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Saturday Commentary and Review #135
"Ban AfD in the Name of Democracy!", Biden Regime vs. Hungary, De-Dollarization Much Tougher Than It Sounds, Englishness As A Brand, 19th Century Slum Photography
Every weekend (almost) I share five articles/essays/reports with you. I select these over the course of the week because they are either insightful, informative, interesting, important, or a combination of the above.
In 1858, Abraham Lincoln defined “democracy” in this manner:
“As I would not be a slave, so I would not be a master. This expresses my idea of democracy. Whatever differs from this, to the extent of the difference, is no democracy.”
Rather simple and easy to understand.
Next, I consulted the Merriam-Webster Dictionary as to the definition of “democracy” and got this result:
1a: government by the people, especially : rule of the majority
2: a political unit that has a democratic government
3 capitalized : the principles and policies of the Democratic party in the U.S.
from emancipation Republicanism to New Deal Democracy—
C. M. Roberts
4: the common people especially when constituting the source of political authority
Oxford Reference gave me this:
A political system that allows the citizens to participate in political decision‐making, or to elect representatives to government bodies.
Democracy is a term that is used to denote a variety of distinct objects and ideas. Democracy describes either a set of political institutions or an ideal of collective self-rule. Democracy can also be short for a normative principle of either legitimacy or justice. Finally, democracy might be used to denote an egalitarian attitude. These four uses of the term should be kept distinct and raises separate conceptual and normative issues.
Stanford gave me a bunch of nonsense.
This academic paper gave me another definition:
…..a political system possessing competitive elections plus the protection of political liberties.
Lastly, I consulted the Council of Europe to see what they had to say. I got this:
The word democracy comes from the Greek words "demos", meaning people, and "kratos" meaning power; so democracy can be thought of as "power of the people": a way of governing which depends on the will of the people.
There are so many different models of democratic government around the world that it is sometimes easier to understand the idea of democracy in terms of what it definitely is not. Democracy, then, is not autocracy or dictatorship, where one person rules; and it is not oligarchy, where a small segment of society rules. Properly understood, democracy should not even be "rule of the majority", if that means that minorities' interests are ignored completely. A democracy, at least in theory, is government on behalf of all the people, according to their "will".
What you notice after doing some comparative analysis is that there is no strict definition of what constitutes “democracy” today. Yet the term itself is bandied about all the time, even though its definition has not been agreed upon.
What all of you are aware of is that the definition of what constitutes democracy is constantly shifting, and in recent times, has become increasingly more narrow, coincidentally overlapping with the values of the ruling elites in western countries. “The will of the people” has taken a back seat to concepts such as minority rights, for example, allowing those who act in the name of democracy to either disregard the will of the people, or outright penalize some representatives of that very same will.
Again, from the last definition above:
A democracy, at least in theory, is government on behalf of all the people, according to their "will".
You will immediately conclude that this is impossible, as the will of the people is never unified, as political divisions exist. The people are naturally divided among themselves, meaning that one side of an issue will win over the other (assuming that there are just two sides) if no compromise can be made.
The ever-narrowing definition of what constitutes democracy in the West means that the will of a large segment of the population is simply to be suppressed or outright discarded. In the USA, they are trying to imprison Donald Trump and deny tens of millions of Americans their vote. In Germany, ruling elites are now looking at banning the rapidly-rising AfD for being “extremist” and therefore “anti-constitutional”:
Germany is debating whether to ban the far-Right Alternative for Germany (AfD) as the party surges to 21 per cent in the polls, amid warnings from intelligence officials that its members are becoming increasingly extreme.
Frank-Walter Steinmeier, the German president, warned in a speech to the country’s domestic intelligence agency that “we all have it in our hands to put those who despise our democracy in their place”.
His speech at the castle where the German post-war constitution was created has widely been seen as support for a ban after Thomas Haldenwang, the domestic spy chief, warned about growing Right-wing extremist influence in the party.
Mr Haldenwang said: “We see a considerable number of protagonists in this party that spread hate against all types of minorities here in Germany.”
The present world order was build on the ashes of Nazi Germany, so Germans have been weaned on an unhealthy diet of historical guilt, and a responsibility to never, ever let a nationalist party come into power in their country. The AfD, already under the monitoring of the domestic spy agency, is riddled with its agents who will push extremism within in ranks to allow the conditions to be present for the party to be banned. “Anti-Semitic” outbursts, attacks against migrants, etc., will all be set up to qualify them for the sanction.
