Sunday, May 19, 2013

Royal Black Swan? A Question of Honours.

When the banks in Cyprus were poised to seize deposits from their customers to provide collateral for a bailout, in Greece, Ireland, Italy, Spain, likely Portugal, and disturbingly, Japan, the question of whether it would be the template for other national bailouts became the question on everyone's mind. 

It is one thing to seize deposits of hedge funds, oil and energy companies, agricultural and tourism firms - along with the funds held in the country by foreign investors - as they employ many citizens and there would no doubt be significant, if containable unrest in the event this occurred...

But among the depositors in these banks is a tiny class of account holders and asset owners who represent perhaps a more powerful constituency. The first group, which isn't the main one, is the Catholic Church, which has come under some scrutiny by the Italian government in regard to its freedom from paying property taxes to municipalities and the federal government. Broke governments are looking to tax any wealth that cannot escape, and so the churches, monasteries, convents and other properties owned by the Holy See look like tempting targets for looting by the state. The mostly evangelical practice of "tithing" %10 of ones earnings makes some churches in other denominations potentially rich targets for confiscation as well.

On this, it is likely that yet a new sex scandal involving the Vatican will be used as a pretext to attack the legitimacy of the Church's sovereign immunity from Italian tax collectors. The antics of Berlusconi are evidence enough that the Italian people are unflappable and mostly disinterested when it comes to sex scandals in their institutions, but if there is bailout money on the line, we can expect a show of pain and outrage that would rival that of a footballer clutching his shin after falling down somewhere in the vicinity of where a ball was taken from him.

But there is another group of Europeans who could prove to be a more difficult target. They have significant assets in banks and in real estate throughout EU countries, and in spite of their diminished role in the late 20th century, they retain the ability to confer honour and a measure of convening power, if not political legitimacy, to those aligned with them.

It would be interesting to see how the remaining royal families and some titled aristocracies in Europe will fare if their governments attempted to impose an %80 wealth tax on their deposits, investments and real estate. While most of them keep a relatively low profile, and many are even passionate egalitarians who view it as a bit naff to use their titles - their histories are closely entwined with the founding myths of these nations, whose citizens are being made to suffer for the mistakes and corruption of their elected representatives.

Modern progressives view royalty as a meaningless circus of wealth and illegitimate privilege, and only understand heredity in the context of a regressive social evil.  It is easy for a politician to foment popular outrage at vague "elites," but said politicians may find their own legitimacy unsteady when they are found to be seizing peoples savings to pay public debts accrued by social spending that was a de-facto bribe to the coalitions who kept them in power.

Honour is often set up as anathema to principle, something practiced in backward and medieval cultures, criminal syndicates, militaristic societies, and a barrier to progress in the global south. To a progressive society, honour is the source of violence, torture, injustice, repression, and it is a fundamentally anti-social urge.  Yet the basic institutions of progressive government are based on honour traditions. The military, police, cabinet, upper houses and senates, judiciary, and even some of the professions are hierarchical honours systems of rank, title, authority and privilege. Independent of whether these are imbued by an elected representative or a hereditary sovereign, honours underwrite the system that operates much of the machinery of state.

Which brings us back to the small matter of banks seizing the assets of citizens and, among them, aristocrats and royal families.

In a monetary crisis where the populace is subject to attacks by foreign creditors, where their own governments and political class are viewed as corrupt; the currency has been debased through high-inflation; and promises by elected officials are not backed by the ability or willingness to pay - a group of people with the power to bestow hereditary honours upon individuals who back them could present a surprising and formidable force. In recent history, Islamist terrorists have used this incentive to great effect in the recruitment and subsequent adulation of "martyrs," and in a lesser way, there appears to be no limit what people will do achieve "fame." If you have doubts about whether modern people would do irrational things for honours, ask anyone whose family title came from the crusades whether they think their ancestor's gambit was worth it.

While some monarchs are essentially the captives of their parliaments, many are not. Some, like those of Italy and Greece are private citizens with an interesting family story. If they fought and won, the children and grandchildren of their backers would be granted titled privilege. It is both a tremendous and inexpensive incentive to align with a monarch.

If  EU institutions seized the assets of the aristocracies and various royal families, it is possible that the man on the street could be offered the choice between aligning with the historic sovereign, and for his grandchildren to inherit a title with a legitimacy aligned with centuries of national history - or the debt-serfdom that is now the best case scenario offered by European democratic institutions.

Critics may point out that monarchies have no political legitimacy and they are the stuff of fairy tales, but it would be wrong to dismiss the influence of religious and spiritual leaders, or the power of the  heroic identity they can imbue. In any crisis, people will align with what they perceive to be power, whether it is of mainstream political institutions, or the autonomy and romance of a resistance movement.

The honours package includes things like, descendents would be permanently aligned with the victors; money and property can be seized, but honours may only be stripped by the grantor; defeat of the grantor makes them no less permanent - what makes it dangerous is that for an individual, it's a fairly good deal. Hereditary privilege is like a lottery prize, it's big enough to take unreasonable risk, and valuable enough to some to risk everything for.

In some parliamentary democracies, royals can still dissolve parliaments.  Even if not directly in law, they might still be able to muster the popular support for a transition, simply because for the man on the street, alignment with sovereign may hold a greater promise than being a mere public debtor in a broken society. If the EU and the IMF can back the Troika to manage countries in receivership and appoint technocratic leaders without a plebiscite, it seems equally plausible that a royal could appoint a group of loyal technocrats. Truly, politics is the art of the possible.

Indebted governments could cede land in exchange for debt forgiveness, and then a rebel sovereign could use an army to take it back. Sure, the Troika can have the land to pay the debt, but if they lose it because they can't defend it, well, it would appear that's their loss. The underestimated power of royals is that their ability to confer honour enables them to convene popular armies. International institutions have some hopeful commitments of support from their member states, but without an army of their own the IMF, the troika, the EU or any others may not be able to enforce the claims they accepted to settle debts. 

A return to monarchy is not a solution to the debt crisis, or much for that matter, but when insolvent governments start confiscating deposits and assets from citizens and foreign investors, those people will be looking for somewhere to turn. There is a plausible (if unlikely) risk that if the troika treads on the few families who are still widely perceived as the fount of honour in their various nations and cultures, they may ignite a tinderbox of popular support that would unite their opposition under the aegis of a mythical past and an honourable future. That aristocracies avoided total annihilation in the 20th century suggests they can probably survive anything. If the various deposed dukes, barons, ladies, princes and princesses of Europe start manning the barricades against international debt collectors, I would go with history on this one and say that the smart money is on the sovereign.

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