The collapse of global equity markets on Monday January 21st is not just an episode of financial contagion from the US stock market to other stock markets.
It rather signals that global stock markets are now beginning to price the following things.
First, the US recession is unavoidable and has already started; and this recession will be ugly, deep and severe, much more severe than the mild 8-month recessions in 1990-91 and 2001.
Second, the rest of the world will not decouple from the US since — as discussed in detail below — many trade, financial, currency, policy, confidence links — lead to a transmission of negative growth shocks in the US to the rest of the world that will lead to a sharp global growth slowdown: 2008 will be the year of recoupling rather than decoupling.
Third, the US stock market has already started to reflect in the last few weeks the consequences on earnings and corporate profitability of a severe US recession.
Fourth, a growing realization that even aggressive Fed easing will not prevent this severe recession, i.e. that we are at the last leg of the stock market’s sucker’s rally and that the Bernanke put has very little value as massive financial losses will increase regardless of what the Fed does.
Fifth, now other global stock markets are now starting to price the effects of the US hard landing on the rest of the world growth, the phenomenon of recoupling.
Thus, the Monday Massacre in global stock markets is — more than a case of financial contagion — a revenge of economic fundamentals as investors are waking up from the delusion that the US would avoid a hard landing and that the rest of the world could decouple from such hard landing. A reality check is now occurring after stock markets remained for too long in the delusional triple dream of a US soft landing, of a Fed being able to ease and avoid the hard landing, and of a world miraculously decoupling from the US hard landing. As predicted here at the beginning of the year 2008 will be ugly bearish for US and global equity markets.
In terms of “decoupling” -the domestic adherents of which pooh-pooh the effects of a US recessions on the argument that we’re more closely tied to the Chinese economy, for example, Dr. Roubini debunks the idea; or, as he puts it, what’s happening is “recoupling”:
There has been a debate for the last year on whether the rest of the world would decouple or recouple from the US economic slowdown. If the US were to experience a soft landing — i.e. a “soft patch” period of slow growth followed by a recovery — then the rest of the world has enough growth momentum and domestic demand to decouple from this US slowdown. But if the US experiences a hard landing — an outright recession as now unavoidable — then the rest of the world cannot decouple and it will experience a serious economic slowdown as well. The US consumer spends about $9 trillion; the Chinese one only $1 trillion; and the Indian only $600 billion. And consumers in Europe and Japan have been cranky as low real income growth and growth insecurities has led them to save more rather than spend more. So there is not enough dynamic and fast growing domestic demand in the rest of the world to take the slack of a now faltering US consumer. An unbalanced global economy where the US was for the last few years the consumer of first and last resort — spending more than its income and running a current account deficit — while China and many other countries were the producers of first and last resort — spending less than their income and running large current account surpluses — needed the sustained growth and spending of the US consumer to maintain its unbalanced growth momentum.
Specifically, the recoupling of the rest of the world to the US hard landing will be due to variety of channels of interdependence and linkages among increasing integrated economies in a world of globalization: trade channels, financial channels, currency channels, investment channels, confidence and policy channels drive a transmission of negative economic and financial shocks from the US to other economies all around the world.
How can things spill over? He says:
* Financial Contagion:
Financial contagion occurs through stock markets: days when the US stock market plunges are followed by similar sharp falls in Asian and European stock markets when such markets open next: part of this high contagious correlation of markets is due to the rise in global investors’ risk aversion when markets are in turmoil and volatile that leads them to dump risky assets — such as equities — from their portfolios. In recent years this correlation of global stock markets has significantly increased especially in periods of high volatility, risk aversion and financial markets turmoil.
But a more important part of the “contagion” is due to the fact that bad economic news in the US — such as signals of recession — that trigger a fall of the US stock market also lead to expectations of lower growth in other economies that triggers in turn a weakening of their stock markets. Thus, the recent sharp fall of global equity markets is a signal that investors are now realizing that the rest of the world cannot decouple from a US hard landing.
