Academic qualifications are no substitute for political experience - the case of Dr Varoufakis

This post is not really about Yanis Varoufakis. OK so it is a bit - mostly because, as tyro politicians go, he is the owner of the most incredible sense of destiny (some might describe this as an ego larger than Greece). However, Dr Varoufakis is the owner of a splendid set of qualifications - degrees in economics and statistics culminating in an economics doctorate from the University of Essex. - and an established and successful academic career. Various folk have drawn a flattering comparison between Dr Varoufakis and what we might term his 'opponents' (and Dr V did spend a year or two as a consultant to a gaming company).

The question we need to ask here is whether Dr Varoufakis' undoubted academic success is in any way an indicator that he would make a successful politician or government minister? And, indeed, to ask the much wider question as to what sort of qualification, background or experience makes for a good political leader. All this is in the context of Dr Varoufakis showing himself to be a very poor political leader indeed.

My qualification in all this is that I've spent most of a lifetime - best part of 40 years - in and around the business of politics. And I am convinced that the core skills of a successful political leader cannot be captured through looking at either previous (or parallel) careers or in higher academic qualifications. Nor is owning a brain comparable to Marvin's a sufficient qualification especially since higher academic qualifications reflect a very narrow interest - a doctorate in economics reflects research in a specific and tightly-drawn field not a generalist expertise in economics itself.

Academic excellence - at the level we are talking about with Dr Varoufakis - isn't an indicator that, placed in the world of political decision-making, an individual will succeed. This is because, in the grubby world of practical politics, there isn't a right answer, nor even an answer that can be successfully modelled. The problem with academics (especially in social science subjects like economics) is that they really do believe the answer can be worked out. The truth is (as us old hands know) that the decision will be made in the end on the basis of a mix between expert briefing, electoral or political calculation and gut feel.

Dr Varoufakis went from being an academic who briefly advised a government to being a minister. This would have been OK if Greece had been in a normal situation - plenty of time to learn the ropes, to discover how the political game works - but sadly for that country, it wasn't. Indeed Greece faced a huge challenge and crisis, partly of its own making and partly a consequence of decisions made elsewhere in Europe. From the outside it seems that Dr Varoufakis strode into the meetings wrapped in his own confidence and the electoral mandate from Greece. The problem was that, as Dr V discovered quickly, his 'opponents' were not impressed with his academic achievements - to them he was a baby politician to be toyed with, confronted and taught a lesson. And the mandate of Greek voters matters to Greek politicians not their counterparts in Germany, Holland or Belgium - such politicians care about the German, Dutch and Flemish voters not voters in Athens.

It could be that the analysis from Dr Varoufakis and his colleagues was spot on. But the tactics adopted were almost guaranteed to ensure Dr V and co lost the argument. Fancy media coverage, confrontational speeches and ultimata all have their place in politics but when faced with a stony-faced and negative response to such grandstanding the proper response isn't to indulge in more of it but to start on the boring task of seeking compromise and consensus. To succeed at this you need those political skills that Dr Varoufakis so clearly lacks. The Greek government - newly elected and excited - placed huge responsibility for the national future in the hands of a man with less political experience than the average parish councillor. And his opponents ate him alive - costing Greece the chance of a decent deal and a chance to get out from under its crisis.

Just as many of my colleagues on the right of politics seem obsessed with getting business leaders into politics (despite the appalling track record for such people), many on the left are captivated by academics like Dr Varoufakis. Yet the evidence for academics succeeding as politicians is just as lacking as that for businessmen. Politics is a business filled with particular skills and behaviours that aren't learnt in grad school - this isn't to say that politicians aren't brainy but that their success can't be predicted on the basis of how many higher degrees they've got or what class they achieved in their first degree. Compare the qualifications of Matteo Renzi with those of Dr Varoufakis and you begin to understand that political achievement rests on something other than those exam results.

Because you don't need anything other than a sufficiency of votes to become a politician, we seldom consider that politics is a business requiring a distinct set of skills and attributes. I spend a lot of time reminding colleagues that we are politicians and should act politically - not just because of the currency of votes but because political decision-making is very different from decision-making in business. And the same applies to negotiation, leadership and marketing - some of the skills transfer but the core business of politics is conducted in front of audiences that react differently to business audiences and which are contrary rather than co-operative.