In a rare move, the respected Der Spiegel news magazine weighed into the debate with a leader titled: “Ban the enemies of the constitution!”
It warned that “the AfD has become more and more radicalised. It’s time to defend democracy with better weapons”.
The co-leader of Olaf Scholz’s ruling Social Democrats also said a ban should be considered if the AfD is categorised as a group of “proven Right-wing extremists” by the Federal Office for the Protection of the Constitution.
A ban to deny over 1/5th of the German electorate their right to vote for the party of their choosing. This violates all the definitions of democracy that I provided above.
Democracy is too precious to allow millions of people to participate in, it seems.
Meanwhile, the German Institute for Human Rights, a non-governmental organisation, declared last week that “the AfD have reached a degree of dangerousness that they can be banned according to the constitution”.
They warned in an analysis that the party is actively and methodically trying “to implement its racist and Right-wing extremist goals” and “shifting the limits of what can be said so that people can get used to their ethno-nationalist positions”.
Ethno-Nationalism is therefore ‘not democratic’, at least according to this NGO, even if it is the will of the people.
Volker Boehme-Nessler, a political scientist, said he does not believe the party meets the high legal hurdles for a ban.
He warned that a failed attempt would only give the AfD an additional boost in the election campaign, he told eastern German broadcaster MDR.
“You can’t simply ban a party that gets 20-30 per cent approval” in various states, he added.
Germans are evenly split on whether the party should be banned, with 47 per cent of the country in favour of a ban and 47 per cent against.
A ban is more popular in the west and among liberal Greens.
You can ban a party with under 10% of the support of the electorate and get away with it easily. Banning a party that is polling above 20% effectively renders your democracy null and void, even if you do get away with that attempt as well.
AfD has not threatened to do away with the German Constitution. All they have done is attack the shibboleths and values of the ruling elites in their country, and are receiving a groundswell of support due to this.
Empires can be very petty when ruled by petty people. Case in point: the USA and its treatment of its erstwhile NATO ally, Hungary.
Even though Hungary is both a representative parliamentary democracy with free and fair elections and is a NATO member, it must be squeezed hard enough to go the extra mile and adopt prevailing (and rapidly changing) US values that would transform the country beyond recognition. Because it refuses to do so, it will be the target of diplomatic tools available to the US State Department serving under Joe Biden:
But beginning this month, the Biden administration is tightening the access of citizens from one conservative country—Hungary—to the visa waiver system. While the southern U.S. border lies in shambles, Hungarian citizens will have to reapply for a single-use entry every time they want to come to the United States.
In a sane world, one might assume that Hungary's blacklisting reflected a deep concern for American security. Surely the Biden administration would only restrict entry from Hungary because of some identifiable risk. But according to U.S. data, until 2018 only 65 out of the one million Hungarians abroad who gained citizenship in recent years—the putative objects of the Biden administration's concern—entered the United States illegally through the visa waiver program.
Double taxation to get those pesky Americans residing in Budapest and learning from Orban and Fidesz out of there:
Last summer, the Biden Treasury Department announced that it would terminate a tax treaty between the United States and Hungary that has been in place since 1979. The treaty protects individuals and companies from double taxation—enabling an easier flow of commerce between both countries. Mind you, the U.S. tax treaty with Russia remains in place, but U.S. citizens working in Hungary will face double taxation beginning in 2024.
Our darling Samantha Power showed up in Budapest recently:
In February USAID administrator Samantha Power visited Budapest to encourage "civic engagement" by foreign-funded media. While taxpaying Americans rightly think of USAID as providing urgent aid to war-torn countries, the Biden administration's USAID announced a "rule of law" program targeting countries, like Hungary, where the rule of law still includes protecting children against transgender propaganda.
…and of course the foreign money that went to the opposition in Hungary, against the actual laws of that country!
Perhaps most remarkably, Hungary's State Audit Office has recently disclosed that, during the 2022 election, the six opposition parties received millions of dollars in illegal foreign funding, including more than $7 million from liberal U.S. NGOs.