* Direct trade links:
Since the U.S. is running a current account deficit that is still close to $700 billion this year, the effect of a U.S. slowdown on its imports is likely to be larger than its share of the global economy. Also, note that a number of countries are heavily dependent on exports to the U.S. (both as a share of their total exports and as a share of GDP). These economies include obviously Canada and Mexico but also China, Japan, Korea and a significant part of the rest of Asia (Singapore, Hong Kong, Malaysia, Philippines, and Thailand). China is particularly at risk in the case of a US slowdown as so much of its recent growth has relied on the growth of exports, and of exports to the US of consumer goods that are now at threat as the US recession will be driven by a fall in private consumption.
* Indirect Trade Links:
If US imports fall and thus Chinese exports to the US fall, the Chinese demand for intermediate inputs from the rest of Asia falls and thus — indirectly – the growth of demand and exports of these Asian economies falls. Some have incorrectly argued that the large growth of inter-Asian trade in the last decade makes this region’s growth less dependent on US growth. But studies have suggested that this argument is faulty as the cyclical and structural dependence of Asia on US growth is now larger than a decade ago. The reasons is as follow: its used to be the case that Asian countries such as Korea, Taiwan and others produced final goods that were exported directly to the US. But with the rise of Chinese competitiveness in such goods the pattern of trade in Asia has now changed: increasingly these Asian countries produce intermediate inputs — such as computer chips – that they export to China and then China assembles them – into final goods (say consumer electronic goods) – and then exports them to US. So greater inter-Asian trade does not mean less dependence — rather greater dependence — on US growth.
* Effects on commodity prices:
Since the US and China have been the two major drivers of global growth in the last few years — the former as the consumer of first and last resort and the latter as the producer of first and last resort — the slowdown of these two locomotives of global growth — following a US hard landing – will seriously affect the rest of the world; in particular, there will be a sharp drop in the demand for commodities — oil, energy, food, minerals — and in the price of such commodities that had surged in the last few years following the high growth of China and, in part, India and other economies.. The ensuing fall in commodity prices will hurt the exports and growth rate of commodity exporters in Asia, Latin America and Africa. For example Chile’s exports of copper and its price will fall as both the direct demand from the US and the indirect demand from China will fall in the context of a US recession and of a global economic slowdown.
* Global Deflationary Effects of a Weaker US Dollar:
The US economic slowdown and the ensuing reduction in US policy interest rates has led to a sharp weakening of the value of the US dollar relative to many floating currencies. While this weaker dollar may stimulate US export competitiveness it is bad news for other countries that export to the US as the strengthening of their currencies relative to the US dollar increase the price of their goods in US markets and makes their export competitiveness lower. So a weak dollar is bad news for the exports and economic growth of many countries that depends on the fast growth of exports to the US as an important engine of their growth.
* Common Shocks such as high oil and energy prices:
A high correlation of growth rates of the US with that of other countries can also be due to common shocks such as high oil and energy prices that slow down growth among all oil importers. Such negative shocks hurt not just the growth of the US; they also hurt the growth of other oil importing regions such as Europe, China, India, emerging Asia and parts of Africa.
* Bursting of Global Housing Bubbles:
A cycle of housing boom and bubble followed by a bust has occurred in the US. But similar booms and bubbles did occur in many other parts of the world as easy money, low long-term interest rates and financial innovation occurred in many countries. We have seen such housing booms in Spain, UK, Ireland and, in smaller measure in Italy, Portugal, Greece, France; in Central and South Europe (the Baltic nations, Hungary, Turkey); in Australia, New Zealand and parts of Asia (China, Singapore and parts of India). With a lag we are now observing the beginning of the bursting of such bubbles outside of the US, especially in the UK, Spain and Ireland. Such bust will lead to a domestic economic slowdown in these countries and outright recession in some.