Debate between academics can be very vigorous but, in the end, it is about the content of academic research. The same goes for business negotiation. But for politicians there is no audience that wants debate for the sake of debate and many audiences who want to pull the politician down rather than support them (we see these in both political opponents and in the media - even supposedly friendly media). The academic robustness of your case and the quality of your presentation mean nothing to the 'opponent' who wants you to fail. To succeed such opposition has to be neutralised.

The Syriza government in Greece might have been better served appointing a horny-handed old trade unionist as finance minister - a person who could get drunk with the Germans, eat with the French and hug the Belgians: an operator. And then used Dr Varoufakis' undoubted talents as a thinker about the economy to provide the bullets for that operator to fire. Instead Dr V managed to irritate bureaucrats and upset politicians making it all the more difficult for Greece to make its case for further support on Syriza's terms rather than on Angela Merkel's. I've no doubt that the main reason wasn't Dr Varoufakis' ego, lack of tie or motor bike but his almost complete lack of political experience.

Many may not like politicians and politics but when the crunch comes, we really need experienced politicians (you can call them statesmen if you want to watch them preen) to deal with the dirty business of politics. And just being clever - in book larnin' terms - is not a sufficient qualification to do that business. Dr Varoufakis is a case study of the consequences that stem from this mistake.

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A warning from Greece: the crisis of government

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Today the Greeks are voting in a referendum. Other wiser and more informed folk will tell you what this is all about, how you should vote (if you were Greek) and what it all means for the poor benighted Greek people. As ever with these debates this wisdom will act more to confuse than to inform since the Greeks seem faced with a choice between poverty and bankruptcy or bankruptcy and poverty.

Instead of giving my advice (for what it's worth this is a rare example where not voting is the most logical option since the outcome isn't really affected by the choice - the Greeks are screwed regardless), I'd like instead to take this particular Greek tragedy as a warning. Not a warning about bankers, business or supranational authorities without accountability but a warning about government.

The politicians are presenting what has happened in Greece as a failure of economics. The bankers, the oligarchs, the mysterious market forces are the causes. Vast libraries of articles filled with 'charts' showing this or that about the situation are penned. Every single economist (or so it seems) appears in print with a slant on the crisis. The commentary on news channels is peppered with barely understood economic jargon and assorted talking heads appear on panels soberly discussing this economic catastrophe.

They are, for all their charts and tables, wrong because the problem is a problem of misplaced trust in government. Two generations of Greeks placed their trust in government believing that the state was their friend and had their interests at heart. Even when they knew some things weren't right, they carried on believing that none of this was existential - there'd be a bad patch or two but everything would carry on (more-or-less) working.

It really did seem that the state was the Greeks' friend - especially for the growing army of people who worked for that state and who retired from working for that state at the delightfully young age of 58 on 80% of final salary. Meanwhile ordinary Greeks got schools, hospitals and free university study plus a generous benefits system - all the superstructure of the modern European state. Not only did this make Greeks happy it also provided loads of jobs for the sons and daughters of Greece:

The expansion of Greece’s huge government sector took decades to create, but its growth in recent years has been particularly striking. Public employment grew by fivefold from 1970 through 2009 — at an annual growth rate of 4 percent, according to a recent academic study by Zafiris Tzannatos and Iannis Monogios.. Over the same four decades, employment in the private sector increased by only 27 percent — an annual rate of less than 1 percent.

It might look right now that the problem is a problem of banks, business and economics but peel back the skin of the Greek crisis and you see a problem of government - unsustainable, expansive government. And what didn't go along with this expansion of government was an expansion in taxes - Greeks got their modern welfare state on the cheap. And still set about dodging the taxes they were supposed to be paying:

...the authors also make an estimate of how much tax is being evaded in Greece. The debt-to-income ratio for wage-earners in a particular profession ought to provide a guide (though not a precise one) to the debt-to-income ratio that banks are comfortable with for self-employed borrowers in the same profession. That assumption enables the authors to work out what multiples banks are applying to reported incomes in various industries; how much taxable income is not being reported; and how much tax is being evaded (see table). At an aggregate level, the authors calculate that the self-employed in 2009 dodged taxes on at least €28 billion of unreported income, enough to fill 31% of the Greek budget deficit that year.

The Greeks aren't uniquely bad - self-employed people everywhere tend to underreport income - but there does seem to have been a reluctance to enforce tax collection. Perhaps Greece's huge black market - over 25% of GDP - has something to do with all this. That and the fact that "the three most tax-dodging professions account for about half the votes among Greek MPs". All this is a country where tax rates - certainly compared to Northern Europe - are low.

