Greed and deception.

The headlines over the past weeks have been dominated by the details of the massive fraud perpetrated by Bernie Madoff. Details of what has emerged as one of the biggest frauds in history, totalling $50 billion in losses, have further undermined confidence in the financial system.

Shocking as it is, this “Ponzi” scheme as Madoff called it has a precedent in history. The South Sea bubble in the 1720's, which included a scheme proposing the draining of the Red sea in order to recover the jewels left behind by the eygptians suceeded in conning such notable figures as Sir Issac Newton and King George I. In 1920, two hundred years after this spectacular boom and bust cycle, Charles Ponzi constructed a pyramid scheme which suceeded in conning people out of an amount which may have totalled up to $20 million.

The “Madoff” scheme dwarfs these previous attempts, however there are several similarities between the three scams. Firstly, all three promised exponential returns with the draining project offering to double investors money, Ponzi promising 50 percent in 40 days, and Madoff's promising a 1 percent return each month. Secondly, all three were supported by a big name, in 1720 it was “His Highness Gregir, cacique of Poyais” and Madoff's strong reputation backed by the fact that he had been the Chairman of the NASDAQ which absolved him of suspicion until recently.

Although greed, a common desire that ran through all three of these schemes, and which provides the fodder for con men everywhere could be employd to explain the Madoff scheme this is would be to ignore its complexity. While the returns Madoff generated were suspiciously consistent, and led to several traders advising their clients against investing with him, many of his investors seem to have explained this consistency by the fact that he was using insider contacts to gain his clients an advantage. Simply said, they believed that he was inisider trading. Therefore these clients knew that the man they were investing in was dishonest, in so far as his conduct although common place was unethical and in breach of trading standards. In punishment those that questioned his policy, audaciously staring into the mouth of the gift horse, were immediately refunded all of their investment! A rare economic benefit for moral probity? However in search of a competitive advantage, the moral compass of the majority of those who invested with Madoff became disorientated, any lingering doubts were quickly assuaged by the consistently brilliant returns.

Not for one moment am I proposing this event as some form of moral fairy tale. The recent suicide of french banker Thierry Magon de la Villehuchet illustrates the often tragic consequences of pyramid schemes. What I am suggesting is that greater transparency is needed in the financial markets, a revendication which is echoed by the general financial chaos which is set to continue into 2009. The SEC and other monetary bodies have failed in their bid to protect investors. Yet ultimate responsability rests with investors, the old addage remains more pertinent than ever: if it looks to good to be true, it probably is.

Unemploymeny benefit : A necessary balm or a crippling disincentive?

In the current economic climate with government spending coming under increasing scrutiny the debate on this ever present issue has been rekindled. According to the OECD, member governments spent an average of 0.75 of GDP on unemployment benefit in 2006. The figure for the US was half of this average, the UK's a quarter, France's twice,and Germany's three times. What are the aims of unemployment benefit? Is it successful in achieving these aims?

Unemployment benefit exists because it is seen to be both economically and socially beneficial. Joeseph Stiglitz maintains that on the economic front it can serve as an “automatic stabiliser” by guaranteeing an income for those who lose their job, and thus preventing a downward spiral linked to decreasing consumption. Unemployment benefit also gives people who have recently lost their job a grace period in which to find a suitable job and to avoid the sub-optimal outcome which results from being over-qualified for a given job. On a social level, unemployment benefit is seen as the siganature mark of a “progressive” society, in which the many join together to support those less fortunate than themselves. It also fulfills the role of providing a legitimate form of income for people who may otherwise resort to crime.

However in attempting to achieve these entirely laudable goals it may well induce several undesirable effects. Principal among these is the accusation that unemployment benefit creates a disincentive to work. This argument claims that by providing people with a source of income with minimal effort expected in return you are in fact removing their motivation to work. This relationship is difficult to measure statistically as the validity of international or even historic comparisons is nullified by a raft of variables (current economic climate, employment legislation, social welfare system etc). However Raj Chetty, a young Berkeley economist, identified a link between an increase in unemployment benefits and a corrollary increase in the length of time between jobs.

This in itself is not a bad thing and in the long-run may even be beneficial to the economy, by allowing people to spend time looking for a job that matches their qualifications. However the question remains as to how best ensure that unemployment benefit serves as a crutch rather than an inhibitor. The contemporary approach is to link unemployment benefit to the status of active job seeking, such as the 1996 welfare reform act in the US which removed the governments obligation to provide unconditionnal indefinite assistance to those who are out of work. Emphasis has also been placed on upskilling and training in an effort to counter the fact that employability decreases in line with time spent out of work.

Many dismiss as outmoded and barbaric the idea advanced by the Elizabethan Poor Laws that the “poor must be put to work”. However, I don't think we should dismiss it entirely . Employment provides not only an economic benefit to wider society through fiscal contributions and increased consumption but also provides a sense of self worth. We have a responsibility to formulate a system of unemployment benefits which empowers those who are looking for work rather than disadvantages them. Unemployment benefits must be contingent on the applicant displaying one or several of the following tendencies: concrete attempts to find work as visible through realistic and determined job applications, a commitment to upskilling, or participation in community service or voluntary work which utilises their individual capabilities.

These measures put the onus back on the person who is looking for work. Yes, the government should protect its more vulnerable citizens. However it should feel no obligation to those who exclude themselves. Unemployment is an increasingly prevalent reality, and so we must remind ourselves that while necessary, it is not a one way street.

If at first you don't succeed..