*Effects on Consumer, Firms and Investors’ Confidence:
Bad news from the US and falling confidence of US consumers, firms and investors can be transmitted to a fall of confidence of similar economic actors in other countries: confidence is contagious. Global investors become more risk averse and dump risky assets (equities, credit instruments, etc.) not just in the US but across the globe; large international multinationals may decide to cut back new capital spending on factories and machines not just in the US but also in other countries as losses on their US operations lead to more caution and less internal funds available for global capital expansion (a “corporate boardroom investment strike”). Consumer confidence outside the US — especially in Europe and Japan — was weak to begin with; it can only become weaker as an onslaught of lousy economic and financial news in the US affects the “animal spirits” of consumers worldwide.
* Constraints on Monetary and Fiscal Policy in Counteracting a Global Economic Slowdown:
…today the ability of policy authorities around the world to use monetary and fiscal policy to stimulate their economies and dampen the effect of a US and global demand slowdown are more limited than in 2001 recession. Then, the Fed slashed rates from 6.5% to 1%, the ECB from 4% to 2% and the Bank of Japan cut its policy rate down to 0%. Today the Fed is easing again but it cannot ease as aggressively as in 2001 as it has to worry about inflation and about the risk of a disorderly fall of the dollar that may lead foreign investors to reduce their financing of a still huge US current account deficit. While in Europe and Japan monetary policy had been recently tightened or, at best, kept on hold and the ECB is in denial of the serious downside growth risks in the Eurozone. Similarly, in 2001 there was a massive fiscal stimulus in the US (as we went from large budget surpluses to large budget deficits), in Europe where the 3% deficit limits were breached in the major eurozone economies and in Japan where the deficit went as high as 10%. Today instead, the existence of large structural budget deficits — and high public debt – in the US, Europe and Japan limits the fiscal stimulus that policy authorities can afford. Finally a weaker dollar is a zero-sum game: it may benefit the US but it hurts the competitiveness and growth of the US trading partners.
Noubini then concludes by saying,
2008 will be the year of re-coupling rather than de-coupling both in financial markets and the real economies; and the effects will be painful for the US and global economy. So, as Bette Davis warned in All About Eve: “Fasten your seatbelts as it’s gonna be a bumpy ride!” Not just bumpy; rather very ugly and scary as the risks of a systemic financial meltdown — that would seriously worsen the economic downturn and around the world – are seriously rising. As argued in detail in the past in this column this is the first crisis of financial globalization and securitization, an episode of a severe and worsening liquidity and credit crunch, a most severe case of systemic risk that will have dire consequences for the growth rate of the US and the global economy.
An additional, cautionary note, in Prof. Michael Pettis’ blog, China Financial Markets concerning the exposure of Chinese banks:
Chinese banks, much to the surprise of many, are among the most valuable in the world in terms of shareholder market value, even if the their assets or annual earnings are far lower those of other large international banks. Partly this reflects their bubble-like Shanghai-market valuations, but even abroad they are highly valued. A lot of very misinformed comment explains the value as somehow reflecting the market’s opinion that Chinese banks have cleaned up their portfolios, improved their management, and are now on a substantially sound footing. The high market values, they say, reflect the market’s evaluation of Chinese banks as solid, healthy, and rapidly growing (although few go so far as to say prudent). I was told this just last week during an investor dinner, when one investor hotly disputed my claim that Chinese banks still had serious problems with non-performing loans by pointing to their extremely high valuations. “Are you saying that the market is wrong, and if so why don’t you short their shares?”
Tempting as it is to say the market is indeed wrong, and often is, I actually think the market is making a realistic assessment of value, but we need to be careful about what exactly what that assessment is. As I have argued in earlier posts and in a number of publications (for example see October 3: “Should Chinese banks acquire banks abroad?”), markets value shares both as a function of intrinsic value and time value, and whereas the intrinsic value reflects assessment of the quality of a company and its management, the value of its assets, and the expected growth in earnings, time value is valuable almost exclusively as a reflection of underlying economic volatility, of which Chinese banks have a lot.
Chinese bank shares have extremely high time value and very little intrinsic value. They are expensive, in other words, not because the market gives high intrinsic value to the banks but rather because a rapidly reforming, rapidly growing economy is extremely volatile, and purchasing shares in low-capitalized banks are typically the best ways to purchase options on this volatility. In fact nearly every country going through substantial political and economic reforms during the past two decades has seen extremely high valuations placed on their bank stocks, even when, as is usually the case, the banks are bankrupt or near bankrupt.