The problem here is that, while we don't trust the politicians we elect to run government, we continue to trust government. Yet the evidence from Greece (and if you look closely enough, just about everywhere else) is that we shouldn't be trusting government quite as much as we do. Don't take this as an argument for getting rid of government but rather as an encouragement to individuals, families and neighbourhoods to take control of their own business rather than to sub-contract it to a government.

The saddest thing about Greece is that the people do not think they have the option of rejecting their failed government - no-one is offering a new settlement based on family and community rather than the old system of state-directed largess. So they turned to a party promising an end to the bad stuff and a return to those comfortable days of safe state jobs and early retirement. After the essentially tactical (and largely purposeless) referendum, Greeks will again face the reality of their future - poverty and bankruptcy. Fingers will be pointed at all sorts of culprits - Germans, EU bureaucrats, bankers, businessmen, politicians who used to run Greece. But no-one will spot the real culprit - an unsustainable government filled with protected and entitled employees prepared to screw over the rest of the nation so as to sustain that protection and entitlement.

So my warning is to echo those words of Ronald Reagan and to remind you that government is not your friend, does not care about your circumstance and mostly seeks to sustain itself using other peoples' money. Much of what we call 'austerity' is simply the realisation that government is too bloated, to overweaning and too self-interested. And pretty unaffordable.

The Greek crisis is a crisis of government not a crisis of banks, economics or markets. It is government that must change to save Greece. And our governments must change too if we are to avoid the same fate.

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Red Gold and the curse of EU conformity

In a telling article about Greece, Nick Cohen say this about the European 'project':

The EU cannot take responsibility for what it has done and be magnanimous for reasons British readers may not grasp. Raised in a Eurosceptic country, we do not understand how an absolute commitment to the European project was a mark of respectability on the continent. Like going to church and saying your prayers for previous generations, a public demonstration of commitment to the EU ensured that the world saw you as a worthy citizen. If you wanted to advance in Europe's governing parties, judiciaries, bureaucracies and culture industries, you had to subscribe to the belief that ever-greater union was self-evidently worthwhile.

And this is true. But Nick Cohen needs to look closely into the UK's public sector and corporatist business sector where being anti-EU is the badge of the sinner. I recall my election campaign of 2001 in Keighley where we were handing out those much sneered at 'Save the Pound' leaflet. A senior local Labour politician was aghast that I - what he patronisingly called 'the decent sort of Tory' - could possibly oppose the single currency.

In my perambulations around public funding both as a councillor and also as someone working in the voluntary sector, I have encountered the unquestioning commitment to the EU project, to the funding it provides and to the opportunities for pleasant junkets to nice European cities that come with the EU game. To conform to the mindset of the public sector - especially in my field of regeneration - you have to do just what Cohen describes, to have that "absolute commitment to the European project".

To borrow from David Eddings, the EU has spread its red gold across the continent - funding this project and that scheme, supporting international exchanges and generally making people feel that the project is a great big cuddly Father Christmas sort spreading joy and happiness. Very different from the stern and questioning national and local governments.

Greece - and soon Spain, Italy and France - are reaping the full cost of this red gold. Suckered into its spell they hooked their fortune to the fortune of Germany believing that this magical union of currencies would lead them to that better, richer, more Germanic world. As Nick Cohen concludes:

Europe does not seem pleasant, prosperous or peaceful today. When historians write about the end of its postmodern utopia, they will note that it was not destroyed by invading armies anxious to plunder Europe's wealth or totalitarian ideologues determined to install a dictatorship, but by politicians and bureaucrats, who appeared to be pillars of respectability, but turned out to be fanatics after all.

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Benevolent lying...

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A wonderful observation by Dan Murphy about the IMF and World Bank:

Over the years current and former employees of both groups have explained that bias is down to the belief inside the financial institutions that their rosy projections can take on a life of their own by inspiring that elusive beast "investor confidence" and unleashing a deluge of cash upon their clients. They see it as a form of benevolent lying.

