How can something so boring be so evil...?

by Jack Copley

The issue of banker’s inflated bonuses has taken up a hell of a lot of media time. These bonuses are spectacularly outrageous, easily comprehensible and provide a scapegoat for public outrage. However, by devoting too much time to this relatively superficial disgrace, we seem to be neglecting the far greater issue of international financial regulation. “NHS is here to stay, make the greedy bankers pay!” and similar chants are often heard at protests – partly because nothing really rhymes with ‘structured investment vehicles’ – but more importantly because financial regulation is the driest, most complex and least exciting topic imaginable. Unfortunately, it’s also incredibly important.

Since the 1970s, the global banking sector has been using its enormous lobbying power to chip away at the international financial regulation regime. Furthermore, continuous innovations in different financial instruments left whatever regulations that remained far outdated. In this article I want to explain three financial innovations that played a key role in the causing the 2008 economic crisis; securitisation, shadow banking liquidity and the credit derivatives market.

Securitisation basically means turning a source of income (such as a debt with regular payments) into a tradable commodity – a security. The staggered payments on this debt are now paid to the buyer of the security, while the seller makes off with a one-off fee. While securitisation became a wide-ranging phenomenon, it was particularly important in reference to the housing market in the US. Due to record-low interest rates after 2001, borrowing became extremely cheap for entrants into the housing market and became highly profitable for banks. Mortgages were given to risky borrowers (low income or poor credit history) in bulk and these mortgages were then securitised and sold to investors around the world. However, when interests rates eventually started to rise in 2005, these borrowers could no longer afford their mortgage payments – making these ‘mortgage securities’ that were now in the hands of countless banks, financial institutions and pension funds totally worthless.

It was this process of securitisation that spread the toxic mortgages around the world, proliferating financial contagion.

The term liquidity means the ability to convert an asset into cash quickly. For example, if you own an enormous mansion but cannot sell it – you can be said to be asset rich but illiquid. Liquidity is crucial to the functioning of the financial sector, as it allows transactions between institutions to continue as well as providing funding for the real economy. Capital requirements are regulations that exist to make sure banks hold on to a sufficient amount of liquid capital (cash), so that in case of sudden losses the bank can still allow investors to withdraw their savings – hence staving off mass panic. The problem that arose during the 2008 Financial Crisis was not just that these capital requirements were inadequate, but that a monumental chunk of the international financial sector was totally exempt from these regulations. This is the ‘shadow banking system’; made up of institutions like Lehman Brothers that carry out the same functions as traditional banks but which operate in a regulatory blindspot. There is no plausible reason for this exemption from regulation – the shadow banking system actually dwarfed the traditional banking sector by $9,000 billion before the crisis. In fact, Bear Stearns – a key shadow banking institution – only had $1 dollar of liquid capital for every $30 that they had loaned. Consequently, most of the US bailout package was directed at saving the shadow banking system from default.

Trying to understand the credit derivatives market is kind of like stumbling across the diary of a madman and trying to interpret his crazed scribbles. The purpose of a financial system is supposed to be to rationally allocate funding into the most efficient sectors of the economy – something that was completely forgotten in this frenzied web of short-term profiteering that contributed nothing to the real economy, while massively exacerbating existing instabilities. The most important form of credit derivatives were credit default swaps (CDSs). A CDS is basically an insurance policy taken out by an investor to protect against the failure of his investment. The buyer of this policy agrees to pay the issuer a set amount each month, but in the case of an investment failure the issuer must pay out the full insurance to the buyer. However, much like the securitised mortgages, CDSs were sold by the issuers to third parties and they were then sold further. The problem was that due to the deregulated nature of this market there was no requirement for the party holding the insurance policy (and collecting the monthly payments) to verify that they actually had the cash to pay out in the event of an investment failure. This meant that when the supposedly insured investment failed and the buyer attempted to cash in on their insurance policy, they were often left empty handed. However, it was the scale of this scandal that made the crisis truly catastrophic. In 2007, the international CDS market was worth $62 trillion, while in the same year US GDP stood at $13.84 trillion. That means that if the US had liquidated every asset in the entire country – if the government had convinced every family to melt down their best silverware and send it to the White House – it would have covered less than a quarter of the losses of a CDS market collapse. It was this ridiculous gambling that necessitated the enormous government bailouts seen in this country and the US; bailouts that are now used to justify the current austerity measures.