Time value is extremely sensitive to change. As a consequence any shift in perception of asset quality or growth expectations will have a disproportionate impact on the stock prices of banks that have high time value. This makes them extremely volatile, and the recent subprime-related gyrations shows just how volatile. I remember when Mexican banks (also nearly bankrupt and also benefiting from an economy undergoing massive political and economic reform) went from having the highest valuations in the world in 1993 to some of the lowest in 1995. Chinese banks are not going to be noticeably different.
At first, I thought it was just a case of mishandling inventory by the store manager when onions suddenly went out of stock in the market section in one of the malls in Metro Manila where I do my weekly marketing. I became alarmed something was wrong when it turned out that onions cost me more when I bought it from the wet market. Two weeks ago, it shot up to P80 per kilo, or double from the previous year’s price. When onions reappeared in the market section of the same mall, four medium-sized red onions had a price tag of P54. In simple arithmetic, each bulb was P13.50. Yesterday, I went to Chinatown in Binondo and I was able to buy red onions at P100 a kilo after much haggling. The white onions are more expensive at P120 to P140 per kilo.
I felt good that I got a good price after all when I heard a survey of prices of vegetables over the radio yesterday that onions sell in Paco public market at P140 per kilo. So upon seeing yesterday Agriculture Secretary Arthur Yap in our Tuesday Club breakfast gathering at EDSA Shangri-La, it was the first thing I asked him about. Yap told me I was lucky that I got P100 per kilo because at one time, the price of onion in some parts of the country even went as high as P180 per kilo.
Only last Monday, Yap even called for a full-blown press conference where he presented a very rosy performance report on how the Philippine agricultural sector fared from January to December 2007. Yap reported that the country’s farm output rose 4.68 percent last year despite the combined effects of typhoons and dry spell that damaged many agricultural farmlands. Philippine agriculture accounts for almost one-fifth of the overall economic production, with rice and corn as our country’s basic staple products.
From the vegetable produce for 2007, the DA reported that onion registered “dramatic output increments” of 92.29 percent. Onion growers in Batanes, Ilocos Sur, Ilocos Norte, Nueva Ecija, Pangasinan and Mindoro Occidental enjoyed good market price during the first semester of 2007.
Yap readily admitted, though, there is really a problem in onion supply. Obviously, Yap declared, this is the result of the policy decision by the DA to suspend the issuance of permits to import onions that has been in effect for the past five months now. The suspension was in consonance with the request of local onion growers to the government to give them some “breathing space” from undue competition of imported onions coming into the country at much cheaper prices. Without elaborating, I could sense that the DA Secretary has been under pressure from both sides of the supply chain, the local onion growers and the import traders.
Yap was already turning red as we needled him yesterday that agriculture’s best output last year was not good enough if we have soaring prices of onions. We teased him that he was being so “onion-skinned” if he gives in too much to our local onion growers at the expense of us consumers. Actually, the phrase “onion-skinned” traces its roots among our more popular Tagalog idiomatic expression that means a person who is overly sensitive.
He conceded that there is a crying need to strike a balance between these competing needs. Such government intervention could be construed as an unfair trading practice under the Philippine government commitments with the World Trade Organization (WTO). Unfortunately, since imported onions, rice, corn, fruits and vegetables and other agricultural products now flooding the Philippine markets that come in cheaper consequently displace our homegrown agricultural products. This is not to mention the problem of smuggled agricultural goods.
Today is the anniversary of the inauguration of the Malolos Congress, a subject I tackled in a column, last week, Mixed and muddled dates.
Singapore’s Lee Kuan Yew provided the hypocrisy. This is the “minister mentor” who has virtually created a leadership cult from his aversion to corruption, a man of famously high morals who encouraged pursuit of an opposition leader to bankruptcy for his alleged abuse of $140 worth of university postage. And yet here he was rushing to the deathbed of a political contemporary regarded as the 20th century’s biggest thief, who the World Bank and UN said stole as much as $35 billion, more than $1 billion for each of his 32 years in power in one of the world’s poorest countries.
