23 May 2013
Since when are there riots in Stockholm? Who could even imagine social unrest in Sweden, that classic example of successful welfare state socialism? Sweden the exemplar of progressive social policies? And then there is the old joke that America is the second most Americanized country in the world — after Sweden. What’s going on? What went wrong? Is the dream of the Scandinavian welfare state unraveling?
No one is innocent in this shocking episode, neither Sweden, nor the immigrant communities that have increasingly come to Sweden, taking advantage of its generous social welfare benefits and its open immigration policy.
Sweden’s self-image as a progressive society has led to its opening its doors to increasing numbers of immigrants and refugees, and Swedish society is in the process of being transformed as it attempts to assimilate these immigrants, who increasingly come from a profoundly different social, cultural, and ethnic context.
In the Wikipedia article Demographics of Sweden we read:
“According to Eurostat, in 2010, there were 1.33 million foreign-born residents in Sweden, corresponding to 14.3% of the total population. Of these, 859,000 (9.2%) were born outside the EU and 477,000 (5.1%) were born in another EU Member State.”
In other words, almost ten per cent of Sweden’s population comes from outside Europe. Ten per cent is enough of a population to make a real difference, especially if this ten per cent identifies with a different social, cultural, or ethnic tradition than that of its host country.
And again from Wikipedia:
The fastest growing groups of foreign-born residents in Sweden between 2011 and 2012 were the following nationalities:
Bosnia and Herzegovina (+2,458)
The issue of Muslim immigration into Europe has been discussed extensively, and usually in a highly politicized context. Muslim immigrants complain of discrimination while doing little to assimilate, while Europeans have expectations of immigrant assimilation while doing little to accommodate the profoundly different culture they have received into their midst.
So, it’s time for some blunt talk. State structures in the Middle East, where many Muslim immigrants originate, have always been weak. The institution of the nation-state has been imposed on the region by the international system, although it resonates but little with the peoples (i.e., the nations) whose interests these nation-state putatively represent. That is one reason (among many) that the region is torn by violence: state regimes in the region lack intrinsic legitimacy, so they cannot enforce an internal security regime.
The lack of a viable state or national identity in the Middle East has been compensated for by a strong sectarian identity. Muslims see themselves as part of the global Ummah, the global community of Muslims, and identify with this community more than their putative political community. When Muslims immigrate to Europe, they continue to identify with the Ummah and not with the nation-state to which they immigrate — just as they did at home.
The Europeans, on the other side, made it easy for immigrant peoples to retain their traditional identities rather than to attempt to assume a new social identity. For my American readers, it may perhaps be worth mentioning that Europe does not assimilate immigrants in the same way that the US does.
For all the US problems with immigration and social identity, it is virtually effortless to become an American. If you arrive in the US from another country, the day you step off the airplane you are a Swedish-American or a Somali-American or an Armenian-American, and so on. All you have to do is to speak English and call yourself a such-and-such-American, and it becomes true as soon as you say it. This is the ultimate political performative language (to borrow a term from J. L. Austin).
It is not so easy to become a European. In fact, it is almost impossible to become a European. If I were to move to Italy tomorrow, and stay there for the next thirty years (if I should live so long), at the end of thirty years I would still be an American living in Italy. I would not be an American-Italian. One cannot simply assume European identity in the way one can seamlessly assume and assert American identity.
We have already seen the results of these European-Muslim immigrant tensions in the riots in Paris and London. Now these tensions have reached as far north as Sweden. The same tensions exist in Sweden despite the efforts of the Swedes and their government to be tolerant, and this is partly the result of pure numbers: neither France nor the UK have an immigrant population of ten per cent from outside Europe, and if they did the problem would be even worse. It is probably more difficult to “become” a Frenchman or an Englishman than to be accepted as a Swede.
In the Financial Times article, Swedish riots spark soul-searching on immigration, we read the following:
The big problem in a suburb such as Husby, where immigrants represent about 80 per cent of the population, is unemployment, particularly among the young. Swedish youth unemployment stands at 25.1 per cent, about triple the level of overall joblessness. And much of that youth unemployment is concentrated among immigrants from countries such as Iraq, Afghanistan or Syria. “Sweden isn’t that different to other countries when it comes to problems of integration in larger cities where we have these suburbs with a lot of unemployment,” says Per Adman, an associate professor at Uppsala university. He points out that the media often refers to “unemployed young men” without specifying that they are predominantly immigrants.
It can be interpreted as an attempt to studiously avoid racial profiling to refuse to specify the differences within statistics between native-born Swedes and immigrants, and we often find this in the US media and police reports, in which one has to read between the lines to try to understand what is really going on. This is a strategy of tolerance that probably has limits. In so far as a democratic country relies on public education and accurate media reports for intelligent public policy discussion, even the best intended efforts to avoid the stigmatization of immigrants can result in false information and false public impressions that leads to a failure to engage with the problem as it is.
And it continues. After a fourth night of rioting, the BBC in Stockholm restaurant torched as riots spread reported:
Stockholm police spokesman Kjell Lindgren said the rioters were a “mixture of every kind of people”.
When does promoting the illusion of integration (such as citing a mixture of “every kind of people” involved in a riot in a neighborhood that is eighty per cent immigrant) contribute to the formation of a mendacious society that makes things worse instead of better? And one cannot appeal to a status quo to be restored, maintained, or achieved. Demographics tells us that populations change over time, and either you find a way to manage the change, or you succumb to chaos and social disintegration.
Riots in one of the most stable and tolerant societies on the planet is an unambiguous sign of social disintegration, though in the name of integration it will be called anything but this.
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Since writing the above yesterday the Swedish Minister for Integration, Erik Ullenhag, has issued an official statement about the rioting in stockholm, Minister for Integration Erik Ullenhag comments on the unrest in some Stockholm suburbs, which is interesting in several respect. The statement in its entirety is copied below.
Society must make it clear that it is never acceptable to burn cars or throw stones at the police. The people of Husby want a society where the rule of law prevails, they want to be able to feel safe and secure. We must remember, the cars that are burning do not belong to people who live in the centre of Stockholm, they belong to people who live in Husby.
In the short term, this is a matter for the police. In the long term, it is a matter of making a change for the better where people live, so that more children and young people can successfully complete school and more people get jobs.