The three issues discussed above can all be significantly addressed through international cooperation on financial regulation. The Financial Stability Forum and the G-20 are important international organisations through which Britain, considering the City of London’s global role, can influence the international regulatory regime. Furthermore, significant dissatisfaction in Europe at the role of the US in instigating this crisis means that these changes are far from politically impossible. The issue of banker’s bonuses makes for sensationalist news headlines, but we must not let it distract us from the broader picture – especially when the window for reform is closing.

We live in a world where systemic risk is far higher than at any other point in history. Global inequality, lack of public services, distorted balance sheets and a ridiculously bloated international financial sector are all underlying factors that created the crisis – factors that will be changed only after a long struggle. However, reforming the problems discussed above does not simply amount to rearranging deck chairs on the Titanic. It can mean the difference between having a public healthcare system or not. If not for this reason, then we should at least get these issues resolved now so that no one ever has to learn about capital adequacy ratios again. 

How Postcolonial Feminism can be used to inform an analysis of the Burqa ban in France

By Asad Zaidi

On 11 April 2011, France became the first country in the world to ban face coverings, this immediately polarized public opinion and was one of the major political events of the past year, with global ramifications.  Whilst on one hand supporters of the law argued that it preserved the French values of liberty, equality and fraternity, opponents saw it as a, “ vote-winning exercise by Sarkozy, in other words, pandering to people's prejudices" (Al Jazeera).  Using the term ‘Women of Colour’ to define non-white oppressed women, this essay will argue that, regardless of what people believe about the wearing of the burqa itself ( and there is no doubt that for some, it is a form of oppression), the removal of agency and choice for Muslim women is symptomatic of a wider issue: that of the disenfranchisement of women of colour in western liberal states such as France.  Moreover, postcolonial feminism will be used to challenge and critique the banning of the burqa by explaining the multiple and interlocking forms of oppression that these women face.  Post structuralism will also be used as a mode through which an analysis of power relations can be subsumed before finally, an explanation through the help of theoretical perspectives will be offered on why the ban is unjustified.

The wheels were set in motion for the ban two years ago when Nicholas Sarkozy claimed that the veil was contradictory to the French state’s values and that it oppressed and imprisoned women.  It was a symbol of patriarchal domination he said, an archaic remnant of the past that was not compatible with the France’s secular values.  Thus, these ‘Lacite’ arguments were used to support the ban; that the separation of church and state was imperative in the maintenance of France’s liberal and free identity (The Guardian), supporters of the bill arguing that they are in fact securing the autonomy of Muslim women and girls by banning the veil.  However, those that oppose the ban argue that such action only serves to alienate the Muslim community in France and that the state is in fact sacrificing the rights of the individual for the homogeny of the French Republic.  Galelloti argues that when three girls were suspended from school in 1989 for wearing the ‘hijab’ or headscarf in school (the beginnings of the row, although the law outlawing all religious symbols was only enforced in 2004), they were not in fact acting through a lack of autonomy because, “at their age, their religious choice cannot count as autonomous” and was thus the result of family demands. Moreover, this argument is furthered by Wilsher who emphasises how French feminists have traditionally viewed the veil as a symbol of male oppression.

The assumptions that liberalism makes on ‘Black feminists’ will now be deconstructed and a narrative based on post colonial feminism shall be offered.  These arguments view women of colour, in this case Muslim women living in France, as oppressed, having neither real agency nor autonomy over their own bodies, let alone their voices. Consequently, they live under multiple and interlocking systems of domination, what Bell Hooks describes as a, “white supremacist capitalist patriarchy”.  Western Liberalism (and feminism in particular for that matter), they argue, has ignored and undermined the voice of these women so that their narrative remains on the periphery, dominated by a society that’s identity has been predominantly shaped by the white middle class man.  Hence, for Western Liberals, women of colour are an ‘the other’, in desperate need of saving from the patriarchy of their primitive and illiberal heritage.  This mentality has its home in the heritage of Imperialism, wherein European colonisers of the global south exploited people of colour under the pretext of a liberalising mission to bring liberty and civilization to the heathens, thereby freeing these women from ‘the sexism that existed within their own cultures.’

