Power & Market
The movie “Hustlers” is generating Oscar buzz and box office cash. Words like “empowering” and “so much effing fun” are describing the JLo vehicle, based on the 2015 New York Magazine article “The Hustlers at Scores,” penned by Jessica Pressler. Ramona (Lopez) and Destiny (Constance Wu) have been described as entrepreneurial for their client fishing, drugging, and stealing exploits.
The critics are koo koo for JLo, with Nigel Smith writing in People, “In a tweet following the premiere, Vulture‘s Hunter Harris praised the film as ‘perfect’ while predicting that Lopez will be nominated for her first Oscar for her performance.”
“Hustlers” cost $20 million to make and is closing in on $100 million in box office receipts world-wide after only a couple weeks of showings. There was a healthy Friday night crowd at a local theater when I saw the film, with the audience 80-90 percent female. It was a girls' night out to see JLo and company drain the credit cards of Wall Street A-holes--pre and post 2008 financial meltdown.
While much of the movie is set in a strip club, there is little nudity. The film, at 110 minutes is larded up with scenes of high-end shopping and champagne corks popping. The screenplay directly lifts passages from Ms. Pressler’s article, but filler was needed to make it a full-length feature. Multiple entrances, Magnificent 7-style, are provided by JLo and co-stars, along with celebrations of big scores. Eventually, hearing Ramona call someone (everyone) “BaayyBee!” might touch your last nerve.
The story does connect with the 2008 financial crash, but you won’t mistake it for “The Big Short” or “Margin Call.” Ramona takes Destiny under her wing and explains the three levels of Wall Street guys--low level, honest, but no money; mid-level, somewhat dishonest, some money; those at the top who cheat people all day and have lots of money to spend at strip clubs.
After the crash and Wall Street layoffs, strip clubs go dead in the city and the enterprising, let’s call them performers, work their old money contacts to get guys into the club. After Ramona has a customer pass out drunk and she swipes his credit card for five grand, she has a Hayekian discovery inspiration, believing she can perfect the process. Pressler writes,
Of course, it didn’t always work. Sometimes they’d go through the whole performance and the guy would be too tired to go out; they would offer him drugs for extra energy, but he would be too lame to take them. In the face of such situations, Samantha had come up with the innovation that was making her rich: a special drink spiked with MDMA and ketamine.
Samantha is the real life Ramona.
This is where the entrepreneurship turned to fraud. While these women showed some entrepreneurial can-do spirit, their high time preferences did them in. They spent everything they made and when Ramona learns a certain customer has $50,000 available credit on his card, instead of drawing only some of it as Destiny suggests, Ramona takes all 50k. “That’s the problem with these girls,” Rosie (the real Destiny) told (Pressler) of her cohort (Ramona/Samantha), shaking her head. “I see the forest. They just wanted a $50,000 tree.”
The movie portrays most men as stupid or worse. Ramona tells Destiny, while doing a lap dance, “Drain the clock, not the c--k.” The occasional good guy is viewed as a hopeless sap, who can be strung along for money as needed.
JLo is, no doubt, extraordinary at age 50. However, her performance is not anymore Oscar Worthy than the acting of any aging stripper hustling at any club in America. In fact, after seeing “Hustlers” you will leave feeling the same as leaving any strip joint--cheap and sleazy.
Back when I taught political science, a phrase I used when preparing students for the tests was "he who makes distinctions well, teaches well."
That is, if we're talking about regime types, dear student, you better know the difference between a totalitarian regime, and a regime that is merely authoritarian. If we're talking about eighteenth-century American ideologies, you better know the difference between Alexander Hamilton and Thomas Jefferson. If we're talking economic policy, know the difference between fiscal policy and monetary policy.
And when it comes to different groups of Americans often considered to be homogeneous, it is often helpful to dig a little deeper to see some of the differences.
One such group is indigenous Americans. Or in the common parlance: "Indians."
Often, whenever one reads a news-media article about Indians, it usually begins with a few sentences about how poor they are, and how terrible the reservations are in terms of their standards of living. Usually, the Pine Ridge reservation in South Dakota is mentioned.
But at all reservations equally poor?