What we are seeing are extreme, unusual events. But we need to be absolutely clear about one thing: we can never accept violence. Violence has a negative impact on social segregation. We know there is discrimination based on where people live, and these events do not improve the image of these residential areas, where there are plenty of positive things going on too. At the end of the day, what this is all about is that we must create a positive belief in the future in areas at risk.
And one positive thing is that civil society has taken to the streets. That adults in the community are helping to calm down the situation in these areas. The Government is not actively involved right now – this is a matter for the law enforcement authorities. But we are taking long-term action, for example by taking measures to increase the visible police presence.
This is a small group of individuals. They are young boys and men who are not representing the 15 percent of foreign born living in Sweden today. Several of them are known by the police and some of them don´t even live in the area where they now burn cars.
Swedish integration policy is now focusing on jobs and education. We can see that school results in some of these areas are bad. But we can also see that we have schools in these areas where the kids are working very hard and doing extremely well.
The minister here asserts that “The people of Husby want a society where the rule of law prevails,” but the problem here is that when the minister speaks of the “rule of law” he means the territorial principle in law which is now nearly universally adopted by nation-states, whereas the Muslim immigrants, is so far as they see their identity in terms of the global Muslim community, the Ummah, does not look to the state as a source of law, but to the traditional law associated with this identity, which is Sharia. In so far as those who understand their political identity in terms of the Ummah, distributed across many different nation-states, and in so far as they look to Sharia as the law of the Ummah, they implicitly understand the “rule of law” as the personal principle in law, i.e., that an individual be judged according to the law of their ethnic or sectarian community, and not in terms of a geographically defined nation-state. So while political representatives can use glittering generalities like “the rule of law” and “civil society,” they do not necessarily mean the same things when they use the same words.
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15 June 2012
There is a famous song by The Beatles that begins, “I read the news today, Oh boy.” This is what I felt like when I looked at today’s Financial Times (since I am still a newspaper reader, despite the declining position of the papers today). The Old World once again appears to be coming apart at the seams. All around the Mediterranean basin, throughout the region where once reigned the Roman Empire, there is turmoil: the Eurozone economic crisis playing out in Greece, Italy, and Spain, the Egyptian military canceling the election results, and civil war in Syria.
The failures in Europe and the failures in the Arab world will certainly interact in unpredictable ways. What remains to be seen — unlikely though possible — is whether these failures escalate each other and result in a complex catastrophic failure of the complex system that is the Old World. Will European economic failure mean that peoples from the Arab world will no longer seek to migrate to Europe, or will it mean that Europe’s weakness will create the conditions allowing a greater transfer of population? This is a complex question, and only time can tell what direction events will take.
When the Eurozone was created there were predictable but also believable claims made on its behalf that it would surpass the US as an integrated economic zone. Now we know that this is not going to happen. The next few years and decades will see countless analyses of what went wrong with the Eurozone. There will be more than one diagnosis, and ongoing events in Europe will continue to churn the mix, turning up further interpretations.
What lies ahead for Europe? Will Europe have a “lost decade” such as Japan experienced, or more than a decade? Again, only time will tell, but there are some general observations that can be made. The future of European development will exemplify regionalism rather than continental integration. I have suggested that a new economic zone in Northern Europe, a modern analogue of the Hanseatic League, might be more successful as an economic bloc. Even if nothing so ambitious is tried again, and there is no Hansa to replace the Euro, the economics of Northern Europe are likely do much better than those of the south. All one needs to do is to look at their economies today to see that they are set for future development, while much of Southern Europe is set for stagnation.
It took a decade for the Euro to reveal its fatal weaknesses. It took a year for the Arab Spring to reveal its weaknesses. It would be easy to be cynical about what has been accomplished, or what was not accomplished, by the protests throughout North Africa, the Levant, and the Persian Gulf, but we should not abandon our hope so quickly.
The Arab peoples have been living under perversely repressive regimes for decades, and in some cases for centuries. Such stagnancy from retrograde regimes cannot be shaken off in a year. We should understand the Arab Spring, whatever its successes or failures, as one of those periodic uprisings that mark societies struggling to free themselves. There will be further unrest, and more Arab Springs to come in the future.
Denis Diderot, committed as he was to the extirpation of the old order in the Old World, notoriously said, “Men will never be free until the last king is strangled with the entrails of the last priest.” This was never more true than it is today, although today we ought to say, “Man will never be free until the last Sheik is strangled with the entrails of the last Mullah.”
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17 May 2012
“Bigger issue now is, what does the US do with its western flank in an era most believe to be defined by the rise of Asia?”
Since my post about the European economy suggested a kind of European regionalism, I immediately began to think of the regionalism that I had described in a global context, i.e., I began to think in terms of global regionalism, and I realized that this would be a fruitful geopolitical perspective.
It is of the essence of geopolitics and geostrategy to think of social, economic, political, diplomatic, and military milieux in terms of their geographical distribution. That these generic strategic trends in human history are not equally distributed, and that the physical topography of the globe has a direct impact upon their distribution, shapes the world in which we live — the possibilities, the opportunities and the constraints.
A region is geographically defined, but not defined by nation-states. This distinction is important, because in the contemporary international system, the power is vested in nation-states. However, it must be observed that it has been primarily economic, military, and diplomatic power that have been vested in nation-states. Social, religious, and intellectual power have been attracted to the locus of economic, military, and diplomatic power of the nation-state, but the non-state structure of social, religious, and intellectual power has never been entirely eclipsed by the nation-state.
In the Islamic world, for example, the idea of the Ummah — the global Muslim community — is an important idea, and not a mere abstraction. The Ummah defines a region that is not a nation-state, just as do Catholicism, capitalism, and petrochemical producers.
In the past, all regionalism was bioregionalism. A people’s way of life followed from the biome and the particular ecosystem in which they lived. Prior to the industrial revolution, the food that you ate, the clothes that you wore, the buildings in which you lived and worked, and the work that you did was all a function of your ecological situation. Since much of the language that one uses on a daily basis is derived from one’s food, clothing, shelter, and work, and the concepts embodied in language express these ideas, the greater part of our intellectual life also reflected bioregionalism. (This has been a theme I have urged since I started writing this blog.)
