Purushottam Agrawal, Alan Gibbard & Bhasmasura

'Democracy is not a mere game of numbers. It is a matter of individual and collective temperament, of the autonomy and credibility of institutions, and a sense of participation for the most marginalised. The current campaign of demonisation of intellectuals, mob frenzy, the systematic weakening of institutional practices ranging from universities and the media to the judiciary and police are indications of Indian democracy turning into a dystopia.

'Those knowledgable about Hindu mythology – and hopefully this included the political Hindutva types – are surely aware of the story of Bhasmasura. The demon was granted a boon by Shiva to turn anybody he wished into ashes, but he soon turned upon Shiva himself. The myth holds lessons for those who believe that their power and the forces that they have unleashed will remain under their control.'

Purushottam Agrawal is a writer, academic and political commentator.

The author is a very distinguished Hindi writer and academic whose views should be taken seriously. 

Though I am Tamil and was educated in the UK- thus my Hindi is not very good!- I have to admit that Hindi writers and journalists- e.g. Vineet Narain, who exposed Hawala scam, and IPS officer Vibhuti Narain Rai who helped ordinary people realzse the true mechanics and consequences of communal riots- have had much bigger and more visceral impact on me than academic or journalistic writing in English- even that of people like Amartya Sen or P Sainath. 

The truth is, it is better for an Indian to express their idealistic, spiritual or political ideas in a vernacular language because it connects up with an action schemata much more easily. The philosopher Alan Gibbard has argued that the essence of normative claims is to tie in conceptually with action. Such action can be of two sorts- first order- which involves doing something about the underlying problem- and second order- displaying approbation or condemnation in the belief that this might somehow cause a first order effect.
English language writing re. India always carries the second order 'conceptual tie to action', but can only attain a first order tie to action if it ceases to be normative simply and becomes 'ideological'. However, in doing so, the second order rent-contestation crowds out first order chrematistics giving rise to purely Gesture Political or Cretinously Credentialist 'tulip boom'.
For ordinary Tamils- Tamil and English are interchangeable because we can't help turning English into Tamil- as Anthony Burgess pointed out. Hindi, however, is an 'universal' wholly autonomous language based on Riti's mubahala divorce from Sanskriti. 

One consequence is that univocal Reformism, even in khaki knickers, could not make much impact on the Hindi Lebenswelt- though one could say that as individuals, people like Vajpayee, even Modi, are part of Ganga-Yamuna 'tehzeeb' or 'shathiyaat'.

By contrast, thanks to Stalin's philosophy of language, Communism has had huge impact on each and every part of India. Also, shooting managers who fail to meet targets turns out to be incentive compatible- as well as a salutary recreation. Indeed, Savarkar declared that India should be Socialist because Communism was the quickest way for a country to become powerful. 

Since the erudite and humane author has a connection with Mexico (and it is this type of lateral connection which can overthrow 'Eurocentric' or PoCo pretend Scholarship) he will know how much Reformed Religion contributed to the different but exemplary trajectories of M.N. Roy and Pandurang Khankhoje. The latter, an agronomist in Mexico before his return to India fought futilely against Nehruvian pessimism re. the peasant. Ultimately Mexican hybrids came to us twenty years later at the hands of Borlaug and the Rockefeller Foundation!

The RSS or the Jamaat or, in the old days, the Khaksars and so on do have appeal for agricultural people. Since the Tamil Muslim League had the best organised youth cadre, the then Kanchi Shankaracharya asked the Muslim youth to do crowd control at the Kumbhakonam Mela even before Khilafat! 
RSS got stamped as 'Chitpavan supremacism, Khaksars were just crazy, Jamaatis were corrupted by Wahhabi money, Communists turned out to be gerontocratic careerists, Congress was a nepotistic joke, OBC politics turned out to be just Kaleckian factionalism- ideology disappeared from Indian politics long ago.

Still, people like this author have made a great contribution. There is some apophatic spiritual, aesthetic and even intellectual greatness in the Hindi speaking region which attracts people from littoral states.

No doubt, Hindi writers, courting the Mohini of English's facile-too-facile pen, write nonsense as egregious as our own- as in the example quoted above. Still, when they turn back to the mirror of the Vernacular, blessing their own Caliban visage, they are spared the fate of Bhasmasura.