“I feel sad to see a very old friend with whom I had worked closely over the last 30 years not really getting the honours that he deserves,” said Lee, who at 84 to Suharto’s 86 is perhaps sensing his own mortality. “He deserves recognition for what he did,” he told the Singapore media at the republic’s embassy. “That’s why I came here to visit him.”
After visiting the old man’s bedside, Lee clarified his position on the morality of theft: “What’s a few billion dollars lost in bad excesses?” he told reporters, comparing Suharto favorably to Ne Win of Burma, who took power three years before Suharto and drove his country to absolute penury. “He built hundreds of billions of dollars worth of assets.”
Lee, a member of JP Morgan Chase’s international advisory board, earlier had a unique take on Indonesia’s economic ills.
“From ’67 when he became president right up to ’97, the economy grew and Indonesia was on the point of taking off the economy. (That) it didn’t take off (is) not because of his fault (but) because Bank Indonesia’s interest rate was too high, and so the companies borrowed in US dollars for low interest rates.”
“When confidence was lost after the Thai baht crisis and people wanted to pull their money out, the whole thing collapsed. It was not his fault.”
Much of that is nonsense. Suharto’s legacy was a collapsed economy, utterly dysfunctional state institutions, a putrid judiciary, radicalized mosques, a nation in an advanced state of break-up and a culture of corruption so deeply inculcated, indeed so normal to many Indonesians, that it will take generations to properly cleanse. It is bizarre to suggest that the mid-1990s financial crisis was caused by Bank Indonesia’s interest rate policy as if it was somehow independent of the palace.
Rather than a historic relic, Suharto, the bland general who emerged from the shadows to dominate his country, remains the most influential figure in Indonesian politics even after a decade of seclusion. The cries of “reformasi” that accompanied his downfall went largely unheeded. Suharto’s influence will survive his burial and haunt Indonesia for years. In truth, Indonesia now is not so different from Indonesia under Suharto.
Yudhoyono and company promote the view that Indonesia is long past Suharto because, like most members of the ruling class, they have a long Suharto past. That’s principally because Suharto didn’t tolerate opposition or develop heirs. His last vice president, BJ Habibie, was chosen mainly for his wildly unconventional views and was intended to function as an insurance policy against his boss’s ouster. Nearly all of the politicians available as Suharto’s successors have been his collaborators.
Despite the sweeping changes in political language and banquet seating, Indonesia’s mentality of governing hasn’t changed. Political office is seen as an opportunity to benefit yourself, your family and your friends — as Suharto reportedly did to the tune of billions of US dollars — rather than serve the public.
At least under Suharto there was order in the corruption: if you paid the right people, things got done. Today, with decentralization and no strongman at the top, corruption is more chaotic and widespread and payoffs less effective.
In 1999 Time Magazine estimated Suharto’s wealth at Us $ 15 billion, that furthermore
“at least $73 billion passed through the family’s hands between 1966 and ”. In a May 27, 1999 article, Time noted thus: “In July 1998 the U.S. Treasury’s attention was caught by reports that a large sum of money linked to Indonesia had been shifted from a bank in Switzerland to one in Austria. As part of a four-month investigation that covered 11 countries, TIME has concluded that $9 billion of Suharto money was transferred from Switzerland to a nominee bank account in Vienna. Not bad for a man whose presidential salary was $1,764 a month when he left office.” Suharto himself “denies he has any bank deposits abroad and insists that his wealth amounts to just 46.9 acres of land, plus $2.4 million in savings”.