With the Industrial Revolution this strong sense of regionalism was compromised once it become routine to import foodstuffs, clothing, building materials, and even forms of work that had not previously existed, or existed in the form that they came to have under industrialization. However, new and abstract forms of region began to supplement the declining strong forms of regionalism that once so completely defined life. Thus industrialization has changed regionalism, but has not eliminated regionalism. This is significant.
In the early part of the twentieth century many of the most advanced thinkers of the time seized upon internationalism as the direction in which the world was headed — what I would call the dominant strategic trend. A part of this intellectual fashion for internationalism was due to Marxism, which was always international in conception and ambition — communism was frequently called “international communism” in order to focus attention on it as a global movement, the communist anthem was called the “Internationale,” and the gatherings of the International Workingmen’s Association (IWA) were called “Internationals” — but not all of this fashion for internationalism can be attributed to communism.
Many major thinkers who were in no sense Marxists consistently thought and expressed themselves in internationalist terms. Bertrand Russell is a good example of this. For Russell and many others, the obvious telos and rationalization of the de facto global political order could be nothing other than internationalism. This may sound a bit odd to my readers in the US, as internationalism never had much of a following in the US, where popular sentiment has often demonized the United Nations and other internationalist movements and organizations. And yet we did experience the international style in modern architecture, and a variety of related international movements made themselves felt in the US no less than in Europe.
But internationalism faltered under repeated blows to the international system throughout the second half of the twentieth century, not least the Cold War that divided the international system into two systems, at war with each other, and contesting their mutual periphery.
The global village that was once imagined as the consequence of universal telecommunications technology and a rapid global transportation network has not come to pass, any more than the “melting pot” model of diversity, which latter has since been replaced by the “tossed salad” model. Instead, the global village has become a place of its own, the region of cyberspace, which touches upon physical space at millions of points of contact, even while remaining distinct. We could map cyberspace onto physical space, or physical space onto cyberspace, but in each case the map is not the territory and the two spaces cannot be shown to be identical.
Internationalism, then, did not happen, or, at very least, did not happen as it was expected to happen. Instead, the growing complexity of the world facilitated the emergence of ever more forms of regionalism. Some have read in these tea leaves the perennial nature of the nation-state, but this is a delusion arising from limited imagination. The ultimate dissolution of the nation-state will come about not as a result of internationalism, but rather from a flourishing regionalism that subdivides nation-states like the inheritance of traditional estates when not checked by a custom of primogeniture. But this will not happen for a long time yet. Other trends must play themselves out for hundreds of years yet before the nation-state is a mere historical curiosity.
The structural forces in the world, then, that create and sustain regionalism are themselves important strategic trends that must be recognized. But that is not all. Above and beyond particular regionalisms there is regionalism itself as a force in world history. And we must even go beyond the understanding of regionalism as a strategic trend of the global system that facilitates other strategic trends. This is not at all wrong, but it is too limited. We must learn to understand regionalism on its own account, both driving other developments even as it in turn is driven by anterior developments.
Let us consider, very briefly, some of the major strategic trends of our time, and we will see that they are strongly regional trends:
● The Decline of Europe By “the decline of Europe” I do not mean the relative decline of European economic importance due to the increasing economic activity of other regions of the world, but the decline of the European idea as a force in world affairs. Europe has not only retreated from the apotheosis of its 19th century colonialism, it has turned against itself and its traditions and has adopted an attitude of atonement, frequently expressed in the form of foreign aid. Part of this attitude of atonement is also expressed by the liberal immigration quotas that has led to the rise of Eurabia. Europe is facilitating the disappearance of its own unique tradition.
● The Rise of Asia As with the decline of Europe, so too with the rise of Asia: this is partly about improving economic performance and industrialization, but it is just as much about the confidence of Asian peoples to assert themselves in the world as the Europeans once asserted themselves, and to do so they have borrowed heavily from the intellectual resources of the European tradition even while distancing themselves from that tradition. Colonialism and neo-colonialism are condemned, while quasi-colonial activity (like China’s growing role in Africa) is called anything but colonialism. More importantly, this is done with a clear conscience, as was also the case during Europe’s period of colonial expansion.
● The Stability of US Power Despite a great deal of declensionist talk that I have discussed in other posts (especially my recent From American Exceptionalism to American Declensionism), the American economy will remain the largest in the world for some time, and even after China’s economy becomes the largest in the world in terms of absolute numbers, the US economy will have the greatest productivity of any economy on the planet for an even longer period of time. The springs of ambition and invention have by no means peaked in the US, and we can expect the American people to continue to assert themselves aggressively in world affairs has has been the case since the end of the Second World War.
These three strategic trends together necessarily mean another strategic trend:
● The Shift from an Atlantic center to a Pacific center I have discussed the decline of Atlanticism and the possibility of a Pacific-centered world order in other posts. With the stability of US power as the fulcrum, the center of world affairs will slowly shift from the Atlantic, dominated by a declining Europe, to the Pacific, dominated by the rising Asia. I emphasize here that this shift will be slow and gradual.
The shift from an Atlantic-centered world to a Pacific-centered world will be a consequence of the decline of Europe and the rise of Asia, and thus this shift will not be consolidated until these developments are mature. In other words, the 21st century will not be the Pacific Century, but rather the century of the fluid periphery (see below), one of the developments of which will mean the shift to a Pacific-centered world order. It will be the 22nd century that will be the Pacific Century. So you see that when I say that this shift will be slow and gradual, I am talking on the order of centuries, not years or decades.
The shifting world center from the Atlantic to the Pacific is but one aspect another another major strategic trend that will be expressed in many different forms, and this is:
● The Fluidity of the Periphery The fluidity of the periphery will be expressed in a variety of distinct movements and changes, but the very fact that the periphery of the mature and established de facto global political order will be fluid is significant. In the past, the periphery was not fluid, but static. Nothing happened in the periphery, which was one reason that Ovid so lamented his exile to Tomis (now Constanţa, Romania) on the Black Sea. The periphery was once the edge of civilization, dominated by stalled technologies. In the future, more things will happen, and more history will be played out, on the periphery than in the center. The fluidity of the periphery will involve, but will not be limited to, the following:
* Atlantic to Pacific Shift The fluidity of the periphery will include the above-mentioned strategic shift from the Atlantic to the Pacific, but this shift will occur on such a time scale that it would be unnoticeable to most living through the shift except that we will know to watch for it. This will be a macro-temporal revolution in world history, and as such almost invisible to the micro-temporality of individual consciousness.