After all, some reservations have forests and ample access to water. Others are in the middle of deserts with few natural resources. Some relatively near metro areas and all the services they provide. Some reservations are hours from good healthcare and good shopping.
Well, it turns out that all reservations certainly aren't all the same.
Looking at the top-25 most populous reservations, we find that the median income among people who self-identify as Indians varies from $18,890 on the Gila River reservation (AZ) to $79,167 on the Agua Caliente reservation (CA). That's for the period from 2013 to 2017.
The overall US median income during the period was about $57,000, which means the median income for Indians on the Isabella and Tulalip reservations were about equal to everyone else.
Indeed, given that many reservations are in rural areas, it's helpful to compare incomes not to the US overall, but to the incomes of Rural Americans. The rural median income for the same period is $44,020. That means income for the median household on the Agua Caliente, Isabella, Tulalip, Uintah and Ouray, Osage, Wind River, and Puyallup reservations are all higher than the median household in rural America.
A the lower end, however, we do indeed find grinding poverty and remarkably low median incomes that are less than half of the national median income.
Even on the reservations with higher median incomes, poverty rates at the lower end remain elevated. The overall US poverty rate of 14.6 percent (against, from 2013-2017) was lower than all of the 25-largest reservations. The US rural poverty rate of 17.2 percent was lower than all but two (Osage and Tulalip) of the reservations.
One aspect of reservation populations that is often ignored, however, is the fact that on many reservations, people who self-identify as Indian are in the minority.
Among the 25-most populous reservations, the portion of the resident population that was Indian ranged from 1.7 percent on the Agua Caliente reservation to 96.8 percent on the San Carlos reservation.1
Reservations with lower proportions of non-Indian residents tend to be poorer. This may reflect several factors:
- Residents on reservations that are more geographically isolated tend to encounter fewer non-Indian residents, thus leading to less intermarriage, and fewer residents who are not Indians.
- Geographically isolated reservations tend to be poorer, and poorer reservations tend to attract fewer non-Indians engaged in commerce and employment on or near a reservation.
- In many cases, reservations with more laissez-faire economic policies have more "checkerboarding," or mixing of privately owned and tribally-owned lands within this reservation. Checkerboarding may correlate with higher incomes.
In general, rural reservations are often affected by many of the same problems that rural communities in general encounter. There are fewer jobs, and the jobs that do exist often pay lower wages than in metropolitan areas. The US rural median income, for instance is approximately $44,000, while the urban median income is approximately $59,900.
Geographic isolation tends to be a clear factor in cases where the tribe owns a casino. When the casino is near a metropolitan area, it attracts large numbers of visitors to the reservation who spend freely. The most extreme case of this, perhaps, is the Mdewakanton Sioux of Minnesota (a group of under 1,000 people) which owns two casinos within the Minneapolis metro area. Members of the tribe receive nearly one million dollars per year in payments from tribal business organizations.
Another extreme case is the Agua Caliente reservation which is adjacent to Palm Springs, California. The tribe and is one of the city's largest land owners. Only a tiny percentage of residents are actually enrolled in the tribe.
Less-extreme examples of relatively prosperous reservations include the Southern Ute reservation — near the college and resort town of Durango Colorado — and the Tulalip reservation, which owns a casino and business park near I-5 in Washington State, near the Seattle-Tacoma metro area.
[A note on the data: In the first and second graphs, I've used median incomes that correspond to the group labeled "AIANa," which according to the Minneapolis Fed's report on reservation incomes, "includes only individuals who self-identify racially as American Indian or Alaska Native alone." In the third graph, the Indian population corresponds to "AIANac" which "includes AIANa individuals and also those who self-identify as American Indian or Alaska Native in combination with other races." See report here: https://www.minneapolisfed.org/indiancountry/resources/reservation-profiles/]
Photo credit: I-5 Design & Manufacture via Flickr (image cropped)
- 1. The number of residents who are members of the tribe governing the reservation is lower than the number of residents who self-identify as Indian.
The Royal Swedish Academy of Sciences has awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2019 to Abhijit Banerjee (Massachusetts Institute of Technology) and to his wife Esther Duflo (Massachusetts Institute of Technology) and to Michael Kremer (Harvard University).