Hungary is even playing ball when it comes to commitments to reach the 2% military spending threshold demanded by the USA of its NATO allies:
For Hungary, all this pressure has occurred during a period of rapid defense modernization. Hungary's military command center in Székesfehérvár plays a central role in NATO's eastern flank. Further, Hungary has already met its 2 percent military spending commitments on 2023, and will do so in 2024 as well. The same cannot be said of certain other NATO partners who are not subject to American pressure campaigns.
Orban and Fidesz are wildly popular in Hungary, and with good reason. The pressure being applied by the USA is indicative of its rejection of the popular will of the Magyar people and their democracy.
As I am typing this, the BRICS Summit is happening in South Africa and there is much fanfare from many media outlets and individuals hoping to see a counter-bloc formed to compete with the US-led one. As many of you are already aware, I am bearish on BRICS and its ability to facilitate a rapid de-dollarization, or to create a rival bloc at all. I will go deeper into this at some point.
Case in point: The de facto BRICS bank, the New Development Bank (NDB), is actually complying with the sanctions regime against Russia. It would be impossible for them to conduct business otherwise. This is a testament to the strength of the US-led financial system, and its control/presence in the global financial architecture. Untangling the BRICS from this system is GOING TO TAKE A LOT OF TIME AND REQUIRE A LOT OF PATIENCE, if it happens at all.
The current BRICS Summit might be a PR success, and the invitation given to six states (Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, UAE) to become new members is a coup of sorts, albeit a seriously-qualified one. They will have a lot of work to do in order to make BRICS a rival to the G7 as desired by many of its participants and promoters.
Even Russian economists are signaling just how hard it will be to de-dollarize, as per this report on a paper that came out in December of last year:
The big problem is countries, particularly smaller ones with large export sectors, find it desirable and frankly necessary to have international reserves. And perhaps even more important, most countries like pursuing the sort of mercantilist trade policies that result in them accumulating reserves.
Let’s first look at the “need to have” part of the equation. The US is, or should be, in an advantaged position because we are a large country with many natural resources and (despite the squeezing of the middle class) have a lot of internal demand and thus in theory do not need to trade much. Most countries are not in that position. Their import and export sectors are larger relative to GDP out of necessity. The result of being more trade exposed, particularly for emerging economies, means they can be whipsawed by changes in global interest rates, global demand, and changes in the value of your currency.
So they are subject to two types of crises. One is an external debt crisis if the country or its businesses and citizens borrow in a foreign currency and then that currency rises in price, raising the cost of debt service. This sadly happens a lot since foreign currency interests are regularly lower than domestic rates. The second is a currency crisis, where the government wants to intervene to prevent its currency from falling further (recall businesses often have foreign currency needs beyond debt payments like supplies, so there are exposures well beyond borrowings). Of course, the former often produces the latter.
A historical example, and another reason countries like to accumulate foreign reserves:
Recall the 1997-1998 Asian crisis. The high-flying Asian Tigers were hit and wound up seeking IMF support (although South Korea wound up participating in an IMF “program” that was arguably unnecessary and most of its citizens feel made matters worse). Afterwards, they all built up bigger dollar FX reserves (no one much minded that it took some currency manipulation to do so) in order never to be subject to the tender ministrations of the IMF again.
However, another reason countries accumulate foreign currency reserves (which they hopefully can use as international reserves) is they really like running trade surpluses. That means they are exporting jobs. High employment and rising wages are popular and in China, recognized as critical to the legitimacy of the government. Trade surpluses are also seen as proof of economic competitiveness and in particular, success in manufacturing and technology. Recall in particular how Germany (before being cut to size by the loss of cheap energy) would run large trade surpluses within Europe, and then complain about the inevitable side of the equation, that they had to lend to those layabouts in southern Europe.
The Russian economists grossly overstate the loss of trust in the dollar, even if they themselves admit that a replacement for the greenback isn’t in the cards any time soon:
And that brings us to a big blind spot in the paper. It starts with the premise of loss of in trust in the dollar. Yet despite the shock and awe sanctions, and increasing levels of trade being moved to direct bi-lateral foreign exchange, the level of the dollar has not been dented. See this chart of the dollar versus ten other currencies through the first quarter of 2023::
How can this be?
The issue, as we have repeatedly pointed out, is that the use of currencies in investment transactions dwarfs the use in trade. In one analysis, the Bank of International Settlements found that investment-related transactions were over sixty times that of trade related ones.2
That leads to foreign exchange transaction volumes that some will find counterintuitive. The Australian dollar is the fifth most traded currency, at about 4% of total volume, while the renminbi is number eight, at only 2% of trading volume. This is because China attempts to allow the renminbi to be used freely for trade but has strict capital controls.3.