Murder of a Mongolian Conservationist

Sumbe Tomorsukh- Martyred saving the Snow Leopard.

'Damdin'

   Protecting this snow-leopard cub, Sumbe found the strength and passion we need to save our planet.

  His bereaved father, Tomorsukh, is a Forest Ranger who rides a reindeer and tracks down poachers along the shores of Lake Hovsgol in Northern Mongolia. 

Young Sumbe's own work, saving the ibex and the snow leopard, took him a thousand kilometres South to the arid mountains of the Gobi desert. He was a ‘mountain climbing machine’- routinely tackling sharp inclines carrying 50 kilograms of water and salt on his back, while holding a massive piece of ice in his gloved hands, to restock the camera-traps his team set up to monitor prey abundance and population dynamics.

    The reindeer, like the Mongolian pony, is an intelligent and loyal friend. Moreover its antlers aren’t purely decorative. But Sumbe wasn’t riding a reindeer, like his Forest Ranger father that fateful day when he was attacked. He was mounted on a light motor-bike coming down a steep slope where the path narrowed between two rocks when suddenly two masked men jumped forward brandishing knives. He had no choice but to carry on and trust to his momentum to get himself clear. He received 3 wounds- a 4.5cm deep gash below the solar plexus and two slightly shallower cuts on the left and right side of his stomach. He was lucky to have survived. 

     Luck can run out. Even the leopard knows when it is time to run away. Yet Sumbe did not give up and leave Mongolia.

  Seven months later Sumbe's body was recovered from Hovsgol lake. His grieving father was shocked to find, almost immediately, a mobile phone in his car even though it had been previously searched by the Police Detectives who had blandly assured him that his son had committed suicide while drunk.  

 The mobile phone had a chilling voice recording on it. In a tone of quiet desperation, Sumbe blames the Police for not investigating the knife attack on him and instead spinning old wives' tales to explain away the incident. He says, in a tone which is bitter but calm and utterly bereft of histrionics, that to protect his family he is letting the gangsters win because they have all the power and money for the moment. But they are low people. Despicable creatures. At this point there is a voice of someone saying ‘shut up!’ and, on audio analysis, another voice uttering an expletive. Perhaps the gangsters thought their voices would not register on the recording. Or perhaps they knew it wouldn't matter. The fix was in.

  Previously, on the long drive to Hovsgol, from Ulan Bator, Sumbe’s car had stopped in front of a CC camera. He got out of the car alone and walked in a circle so as to be visible to the camera. The intention, clearly, was to show he was driving alone to Hovsgol. The only problem is that analysis of the shadows cast in the footage shows that he had got into the back seat not the front. He wasn’t driving the car. Once again, the perfunctory manner of the frame-up is what makes it so chilling. Sumbe wasn't yet a high official. Thus it was important, not just to bump him off but to do it in so deliberately a slovenly fashion as to showcase how easily the bumping off of an activist can be passed off as suicide.  

  Sumbe Tomorsukh had just turned 27 when he was killed. He had completed his Masters Degree and already co-authored several well regarded Scientific papers in his field. He had attended specialist courses in India and America, and was due to come to the U.K this year to further hone his skills and expertise.

  Yet, according to the Mongolian police, Sumbe was a maladjusted fellow who, for some mysterious reason, kept bothering them with complaints that he had been stabbed in the neck (in May 2014) or, later on, kidnapped and threatened (in January 2015) both times in the City of Ulan Bator, and then stabbed three times in the stomach in the Tost Mountains, before finally being drowned in Hovsgol. 

  It is completely ridiculous to suggest that some ‘Mining Mafia’ exists which threatens or bribes Conservationists into giving ‘no objection’ certificates for Exploratory or Operational Licenses for multi billion World Bank funded projects involving some of the most powerful companies in the world. Sumbe was just unlucky. The attack in the Tost mountains could plausibly have been dismissed as the work of 'Ninja miners'- i.e. illegal prospectors- and the attacks which happened in the Capital city explained away as unrelated acts of hooliganism. But, since the long drive to Hovsgol and subsequent drowning has been attributed to drunken melancholia, the official line is to say that the other attacks which Sumbe reported- even the one for which his Snow Leopard team-mates were material witnesses- never happened at all. With Monty Pythonesque humour, the Police explained that they looked for foot prints and tyre tracks on bare rock, not the places where snow was piled up and the escape vehicle likely to be parked. Strategic stupidity, in the West, is a tactic of resistance associated with 'Good Soldier Svejk'. It has a far more ominous and Orwellian ring in countries with a Stalinist past.