Western Liberal Feminists are criticised in particular for their selective amnesia in relation to the struggles of women of colour, a notable feature of the burqa debate.  Thus, Mohanty has critiqued the social construction of a homogenised and victimised ‘third world woman’, devoid of any cultural specificity.  Ironically, the burqa is a contributing factor to this homogenisation, given that it provides a praxis through which ‘Muslim women’ can be viewed as one, anonymous, mystical-mystified other. The fact that only 2000 out of a total population of 5 million Muslims wear the Burqa is not mentioned by Liberal commentators, or that the majority of French Muslims manage to reconcile their faith and nationality through a complex, yet unified identity.  Thus, these women are contained and studied as subjects in Western discourse through both media and politics, but rarely given their own voice.  Black and Arab women are famously underrepresented in French civil society and rarely do they take up prominent positions in society.  Moreover if they reach institutions of power and influence, they must accept western norms and yet, they are judged by harsher rules than their white colleagues.  An example of this is being the sudden rise and fall from grace of former Justice Minister Rachida Dati, ‘the first Muslim woman to hold a major government post’, who was placed under huge media attention not prescribed to her fellow cabinet ministers (Guardian).

Through postcolonial feminism then, one can view the Burqa ban as just one of multiple forms of oppression that women of colour face.  The domestic violence that some Muslim women encounter is amplified by gender and racial inequality that all encounter, emanating from a prejudiced media and civil society.  By banning the burqa, the French state thereby renounces the agency of Muslim women and it is this that is the fundamental problem with using notions of Western Liberalism in the context of minorities; it assumes a collective identity for those it objectifies. The corollary of this assumption is that, by default, if Muslim women are subservient and repressed, then Muslim men in the eyes of the liberal west are the controlling upholders of patriarchy and sexual oppression.

Here it would be useful to engage further in just how ‘power’ is used in the debate over women of colour and the burqa ban in particular, through the use of post structuralism.  If Michel Foucault were alive today, he would have viewed the banning of the burqa and the liberal pretext that it freed Muslim women from the patriarchy of conservative Islam as inherently fallacious.  The liberal perspective that the State was removing patriarchal power from Muslim women would have been rejected due to the ubiquitous nature of power.  Thus, power would not be removed, but it would exist in another form (for example the further entrenchment of ultra Conservative Muslims seeking to defy the ban or through the implementation of French laws to the maintain it).  A post-structuralist critique on the Burqa ban would therefore view the Western Liberal concept of what is and what role a woman should play in society as fundamentally flawed due to the binary opposition it creates; either French Muslim women ascribe to a very particular definition of what they are as set out by the white liberal man, or they risk being rejected from society.  Thus, a post structuralist argument, as with a post colonial critique, would deem that there is a plurality in the forms that society can take, multiple cultures, experiences and narratives that cannot be subsumed under universal categories.

Power for Foucault is not just repressive but productive due to the fact that it produces social relations. Hence the Western Liberal discourse that the Burqa inhibits the partaking in classical French society is a self fulfilling discourse; it discounts the extant, real social relations in which subjects of multiculturalism find themselves.  However, if we view the Burqa through the eyes of the women that wear it, then the relations that are produced through this action may allow her to harness an emancipatory space within her community.  Thus, if we take the law as it exists in reality, not as we would like it to exist in the ethereal, we have to ask how ‘free’ she is now that her agency is restricted. Is she, for example, able to leave the house to meet her friends now without her Burqa if she lives in a deeply conservative community or will she be further confined and oppressed?