To put it another way, the authors misconstrue what trust means in a currency context. Most varieties of trust it mentions don’t embrace what really matters, which is what wealthy folks and countries want to hold wealth in, plus what will allow them to do short run deals with “certain” assets. That certainly is affected by how reliably they can trade monies for other monies.
The problems with gold and/or crypto as replacements:
The authors themselves point out that central banks can’t use gold as a major reserve asset, since there’s not enough. And in the 2007-2008 crisis, gold did not rise in price as a supposed “safe haven”, it fell as investors dumped it to cover margin calls.
I don’t think any cryptocurrency belongs on the list, but one can surmise they are pet ideas among some policy makers and promoters and so needed to be discussed. A digital central bank currency is merely an implementation. And as for private crypto currencies, see the Heisenberger Report’s masterful takedown. Key section (emphasis original):
Beyond that, though, the notion of private money at scale, and, more to the point, the notion of private money at scale as an investable proposition, is stupid. Not “misguided,” not “misplaced” and not any other more generous adjective either. Just plain old stupid.
Aside from the “wild West banking” problems revealed by FTX, no private cryptocurrency will have the depth of liquidity to serve a central bank’s needs.
Again, remember that liquidity will be a key need for any central bank for international reserves to have any insurance value. You need to be able to break glass and sell in size. And we see how even the renminbi is only number eight due to its capital controls. Even the Canadian dollar is more actively traded. So it is not clear that the idea of “fragmentation of reserve functions between different instruments” can go all that far in practice.
Mind you, the authors do consider what they call “a global synthetic currency,” aka new reserve currency. They don’t consider it viable. The reason is the one we’ve repeatedly cited, that it would require ceding considerable elements of sovereigntiy, and therefore runs afoul of one of the prime attractions of the multipolarity initiative, that of nations getting more control over their economic affairs. Recall that one of the big aims of Keynes’ bancor ideas was to use it to impose punishments on countries that built up big foreign exchange reserves, which Keynes saw as destabilizing. But as we described above, the policies that produce those reserves are popular. Who wants to be punished for doing what, outside the reserves context, seems like a good thing?
This is one of the reasons why the main partners in BRICS (Russia, China, and India) have tut-tutted the idea of rolling out a new currency to try and displace the Almighty Greenback.
I’ll end this segment with a joke tweet that some of you will find distasteful:
“I’m English……sorry!” (Something I’ve heard more than a few times myself over the years)
George Orwell once remarked that England is “the only great country whose intellectuals are ashamed of their own nationality”.
Did the rise of Great Britain and British identity have a negative impact on the sense of being English among Englishmen and Englishwomen? We know that they are prone to self-effacement and self-deprecation….but could they ever become assertive about their own ethnic affiliation? Or are they simply too divided among themselves?tackles the subject of “Englishness as a Brand”:
The Celts around them, among them, and part of them:
Another part of the answer: has the proximity on these small crowded islands of Scotland, Ireland and Wales - each with a romantic David-versus-Goliath story - been to the detriment of the image of England? Whilst the three nations have, in many ways, rubbed along pretty well with their big over-fed neighbour, historic grievances have been distilled and aged to a fine brew that when imbibed can arouse bile towards those English with their infuriating obliviousness to the rigors of life on its Celtic fringes. English as an ethnicity is of course awash with Welsh, Scots and Irish genes (much more so than in the reverse direction) but the Englishness part of Britishness has remained but a blank canvass splashed with vivid graffiti of Celtic myth. And in our time of course victimhood walks on stilts.
The UK Class System as an impediment to proud Englishness:
Every nation’s middle class is sub-divided into upper and lower strata but this divide is particularly stark in the famously class ridden Nation of England. (The public-school educated English upper middle class is so subtly snobbish that they even pronounce place names different from their lower middle class neighbours.) And amongst this upper middle class a kind of anti-patriotism has perhaps always been latent. Some say it goes all the way back to 1066 and the establishment of a French-identifying Norman aristocracy on English soil.