* Globalization Globalization in turn can be understood by many different labels — it is what I have called the extension of the industrial revolution to those parts of the world that have not yet industrialized; this global economic growth has been called “re-balancing” by Thomas P.M. Barnett; at the same time “re-balancing” might also be called a leveling of the global economic playing field, and this has also been called the global rise of the middle class. More tendentiously, I might call this strategic trend The End of Poverty, for when the gains of global industrialization are consolidated over the next two hundred years, one of the profound developments will be the end of the kind of poverty (made visible by the contrast between rich and power, and made more visible yet by the telecommunications technology that emerged from industrialization) that had typified the human condition since the dawn of agriculture and urbanism.
* Divisions internal to the Periphery Uneven development will more and more mark the fluid periphery, as some nation-states in Latin America and Africa develop rapidly, joining the global economy and catapulting their populations on a new trajectory of development, while other nation-states in Latin America and Africa cannot break out of the failure cycle, continuing to stumble and stagnate while neighboring nation-states pull far ahead of them. These divisions within the periphery will foster instability and tensions, as populations inevitably seek to better their lot by moving from failed and failing states into neighboring successful states.
* Global Divisions The consolidation of the democratization of the Western hemisphere will continue to contrast with non-democratic, non-representative, autocratic regimes throughout the fluid periphery and indeed throughout the Eurasian landmass. While there will be democratic regimes in the Western hemisphere that perpetuate the failure cycle, the slower pace of life that results will constitute a de facto social consensus for a society not to live in the fast lane. By contrast, outside the Western hemisphere, the failure cycle will be exacerbated by non-representative regimes that impose failure upon a restive population. These global divisions will be expressed as geostrategic tensions, which will in turn be expressed as flows between the divisions, and these flows — of populations, of resources, of smuggled contraband, of technology, etc. — will flow through the periphery, further destabilizing regions already destabilized by divisions internal to the periphery.
There are limits to the fluidity of the periphery. Fluidity is constrained by regional stability. Now by “regional stability” I do not mean a part of the world that is political stable (which is how the term is usually used in contemporary discourse) but rather that regional strategic trends that are geographically defined by not embodied in formal institutions. Actually, a distinction could be made between formal and informal regions, but I haven’t thought this through yet, so I will leave this potential distinction to another time. I hope that the reader will see, without further elaboration, that the same structural forces in the global system that create regions are powers that limit the latitude of other regions, sometimes simply by their existence, and other times by actively working against the strategic trend expressed by another region.
So that is my sketch of regionalism and how it will play out at least over the next two hundred years. I hope that even if the reader disagrees with the details of the picture that I have sketched, that you will at least see the power of differently-defined regionalisms in the global system, that this regionalism is a force to be reckoned with, and that regionalism may possibly become the dominant strategic trend, or a dominant strategic trend, over the long-term future.
There is much more to be said regarding regions, and I hope to think more on the matter, now that I have proposed it to myself in this explicit form, but for the time being I will close with the observation that regions are likely to play a larger role in history than either internationalism or nation-states.
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14 May 2012
There is no question that it is unwise to engage in speculation at a time when events are poised at a moment of decision, but is there any moment that is truly free of historical consequence, when speculation might be a safer and more certain undertaking? I think not. Another time I will attempt to explain why not, which involves a careful consideration of several points in the philosophy of history, but I will leave that particular justification for another time and boldly press forward on the prospects of the Euro and the Eurozone, even as the Greeks continue to have difficulties forming a government after their recent elections, and even as the new president-elect of France, Francois Hollande, has not yet revealed the precise policies that will be implemented in the attempt to make good on his campaign promises assuring growth instead of austerity.
I have several times discussed the nature and difficulties of the Eurozone, first in a trio of posts about the crisis in Greece as it first become evident — The Dubious Benefits of the Eurozone and Will the Eurozone Enact a Greek tragedy? and Can punitive fiscal policy work? — and then in further posts about the Eurozone periphery more generally, beyond Greece — A Return to the Good Old Days, Can collective economic security work? and Poor Cousins. My most frequently read post on the Euro, Shorting the Euro, while still accurate is no longer timely. Since then I wrote What would a rump Eurozone look like?.
The Eurozone is a great economic experiment in the way that the US is a great political experience: both have represented a revolutionary new order while building on past experience. This, if nothing else, makes the Eurozone fascinating. In the categories of my own thought the Eurozone is not quite an intelligent institution since it was constituted with mechanisms for nation-states to enter the Eurozone but no mechanisms for a nation-state to exit the Eurozone. Most culpably of all, the Eurozone was designed without a mechanism for either 1) forcing compliance of member states with its standards, or 2) forcing member states to collectively come to the aid of a failing member state (or, I could also observe, some combination of the two).
If the Eurozone had had either of these two mechanisms — compulsory and enforceable standards, or compulsory wealth transfer from richer to poorer states — the acute problem in Greece at the moment, and the possibly chronic problems in Italy, Spain, Portugal, and Ireland, would present definite options. Without a formal mechanism for resolving the crisis, the financial crisis becomes a political crisis that it did not have to become.
The consensus in the financial press at the present time is that the Franco-German core of the Euro will remain intact, and that Francois Hollande will not set out to enact any radically socialist policies (cf. President Hollande and the IMF) that would doom either France or the Euro to the kind of perpetual economic twilight experienced by the nationalizing likes of Hugo Chavez, Evo Morales, or Cristina Fernandez de Kirchner. Hollande knows well enough on which side France’s bread is buttered, and his campaign rhetoric must be understood as something entirely parallel to the “red meat” speeches given in the US by both Republicans and Democrats during the primary season, only to be dialed back drastically when it comes to the general election.
But matters are altogether different outside the Franco-German core of the Eurozone, as what was once merely whispered is now on the front pages of the newspapers: the likelihood that Greece will leave the Eurozone. (cf. Greece, France and the future of the euro and EU central bankers ponder Greece euro exit) Indeed, today’s Financial Times had Greece on the front page (Fear grows of Greece leaving euro) and the inside pages (Greek exit from eurozone ‘possible’) as well as a new week-long series, “If Greece goes…”
What will the Greeks do if they leave the Eurozone? Will they take to the printing presses and start printing Drachmas until everyone has a satisfying pocketful of money and the economy is driven into hyperinflation and the Greeks impose on themselves the austerity that they were unwilling to accept from the Germans? Since it seems to be universally believed that a bloated public sector and no expectation of paying taxes is a good thing, maybe they will suspend taxes altogether in Greece, and add anyone who likes to the public payroll dole. Not surprisingly, such steps aren’t going to revitalize the Greek economy, promote prosperity, or stoke economic growth.