From the Nobel committee:
Despite recent dramatic improvements, one of humanity’s most urgent issues is the reduction of global poverty, in all its forms. More than 700 million people still subsist on extremely low incomes. Every year, around five million children under the age of five still die of diseases that could often have been prevented or cured with inexpensive treatments. Half of the world’s children still leave school without basic literacy and numeracy skills.
This year’s Laureates have introduced a new approach to obtaining reliable answers about the best ways to fight global poverty. In brief, it involves dividing this issue into smaller, more manageable, questions – for example, the most effective interventions for improving educational outcomes or child health. They have shown that these smaller, more precise, questions are often best answered via carefully designed experiments among the people who are most affected.
In fact, these laureates are government technocrats who think at the government level rather than at the foundational level where an appreciation for free markets would make their work useless.
The Nobel committee:
As a direct result of one of their studies, more than five million Indian children have benefitted from effective programmes of remedial tutoring in schools. Another example is the heavy subsidies for preventive healthcare that have been introduced in many countries.
One has to ask, do these three seriously believe they have the answer for five million Indian children rather than leaving things up to the free market where multiple options would develop (without political interference)?
And political interference is not a theoretical question.
Alex Tabarrok reports on one type of interference (one of potentially many kinds):
[W]hen they tried to institute a similar program for nurses in Putting a Band-Aid on A Corpse the program was soon undermined by local politicians and “Eighteen months after its inception, the program had become completely ineffective.”
And government subsidies for preventive healthcare? That is the government, deciding what is proper preventative healthcare, is taken seriously. In other words, the vegans, ketos and paleos get to battle it out to see who gets influence over health policies rather than leaving options?
How confused are these three?
Naturally, they are concerned with politically correct questions.
Duflo and Banerjee have conducted many of their field experiments in India and have looked at not just conventional questions of development economics but also at politics. In 1993, India introduced a constitutional rule that said that each state had to reserve a third of all positions as chair of village councils for women. In a series of papers, Duflo studies this natural experiment which involved randomization of villages with women chairs. In Women as Policy Makers (with Chattopadhyay) she finds that female politicians change the allocation of resources towards infrastructure of relevance to women. In Powerful Women (Beaman et al.) she finds that having once had a female village leader increases the prospects of future female leaders, i.e. exposure reduces bias.
Then there are just silly, poorly constructed models.
Before Banerjee became a randomistas he was a theorist. His A Simple Model of Herd Behavior is also a favorite. The essence of the model can be explained in a simple example (from the paper). Suppose there are two restaurants A and B. The prior probability is that A is slightly more likely to a better restaurant than B but in fact B is the better restaurant. People arrive at the restaurant in sequence and as they do they get a signal of which restaurant is better and they also see what choice the person in front of them made. Suppose the first person in line gets a signal that the better restaurant is A (contrary to fact). They choose A. The second person then gets a signal that the better restaurant is B. The second person in line also sees that the first person chose A so they now know one signal is for A and one for B and the prior is A so the weight of the evidence is for A and the second person also chooses restaurant A. The next person in line also gets the B signal but for the same reasons they choose A. In fact, everyone chooses A even if 99 out of 100 signals are B. We get a herd. The sequential information structure means that the information is wasted. Thus, how information is distributed can make a huge difference to what happens.
Does Banerjee seriously think that restaurants are just signal takers subject to the herd? That they will do nothing to signal the benefits of their restaurants? This model has nothing to do with reality.
The Prize awarded for this silly work is 9 million Swedish krona ($916,000), to be shared equally between the three.
Originally published at Economic Policy Journal
Consumers do not gain because there are many producers of the same good, the number is irrelevant. They also do not gain from firms competing with each other, their strategies matter little. Consumers gain from production directed toward value creation.
We have been taught that competition "is" many actors trying to do exactly the same thing, which "forces" them to outdo each other. But it is a simplification that gets very close to being a lie.
The reason is that the competitive pressure that makes a business continue to innovate and even reinvent itself is not that there "are others." What matters is that others may beat them in the future. This is more than hairsplitting.