In the halcyon days when this upper crust ruled the waves, they seem to have had a strange superiority/inferiority complex. Plenty of looking down noses at the rest of the world combined with a sense that culture and romance was something that mostly occurred south of Dover. There is though (or there used to be) a grudging respect for them in foreign parts - these stiff upper lipped, receding-chinned, phlegmatic, pasty-faced b*****ds; these seafaring, colonising anti-heroes who have so disproportionately altered the face of the planet. At its very best they gave the world an image of the Englishman as Churchillian. And in their post colonial phase they are arguably, on the whole, the most peaceable, law-abiding, non-rioting, tax-paying and tolerant citizens that humanity has known at any time in its history. So what if they are – in certain abstract ways – full of crap.
The same could be said, only more so, of England’s much more numerous lower middle class; its petite bourgeoisie. They are the great missing centrepiece of the bayeux tapestry of Englishness. It is they who, in the early to mid 20th century, when mass-mediated national stereotypes were first being projected worldwide, perhaps took self-effacement to an extreme; seeing this as merely what good manners dictated. In my young days in the ‘60s this lower middle class, white-collar stock was perhaps England’s model of decency and sobriety. Most would have missed out on a university or polytechnic education and so missed out too on The System needing to be smashed and vengeance needing to be wreaked on trade union picket line crossers etc. These were people bored quite quickly by political opinions - including even their own - and least prone to fashionable dysphorias. But they weren’t the kind to become television producers.
The Thatcher Effect:
In the 1980s Margaret Thatcher – lower middle class shopkeeper extraordinaire – almost managed single-handedly to recast the English brand, synthesizing, as she did, a stiff upper lip with a down-to-earthness with none of this wishy-washy self-deprecation. True to form, the London-based media did their utmost to trash her of course. It is a tragic irony then that – quite antithetical to her own personal instincts - she unwittingly presided over the emergence of a new middle class subset: a loads-a-money professional class cruising on such cheap GNP gas that they could easily afford additional luxuries like liberal guilt-tripping and moral tourism. And mixed in with this new elite was a kind for whom being part of an elite is not enough; they also want to taste the fruit of oppression and so, when drunk at elite parties, will bang on about their working class roots.
And finally, the Ugly Anglo who terrorizes sunbathers in Magaluf, Spain:
The English constituency that, in former times, would have holidayed in Great Yarmouth or Blackpool are, in the age of cheap air travel, now often seen to have exported an image of us as an ungainly kind of sun-worshiper. Not so long ago an unholy alliance of drunken pot-bellied football fandom and faux shock horror journalism exported a degraded version of English patriotism made all the more cringingly pathetic by being combined with routine failure on the pitch. Meanwhile the (still primarily public school) media class just can’t wait for their annual sojourn in Provence or Tuscany. The 21st century remnants of my English lower middle class idyll still go relatively unnoticed at home or abroad. They will be amongst those least likely to try to get on a phone-in or reality tv show.
It didn’t take me too long to understand just how significant a role class plays in the UK, and how different classes belonging to the same ethnic group are almost entirely alien to one another culturally and socially.
We end this weekend’s (LOL) Substack with an essay on how “slum photography” of the late 19th century was used to enact social reform, but also possibly had negative repercussions for slum-dwellers that they were trying to help:
Slums have long invited the camera’s gaze. This photograph of Jerusalem Court is characteristic of the many photographs of slum housing taken across Britain since the late 1860s. Most of these are unremarkable in aesthetic terms, but the sheer volume of ‘slum photographs’ held in the archives of British cities such as London, Manchester, Liverpool and Birmingham reveals the extent to which slum housing – and, by extension, the management of the working-class populations who lived in it – was a subject of major national concern. From Thomas Annan’s 19th-century photographs of rundown Glasgow tenements, to images of East End slum clearances taken in the 1950s, such images have informed our ideas about how the urban environment might be critically linked to the nation’s social, moral and physical health.
Slums captured the American imagination, too. In the 1880s, Jacob Riis, once a destitute Danish immigrant himself, photographed the abject conditions endured by New Yorkers in the overcrowded tenements of Lower East Side Manhattan. Riis’s photographs revealed for the first time to a suitably scandalised middle-class public how the ‘underclass’ lived, inaugurating a tradition of photographing the most powerless in society, which was built on by 20th-century photographers like Dorothea Lange. While Lange was photographing the rural poor of America’s dust bowl in the 1930s, British photographers like Bill Brandt, Edith Tudor-Hart and Humphrey Spender were documenting British slum life.
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