  Still, because Mongolia is a genuine multi-party democracy and because its people really care about their marvellous, but fragile, natural heritage, Sumbe Tomorsukh's sacrifice will not go in vain. 

  Slowly but steadily, Sumbe's father, is uncovering the tracks of those behind this dastardly crime. Not so as to exact a personal Revenge- bygones are bygones- but to help catalyse needful Reform of a Society which could too easily cannibalize itself, the fragile eco-systems which gives it life, in the name of some bogus Economic ideology. Already, a detailed TV documentary on Sumbe's murder has been broadcast. Social Media has enabled young people, already enraged at the rape and plunder of the environment, which adversely impacts livelihoods now and for future generations, to find a rallying point and campaigning issue. The Government may find legal excuses to ban a protest videos by the pop-opera group Uvertura, but they can't un-ring that clarion they first sounded in 2010. The film 'Wolf Totem' directed by Jean Jacques Annaud (of '7 Years in Tibet' fame), based on Lu Jiamin's (aka Jiang Rong) Chinese language book has found an eager audience even amongst alienated urban youth. The wolf, as apex predator, preserved fragile grasslands which might otherwise collapse and fuel apocalyptic dust-storms such as those with threaten Beijing. Interestingly, Mongol youth seem to understand the author's message (he was imprisoned in the Tiananmen aftermath) much better than certain 'Western' vaunted aesthetes and 'engaged intellectuals' who dismissed it as 'fascist' or woodenly 'didactic'. Many, nay most, of these young people have been driven into the Cities only recently because of the double failure of de-regulated Markets and soi disant Democratic Parliamentary Musical Chairs. Like the 'Ninja Miners' who bitterly regret poisoning their own ancestral source of sustenance, the marmots can destroy the integrity of their own habitat if they are not kept in check.

   Wolf and Marmot, Leopard and Ibex, Markets and Regulation, Democracy and the Rule of Law- the one dies without the other.

  Sumbe wasn't trying to make pets out of the little snow leopard cubs he so often rescued. He was acting out of something larger than love, more merciful than compassion, something as vast as the azure sky, which yet is as intimate and implacable as the grief which unites his beloved parents at what Death has divided from them now.

 One day, it may be, Sumbe Tomorsukh  will have a living monument equal to that of the great champion of Multi Party Democracy, S. Zorig- who was murdered in his home in 1998.

  That murder remains unsolved, but, at least, it was acknowledged to be murder. What is happening to the fragile eco-systems of the Gobi is not less than the Chronicles of a Genocide foretold- a planetary disaster emerging plutocracies ignore at their peril.

  Sumbe, like his father, understood very well what role apex predators play in fragile eco-systems. The ancient Sages expressed it thus- 'where the leopard is endangered, the forest can not survive. When the forest disappears so do the rains and rivers. Where waters fail, famine follows.'

  Sumbe was repeatedly attacked and threatened. He could have kept quiet or gone away and earned laurels as an Ivy League, if not Ivory Tower, Acadmician. He did not do so because he understood this was not a story about a single greedy company or a clique of corrupt kleptocrats. The issue here is centralized control of water- the diversion of rivers across vast distances so as to create a mirage of wealth- in the service of a Chrematistic swindle that couldn't take in a child.  

  Sumbe's blood was shed in the arid region where he had himself carried water to ensure the survival of an endangered cubs. He was drowned near his own home in the water rich north. There is a sort of twisted sub-text to the way his murder was staged. Surely all we need to do is to spend a few billion piping water from one place to another so as to extract ever increasing dividends without paying any price in terms of the loss of the cuddlier type of animal? Once everybody signs up to the new grand design, everything will be fine- we won't have any more 'Ninja Miners' poisoning the environment- big Corporations, meshing with each other seamlessly, will take care of everything smoothly and neatly.

