Wednesday, November 7, 2018

Adults in the Room - observations

Read Yanis Varoufakis' chronicle of his tenure as Finance Minister of Greece. 

Several interesting bits. Great account of how European institutions actually work and the power balance within. Clearly Germany matters and those at the helm don't try to hide it.

Two points stand out. 

1. He clearly is someone who believes he cannot do wrong and his views and plans are the fail-proof. Not one admission of goof-ups that I can remember from the entire book. 

2. Resolution of any problem or situation for him is more about its technical dimension. Sample the numerous instances of the pride with which he talks about his proposals and his speeches, compared with the grudging acceptance of compromises and concessions to the Troika and other interlocutors.

Without in anyway condoning the pig-headedness of the institutions on austerity and the failings of European politics, it is no surprise that Yanis failed. Just those behavioural attributes meant that he had to. A perfect illustration of a brilliant technocrat struggling with navigating his ideas by overcoming real-world challenges. 

Two standout extracts

On insiders and outsiders,
“There are two kinds of politicians: insiders and outsiders. The outsiders prioritise their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcomes. So Yanis, which of the two are you?”
On conspiracy theories (applies as much to claims of grand strategies),
“There are what I called “super black boxes”, whose size and import is so great that even those who created and control them cannot fully understand their inner workings : for example, financial derivatives whose effects are not truly understood even by the financial engineers who designed them, global banks and multinational corporations whose activities are seldom grasped by their CEOs, and of course governments and supranational institutions like the IMF, led by politicians and influential bureaucrats who may be in office but are rarely in power. They too convert inputs – money, debt, taxes, votes – into outputs – profit, more complicated forms of debt, reductions in welfare payments, health and education policies...
When a large-scale crisis hits, it is tempting to attribute it to a conspiracy between the powerful. Images spring to mind of smoke-filled rooms with cunning men (and the occasional woman) plotting how to profit at the expense of the common good and the weak. These images are, however, delusions. If our sharply diminished circumstances can be blamed on a conspiracy, then it is one whose members do not even know that they are part of it. That which feels to many like a conspiracy of the powerful is simply the emergent property of any network of super black boxes. The keys to such power networks are exclusion and opacity. Recall the ‘Greed if great’ ethos of Wall Street and the City of London in the years before the 2008 implosion. Many decent bank employees were worried sick by what they were observing and doing. But when they got their hands on evidence or information foreshadowing terrible developments, they faced Summers’s dilemma: leak it to outsiders and become irrelevant; keep it to themselves and become complicit; or embrace their power by exchanging it for other information held by someone else in the know, resulting in an impromptu two-person alliance that turbocharges both individuals’ power within the broader network of insiders. As further sensitive information is exchanged, this two-person alliance forges links with other such alliances. The result is a network of power within other pre-existing networks, involving participants who conspire de facto without being conscious conspirators. Whenever a politician in the know gives a journalist an exclusive in exchange for a particular spin that is in the politician’s interest, then journalist is appended, however unconsciously, to a network of insiders. Whenever a journalist refuses to slant their story in the politician’s favour, they risk losing a valuable source and being excluded from that network. This is how networks of power control the flow of information: through co-opting outsiders and excluding those who refuse to play ball. They evolve organically and are guided by a supra-intentional drive that no individual can control, not even the President of the US, the CEO of Barclays or those manning the pivotal nodes in the IMF or national governments.”

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