The Other 10 Percent

Finally, Glenn Beck is being consistent!

I will accept, or at least have some respect for, any philosophy or set of beliefs so long as it is consistent. Most philosophies fail this simple test. Glenn Beck has excelled at failing this simple standard. But no longer!

In defending his statement that 10% of Muslims are terrorists, Beck states that 10% of people will believe anything. Ten percent of people don't believe in the moon landing, 10% of people are birthers, truthers, what have you. Basically 10% of people are crazies.

Separately, in explaining why his audience will usher in a bright future, Beck has estimated his audience at 30 million people:

We have 30 million people in our footprint. 30 million people [if you count Beck's combined TV, radio, book and event audience this is not an unreasonable number]. That’s ten percent of the population. Here’s the good news. This ten percent is going to be the shelter for the other ninety percent. This ten percent will be the leaders of tomorrow…this is the group, this ten percent will be the ones when all hell goes to hand-basket and everyone on the left and the right are yelling and arguing and trying to pull you into camps…maybe literally. You’re going to say…don’t go, everything’s fine, don’t worry we can take care of eachother. We’re Americans, we’re better than this. [Emphasis added]

 So there we have it:

1. 10% of people will believe anything
2. Beck's audience is 10% of the people

The conclusion is obvious

The Concert of Europe

The EU certainly has many things said of it, some going as far as to say that it is repeating the Tower of Babel . Today, however, I read a historical parallel I have never seen before: that the EU is in fact a mirror of the Congress of Vienna. Of course, the Congress of Vienna, it makes perfect sense. Think about it:

Who headed the Congress? von Metternich

Who heads the EU? Van Rompuy

Eerily similar isn't it? The similarities are endless! As the linked comparisson states:

The parallel between 1815 and 1945 is interesting as both years marked the defeat of a tyrant whose armies had totally destroyed the societies and countries of Europe, rewriting laws, relationships, and creating a new society.

OK, not sure that Napoleon and Hitler really form a fair comparison; seems like Hitler was somewhat of the antithesis of the Napoleonic Code, but I can see some parallel. What else?

The goal of the Congress of Vienna was the complete removal of any trace of Napoleon’s activities – putting Europe back to where it was before the French revolution. Not only were the Germans defeated in 1945 but the Allies reestablished all the old boundaries and governments. It took many years before the event that we would consider equivalent to the Congress of Vienna occurred. The Treaty of Rome created the Common Market in 1956 to make it impossible for another war to occur in Western Europe. Both major treaties were reactionary events as they put things back to where they were before the periods of war and both were extremely successful for a long time. 

Um, no.

Yes, the Congress of Vienna sought to remove all traces of Napoleon, and turn back the clock of Europe. The Congress sought to, and did, somewhat arbitrarily redraw the map of Europe, reestablishing separate and feuding states. This is very much a reactionary thing. Von Metternich aimed at establishing a balance of power in Europe among different nation.

By contrast, the EU was the opposite of reactionary. The Common Market reduced the barriers between countries. The EU has sought to lessen the effect of national borders, increasing the mobility of people and property. Rather than establishing a balancing of power, the EU seeks to unite powers. In essence, the EU is the antithesis of the Congress of Vienna. Rather than seeking to divide up Europe, the EU is established to unify it. Yes, the form of that unification is up for debate (a super state, a federation, a liberalized common market, etc.) but it is a unification nonetheless. The Treaty of Rome and the EU in general is not seeking to "put things back where they were before the period of war". The European Idea is the to move things away from the way they were, the counter to the reactionary Congress.

Just because both the Congress of Vienna and the Treaties of Rome, Maastricht, and Lisbon involved the countries of Europe getting together to accomplish something does not mean that they are parallels. If anything, the goals of the EU are much more in line with the views of Napoleon than von Metternich, but that might not be the best pro-EU argument...       

The European Diktat

Barry Eichengreen has an excellent article about the Irish bailout, comparing it to German reparations after WWI. I would like to expand on this point with further analogy to the post-WWI world.