Consider a runner who is so fast that nobody in that sport can beat her/him. Does that mean s/he stops training or just works to maintain that skill? No. Because there is no guarantee that others, who have trained differently and developed a new set of skills, won't enter. So to stay on top, the runner needs to continue to get better. For business, it is more difficult, since those who judge the outcome -- consumers -- might change their minds and develop new wants.
The same thing holds true though, it is not enough to "simply" beat the existing competition, because there may be new entrants with innovations that undermine the value of your offering. And competitors may reinvent themselves to do the same.
True competition, which any business needs to deal with, is the possibility of better offerings in the future.
More importantly: this pressure exists regardless of how many are currently producing a certain good. Competitors in the flip phone market were not disrupted by a better/cheaper flip phone, but a different type of device: the smart phone.
In other words, what really matters is the value proposition, how well one satisfies consumers -- not the number of competitors in the present market.
While firms in the existing market try to keep prices lower and quality higher than the existing competition, and try to position their offering with respect to competitors' similar offering, this "dance" is not what creates value. Innovative, imaginative, entrepreneurship is what facilitates value for consumers and creates, reshapes, and destroys industries.
In other words, all that is needed for a competitive product offering is *one* producer -- as long as others are not hindered from entering. There is this mistaken belief that what matters to consumers is the number of firms already busy producing a good, preferably almost the same good, which has made us think of competition not in terms of entrepreneurship but "how many." It often is true that more firms competing for limited demand will therefore engage in innovation, but it is not the fact that there are other firms that benefits consumers--it is the innovation.
And what drives innovation is the pursuit of future profitability. You can have a market with hundreds of similar firms producing, which is disrupted by one innovative entrepreneur, and that one entrepreneur is much more important than any of the hundreds of competitors.
The entrepreneur creates the valued new offering that satisfies consumers; s/he destroys the old by creating the new. That's what matters, not the number of firms.
Formatted from Twitter @PerBylund
The Federal Reserve, through its president Jerome Powell, has indicated that it is preparing to increase its balance “organically”. The effort to separate this latest monetary policy change of course from a full-blown new QE (quantitative easing) is, at the very least, amusing. If we look at what is being discussed, it has nothing to do with organic expansion and looks a lot like a new repurchase program.
Why has this announcement not affected the US dollar? The DXY Index is almost at highs of 99.02 at the close of this article. The main reason is that the dollar is appreciating not because the monetary policy of the Federal Reserve is hawkish, but because the central banks of other economies are much more reckless. The US dollar seems to strengthen as a safe-haven currency against other countries’ larger and worse financial repression actions. As such, the US dollar, gold and silver act as the best stores of value into a global slowdown where tother countries implement worse monetary policies as well as negative nominal rates.
The repo market crisis shows something that we have mentioned in this column several times. Central banks have created a monetary tsunami and thought they could manage the magnitude of the waves. The need to inject more than 270 billion US dollars into the short-term money market teaches us that liquidity is much lower than the Federal Reserve estimated and the agents’ debt much greater. If this happens in a dynamic economy and financial sector like the US and with huge liquidity providers, imagine when it happens in Europe, where those mechanisms do not exist with the scale of the US counterparts.
What the Fed proposes has very little to do with organic expansion. The Quantitative Easing programs repurchased between 60 to 85 billion dollars in assets per month. If we look at the organic growth of the Federal Reserve balance sheet prior to quantitative easing, it barely reached 3 billion dollars in a month. The Federal Reserve is discussing between 200 and 300 billion per quarter. That is not organic expansion but it is neither the type of measure that would trigger a surge in risk appetite from financial agents. So it is quite a lot more than organic expansion and also a lot less than what beta-chasing investors may require to keep their negative dollar carry-trade on cyclical assets.
This is a measure that will not satisfy those who need more excess liquidity and more stimuli to continue playing against the dollar but, at the same time, it further distances the Federal Reserve from normalization. If we assume the figures mentioned in different sources, the Federal Reserve balance sheet is unlikely to go below 25% of GDP in the next years.
