states of the resources needed to enter into higher-value production processes and further locks them into low-value commodity exports. Enter fair trade certification, and its promise to improve working standards and income distribution for farmers in developing regions. It is interesting to note the powerful lobbying pressure for ‘fairer traded’ foods did not come from farmers and growers in developing regions, but from consumers themselves. The push for fair trade certification is actually part of a broader contemporary trend among consumers, increasingly interested in more than just the price of their food purchases. Growing
“Truly fair trade is not a pretty sticker stamped on coffee and chocolate bars to make consumers feel a little better about farmers in distant places, while doing nothing to tackle the asymmetrical power structures embedded in the global agri-business”
consumer curiousity about nutrition, food safety, impacts on natural resources, greenhouse gas emissions and farmworker conditions are all part of this relatively recent pressure for stricter food labelling standards. This raises an important question: who does fair trade exist for – poor farmers or disgruntled consumers? Despite the increased revenues at higher levels of agri-business value chains, the costs of fair trade certification are unfairly placed on farmers and cooperatives at the very bottom. The costs of obtaining certification documentation, hiring educated professionals to complete these documents for submission, and allowing inspection of farm premises and crops, should not be underestimated. Many scholars suggest that smaller groups of farmers, unable to bear these costs yet most in need of the developmental standards that the Fairtrade Association promotes, are systematically excluded from participation. Currently there is no meaningful mechanism for sharing the costs of certification across the different levels of the agri-business value chain. This raises ethical issues; poor farmers are exclusively responsible for paying the premium prices required to meet the demands of high-income consumers. This is not to suggest that fair trade certification is not a desirable and viable tool for promoting higher labour, gender and environmental standards. However, in its current form, by reinforcing the unequal power structures between lower and higher income countries, and failing to challenge asymmetries in the value chain, it is an insufficient response to our development concerns. Truly fair trade is not a pretty sticker stamped on coffee and chocolate bars to make consumers feel a little better about farmers in distant places, while doing nothing to tackle the asymmetrical power structures embedded in the global agri-business. Truly fair trade is not an isolated assurance that some smallholders were safe from exploitative practices, if accompanied by an overwhelming ignorance of the unequal wealth distribution within global food value-chains. If global food trade is to be truly fair, we need to tackle the asymmetrical value-chain power structures and its distributional deficits. We need to challenge the oligopolistic control of food production super-firms which trap developing regions in low-revenue primary commodity export. We need to question the loan conditionalities and unfair trade regulations which limit the ability of developing regions to establish firms in higher levels of global food value chains. Until then, global agri-business is far from fair, and unworthy of any sticker that tries to legitimise it as such. Aanjalie is studying for an MPhil in Development Studies at Wolfson
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RELAUNCHED, VOLUME I ISSUE I, JANUARY 2014