What Greece does have to offer is an enormous tourist industry, whose beaches and islands and quaint hotels with tavernas around the corner will suddenly become attractive to northern Europeans when they once again because an inexpensive playground, which will happen if Greece exits that Euro and allows a fully floating Drachma that can be bid down on the international currency markets. Of course, tourists hate riots, and they would prefer not to see news stories about pensioners committing suicide in the capital as a protest. A single negative newspaper story can ruin an entire tourist season, and the hotels and restaurants wait and hope that next year will be better.
This may sound cynical, but it is realistic, and as close to true as I cam capable of getting. In actual fact, the reintroduction of the Drachma will necessarily be partial. The very wealthy already hold their assets in financial instruments not directly linked to Greece. Those not truly wealthy, but who have enough assets that they know to protect themselves, will already have their assets (other than real estate) moved out of Greece to the extent that this is possible. For the lower income bracket, the lower prices that will likely come (barring hyperinflation) from Greece re-adjusting its internal price mechanisms will make life slightly more affordable, but any assets held in Greece will essentially be ruined.
In practice, Greece will use both the Drachma and the Euro, because the Euro isn’t going away; the Euro will continue to be used in the rest of Europe, and will continue to be used as a secondary reserve currency around the world. The Euro will continued to be used in Greece, but Greece will no longer have any rights in determining administration of the Euro. I suggested once that the adoption of the Euro in peripheral European countries could be understood as a pre-emptive Euroization of the European periphery, with “Euroization” understood analogously to “Dollarization.” Greece will be related to the Euro as Ecuador is related to the US dollar. In fact, Greece will come close to approximating what I have called currency pluralism.
Under these conditions, the Greek economy will slowly and gradually improve its position, but no one will mistake the Greek economy as a peer competitor to the core states of the Eurozone. The Greeks will learn that if they riot, they will damage the one source of revenue that they can count on — tourism — and those who can accept this deal will reconcile themselves to life in the slow lane. The ambitious will leave for other parts of Europe or to America.
What will the rest of Europe do upon the exit of Greece from the Eurozone?
The Eurozone is a paradigmatically technocratic institution that presumes to organize and administrate the ordinary business of life without imposing any kind of ideological constraints on member states. Critics of the free market model of western capitalism linked to liberal democracy never tire of pointing out the ideological presuppositions of trans-national institutions like the Eurozone, the World Bank, and the IMF. I imagine that many of the Greek leftists now aspiring to form a government probably buy into much of this critique. But as they rail against the center and consciously enact policies intended to prove that they were right all along, they will only be guaranteeing the economic marginalization of Greece.
The implicit ideology of the Eurozone, however, is not that of the “Washington Consensus” with its deregulation and privatization, low tax rates and minimal government (otherwise known as Yanqui imperialism). Rather, the ideology of the Eurozone is that of the post-modern welfare state, with its cradle-to-grave social support system and a social consensus in which (in the words of the oft-disparaged Malthus), “each man’s share of labour would be light, and his portion of leisure ample.” You can call this the “Brussels Consensus” if you like.
In very small nation-states with ethnically homogeneous populations and a strong Protestant work ethic, the Brussels consensus works marvelously — in fact, it works better in such places than it works in Brussels itself. And that is why the Scandinavian nation-states regularly top all lists of the world’s stable democracies with the highest standards of living. But the rest of Europe, much less the rest of the world, cannot make itself over as Sweden or Norway, Denmark or Finland. However, those regions of Europe and the Eurozone that already approximate this social milieu, will continue to thrive in the economic context of the Eurozone.
As the Eurozone moves northward and begins to add stable and growing economies from the former Soviet periphery — chiefly Poland, but also the Baltic states — the geographical area of the Eurozone will come more and more to resemble that of the Hanseatic League, the great medieval trading network of Northern Europe (a trans-national corporation from before the age of nations and corporations). If you are unfamiliar with the Hanseatic Leagues, I urge you to watch Jonathan Meades’ wonderful documentary, Magnetic North, which offers a sketch of the trading bloc that is both erudite and amusing.
The Glory that was Greece and the Grandeur that was Rome may soon be severed from the industry and commerce that is Northern Europe, and Europe will continual to evolve regionally in ways that are consistent with regional economic cultures. Balkan Greece will have its own Orthodox tradition in the Balkans. Catholic Southern Europe (Italy, Spain, Portugal, and the Mediterranean islands) will eventually realize its own slower track version of the Eurozone, closer to the Eurozone than Greece, but not quite the same as the Franco-German core. Protestant Northern Europe will continue to optimize the currency union for those nation-states that are capable of maintaining the economic standards of the Eurozone.
If the Eurozone treaty can grow and evolve and change with the times, the Eurozone that will result will be more efficient and effective than the Eurozone as it is known today. If only those nation-states that are peer competitors can enter the currency union on terms of being true economic equals, this bond will grow and strengthen over time. The “Euroized” periphery will benefit from the trickle-down from a vibrantly economically competitive Northern European economic zone, but life will be different for them. It is silly to pretend otherwise.
There will be both opportunities and dangers in this changed and changing Europe. As has been the case from time out of mind, the clever and the ambitious will exploit the opportunities and will live well; the slow and the timid will will accept their lot.
Thus Europe will come to exemplify the maxim that Thucydides attributed to Athens at the height of Athenian hubris, though displaced from the political into the economic realm: the strong will do as they will, while the weak will suffer what they must.
Is this kind of economic hubris unsustainable? Not in the least. It was the model for Europe in antiquity, as we have seen in the case of Athens, and which was no less true of Rome, and it was the model for Europe again throughout the Middle Ages. This is the European way, however much they seek to deny it.