The average investor may find contradictory messages in the Fed statements. Powell confirms that the economy is growing at a good pace, that unemployment is at the lowest level in 50 years and that core inflation remains above the Federal Reserve threshold, yet they also tell us that they have to cut rates and expand the balance sheet. Something does not match, and the explanation may lie in the need to keep an excessively leveraged market afloat and prevent the chain of bubbles in financial assets from bursting.
To me, these apparent contradictions in communication mean that the Federal Reserve is looking to prevent a financial asset meltdown while at the same time trying to avoid a higher concentration of risk. It may be, again, trying to manage the waves in the tsunami.
Originally published at DLacalle.com
Recently, the BBC produced a radio series on "50 Things That Made the Modern Economy". One episode focused on the economics of prohibition, crediting the work of Mark Thornton's Economics of Prohibition for helping write the script for the show.
The episode is available here.
Dr. Thornton's book is available here.
(Thanks to Bob Broadfoot for letting us know!)
Now that Greece’s bailout program has ended, what are the prospects for economic growth and development in Greece? These two definitions are different, as economic growth is the increase of income while economic development includes factors as increased schooling, life expectancy etc. However, economic growth is mandatory for economic development. There are many theories in the international literature about economic growth. The fundamental theory is Robert Solow’s that combines two variables — capital and labor — but there are many other such as the theories of Romer and Lucas which focus on human capital and innovation. I am going to examine investment, savings and labor as variables of economic growth in Greece scrutinizing data of Greece from the latest years before I reach a conclusion.
Greece has made numerous efforts to attract foreign investment. While the benefits of foreign direct investment are controversial, as they depend on the kind of investment, this effort seems not to have had significant results in Greece. The first graph depicts the foreign direct investment per year. The straight line shows the trend of foreign direct investment that is almost a horizontal line, there is no sizable increase.
The second graph shows the Foreign Direct Investment as a percentage of GDP from the World Bank. Over the last two years, the FDI does not exceed 2% of GDP:
From my point of view, there are three main factors that have led to this failure. First, it is worth mentioning that Greece has the fifth-highest corporate tax rate in Europe (29%). This reduces the profit margin of a potential investor. It is 5.7 percentage points higher than corporate tax rate in Euro area (23.3%) while the rate of the neighboring countries is on average 14.2%.
Another drawback is the public bureaucracy. It is a problem that governments have tried to solve in recent decades, but little has been done. In any case, the facilitation of potential investors is crucial in order to attract investments.
Finally, political instability undermine investment and growth. The World Bank provides data from which an index has been created that depicts political stability. 2.5 points of the index indicates strength political stability and -2.5 points indicates political instability. The picture below proves the political instability of Greece.
Savings are vital in economic growth according to economic theory as an increase in savings increases the capital stock which is one of the two variables in Solow’s model. A simple way to understand the importance of savings is that someone’s saving could be someone else’s funds for investment. Financial institutions play the role of closing the gap between them. The following graph depicts the savings in Greece per year. Domestic savings have been reduced from 2008 to date dramatically due to consumption needs as Greeks’ income has decreased.
This reduction has a negative effect on economic growth and it is a necessity the savings start to increase again.
The last variable we'll examine is labor. Labor force participation has decreased over the last ten years. An explanation behind this may be the frustration that unemployed citizens feel from the high unemployment rate that the Hellenic Statistical Authority has approximately calculated at 19.9%. This increased by 12.1 percentage points from 2008. But the quantity of the labor force is not the only important factor. One must also consider the quality.
Unfortunately, the quality of workers may be getting worse: approximately 400.000 Greeks have emigrated the last eight years in order to work abroad, the majority of them not only graduates of universities but also holders of a master’s degree. This brain drain has a huge impact on economic growth as affects productivity and innovation, both significant for economic growth. There are many factors that affect productivity but surely education is one of them. Also, according with the European Commission, the innovation performance of Greece from 2010 to 2017 has decreased by 0.9% and Greece is considered as modest innovator. Needless to say, it is the same period that brain drain was more intense. The next graph depicts the trend of labor force participation rate.