  There is a problem with this story- a problem Mongolians understand all too well. Commodity markets crash regularly. In the boom years a tiny elite is enriched beyond the dreams of avarice with no trickledown- then, when the bust comes, the same Corporations morph and downsize creating a class of impoverished 'Ninja Miners' symbiotic with the State's retreat to cosmetically Modern Metropolitan enclaves for a spot of old fashioned Manorial Rent extraction.

  Big irrigation schemes, and grand hydrological projects- Communist or Capitalist- promise much but deliver little. In the end, they divert water from those who use it efficiently, that is sustainably, to vested interests who squander it senselessly. Democracy, Transparency, Accountability- these are as necessary as water. Without them, livelihoods and eco-systems will be destroyed in an irreparable manner. Economists and Evolutionary Biologists are beginning to understand that 'regret minimization' not 'profit maximization' is what underpins stable, sustainable, equilibria in the real world where you have to expect the unexpected. Sumbe learnt this lesson at his father's knee even before his Academic success. It is time for Pundits and Policymaker's to admit that killing golden geese doesn't work out well for anybody.

 Brutal men shed Sumbe's blood to secure the mirage of wealth. But, by shedding the blood of a young innocent who carried water to helpless cubs- they may just have triggered a mounting flood of protest and indignation which will cleanse the Augean stables of corrupt politics and corporate wrongdoing in Ulan Bator as surely as S. Zorig's blood sacrifice established Mongolia firmly upon the path of Democracy and the Rule of Law.

                                        Sumbe's father 

Father & Son- fighting the good fight.

Notes

1) Sumbe's father is featured in 'Sons of Taiga' the official video of the Lake Hovsgol Conservancy & Mongol Ecology. (this has English subtitles)

His picture is taken from the Snow Leopard Trust website. 

2) The two parts of a Mongolian language documentary on the murder of Sumbe can be found here- https://www.youtube.com/watch?v=lLpG-vFriu0

https://www.youtube.com/watch?v=ql2AM-t3lTs

Mafias, Mujahideen and Agha Shahid Ali's Rizvan.

“We also have mafia in Kashmir.' said Zafir-  a 38 year old former Mathematics teacher, now working, thanks to E.U funding, as an agricultural labourer on land seized from criminals in Corleone, Sicily-  "The mujahideen are like mobsters. I look at what the Italians have done here, I realise how far away my land is.”

Zafir says he hopes to buy land in Italy and to settle on it with his wife who is currently back in Kashmir. However, his wage, from the E.U Migrant Fund, is only 600 euros per month which works out to little more than, to international scandal, the Mafia paid African migrants to work in similar fields only a couple of years ago. The NGO which helps Zafir probably receives more than 1200 euros per month for helping him. Still, the danger exists that the Mafia may gun him down so as to scare off that NGO from cultivating their sequestered land.

How much would Zafir have earned in Kashmir as a teacher? His base salary would have been about 300 Euros per month. For a 38 year old, sound in wind and limb and capable of displaying a little initiative, 500 Euros per mensem would be easily achievable.  Yet Zafir isn't teaching Maths in Kashmir, he is learning how to cultivate the land- like his remote or illiterate ancestors.
Why? Well, the  E.U and the Italian Government are paying upward of Euros 1800 per month between them, of which Zafir gets to keep 600, so that some stupid bureaucratic pretense that a single arrow is hitting multiple incompossible targets, is farcically kept up. 

What is noteworthy is that Zafir is now no safer from a Mafia bullet than he was from a Mujahideen bullet and the work he does, however ineptly, now is far harder, much less Socially beneficially, and offers fewer prospects for promotion. Still, it may be, Zafir will gain settlement rights and start up a business or migrate to a more salubrious area- perhaps even the U.K, which was probably his preferred destination at the inception of his Odyssey. 

Thus, unlike the Mafia, which terrorized Sicily and which is making millions out of the migrant crisis, or the Euro-Italian bureaucracy- complicit if not in cahoots with this bonanza for criminality, corruption and clownishly cosmetic social engineering- Zafir and his possible descendants, if his wife manages to join him, may actually end up making a positive contribution to Europe. 