I find this a fascinating take on the problem of these international - and essentially unaccountable - organisations. I recall being taught - back in the early 1980s - that the two babes in the Bretton Woods were essentially superior bodies since they didn't suffer from the self-interest or realpolitik of bilateral interventions. Now it seems that the truth is sneaking out - their guesses are just as self-serving as the guesses of political leaderships in client countries. And the prescriptions - based on these optimistic guesses - have dreadful consequences:

"However, not tackling the public debt problem decisively at the outset or early in the program created uncertainty about the euro area’s capacity to resolve the crisis and likely aggravated the contraction in output. An upfront debt restructuring would have been better for Greece although this was not acceptable to the euro partners."

However Murphy suggests we shouldn't be surprised:

In the middle of that decade (1990s), the so-called Asian financial crisis hit much of the region, with capital flight threatening private banks, government coffers, and project finance alike. Thailand and Indonesia accepted IMF loans in exchange for "structural adjustment programs" (government spending cuts, foreign investor friendly legal changes, promises to have fully convertible currencies), while Malaysia, against dire warnings from the IMF, imposed currency controls and sought to stimulate the economy out of the downturn with an expansive government budget. The results? Malaysia weathered the crisis better than its neighbors, with fewer job losses and much less political turmoil.

Perhaps the time has come for politics to reassert its ascendancy over the cosy internationalist boondoggle. It seems that, whatever the choices made, it is better for them to be made by politicians we can kick out rather than on some distant scapegoat of an international institution. Especially one with as lousy a record as the IMF!

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Come on Christine put your money where your mouth is...

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Christine Lagarde called the other day for Greeks to pay their taxes:

And I think they should also help themselves collectively [by] paying their tax"

Today we discover that this grand lady doesn't pay any taxes either:

As an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes.

So come on Christine put your money where your mouth is...if you want others to pay taxes, pay some yourself.

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"Pay your taxes..." Or how to annoy a Greek.

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As ever, I start with the caveat that I'm not an expert on Greece's economy or how it might resolve its current problems. But I am pretty sure - no absolutely sure - that the solution to Greece's economic problems does not lie in getting the populace to cough up more taxes. That might make a small dent in that suffering country's problems with government finances but it won't deal with the consequences of the 'big lie' visited on Greece by its politicians - that the Drachma was equal to the Mark.

Yet - in a great campaign slogan for the Greek worshippers of the Mystic Money Tree (usually referred to as Syriza) - this is precisely what Christine Lagarde, boss of the IMF has done:

"As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.

"I think of them equally. And I think they should also help themselves collectively [by] paying their tax"

If anyone out there really believes that getting people to pay more taxes is a route to economic salvation they should be gently removed from any positions of decision-making (and probably kept away from sharp instruments). The resolution is always - absolutely and every time - in the private sector, in economic activity rather than the legerdemain of public financial manipulation, currency fiddling and regulation. These are the things that created the problem and we aren't going to resolve the problem through more self-important central banking.

In the end, the solution lies in the real economy - in the decisions of consumers, in the promotion of economic activity. And the drivers of that economic activity in Greece are the folk who dodged the taxes - take more money off them and, as sure as eggs is eggs, there will be less economic activity. Meaning that next time, there's less money to take off folk in taxes...

As ever, in this matter, government is most of the problem and very little of the solution.

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Ah, that high speed rail thing again...

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...and how it's impact will not be what we're told:

If building great roads and trains were the route to lasting prosperity, Greece and Spain would be booming. The past 30 years have seen a huge splurge in infrastructure spending, often funded by the EU. The Athens metro is excellent. The AVE fast-trains in Spain are a marvel. But this kind of spending has done very little to change the fundamental problems that now plague both Greece and Spain – in particular, youth unemployment.

Worse, in some ways, EU funding for infrastructure has created problems. In Greece, milking the EU for subsidies became an industry in itself: and political connections were a surer route to wealth than entrepreneurial flair.

Doesn't look that promising, eh?

All hail our new philosopher kings!

The governance model du jour appears to be “technocracy”:

Another response involves the surgical removal of elected leaders in Greece and Italy and their replacement with technocratic experts, trusted within the EU to pass economic reforms deemed appropriate by policymakers in Berlin, the bloc’s top paymaster, and at EU headquarters in Brussels. Europe this week prised open the lid of the dustbin of history to accommodate Mr Papandreou, Greece’s Socialist prime minister since October 2009, and Mr Berlusconi, the billionaire who has dominated Italian politics since 1994.