Greece still faces many headwinds. Investments have not increased sufficiently, savings are going down, and the labor force is not only reduced compared to previous years, but highly educated Greeks have emigrated. Taking everything into consideration, it seems that Greece will have to change course to improve capital stock (via investment and savings), and labor, in order to achieve higher levels of productivity and actual production. Both are key in improving economic growth — and thus the Greek standard of living.
As hard as it is to believe after the 2016 election, attempts to bend, fold, spindle and mutilate public opinion have become even more intense and partisan since. Attacks, accusations, misrepresentations, leaks, innuendo, “gotcha” questions, ad hominem attacks and more follow one another on an accelerating merry-go-round of political abuse.
While many decry this overheated partisanship, few have analyzed the issue better than James Fenimore Cooper, in The American Democrat, an 1838 primer on Americans’ political responsibilities, written in reaction to the political excesses of his era.
America’s first great writer recognized that “in a democracy, the delusion that would elsewhere be poured into the ears of the prince is poured into those of the people.” He also saw that citizens needed the vigilance to see through those delusions, to maintain a democracy that did not eviscerate liberty: “The elector who gives his vote, on any grounds, party or personal, to an unworthy candidate, violates a sacred public duty, and is unfit to be a freeman.” As we wade through the mountain of muck that is accumulating in anticipation of the 2020 election, Cooper’s analysis appears very prescient:
- In a democracy, as a matter of course, every effort is made to seize upon and create public opinion, which is, substantially, securing power.
- Failing of the means of obtaining power more honestly, the fraudulent and ambitious find a motive to mislead, and even to corrupt the common sentiment, to attain their ends. This is the greatest and most pervading danger of all large democracies...We see the effects of this baneful influence in the openness and audacity with which men avow improper motives and improper acts, trusting to find support in a popular feeling.
- The people are peculiarly exposed to become the dupes of demagogues and political schemers, most of the crimes of democracies arising from the faults and designs of men of this character.
- Party misleads the public mind.
- Opinion can be so perverted as to cause the false to seem to be true; the enemy, a friend, and the friend, an enemy; the best interests of a nation to appear insignificant, and trifles of moment; in a word, the right the wrong and the wrong the right.
- Party, by feeding the passions and exciting personal interests, overshadows truth, justice, patriotism and every other public virtue…by putting unworthy motives in the place of reason.
- Party feeling...induces men to adopt in gross, the prejudices, notions and judgments of the particular faction to which they belong, often without examination, and generally without candor.
- Thus it is we see half the nation extolling those that the other half condemns, and condemning those that the other half extols. Both cannot be right, and as passions, interests and prejudices are enlisted on such occasions, it would be nearer the truth to say both are wrong.
- The discipline and organization of party are…putting managers in the place of the people.
- When party rules, the people do not rule, but merely such a portion of the people as can manage to get control of party.
- Party pledges the representative...right or wrong, when the institutions intend that he shall be pledged only to justice, expediency and the right, under the restrictions of the constitution.
- No freeman who really loves liberty...will ever become a mere party man...it will be his earnest endeavor to hold himself a free agent, and most of all keep his mind untrammeled by the prejudices, frauds, and tyranny of factions.
Given how many Americans are now acting as if they were mere “party men,” Cooper’s warnings against putting party before serious thought were never more necessary. Unfortunately, those who most need to heed it show little inclination of doing so.
On September 24, the Supreme Court of the United Kingdom (UKSC) has declared the Prime Minister Johnson’s move to prorogued Parliament from the September 9 or 12 to October 14 was unlawful and that Parliament was not prorogued (2019 UKSC 41). An article on the Mises Wire (Ryan McMaken on 09/24/2019) has commented on this ruling, describing it as a ‘move of the UK’s political class designed to postpone Brexit yet again’. The article is asserts that ‘democracy is only allowed when the regime likes the outcome’.
There are certainly some valid arguments in this article. However, it is my position that the merits of the Court’s decision prevail.
The Brexit Referendum
The previous article has stated that, while the UKSC has not ruled on Brexit per se, in context it is an attempt to postpone Brexit. This may be true. The court proceedings have been initiated by an activist with a pro-European attitude, although her arguments have consistently been based on holding the executive accountable to the Parliament (see also 2017 UKSC 5). But the very recent context of power struggles within both the British Parliament and the British Conservative Party to which, I assume, Mr. McMaken refers, conceals the origin of these struggles. The question asked in the Brexit referendum was:
"Should the United Kingdom remain a member of the European Union or leave the European Union?"