 Still, the fact remains that Europe is out of pocket by at least 1800 Euros a month by keeping him in Corleone. The market clearing price for agricultural labour in the area might be 500 Euros once Agricultural subsidies have been discounted. 

Clearly, sooner or later, laws will be changed to reflect the fiscal realities of Migration and such subventions will cease. Indeed, if the Mafia ever really ceases to morph and thus loses power, then the corrupt constituency for such subventions will itself disappear. Ever larger numbers of migrants washing up on Italian shores, however, will not.

Zafir was taking a well trodden path to prosperity when he set out on his adventure. Asylum seekers, bogus or otherwise, who arrived in Europe in the last three decades generally improved their life-chances and those of subsequent arrivals similar to themselves. It seems this may no longer be the case. More and more migrants, like Zafir, will find themselves either in privately run Refugee Camps where they are brutalized and illicitly used as cheap labor or else exiled to remote rural locations and a life of back breaking toil. Meanwhile, entrepreneurs and highly educated professionals from their home countries will easily get Visas and crowd out the poorer class of natives from desirable neighborhoods in thriving Cities. This is especially true of countries- like India- which are growing rapidly. However, so long as Mujahideen exist, such growth will be uneven and there will be more Zafirs.

In India, teachers in Govt. Schools count the votes at elections. This can make them a target for Radical Outfits- often funded by the very diaspora their actions created- which have declared a boycott of the polling booths. Thus, teachers may feel they have to flee knowing full well that by doing so they are destroying the life chances of the rising generation and thus handing victory to the thugs who drove them out.

Agha Shahid Ali, the Kashmiri-American poet who, as a child was permitted to have a 'puja' altar to Krishna in his room by his Shiah parents, and who relished the cuisine of the Pandits whom the Muhajideen ethnically cleansed from his natal valley, wrote a prose poem called 'The Country without a Post Office' which contains the following line- 'You must have heard Rizwan was killed. Rizwan: Guardian of the Gates of Paradise.'

The Mafia, like the Mujahideen, too claimed to be Guardians. Indeed, they got their claws into Corleone claiming to safeguard property rights and family honor and Sicilian culture. But they weren't the only 'Guardians' jockeying for position. Where the claims of Governments overlap- even those of a nation and that of the wider political union it has voluntarily acceded to- disaster swiftly follows.

As a young Kashmiri poet- in my novel, Samlee's daughter- says

Emrys Westacott's Existential fallacy

What kind of fallacy is Prof.Emrys Westacott guilty of here?

'...we have separated out several different kinds of respect. These are: (1) respect for a person in virtue of what they share with all humanity (2) respect for a person in virtue of their specific qualities, achievements, or experiences (3) respect for a person's right to hold a belief (4) respect for a particular belief A lot of people assume that both (1) and (3) entail (4); so they worry that to withhold (4) implies that one is withholding at least (1) and (3). This is perhaps what underlies much ready talk about respecting beliefs. The worry is perhaps exacerbated by the fact that withholding (4) may well involve a diminishment of (2).'

Since Respect has to do with a prudential regard and heedfulness, it is linked to 'regret minimization' as opposed to 'utility maximization'.  We may respect the corporeal inviolability of the golden goose, by not slitting its gizzard, because we will later regret losing its golden eggs. We may respect the numinous sanctity of the Capitoline geese because, it may be, they can sense things we can not- perhaps an invasion, but perhaps also an earthquake. Respect for the Environment or for animals or for oracles or autistic savants may be prudential and 'regret minimizing'.

A special instance of Respect arises in the case of autonomous agents capable of rational information processing and intelligible discourse.
Respect for such persons as 'ends in themselves' may well be 'regret minimizing' even though, in the short run, some benefit is not ruthlessly extracted from them.
Such respect may even be something 'shared with all humanity' in the special sense that there is a reflective equilibrium all reasonable people would agree to and thus we can assume a 'Revelation Principle' such that strategic problems need not detain or deter us from eusocial Mechanism Design or the deontic or doxastic reasoning in which such Mechanism Design is embedded or expressed.

