How to make protest effective

We need to do more than march from A to B if we want political change.

It’s so difficult to say anything that hasn’t already been said about the crisis in Europe. This past Saturday, I watched closely as Portuguese rallied in enormous numbers against the foreign imposed austerity measures. The energy of tens of thousands filling the streets is momentarily intoxicating as ever, especially when they sing Grandola, Vila Morena, a song charged with revolutionary energy and optimism. But as soon as the last verse is sung, the crowds begin to demobilise; videos, photos and memories are the only evidence that there was even a protest of such scale. Because the next day, as the political leaders remain indifferent, the discussion already switches to the next austerity measures and the next bleak economic headline.

This has played out countless times in each crisis hit country in the eurozone. The social anxiety of the public spills out onto the streets as anger and then recedes back into anxiety. Then, a sense of defeat sinks in during the following weeks and months, until the latest provocation of yet more sacrifices transforms that anxiety into yet more protests by thousands of angry, crisis-fatigued citizens.

I think the reason for this is obvious, though I suspect many who attend, promote and organise these protests don't want to hear it. The protests aren't to challenge the government, but only to probe the government's resolve. When the government's resolve proves to be unshaken, since there is no policy alternative within the current framework of the Troika, there's nowhere to go but to return to that state of social anxiety. The point A to point B marches play it safe, expressing their demands but not setting out an objective that is to be reached through various tactics. I would call it public relations but I think organisers of protests like Que Se Lixe A Troika on Saturday sincerely believe mass marches every few months can stop the austerity. I'm here to say that this is a miscalculation.

It’s easy to see how opposition to austerity will eventually triumph, the policies undoubtedly cause tremendous economic and social damage. Each round of cuts and tax hikes align more people against the government and the international creditors known as the Troika. Inevitably, the protests in Spain, Greece, and Portugal has swelled with each passing year. But this slow grind of declining legitimacy for governments in southern Europe has great risk. As we can see in Greece, a neo-nazi party, Golden Dawn, has surged onto the highest stage of Greek politics, now polling 3rd overall, this as its militias violently attack immigrants on the streets. Spanish society, if eroded by a similar amount of austerity, could see regional and cultural differences hardened. Portugal, with no parliamentary far-right in existence, could be tempted by similar extreme nationalists in the years ahead as frustration with mainstream parties grow.

There is a clock ticking away in Europe, but it isn't necessarily counting down till the day when the streets banish the troika's authority. Rather, this is a clock ticking down to when that far-right menace erupts to break up the European project on its own terms, all the while fanning once-dormant national rivalries. This isn’t without precedent in Europe. It was during the 80s that another federation of nations, Yugoslavia, was subject to fierce austerity which provoked strike action like we see in Europe today. But they fell short, and by the early 90s, nationalists would assert themselves and give Europe another bloody chapter of warfare and ethnic cleansing.

The forces opposed to austerity must set political objectives, and deploy tactics to reach those objectives. This doesn’t have to mean preparing for insurrection and the siege of congress like some in Spain are organising for. In Portugal, daily mobilisations could replicate the success of the recent protests in Bulgaria. With the right-wing coalition government in Portugal plotting further austerity to the tune of 4 billion euros in cuts, the urgency should be widely shared. The streets must themselves become political actors, not merely a visualisation of the discontent politicians see in any monthly political survey. There has to be a willingness by anti-austerity forces to fail, to overplay their hand. It doesn't require the approval of the whole country or hundreds of thousands of people to get involved. Even thousands, if they are committed and share common purpose and tactics, can achieve a government's resignation. Those thousands shouldn’t be hard to find amid the misery that exists across southern Europe today.

This is a cross-post from David Ferreira's blog Igualitárista

A demonstrator at Saturday's protests in Lisbon. (Photo: Getty.)
Ralph Orlowski / Getty
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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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