51.89 % voted Leave, 48.11% voted remain. There are no further implications on the nature of the future relation with the EU or the withdrawal process. The Members of Parliament (MPs) have since then been split up into actual Remainers, MPs in favor of leaving with an agreement, MPs in favor of leaving without agreement (the so-called No Deal) and some positions in between.
Parliament has enacted the European Union (Withdrawal) Act 2018 defining an exit day, although with the possibility to extend, and requiring Parliament to approve any withdrawal agreement. As the agreement reached by then PM Theresa May was rejected, the exit day was postponed. The current position is that the UK will leave on October 31 with or without agreement, although since very recently, the European Union (Withdrawal) (No 2) Act 2019 requires the PM to seek a further extension if the Parliament does not consent to either an agreement or to no agreement.
While the political situation is therefore complicated, one thing remains clear: Parliament must have a say in the Brexit procedures. The government can negotiate with the EU, but it must be held accountable to the people’s representatives. It has no unlimited mandate.
The Court’s Ruling on the Prorogation
Prorogation ends a parliamentary session. During prorogation, the government can still exercise its powers, but Parliament may not meet, debate, pass any bills, debate Government policies, or ask questions to Ministers (2019 UKSC 41, §2). As such, prorogation prevents ministerial accountability to Parliament during the period of prorogation (2019 UKSC 41, §33).
Prorogation cannot be compared to a recess, which is voted upon in the House. Prorogation is a prerogative power. The Crown, advised by the Government, declares it. The Crown is obliged to accept the PM’s advice, which places constitutional responsibility on the PM as the only person with the de facto power to prorogue Parliament (2019 UKSC 41, §30).
While prorogation is a normal procedure, it is obvious that there must be a legal limit to prevent a completely unaccountable government. The UKSC has set the legal limit to the point when prorogation frustrates Parliament’s legislative and supervisory functions (2019 UKSC 41, §51).
The UKSC decided that the PM’s move to prorogue for around five weeks crossed this limit. The summer recess ended on September 3. Usually, Parliament would go into recess for around three weeks between September and October to allow for the party conferences. Then, the next session would have started with the Queen’s Speech which is prepared during prorogation. Normally, this takes six to seven days (2019 UKSC 41, §59). However, right now is not business as usual. The exit day and the preparations leading up to it are crucial for the future of the country, and, as outlined, there are multiple positions clashing. In fact, the majority of the House is opposed to the No Deal scenario (2019 UKSC 41, §53). Parliament could have decided to skip recess. Even if they agree to go into conference recess, they will retain their supervisory function. A prorogation of five weeks is unprecedented and creates a long time period just before the exit day where the government cannot be held accountable by Parliament. Above that, the Court found that the government did not provide reasonable justification for this unusually long time period. The government gave the impression that recess and prorogation are ‘much the same’ (2019 UKSC 41, §60). The motives of the PM did not matter to the Court. The length of the prorogation was not justified and frustrated the legislative and supervisory functions of Parliament.
The Merits of this Ruling
In his column, Mr. McMaken has brought several arguments relating to the politically charged situation in the UK. He criticized Parliament for preventing new elections, suggesting that they follow a party-political agenda and fear that Boris Johnson would win a majority in the next elections. He also asserted that only votes that help the pro-European position are allowed. Both statements might be true, and he has presented some cases to support them. But I suggest here that we should not let the noise around partisan power struggles conceal the facts. The PM has tried to create an unprecedented time where the government is not held accountable by Parliament. This is quite a drastic step, especially given the fact that the UK government is elected by Parliament. The government is only in office because it has the Parliament’s support. And we should also consider another fact: the Brexit referendum has only expressed the people’s will to leave the EU. There are still competing positions on the withdrawal agreement and procedure, even within the same party. It is the task of the Parliament to take those various interests into account.