The problem here is that if we knew what a given person shares 'with all humanity' then we would have a metric for 'respect' (i.e. the vector associated with the relevant reflective equilibrium's Hannan Consistent information aggregating multiplicative weights update algorithm) which, sooner or later, all people with equal knowledge would concur with. There would be 'Aumann Agreement' as to the extensional content, both general and specific, of the word 'respect'. It would be well defined and eminently operationalizable.

Clearly no such knowledge actually obtains. Indeed, it can not obtain if Knightian Uncertainty exists and human beings evolved by Natural Section. Thus (1) is vacuous. It commits the existential fallacy. For a given human, what is shared with all Humanity, and which is also of salience in this context, might well be the empty set.

 If human beings really did evolve from non-humans, who in turn rose up ultimately from inorganic matter, then the underlying set is impredicative. It may also, for all we know, be infinite. Thus, there is no warrant for assuming away the existential fallacy for the purpose of a elaborating a deontological comparative statics.

Still, purely as a doxastic exercise, let us grant (1)- with the result that having a non empty doxastic endowment is assumed to be a property of every agent. 

 The problem here is that (2)- i.e. discriminating a specific person's 'qualities, achievements and experiences'- requires us to ascribe an epistemic content to (1). Indeed, we might say there is a dialectical relationship between (1) and (2). The more we learn about the specific individual's haecceity, the more our idea of 'what is shared with all humanity' changes and this is a continuous and reciprocal process as more individuals fall within our ken.

One way out is to end this doxastic exercise immediately with the acknowledgment that this sort of thing is better covered by Game Theory- more particularly because strategic considerations arise under the rubric of Newcombe's problem, Kakfa's toxin and so on. If there is any Evolutionary benefit from 'doxastic' dialectic, it can be illuminated by the Mathematical and Quantitative Sciences. We can turn back to Parmenides and let doxa make its own way in the world.

However, it appears that Prof Westacott knows of people who believe (3)- i.e. that a duty to respect another person's right to subscribe to a doxastic system exists. Surely this duty could be discharged most efficaciously by abstaining from evangelizing for one's own favored belief system? Don't ask, don't tell- least said, soonest mended. In this case, no obnoxious dilemma related to (4)- viz. respecting particular beliefs- need arise.

Popatlal Mirchandani- true inventor of the light bulb.

In 1974, I was asked the following multiple choice question in my Junior Science Talent Exam
'Who invented the Electric Light Bulb?'
a) Popatlal Mirchandani a.k.a 'Lizard of Menlo Park'
b) Yao Bao Hu a.k.a 'Gizzard of Menlo Park'.
c) Thomas Alva Edison a.k.a 'Wizard of Menlo Park'.
d) Ancient Vedic Rishis a.k.a 'Blizzard of Menlo Park'.

I thought it was a trick question and put down (a) because Wizards don't really exist whereas Lizards do and are just as likely to be Sindhi inventors as anything else. The result is that I lost a valuable scholarship which reduced my life chances and reproductive success. Thus, literally billions of possible descendants of mine were denied a chance to exist.

There is still time to reverse this horrible outcome. By Law, Popatlal Mirchandani, a.k.a 'Lizard of Menlo Park' should be declared the true inventor of the Electric Light Bulb and my test scores in the Junior Science Talent Exam adjusted to reflect this.

Why is the Media focusing only on Woodrow Wilson and Cecil Rhodes? What about the genocide of my potential descendants brought about by the Establishment's refusal to credit Popatlal Mirchandani with the invention of the Light Bulb?

Varoufakis as Mathematician.

Yanis Varoufakis got a lower second class degree in Mathematical Economics from the University of Essex.  How good is his Maths? Can he multiply and subtract? What's more can he multiply and subtract in an Economic context? Let us look at the evidence- the following is from a Project Syndicate article (not actually a Spank Mag- believe me, I checked) published last month. My comments are in bold.