As we saw with the bureaucratic fury at Mr Papandreou’s plan for a referendum, Europe’s leaders have lost confidence in the choices that the people might make – democratic solutions are rejected something even the pro-Europe FT sees as momentous:

The sidelining of elected politicians in the continent that exported democracy to the world was, in its way, as momentous a development as this week’s debt market turmoil. In effect, eurozone policymakers have decided to suspend politics as normal in two countries because they judge it to be a mortal threat to Europe’s monetary union.

Yet the appeal to the expert in times of crisis is not new – indeed, the manner in which we are governed increasingly reflects a mistrust of the elected official (and an abject loathing of the idea of popular democracy through referendums or other participatory models). The ‘Man in Whitehall’ – or his equivalent in Brussels and in your local town hall – really does know best.

Technocracy’s origins lie – like so many of the slightly scary and mostly illiberal ideas of government – in the years between the two great wars of the twentieth century. At first it was a slightly cranky idea promoted by a self-educated engineer called Howard Scott that drew on the ideas of Thorstein Veblen (who is most remembered for coining the term “conspicuous consumption”). Veblen proposed a society and economy managed by a ‘soviet of engineers’:

As a matter of course, the powers and duties of the incoming directorate will be of a technological nature, in the main if not altogether; inasmuch as the purpose of its coming into control is the care of the community's material welfare by a more competent management of the country's industrial system.

In the US technocracy was swept away by the ‘New Deal’ and FDR’s National Recovery Administration – those almost fascist institutions of American recovery. Yet the idea of government by expert has never departed, we remain captivated by the idea that we can with the help of the wisest and brightest plan a better society. Here Naomi Klein advocates planning as the way to address an identified environmental crisis:

In addition to reversing the thirty-year privatization trend, a serious response to the climate threat involves recovering an art that has been relentlessly vilified during these decades of market fundamentalism: planning. Lots and lots of planning.

Once again we turn to the philosopher kings:

Until philosophers are kings, or the kings and princes of this world have the spirit and power of philosophy, and political greatness and wisdom meet in one, and those commoner natures who pursue either to the exclusion of the other are compelled to stand aside, cities will never have rest from their evils — no, nor the human race, as I believe — and then only will this our State have a possibility of life and behold the light of day.

Great men can solve our problems but only if they are freed from having to pander to the demos – to the rabble, the swinish multitude, to ordinary men and women. Such is the mission of Europe today – government by central banker, administration by academic economist and rule by the bureaucrat. We have rediscovered the District Commissioner – no longer florid of face, swagger stick under the arm but now besuited by Armani, trained in the great institutions of governance, silver-haired, multi-lingual and international in perspective.

Twenty-first Century technocracy is government by such men – unelected, disdainful of democracy and charming of manner. We the people watch helpless as they slide smoothly from commission to cabinet, from governor’s mansion to state house and from academic sinecure to mahogany boardroom table. These are our philosopher kings riding to save us from the disaster of the market’s chaos and democracy’s failure.

At some point we will get a say – the new philosopher kings will permit this. But will it be the exercise of power or a sop to the idea of democracy, a fig leaf to cover the triumph of the technocrat?

And do these people really know better? Were they not in charge before it all went wrong?

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Ski-ing and the prospect of Greek default

We're told that Greece - despite this weeks latest bailout - is likely to default on its debts.

So, even if the EU were willing to take on all of Greece’s debts, Greece would be paying more than 10pc of GDP in debt interest. Of course, the EU isn’t going to do anything like that. No plausible market interest rate is going to be less than twice that level. So to repay its debts, Greece would have to be willing, for decades, to devote well above 10pc, perhaps closer to 20pc of GDP simply to paying interest. 

You see, Greece is going to default - the bondholders are going to have to get a haircut. It is inevitable...is it not? Or does the postponing of the inevitable - what nature ordains - reduce the likelihood of that inevitability. Let me explain with a ski-ing metaphor.

When I learned to ski the instructor, in an effort to break my habit of leaning back, explained (in a fabulous French accent that I won't reproduce):

"Ski-ing is controlled falling over. Because of gravity you are going down that hill, what we do is agree with nature that we will fall over but put it off until we get to the bottom. And then we don't need to fall over."

The longer we postpone default, put off Greece's moment of tumble, the less damage that fall will do, the haircuts become number three rather than number one and the lenders - sovereign or private - have time to order their affairs so as to minimise the loss from default. And you never know, the inevitable might not be inevitable?

Mind you the Greeks aren't noted for prowess at winter sports!

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