And the list goes on:
According to TIME’s investigation, the six Suharto offspring have significant equity in at least 564 companies, and their overseas interests include hundreds of other firms, scattered from the U.S. to Uzbekistan and Nigeria. The Suhartos also possess plenty of the trappings of wealth. In addition to a $4 million hunting ranch in New Zealand and a half share in a $4 million yacht moored in Australia, youngest son Hutomo Mandala Putra (nicknamed “Tommy”) owns a 75% stake in an 18-hole golf course with 22 luxury apartments in England. Bambang Trihatmodjo, Suharto’s second son, has an $8 million penthouse in Singapore and a $12 million mansion in an exclusive neighborhood of Los Angeles, just up the street from his brother Sigit Harjoyudanto’s $9 million home. Eldest daughter Siti Hardiyanti Rukmana (“Tutut”) may have sold her Boeing 747-200 jumbo jet, but the family’s fleet of planes included, at least until recently, four other jets.
Ex-President Suharto and his family have homes in Bermuda, the Cayman Islands and Hawaii as well as a multi-million dollar mansion outside Los Angeles and a ski ranch in the New Zealand Alps. The value of their treasure in Indonesia may have declined with the collapse of the rupiah in recent months, but much of it is believed to be invested abroad. Suharto’s youngest son, Hutomo Mandala Putra (known as “Tommy”) boasted about this last autumn when one of his banks was closed. He did so at a press conference at which he arrived in a Rolls Royce. Recently the reviled “Tutut”, daughter Siti Hardijanti Rukmana, chartered a plane for a shopping trip to the USA at a cost of US$ 100,000. Much of the wealth comes from franchises and monopolies granted the children by their indulgent father, funded through soft loans from banks whose heads have been appointed by the ex-President. Suharto has defended his family’s vast business empires as being good for the country, but there is little evidence that any of this has trickled down. Rather, much of the country has been impoverished and excluded from the economic advances of the past 30 years.
To be sure, nothing has been proven, not least because President Habibie called an for end to investigations. In 2000, investigations were resumed under President Wahid. But in 2006, Suharto was found unfit to stand trial.
In 1998, the ex-dictator said, “The fact is I don’t even have one cent of savings abroad, don’t have accounts at foreign banks, don’t have deposits abroad and don’t even have any shares in foreign firms.”
At one point, Tommy Suharto owned Italian sports car maker Lamborghini.
President Wahid believed the fortune amounts to $45 billion. In 2000, the BBC reported “Much of the Suharto wealth is thought to be in overseas bank accounts as well as tied in to property in London and Los Angeles and golf courses.” Suharto sued Time for libel. He lost.
Ferdinand Marcos was our Suharto, but Marcos has been dead twenty years, and what the Indonesians are only beginning to contemplate, we’ve been living out. Some time ago I wrote that it’s only now that we’re beginning to see life beyond those who surrounded Marcos; the political torch is being passed to the generation that grew up during martial law and which had no recollection of life before the dictatorship. In a sense, my generation is the one most influenced by Marcos because of the absence of any personal recollection of the Third Republic. Someone, during a conversation, asked me what I felt this implied, and I said the internalization of a basic lesson: it’s not how you play the game, but winning that matters, because my generation only knew Marcos at the height of his dictatorial powers, and his cult of success at all costs. In contrast Marcos’s contemporaries still had to wrestle with the old concepts of gentlemanly politics, which, whether clung to or rejected, involved a conscious choice. Together with that win-at-all-costs mentality comes the mentality that nice guys finish last (something that, in off moments of psychologizing, I’ve always felt was the embittering lesson the President learned at an early age with her father’s defeat).
But as Marcos recedes beyond the living memory of the Edsa Dos generation, we also have to contemplate the eventual haunting of our political life by Arroyo’s ghost.
The other night, I saw a documentary titled Oswald’s Ghost (see reviews here), a trailer for which and supplementary material can be found over at The American Experience. One of the things that struck me most was the inclusion of Norman Mailer. His novel, Harlot’s Ghost, had been an enjoyable read for me back when I was still in college, and his thoughts provide a kind of ending theme for the documentary: how Oswald remains a kind of ghost, who haunts all investigations of the Kennedy assassination, but who, being a ghost, can never answer the question everyone wants to ask the most (did Oswald really do it, and alone?).