Now the theories have been analysed, one must consider the essential debate that lies between Western Liberals and Post Colonial feminists on the Burqa ban.  Does the facial covering prevent or facilitate liberty?

 On one hand, it can certainly be argued that the covering of one’s face is not feasible in a society with security and identity issues.  The fact that the very nature of the burqa is that it conceals the entire body creates problems of communication and trust in a society where those two are, at times, in dearth between the minority and majority communities.  Secondly, it can also be argued that the burqa confers an ownership of women that de-individuates them to a commodity. 

However this assertion can be countered wholly and utterly.  Although the burqa does not necessarily facilitate liberty, the banning of it prevents liberty.  In this way, the plurality of experiences of women of colour as a belief, need to be assessed.  Of course if the Burqa is worn by force then it certainly constitutes a form of oppression.  However, fundamentally the judgment of who is and who isn’t oppressed cannot be easily ascertained, and when it can, it should not be for the role of the state to decide.  Indeed, one could make the point that, just as some Burqa clad women are oppressed, others wear it out of choice.  An example of this is the use of the burqa as a mode of protest by Turkish Muslim women, protesting the encroachment of secular values on private faith.  Secondly, with so few actual Burqa wearing Muslim women in France, the debate itself far exceeds the actual ramifications of the ban.  This leaves the French government open to the allegation that it was knowingly using the sensitive issue of ethnic minorities to play on to secure support during the economic downturn. Thus, it is undeniable that issues on immigration and integration of ethnic minorities are valid issues to be debated in a civil society.  However, the burqa debate itself is an example of a patriarchal, racist and imperialist mentality still existing within a country that has never fully come to terms with its bloody colonial legacy, nor the fact that its very own imperial projects were the catalysts for the waves of immigration that succeeded it.

One can hint at the French government’s nefarious intentions in that, if this policy was grounded in a broader calibration of attempts to integrate the Muslim minority within France, perhaps there would be more truth to the ostensible emancipatory claims of this law.  However, it remains a populist, solitary top down imposition that French Muslims must work around.  The French revolutionary ideal of positive liberty that, ‘we will force you to be free’ is one that resonates here; the freedom to wear the burqa is negated in favour of a very particular, restrained freedom that sets boundaries on what you can wear.

The burqa ban is a self defeating ruling which, while seeking to bring Muslims kicking and screaming into the secular fold, has only served so far, to alienate, objectify and anger. However, the permeation of racist and sexist stereotypes and assumptions that have characterised the debate has only served to further marginalise women of colour in France. What the ban essentially does is to scrutinize the place of not just Burqa wearing but all Muslim women in French society and this scrutiny, built on layers of stereotypes and assumptions, must be fought by all, for all. 

‘I cannot afford the luxury of fighting one form of oppression only.  I cannot afford to believe that freedom from intolerance is the right of only one particular group.  And I cannot afford to choose between the fronts upon which I must battle these forces of discrimination’

Wisconsin: Labour conflict and the recall election

By Jack Copley

Public sector unions are facing decimation in the state of Wisconsin - traditionally a labour stronghold.

Wisconsin’s Republican Governor Scott Walker introduced a Bill earlier this year that eliminates nearly all collective bargaining rights for most public sector workers as well as slashing their pay and benefits. No one gets any points for guessing what the Republican justification for this Bill is, as it has become a nauseastingly familiar rationale for rolling back decades of progress; a large fiscal deficit. However, this justification unsurprisingly holds very little water. Public sector unions in Wisconsin have explicitly expressed their willingness to negotiate monetary concessions in order to help alleviate the state deficit, but Governor Walker insisted on dismantling their right to negotiate, while at the same time passing $140 million worth of business tax breaks. 

Instead of viewing this attack on public sector unions as some kind of apolitical pragmatism, it should be considered in the context of America's recent labour history.