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17 December 2011
What was once in the recent past spoken only in a hushed whisper is now openly discussed and debated: the break up of the Eurozone. But what exactly does “break up” mean in this context? The term implies a catastrophic failure that is not likely to come about, however painful a Greek exit from the Euro would prove to all the Eurozone economies. The Economist Intelligence Unit is calling the Eurozone crisis “€urogeddon,” which seems a bit dramatic for the financial press. With dire news following day upon day it would be easy to be very pessimistic about the Eurozone at the present time, but I am not pessimistic, although the short term outlook is not good. Being able to distinguish the short term prospects of an institution from its long term prospects is crucial in this context.
What exactly would a “break up” of the Eurozone look like? Here is what the Economist Intelligence Unit says in their report, “After €urogeddon? Frequently asked questions about the break-up of the euro zone”:
Firm predictions are tricky, but broadly a fracture between a strong northern “core” and the weaker “periphery” looks most likely. The process would, in our view, probably entail periphery countries breaking off individually to leave a “rump” of northern countries still within a currency union. Once one peripheral country (say, Greece) left, all the other vulnerable countries would probably follow. This means that Portugal, Ireland, Italy and Spain would leave the euro, although not necessarily immediately. Malta would probably leave, and Cyprus would have little choice but to exit as its banking system would be nearly wiped out by a Greek collapse. Up to ten countries could remain members of the euro: Germany, France, Austria, Belgium, Finland, Luxembourg, the Netherlands, Slovakia, Slovenia and Estonia (the last three all being small, open economies like Malta and Cyprus, but with healthier fundamentals).
It is interesting to me to see how this analysis — which I believe to be entirely reasonable and defensible — follows the principle of distinguishing center and periphery, which is something that I have been thinking about recently, and which I wrote about in The Farther Reaches of Civilization and The Second Law of Geopolitical Thought.
Thus a “break up” of the Eurozone would likely involve recession, riots, civil unrest, and bank failures (all these are also discussed in the Economist Intelligence Unit paper quoted above), but it would not be a catastrophic failure. We are not likely to see the dissolution of the Eurozone. The Euro currency will not only survive, but will eventually strengthen as the weaker and underperforming economies of the Eurozone leave the currency union and pursue a different — and marginal — economic path. The underperforming economies will devalue their labor, eventually attracting a little investment on the basis of this devaluation, and will more or less be relegated to a permanent twilight of an economy based almost entirely on tourism. (This is the obvious fate of Greece, and is likely the fate of Greece even if it remains within the Eurozone.)
A rump Eurozone would in fact be a healthier and more sustainable Eurozone than the current Eurozone, which attempts to treat underperforming economies the same as nearly optimal economies. The current Eurozone, with its peripheral members included, is like a cart pulled by two horses — a plough horse and a race horse yoked together. The financial markets are already anticipating this longer-term strengthening of the Euro. If the markets were expecting a catastrophic failure in which the Euro entirely disappeared and all the Eurozone member nation-states reverted to a national currency, we would see the Euro driven down dramatically. The Euro has fallen, but it still remains well within a ten year horizon of trading values. Nothing truly dramatic has happened to its value. If a catastrophic failure was expected, the Euro wouldn’t be trading ten or twenty percent down from its highest value, it would be trading at ten percent of its highest value.
The Eurozone still remains one of the great socioeconomic experiments of human history — an experiment on a grand scale, like the Constitution of the US, which attempted to put Enlightenment-era values into actual practice as a political institution. We recall that the US, in the course of working through its experiment, has encountered some major obstacles, such as the Civil War. As it happened, the US did not break up, or even shed its underperforming regions; however, it maintained its unity only through force of arms. This is significant.
One of the radical and novel aspects of the Eurozone is that it has been voluntary; no military power was been employed either to establish the currency or to further the expansion of the Euro or to secure its ongoing unity. We cannot place too much importance upon this unique historical fact. The very existence of the Eurozone is a living and vital rejection of the Stalin Doctrine. This is not only historically unusual in global terms, it is remarkably at variance with European history itself, which has been unparalleled in its violence and bloodshed.
Because the Eurozone is voluntary, it can afford to be flexible over the long term. It may not have been initially conceived as a flexible institution that could grow or shrink as political and economic conditions change over time, but I think that it could become something like this. Even while the peripheral economies may fall away, several nation-states continue with their accession process to join the Euro. From the experience of the Euro so far, we can more or less predict which economies will be able to successfully join the Euro, deriving a benefit thereby, and those economies which cannot successfully function as a part of the Eurozone.
The voluntary and egalitarian nature of the Eurozone will not vanish with a Greek default and exit from the currency union, even if the exit of Greece takes another member states out of the currency union at the same time. In fact, it could be argued that the experience will make the Eurozone more voluntary and more egalitarian. If the Eurozone comes to include formal protocols both for entering and for exiting the Eurozone, the voluntary nature of the association will have taken a step toward rationalization, and the Europeans will have accomplished something that the US was not able to accomplish: peaceful succession.
I am optimistic that the Eurozone (under the security umbrella provided by overwhelming US military force) may become one of human history’s first truly intelligent institutions. In some earlier posts I made a distinction between the grades of flexibility in institutions, and suggested that humanity might someday be capable of living under intelligent institutions which can take account of their own need to change over time, and the effect this change intelligently and peacefully, rather than being dragged kicking and screaming into the future. The Europeans have proved that they can learn from history, and have demonstrated this by peacefully creating and living within the Eurozone. If they can learn to live without solving problems through force of arms, there is hope that they can also learn to live with truly egalitarian, flexible, and intelligent institutions that can learn from past mistakes and incorporate change into the very structure of that institution. Time will tell.
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I have further (and more recently) elaborated on the future economic possibilities for Europe in the following posts:
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9 July 2011
Once upon a time there was a large family, which either because of or in spite of their long intimacy and shared history, was a fractious and disputatious bunch, with old fights and old grudges that were never forgotten, even though the principals to these disputes were long dead. Over time the fortunes of the family had diverged, and some that had been rich in the remote past had become quite poor, while others who had started with nearly nothing had done very well for themselves.
The wealthy members of the family, who owned many industries, employed many people, and had large, modern, comfortable houses for themselves and their immediate family, were fully aware of their improved status in their world, while those members of the family who had fallen on hard times were equally well aware of their fallen status.
The poor cousins nurse a sense of resentment over the lower living standards and their perceived lower social status, while the well-to-do cousins nurse a sense of resentment over contributing to the support of their ne’erdowell cousins. The former never lose sight of the fact that every penny given has been given begrudgingly; the latter never lose sight of the fact that every penny spent on the poor cousins is a penny they are not spending on themselves or their children.