The main issue for Ireland is that it has too much debt (remember, debt is a practical issue, not a moral one) and even with reasonable growth it will not be able to handle this debt burden. Now, when a borrower borrows more he can handle, he should suffer for that, so that he and other borrowers know that you can't borrow too much. When a lender lends imprudently, he should suffer for that, so that he and other lenders learn you can't lend imprudently.  The Irish bailout, however, seeks to impose costs only on the Irish people (the borrowers) while leaving the lenders (bondholders) untouched. Europe is telling Ireland that it must pay a heavy debt.  This is unreasonable. This is the European diktat.

A much more sensible solution, as mentioned in the linked article,  is for the Irish debt to be written down, while Ireland also imposes fiscal austerity. This way the burden on Ireland is reduced, but both borrower and lender still pay a cost. Not only that, as it currently stands, the Irish have no incentive to improve their situation and pay back the debt, as I will explain.

First, however, let's compare this situation with the post-WWI world. The Allied nations had borrowed immensely from the US to pay for the war. At the end of the war the Allied nations sought to link reparations from Germany to the war debts they had with the US, but the US refused to write down the debts, which was part of the reasons reparations on Germany were so high. On the matter of reducing war debts Calvin Coolidge famously said "They hired the money didn't they?" These war debts and reparations were a terrible burden on post war Europe. Still, the debtor nations sought to have the war debts reduced.

In 1923 Britain, in a desire to be as responsible as it could, accepted a deal with the US to settle the debts at 80 cents on the dollar. The French waited longer and eventually settled in 1926 at 40 cents on the dollar (ratifying the settlement even later in 1929). Italy also waited and settled the debts at 24 cents on the dollar. [Source: Lords of Finance] The takeaway here should be twofold: that an overly burdensome debt will likely eventually be written down, and that the longer you wait the greater the chance of a lower write down.

At the time J. M Keynes encouraged Britain to wait longer for a better deal "in order to give them [the Americans] time to discover that they are just as completely at our mercy as we are at France’s and France at Germany’s. It is the debtor who has the last word in these cases."

Keynes was exactly right on this. It is better to write down a debt and receive a part of it then have the debtor  default and realize even less. With too much debt, high unemployment, ands severe austerity and tax hikes, what incentive do the Irish have to work harder and pay back the debt? They would be better off making the situation worse and forcing either a default or a write down of the debt. That is, they have an incentive to be disruptive, or even destructive. Ireland may well go for Katastrophenpolitk, much as Germany did with reparations. As the situation gets worse in Ireland, it will fuel things getting worse in the EU, which will encourage the EU to move to write down debts, which would benefit Ireland.

This is nothing new, it is the classic debt overhang problem. If the economy in Ireland grows then it is not the Irish people who will benefit, since so much will go to pay off the debt. The Irish people will have to deal with lower wages, higher taxes, and still have to make the debt payments. The benefits accrue to the bondholders and not the "equity holders"--the citizens of Ireland. So you would expect the equity holders to "under invest"--work less. Better for the Irish people to be disruptive, worsen the situation, and force the EU to write down debts. This is the essence of Katastophenpolitk.

But this is a terrible outcome for everyone, worse still because as we saw with Britain, France, and Italy, its likely that the debt will be written down in the end anyway. On the way, however, we will have a languishing Irish economy, as well as other European economies. We will have growing resentment towards the EU, growing nationalistic feelings, growing conflict. Katastrophenpolitik is a form of brinkmanship: pushing the situation to the verge of disaster in order to gain an advantage. Ireland is being overburdened with debt, if the situation get worse in Europe then this debt will be reduced, so let's make things worse! Is this the strategy we want for Europe?

No!

Better for the debts to be written down now, as reasonably as possible, without having to go through the damage to European unity. It seems overwhelmingly likely that the debts will be written down anyway, so why not do this sensibly? It is alright to risk the European Idea for something, but to ruin it for nothing?