The Financial Times reported in February that private sector unions in the US are "practically extinct". Private sector union membership has fallen from 30% in the 1960s to 7% today. This decimation was largely instigated by the Reagan Administration (I say administration because I doubt Reagan himself actually knew which country he was president of), which made clear it would turn a blind eye to legal and illegal union-busting methods. These methods continued under Clinton and the process was actually accelerated by the creation of NAFTA, which allowed employers to crush unions through threats of plant-relocation to Mexico. Bush's legacy needs no summary. 

On the other hand, US public sector unions have managed to come through this period unscathed. Their membership stands at 39% on average but is much higher in some states. Public sector employees have accordingly managed to avoid the income stagnation/decline suffered by private sector employees, as well as negotiating better benefits to compensate for lower wages.

However, far more important than their economic standing, is the political power commanded by unionised public sector employees. An article published in 2010 in the Cato Journal – a right wing public policy journal – argued that the public sector unions wield a dangerous amount of political “clout on a wide range of policy issues, such as opposing privatization of government services”. The American Federation of State, County and Municipal Employees was in fact the largest outside contributor during the 2010 Senate elections. 

The attack launched by Governor Walker in Wisconsin, and in Ohio by Kasich, has nothing to do with economic logic or pragmatism - it is an ideological assault on a political lobby that has long campaigned in the interests of America's working and middle classes. 

Recall elections in Wisconsin this summer threaten to remove 6 Republican state Senators from their seats - a move which would shift the balance of political power in the state and could spell a win for the public sector unions.

Keep an eye on this issue, because the outcome will shape the futures of millions of US workers. 

Is a referendum on the alternative vote a good idea?

By Nerijus Cerniauskas

In most countries, whether a referendum is necessary or not is either explicitly stated in a constitution, or decided upon by the cabinet. Since the United Kingdom does not have a written constitution, the decision whether to hold a referendum on an alternative voting system is strictly a cabinet decision. At first, it may seem a smart idea to call for a referendum.  Voting is, after all, the most direct way in which citizens can express their opinions by choosing the candidate who will represent their interest or by punishing those which have previously…misbehaved.  Once a vote it cast, it must go through a system which will transfer votes into parliament seats. Since the people choose the representatives and the voting system is the way representatives are elected, it seems democratic to allow the people choose the system as well.  However, is the decision really so simple? If it were, why have electoral system been so widely discussed by politicians and scholars (Rae, 1971; Lakeman, 1974; Bogdanor and Butler 1983; Groffman and Lijphart, 1986; Taagepera and Shugart, 1989; Reeve and Ware, 1992; Nohlen, 1996; Norris, 1997 and so on). In University of Birmingham alone a lecture on voting systems is presented in at least two modules: Comparative Governments and British Politics.

The election system does more than just turn votes into seats in the parliament. The website on electoral referendum lists 6 cases influenced by a system of votes :

·         Will MPs have the support of majority?

·         Will there be constituency-MP link?

·         Will extreme parties be included or purposely excluded?

·         Will there be tactical voting?

·         Will there be negative campaigning?

·         Will broad policies, undertaken by several parties at once, be rewarded?

This list is by no means exhaustive and subordinate to the questions of accountability and representation which, many argue, are 2 of the key elements of any representative government.  The point here is that there are many factors which a change in the voting system implies. Each factor, it should be said, carries different weights for society: some may believe accountability is the most important, while others favour representation. Furthermore, each voting system also implies tradeoffs: it is impossible to be fully representative of a country without a single relatively extreme MP. Similarly, there is a trade-off between representation and efficiency, for a single party majority is likely to pass a law quicker than having to convince the whole coalition that a certain policy, such as the no-fly zone over Libya, is a good thing. Taking all this into account, it does become quite clear why so many scholars persist with the debate in the first place. It also becomes questionable, whether an ordinary citizen does take the time or the effort to think about these broad consequences.