…Oswald had a choice. He might not only be the instrument but the leading man. That presented a new conflict — to be the instrument of history or the leading man? The latter could occur only if he was captured and stood trial. If he succeeded in the act but managed to remain undiscovered, obscurity would be his lot again. He had learned as much from his attempt on Walker.
Capture, however, would guarantee him a very high level of attention. And if he was convicted, he had the temperament to live alone in a cell; he was more than half habituated to that already. He could even view his life up to this point as a preparation for spending many years in prison.
Indeed, it may even have been the thought of his trial that fired him on. What a podium! Such a trial could alter history, stimulate the stupid, rouse the lethargic, confound the powerful. So he had to feel divided between his desire to escape and his recognition that capture, trial, and incarceration might generate a vastly larger destiny.
His personal attitude toward Kennedy had little to do, therefore, with his act. In war, one may execute a man for whom one feels respect or even personal affection; Oswald saw it as an execution. One mighty leader was going to be dispatched by another high and mighty personage — of the future. The future would preempt the present.
If he failed to escape, well, he could tell his story. He could becloud the issue and possibly be acquitted, and if it came to twenty years of prison, he would be able to forge his political agenda — even as Hitler, Stalin, and Lenin had done. Should he face capital punishment, then, at the least, he would be immortal. He would take care of that at his trial. He would expound his ideas.
What he may never have taken into account is that the furies he set loose would devour him before he could utter one idea. The first element in the loss of an heroic trial became the four shots he fired into Tippit. There can be little doubt that he panicked. As soon as he killed Tippit, the mighty architecture of his ideology, hundreds of levels high and built with no more than the game cards of his political imagination, came tumbling down. He knew Americans well enough to recognize that some might listen to his ideas if he killed a President, but nearly all would be repelled by any gunman who would mow down a cop, a family man — that act was small enough to void interest in every large idea he wished to introduce. By killing Tippit he had wrecked his grand plan to be one of the oracles of history. Now he had to improvise a defense: I’m a patsy.
It may never have occurred to Oswald that the obfuscation and paranoia which followed the assassination of Kennedy would contribute immensely to the sludge and smog of the world’s spirit.
Mailer said that most people think Oswald was some sort of feebleminded crank, but that his life proved that the man, though not well-educated, was quite intelligent, and had managed some rather difficult transitions on his own, without connections or patrons. Mailer said, then, that the real question that should be asked is, why did Oswald kill Kennedy, what did he hope to achieve. Describing Oswald as an utopian, and one who’d studied Hitler’s life and career not because he sympathized with Nazism, but rather, as a kind of case study for how poor, obscure individuals can, by sheer force of will, become great and powerful figures, Mailer then says that Oswald saw killing Kennedy as the chance to make himself a great world-historical figure himself.
Now what struck me about the documentary was how in it, three assassinations -JFK’s, Martin Luther King’s, and RFK’s- served as kind of psychic bodyblow on American social cohesion and public morale: Kennedy had been the first US President born in the 20th century, himself pointing to the passing of the torch of leadership from the last American President born in the 19th Century (Eisenhower) to himself; a generational shift as dramatic as any. But then he would slain, the Dr. King was murdered, and finally, in the crucial political year, 1968, Robert Kennedy was assassinated, too; and in the Chicago national convention of the Democrats, old-time American politicians like Mayor Daley sent out the troops to assault a young generation for whom the still-youthful Kennedy’s were their elder mentors. It was as if the old ward bosses had mugged the country and stolen back the torch of leadership.
Which brings, curiously, to something here at home. The past few days have seen more articles on Edsa Dos, and the question asked time and again (see The Lonely Vampire Chronicles): does a plot to remove Estrada diminish the importance of the People Power aspect of the whole thing?
Ms Arroyo has shown us the limits of people power. We now know that as a moral force, people power will not succeed in shaming an amoral president out of office. We also now know that as a political force, people power cannot topple down a president without the consent or collaboration of the military. This realization, more than anything else, has diminished our people’s enthusiasm for mass protests. I think that what we should realize is not the futility of people power, but rather its eventual impotence if it remains unorganized and naively dependent on spontaneous sparks of moral outrage.