The Irish will vote again. Yes, less than six months after the government supported treaty was rejected by the Irish people, the ever benevolent Brian Cowen has commited to offering them another chance. Cowen and his allies within Fianna Fail are of course casting the event as a triumph. Minister for foreign affairs Micheal Martin declared that the new referendum recasts the wishes that the Irish people expressed through the ballot box in June. Pardon my scepticism, but this seems like a rather explicit distortion of reality.

The reason that we will return to the ballot box some time in 2009, has far more to do with the European vision espoused by Sarkozy and other european leaders, than it has to do with the democratic perogative of the Irish people. Indeed Sarkozy was quoted as early as July saying that the Irish would vote again. The EU is effectively consigned to a state of lmbo without profound legislative reform, a state many countries are not willing to accept. The fundamentals behind the reform are an attempt to reform a decision making process that is as restrictive as it is outdated, a fact illustrated by the current situation in which a country with a population of approximately 4.35 million has stalled the reform across the EU, an area comprising almost 500 million people.

The rejection of the Lisbon treaty in June was a result of a number of factors prominent among which was a sanction of the governments handling of the corruption scandals involving the former Taoiseach Bertie Aherne. While several questions pertaining to mysterious bank lodgements remain unresolved, other issues which were at the forefront of the 'No' campaign have been adressed. Brian Cowen declared today that he has secured provisions safeguarding the autonomy of Irish taxation law, a guarantee that the current statute regarding Irish defence and security policy and Ireland's policy of neutrality would not be prejudiced, and the primacy of the Irish constitution concerning the right to life, education, and the family.

So, with the major concerns of the Irish public supposedly catered too, Mr Brown satisfied that these guarantees don't imperil his “red lines”, and Sarkozy adopting his smug told-you-so face, should we all be jumping for joy? Critics will say no. Pointing to the cost of referendums, castigating the compliance of Brian Cowen, and denouncing the governments willingness to trample on the democratic declaration of the people whom they are supposed to represent, the 'No' campaign will march again. The 'Yes' campaign freshly armed with retorts to the oppositions headline slogans will implore an Irish people to reembrace the Europe which has given it so much.

The backdrop has changed. The financial crisis has burst the irish people's mythical conception of their own invincibility. The second referendum may well find a rather contrite electorate, an electorate whose desire for a financial safety net overrides any previous ideological apprehensions.

Barack Obama, a new perspective. A new hegemony?

“Change is coming”. The idea that the election of this dynamic, highly charismatic, and profoundly intelligent man as the 44th President of the United States of America offers a rupture with the disillusionment of the Bush Jr. Era is oft cited.The necessity of this rupture cannot be stressed strongly enough.

Obama faces a plethora of challenges right across the social spectrum. Challenges compounded by the seemigly ever deeping recession, indeed it was recently declared that 533.000 jobs were shed in America in November alone bringing the current unemployment figure to 6.7%, a 15 year high . However the challenges awaiting Obama extend beyond the boundaries of his country. Obama in order to effectively combat the recession must get the world back on America's side.

The allure of the american way of life, the land of opportunity and freedom were key factors in consolidating the US's role as a super and then hyperpower. It has not only attracted gifted students from all over the world to study on its ivied campuses, and immigrant workers who fuel its economy, but also created a pro-american sentiment which has consequently inspired pro or at least neutral policies towards the US. This “soft-power” engendered by the US way of life however has been polluted and strucrally undermined by the comedy of PR errors committed by the Bush regime. The perception of America as the land of the free has been replaced by images of Guantanamo and hooded rendition suspects being bundled onto military transport across the “free world”. America the land of liberal democracy and noble idealists like Woodrow Wilson has been usurped by the aggresive world vision of the neo-cons and the US invasions of Afghanistan and Iraq. The result, the collapse or continued glaciation of relations between the US and countries around the world, the conflict with Iran being one prominent example the rift within the western world on the Iraq war another. Images of the Stars and Stripes being burned in streets across the world from the middle east to Asia, and central and south America and even in the streets of European capitals have become increasingly common. Populations disillusioned with what they perceive as an American imperialism have pushed governments to oppose America across international institutions such as the UN and in the international press. Chavez in Venezuela, an increasingly hostile government under Yousaf Raza Gillani in Pakistan, and a vitriolic anti-american discourse in the Middle East are just some of the symptoms of this failure.

Barack Hussein Obama offers a new horizon in US international relations. He represents change and rupture with the previous regime to such an extent that Fidel Castro (yes, the staunchly anti-american, communist dictator) declared in his most recent press release that "a conversation can be held wherever he (Obama) wants,". While this may in part have been motivated by the health of both the ailing Castro and that of his country it does not take away from the fact that Obama offers a juncture, an opportunity to countries ostracised by the Bush regime to reintegrate themselves into the international community. A community with America at its fore. The reintegration of countries into this “American order” offers a much needed support in light of the financial crises which has challenged the economic liberalism one of the tenets along with liberal democracy of the American led order.

By the very fact that he himself embodies the concept of America as the land of opportunity. That he has declared his willingness to talk to countries which to this point have been shunned, and that he represents hope for change Obama may well suceed in renewing a positive conception of America in the rest of the world. The healing however will have to wait until he takes office on the January the 20th. America's image eagerly awaits its rehabilitation.

Why?

Hey,

This blog is the end result of the confluence of several factors, prominent among which is the fact that I am studying at Sciences-po in Paris for the year. This college, described by some as the ante chamber of French politics, has catapulted me into a world where current events are hotly debated, discussed and raffined by a truly multi-ethnical and multi-cultural student body.

Faced by this process I have become increasingly entangled in, and fascinated by the world of current affairs. On this blog I hope to articulate my opinions and the debates on these issues of both a political, economic, and social nature.

I am fully open to contestations or corrections, and am looking forward the process of thinking and writing.

Cheers,

Darragh