Finally, I would like to defend the Court’s decision in view of one last statement which Mr. McMaken made: that democracy is only tolerated if it leads to the outcome preferred by the ruling class. This problem has been known before. J.S. Mill wrote that ‘the power of the people over themselves’ is often misinterpreted:
"The 'people' who exercise the power are not always the same people with those over whom it is exercised; and the "self-government" spoken of is not the government of each by himself, but of each by all the rest." (J.S. Mill, On Liberty, Ch. 1).
The majority might therefore try to oppress a minority to pursue their own interest. Mill already noted that the majority are not necessarily the most numerous people supporting a position, but it could also be those who made themselves accepted as majority. He therefore concludes that
"The limitation, therefore, of the power of government over individuals, loses none of its importance when the holders of power are regularly accountable to the community, that is, to the strongest party therein." (J.S. Mill, On Liberty, Ch. 1).
The "ruling class," or the majority, might prefer certain outcomes. But to prevent a tyranny of the ruling class, the government needs to be limited in its power. With its decision, the UKSC has prevented the government from creating an unusually long period at a crucial time where it would not have been accountable to all the People’s representative. The court procedures might have been initiated for purely partisan motives. The decision might be in favor of what is perceived a pro-European class. But it has prevented that a small group of people enforces whatever agreement they reach on all citizens of the UK.
You don’t need to be a supporter of President Trump to be concerned about the efforts to remove him from office. Last week House Speaker Nancy Pelosi announced impeachment proceedings against the President over a phone call made to the President of Ukraine. According to the White House record of the call, the President asked his Ukrainian counterpart to look into whether there is any evidence of Ukrainian meddling in the 2016 election and then mentioned that a lot of people were talking about how former US Vice President Joe Biden stopped the prosecution of his son who was under investigation for corruption in Ukraine.
Democrats, who spent more than two years convinced that “Russiagate” would enable them to remove Trump from office only to have their hopes dashed by the Mueller Report, now believe they have their smoking gun in this phone call.
It this about politics? Yes. But there may be more to it than that.
It may appear that the Democratic Party, furious over Hillary Clinton’s 2016 loss, is the driving force behind this ongoing attempt to remove Donald Trump from office, but at every turn we see the fingerprints of the CIA and its allies in the US deep state.
In August 2016, a former acting director of the CIA, Mike Morell, wrote an extraordinary article in the New York Times accusing Donald Trump of being an “agent of the Russian Federation.” Morell was clearly using his intelligence career as a way of bolstering his claim that Trump was a Russian spy – after all, the CIA should know such a thing! But the claim was a lie.
Former CIA director John Brennan accused President Trump of “treason” and of “being in the pocket of Putin” for meeting with the Russian president in Helsinki and accepting his word that Russia did not meddle in the US election. To this day there has yet to be any evidence presented that the Russian government did interfere. Brennan openly called on “patriotic” Republicans to act against this “traitor.”
Brennan and his deep state counterparts James Comey at the FBI and former Director of National Intelligence James Clapper launched an operation, using what we now know is the fake Steele dossier, to spy on the Trump presidential campaign and even attempt to entrap Trump campaign employees.
Notice a pattern here?
Now we hear that the latest trigger for impeachment is a CIA officer assigned to the White House who filed a “whistleblower” complaint against the president over something he heard from someone else that the president said in the Ukraine phone call.
Shockingly, according to multiple press reports the rules for CIA whistleblowing were recently changed, dropping the requirement that the whistleblower have direct, first-hand knowledge of the wrongdoing. Just before this complaint was filed, the rule-change allowed hearsay or second-hand information to be accepted. That seems strange.
As it turns out, the CIA “whistleblower” lurking around the White House got the important things wrong, as there was no quid pro quo discussed and there was no actual request to investigate Biden or his son.
The Democrats have suddenly come out in praise of whistleblowers – well not exactly. Pelosi still wants to prosecute actual whistleblower Ed Snowden. But she’s singing the praises of this fake CIA “whistleblower.”
Senate Minority Leader Chuck Schumer once warned Trump that if “you take on the intelligence community, they have six ways from Sunday at getting back at you.” It’s hard not to ask whether this is a genuine impeachment effort…or a CIA coup!