To forget EDSA II is to give up the quest for accountable governance. Estrada and Ms Arroyo both want us to feel bad about EDSA II. Why? Because they are twins. The memory of our struggle against the former sustains our struggle against the latter.
That brings me to my thesis: Contrary to rumor, in a country like ours People Power does not weaken democracy, it strengthens it. It does not impair democratic institutions, it repairs them. Or where they do not exist at all, it builds them.
That is patently so in the case of illegitimate leaders. Ousting unelected leaders does not deny democracy, it affirms it; it does not destroy the institutions of democracy, it restores them.
It’s so even in the case of elected leaders grown tyrannical, though that is less patent. Or so for countries like ours. In other countries like those of the West, the democratic institutions work in practice and not just in theory (in the United States, for example, a Kiefer Sutherland could be thrown in jail for drunk driving). Where the institutions truly, or reasonably, represent the general interest (that’s why it’s called “representative democracy”), you mount direct citizens’ intervention in the political process only at your own peril. In countries like ours, the democratic institutions exist only on paper — convicted ex-presidents are pardoned and political activists are shot to death; the vote, the most basic democratic institution of all, can be stolen at will. Where the institutions not only do not reasonably represent the general interest but exist to unreasonably thwart it, the law being used to justify, and foment, lawlessness rather than justice, you mount direct citizens’ intervention only at your own benefit.
You never experienced the utter pits this country found itself in during Estrada’s time and you’ll see a seemingly indulgent effort to oust a formidably elected president like him as mob rule. You saw what it was then and you’ll see the desperate effort to oust him as ridding this country of mob rule.
The dynamics of Edsa Dos were confusing: the commingling of the business leaders, the political veterans, the generals, the priests, the teachers, lawyers, middle class and the masses, all trying to figure out what to do about a President who simply refused to do some basic things: his paperwork, and refereeing competing parties wanting to influence policy -only to discover policy was liable to be overturned or modified during all-night drinking sessions.
But all the critics go about their organizing and plotting in the manner that an alumni homecoming associations puts together class reunions? Those on the outside can’t see the nuances that exist in such gatherings, the various subcultures of the professional classes at play, sometimes at cross-purposes.
In his blog, Red’s Herring tackles some of my previous comments and past thoughts on plebiscitary democracy and People Power, and the contending views of those who insist that protests are an evil. He says that constitutional mechanisms are the default option, but only if adhered to by officials themselves, otherwise People Power serves as a corrective mechanism of sorts:
People elect officials both on self-regarding and other-regarding concerns. The former serve the individual’s interests and wishes, the latter the common good. The elected officials have incentives to fulfill both concerns because they want to get elected again (if re-election is allowed) or, otherwise, keep in power the political organization or party they are identified with (with the expectation that even when out of office their interests will continue to be protected by allies).
When public office is tenured, the exercise by the people of their power to hold public officials immediately accountable is held in abeyance until the next election. During the inter-election period, aside from the fact that the individual electorates would go about attending to their personal needs such as earning a living, their voices are effectively muted unless they combine to coordinate their efforts or form “interest groups.” By contrast, under our constitutional system, for example, the president has full discretion to fire any member of her cabinet who has lost her trust and confidence; that same discretion, by the fact of auto-limitation, may not be exercised by the people as regards the president who may have breached her electoral promises or is not performing according to their expectation. Reckoning will have to wait for the next election.
Historically, the “office” that had filled the gap was the newspaper (of the “mucrakers” who leaked the truth – before, of course, the media took on the corporate form) through which the people expressed their individual concerns and frustrations during the inter-election period…
My thesis is this: Impeachment (which I also call the un–election process), initiative, recall, or “the way datus were chosen and replaced” as well as “muckracking” is of kindred mechanism with plebiscitary democracy that refreshes, revalidates or proves mandates in the interim.
Indeed, substantive democracy (or people power per se), as opposed to procedural democracy, predominates if political sovereignty (or the power of the people to have effective control over leaders) is maintained throughout.