The wealthy cousins were constantly faced with the question of what to do with the poor cousins. Say you put the poor cousins on the dole. They become lazy, drink too much, pick fights, and cultivate a sense of entitlement. Do you help the poor cousins find work? Do you make work for them in your own industries? The same problems reappear: the poor cousins show up drunk and do shoddy work.
Say that the wealthy cousins attempt to observe the old maxim that if you give someone a fish they eat for a day, but if you teach them how to fish, they can feed themselves in perpetuity. In this spirit, the wealthy cousins help the poor cousins to start businesses. But the business doesn’t go well. Do the wealthy cousins continue to support the failing business, just so the poor cousins have something constructive to do? And, if they do, for how long?
In the fullness of time, the wealthy cousins decide to pool their resources and create a bigger business enterprise than ever before. The poor cousins want to be part of this, so the wealthy cousins tell them that if they maintain certain standards, stop drinking, and promise to work very hard, that they can be part of the new business enterprise and share in the wealth that will be produced.
Alas! the present plan works no better than previous plans. The poor cousins join in the new business, but they can’t quite make it work, and worse, they threaten to pull the whole industry down with them. What’s a wealthy cousin to do? Cut the poor cousins loose? Keep giving them money so they can continue with their end of the business, even though it is obvious that they can never turn it around?
Europe has not an essence, but a history. Like the individuals who jointly constitute Europe, there is no metaphysical center to the continent any more than there is a metaphysical center of the individual person. It is the shared history that constitutes Europe that makes Europe what it is. But in addition to being a shared history, it is also a disputed history. Every part of Europe has its own perspective on European history, and therefore its own sense of its place within Europe.
The shared history of the European nation-states makes the Eurozone seem like an obvious idea, so much so that it would only seem to be a matter of financial engineering in order to get things right. It would seem to be a mere matter of details to be cleaned up and the whole scheme put into practice, but, as is often said, the devil is in the details. The disputed history makes the obviousness of the Eurozone not quite so obvious in practice.
The crafting of the Eurozone turned out to be more political than financial engineering. As a political creation, the Eurozone was more diplomatic than a strictly business deal would ever be. Businesses deal with hard and unpleasant facts; if they fail to do so, they will go bankrupt. Diplomacy, however, avoids hard facts because hard facts are the rocks upon which ships of state come to grief. In diplomacy, nothing that can be stated indirectly is stated in direct and unforgiving terms.
This diplomatic behavior is fine for cautious nation-states who always keep an eye on neighbors, even when they have signed a peace treaty with them, but when it comes to unifying economies, it is no longer an acceptable practice. To make the Eurozone work for all members of the Eurozone would have required internal mechanisms that would, quite without sentiment, transfer wealth from where it was abundant to where it was needed. But rich cousins don’t want to support poor cousins, and poor cousins have no incentive to go to work if rich cousins are there to foot the bill.
It was widely reported not long after Greece joined the Eurozone that it had cooked the books to show itself as having met the Eurozone standards for entry into the monetary union. This was no secret once it came out. Greece was not summarily dismissed. Once made part of the family firm, how do you fire your poor cousin? Now the Eurozone is paying the price both for its diplomacy and its family sentiment.
Every large extended family has at least one drunk, one lunatic, one pervert, one criminal, one womanizer, one ne’erdowell, and one layabout — at least one, and more likely several of each. Europe is a family, it has its share of misfits, and some of these misfits are the most successful among the European nation-states. Family sentiment can paper over the strained relations withing families in the limited and controlled context of a family reunion, but when it comes to sharing the family purse, family sentiment is not enough.
It has been a fascination and an education for me to open up the Financial Times over the past few weeks, since every day has brought a new round of stories and opinion pieces on the looming Greek debt problem, possibly leading to default. Every possible opinion has been presented and argued for and against. I suspect that what is happening in the pages of the Financial Times is often more important than what is happening in government bureaucracies and boardrooms around the continent, since everyone in the bureaucracies and boardrooms reads the FT before they attend their meetings, and they probably all take their arguments from those already presented in the press.
I have the luxury of being intellectually fascinated by the process; those in the Eurozone must be experiencing that sinking feeling and so cannot really fully engage in the question as an intellectual exercise. For the Europeans, this is about family. And so the question remains: what is to be done with the poor cousins?
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29 June 2011
The idea of collective security can be traced back at least to Kant, whose short and widely influential work Perpetual Peace is as clear and as easy to understand as the Critique of Pure Reason is opaque and difficult to understand. There are many visionary ideas in Kant’s essay, all of which were ahead of his time, and most of which still remain ahead of our time. Here is Kant’s formulation of collective security:
“Peoples, as states, like individuals, may be judged to injure one another merely by their coexistence in the state of nature (i.e., while independent of external laws). Each of then, may and should for the sake of its own security demand that the others enter with it into a constitution similar to the civil constitution, for under such a constitution each can be secure in his right. This would be a league of nations, but it would not have to be a state consisting of nations. That would be contradictory, since a state implies the relation of a superior (legislating) to an inferior (obeying), i.e., the people, and many nations in one state would then constitute only one nation. This contradicts the presupposition, for here we have to weigh the rights of nations against each other so far as they are distinct states and not amalgamated into one.”
Immanuel Kant, Perpetual Peace, Section II, “SECOND DEFINITIVE ARTICLE FOR A PERPETUAL PEACE”
After considering the vicissitudes of “lawless freedom” and the perversity of war, Kant continues:
“…there must be a league of a particular kind, which can be called a league of peace (foedus pacificum), and which would be distinguished from a treaty of peace (pactum pacis) by the fact that the latter terminates only one war, while the former seeks to make an end of all wars forever. This league does not tend to any dominion over the power of the state but only to the maintenance and security of the freedom of the state itself and of other states in league with it, without there being any need for them to submit to civil laws and their compulsion, as men in a state of nature must submit.”
While Kant is known as an “idealist” philosopher in the technical sense of idealism, which is to say that Kant sees the world as ultimately constructed out of ideas, this essay of Kant reveals Kant as an idealist as the term is commonly used in conversation. In fact, Kant deserves to be called an idealist in both senses. It is hard to believe that Kant believed in the practicality of his proposals in his Perpetual Peace essay, but I don’t think that there is any question that he did so believe. Kant also wrote a wonderful little essay, which I have quoted on several occasions, in which he argues quite explicitly against those who maintain the impracticality of theoretical ideals.