England is known to have a relatively passive population majority when it comes to democratic decision making. Decision can either be made by the people directly in what is known as participatory (or the more extreme version: direct) democracy or by giving someone the right to do the work on your behalf (representative democracy). A usual example of modern participatory democracy is Switzerland, which sometimes has 4 referendums a year, with some of the referenda covering a few issues at once. This requires a population which is interested in different matters and seeks to form its own opinion, otherwise, the required number of voters would not turn up and the referendums would be void. The United Kingdom on the other hand had only 9 (non-local government) referendums since the first in 1973 and only one of those covered the whole of United Kingdom.  As such, the United Kingdom does not have a well developed tradition of direct democracy. Furthermore, even representative democracy has been declining in the last decades. In 2011 UK General elections 65,1% of the population turned out to vote, which fell from 77,83% in 1992. This compares with to 80,5% in Italy, 75,32% in Spain and 77,65% in Germany[1]. While Parliamentary elections are even less popular in France and the United States, 83,97% and 89,75% of their populations turn out at presidential elections respectively . During the European Parliament election of 2009, only 34,7% of the United Kingdom’s population voted - the least out of all Western states ( 43% was the  overall European Average).[2] The data indicates a general lack of interest in the population on political matters.

There are many possible answers to the question. One of them is that the British tradition of strong central government goes back all the way to the glorious revolution, were only select few, usually from higher classes, could participate in politics, who had the responsibility of representing the citizens. Since then, the government has grown. The government is now responsible for the provision of services (such as the NHS) and there are many different organizations and institutions influencing outcomes. However, the idea still remains the same. Each individual chooses someone else be it a president of an association or a member of parliament, who he believes can do the work for him. Another is a lack of education (Miligan 2004), or possibly a narrow-minded education. Third – poverty, which leaves little time for thinking. There are possibly many others, but the general outcome is the fact that people show less and less interest in politics in general (National Centre for Social Research, 2010).

Interestingly, current government decided to do what usually British government seldom does: let the people decide on policy directly and encourage direct democracy. By launching a referendum on the election system the government seems to put the work load back on the electorate. This way, the electorate has to vote once for the party, and then separately on party’s policies. Such behaviour can be explained in two ways:

 First, the party wants to involve the population not on a general issue (which party to elect), but also give a direct say on which policies to take, thus promoting civil participation and spreading awareness. But then we have a problem. If the population is not used to direct democracy and is little interested in politics in general, why should people come and vote on a highly complicated and technical matter? Why not start on more touching issues first or try to approach the matter in a more local  and engaging way? A tradition of mass participation does not spring in one night. For the referendum to go ahead, 40% of the population should attend, which is more than some of the past technical referendums, such as The Greater London Authority referendum in 1998, where only 34,1% voted. Even if the referendum will be on the same day as regional elections there is a chance that not enough people will turn up or vote without thinking too much. Then there would be even less enthusiasm to vote in the following referenda and participation as well as awareness would fall. Second, it could also show that the formed coalition is either uncertain as to what kind of democracy it presides over, not sure what the population wants, or wants to evade some kind of internal conflict and believes that the general population should deal with the issue, because they cannot. 

Overall, a few things are clear. The choice of which election system to use is a difficult matter, requiring a lot of thought and research. Within United Kingdom the participation in elections has fallen and referendums on technical matters also receive low turnout, which seems to show a decline of interest in political matters. Until now, the United Kingdom has been and is likely to remain a representative democracy, but the current referendum can be seen as a way that will implant elements of direct participation. While it is questionable if United Kingdom should be satisfied with a relatively passive population, it is unlikely that such a referendum will rectify the situation and therefore it would bebetter to leave for the experts to decide. Either way, the referendum indivertibly touches on the most fundamental of political issues of who and to which extent governs: the people or their elected officials. If we want the people to govern in significantly larger extent, we have a long way to go.

---

[1] Elections of 2008, 2008, 2005 http://www.idea.int/vt/viewdata.cfm#prebuilt=yes&countries=53,61,110,72,77,231&types=parl,pres&fields=vt&logurl=http%3A%2F%2Fwww.idea.int%2Fvt%2Fviewdata.cfm&timemode=range&firstyear=1990&lastyear=2011&quickView=false&qid=897616&d=2&h=12&m=55

[2] http://www.europarl.europa.eu/parliament/archive/staticDisplay.do?language=EN&id=211