Surprisingly, perhaps even shockingly, the world has tried to put some of Kant’s ideas into practice. While the League of Nations didn’t work out so well, we still have the United Nations, and though it can’t accomplish much, it is at least a nod in the direction that Kant visualized. The idea of collective security, then, in familiar to all, and can be intuitively summarized in phrases such as there being strength in numbers, all for one and one for all, and the like.
I would like to suggest that beyond collective security in the familiar sense that there is also the possibility of collective economic security, and I would argue that the European Union constitutes an attempt to realize collective economic security. I can easily imagine how others might disagree with me on this. I recall some time ago I was reading a Stratfor analysis in which the writer (probably George Friedman) argued that the rationale behind the European Union was ultimately security, and that the unification of the European economy was only a means to the end of getting Europe to work together abandon its militaristic ways so there wouldn’t be any more blood-lettings like the world wars of the twentieth century.
That Europe is and has been a deeply fractured place was recently reiterated on Stratfor by Marko Papic in The Divided States of Europe:
“Europe has the largest concentration of independent nation-states per square foot than any other continent. While Africa is larger and has more countries, no continent has as many rich and relatively powerful countries as Europe does. This is because, geographically, the Continent is riddled with features that prevent the formation of a single political entity. Mountain ranges, peninsulas and islands limit the ability of large powers to dominate or conquer the smaller ones. No single river forms a unifying river valley that can dominate the rest of the Continent. The Danube comes close, but it drains into the practically landlocked Black Sea, the only exit from which is another practically landlocked sea, the Mediterranean. This limits Europe’s ability to produce an independent entity capable of global power projection.”
Nevertheless, I think that there is a certain segment of people who see strength in numbers economically, in way that that is not tied to security. Sometimes bigger is better, and especially so when one is attempting to deal with the consequences of mass society engendered by industrialization. It could be argued — in fact, I would argue — that the economic success of the US was due in no small part to is large (ultimately continental) contiguous land area under a single political regime. If North America had been political divided like South America, it is unlikely that its economic development would have taken the particular path that it did take.
I have mentioned in some previous posts that Gaddafi has argued on many occasions for a “United States of Africa,” and while this is perhaps impossibly visionary, if it could be made to work it would have great economic benefits for the continent. Similarly, the European Union is sometimes characterized as a “United States of Europe,” and with hope and the aspiration that its collective economic and technological clout might rival that of the US. So even though the term “collective economic security” is not used, the idea is out there, and has been the basis of practical policy objectives.
The Wikipedia article on collective security quotes A.F.K. Organski on five (5) basic assumptions of collective security:
● In an armed conflict, member nation-states will be able to agree on which nation is the aggressor.
● All member nation-states are equally committed to contain and constrain the aggression, irrespective of its source or origin.
● All member nation-states have identical freedom of action and ability to join in proceedings against the aggressor.
● The cumulative power of the cooperating members of the alliance for collective security will be adequate and sufficient to overpower the might of the aggressor.
● In the light of the threat posed by the collective might of the nations of a collective security coalition, the aggressor nation will modify its policies, or if unwilling to do so, will be defeated.
This is formulated in terms of security from military attack, but it could be reformulated, mutatis mutandis, to address collective security from an economic standpoint. Economically, the threat to economic security comes not primarily from a military assault but from an economic crisis. This should seem pretty intuitive to most people these days, since the global economy is only now pulling out of what is being called the “Great Recession,” which was triggered by the subprime mortgage crisis — a genuine financial crisis if there ever way one — and even more recently the Eurozone was been faced with major crises as Portugal, Ireland, and Greece have come close to defaulting on their debt payments. (Most of the today’s Financial Times was about the Greek debt crisis.)
Well, interpreting Organski’s basic assumptions in terms of collective economic security, we see that the idea turns into a disaster:
● In an economic crisis, member nation-states will be able to agree on the cause of the crisis.
● All member nation-states are equally committed to contain and constrain the crisis, irrespective of its source or origin.
● All member nation-states have identical freedom of action and ability to join in containment and de-escalation of the crisis.
● The cumulative power of the cooperating members of the alliance for collective economic security will be adequate and sufficient to contain the economic crisis.
● In the light of the economic power wielded by the collective might of the nations of a collective economic security coalition, the cause of the crisis will be intimidated into cooperation, or failing to do so, will be contained.
The amusing thing about this is that, while this remains a coherent set of principles when reformulated in terms of economic security, it is even more spectacularly impossible than when formulated (as in the original) in terms of politico-military security. This makes the disaster of these principles particularly interesting, because it shows us that a coherent body of thought can be utterly unworkable despite its coherency.
The reader may well respond to me by saying that I have no basis whatsoever for my claims about collective economic security, and this is not even a fair way to summarize the mission of the EU. I would agree that this is certainly not the be-all and end-all of the European Union, but on the other hand what I did explicitly say about was that the idea of collective economic security is out there.
The idea is out there, but it has not (perhaps, until now, unless I have been anticipated, which is more likely than not) been made fully explicit. What that means in practical terms is that the idea is present implicitly, and the implicit presence of an idea is an idea with deniability. People can and do think in terms of ideas that have not been made explicit, and when they do so they often think in a way that is sloppy, vague, imprecise, and riddled with fallacies.
One of the virtues of making an idea fully explicit is that weaknesses and faults become as obvious as strengths and virtues. When an idea is out in the open and is debated and discussed in explicit terms, its strengths and weaknesses can be compared in a rational and systematic fashion. When an idea remains in the shadows, by contrast, it has a subterranean influence without being critically assessed. This can be unfortunate, since a vaguely appealing implicit idea is not balanced by an explicit consideration of its limitations.
One of the reasons (though certainly not the only reason) that ideas are never made fully explicit is that they are “unthinkable” for some reason or another. It takes a visionary mind to think the unthinkable in explicit terms. Herman Kahn famously did this for nuclear war during the height of the Cold War. I am not suggesting that collective economic security has anything like the unthinkable character of nuclear war, but I am suggesting that we have not had an economist since Malthus who was willing to think through the economically unthinkable.
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