'Imagine a depositor in the US state of Arizona being permitted to withdraw only small amounts of cash weekly and facing restrictions on how much money he or she could wire to a bank account in California. Such capital controls, if they ever came about, would spell the end of the dollar as a single currency, because such constraints are utterly incompatible with a monetary union. https://www.project-syndicate.org/commentary/greece-dual-currency-regime-by-yanis-varoufakis-2016-01#Lhm32CE5g1edaVbx.99

Suppose Arizona has just one bank. It is insolvent. The Fed could agree with the Receivers of the insolvent Bank, that small transactions can go through because they will net out in a predictable manner but that large transactions or cash withdrawals will not be permitted. Clearly, this is a stop gap measure of a type familiar to Insolvency practitioners.  In the long term, Arizonan depositors will take a haircut whose size depends on relevant Deposit insurance provisions. Shareholders are likely to be wiped out and different classes of creditors will settle for cents on the dollar. There is no implication for 'monetary union'. True, there may be an Arizonan political party which demands secession from the Union and the refinancing of the troubled Bank through the establishment of a new currency. If Arizona does a lot of trade with the rest of America or receives net transfers, this course of action would be suicidal even if it were politically or militarily feasible. Why? Creditors in other States would be able to get Court orders to distrain assets owned by, or remittances to, relevant Arizonan counter-parties so as to satisfy their own claims. Those Arizonans with positive net assets or transfers with respect to the rest of America will have to be coerced to accept the new currency or the intermediation of the re-financed Arizonan Bank. If this is not done, then the new 'funny money' will rapidly inflate away into toilet paper. 

Varoufakis thinks otherwise. Why? Turns out he's been doing a bit of Mathematics. Let us see how good he is at multiplying and subtracting.

Greece today (and Cyprus before it) offers a case study of how capital controls bifurcate a currency and distort business incentives. The process is straightforward. Once euro deposits are imprisoned within a national banking system, the currency essentially splits in two: bank euros (BE) and paper, or free, euros (FE). Suddenly, an informal exchange rate between the two currencies emerges.

Urm...Capital Controls lead to Currency Black Markets and/or 'Multiple Exchange Rates'- everybody knows this. If Tax evasion and money laundering are going on there is already going to be an effective 'Black' exchange rate depending on the level of risk and size of the transaction involved.  A guy running a kebab shop in Kensal Green who launders his money through Cyprus is probably paying about a 7 to 15 percent premium. If VAT goes up along with stricter enforcement and hence detection rates, the premium goes up (unless there is a compensating Supply shock). If VAT falls, the premium falls because demand decreases.

Consider a Greek depositor keen to convert a large sum of BE into FE (say, to pay for medical expenses abroad, or to repay a company debt to a non-Greek entity). Assuming such depositors find FE holders willing to purchase their BE, a substantial BE-FE exchange rate emerges, varying with the size of the transaction, BE holders’ relative impatience, and the expected duration of capital controls.

On August 18, 2015, a few weeks after pulling the plug from Greece’s banks (thus making capital controls inevitable), the European Central Bank and its Greek branch, the Bank of Greece, actually formalized a dual-currency currency regime. A government decree stated that “Transfer of the early, partial, or total prepayment of a loan in a credit institution is prohibited, excluding repayment by cash or remittance from abroad.”

Actually, what happened was this. Varoufakis was Finance Minister when the Banks closed. A couple of weeks after he resigned they reopened with stringent limits on withdrawals. The decree he mentions came into effect at that time- i.e. 20th July- two weeks after he resigned. It was the Government of Greece, led by Tsipras (with whom Varoufakis had not yet broken ties) who passed this law. Incidentally, the Bank of Greece is not a branch of the ECB. Its Governor is the Greek economist who invited Varoufakis to take up a Professorship at Athens University. 

The eurozone authorities thus permitted Greek banks to deny their customers the right to repay loans or mortgages in BE, thereby boosting the effective BE-FE exchange rate. And, by continuing to allow payments of tax arrears to be made in BE, while prescribing FE as a separate, harder currency uniquely able to extinguish commercial bank debt, Europe’s authorities acknowledged that Greece now has two euros.

The Eurozone authorities did not have the power to prevent Greece passing the law Varoufakis complains about. Europe's authorities 'acknowledged' nothing. They did not say 'our Banks will only accept Euro transactions emanating from Greece if they are of a particular sort'. No rules were changed by Eurozone authorities. The Greeks had made certain sorts of transactions illegal and this had consequences for Banks dealing with Greece no matter where they were registered. 

The real effects of the dual-currency regime on Greece’s economy and society can be gleaned only from the pernicious interaction between the capital controls and the “reforms” (essentially tax hikes, pension reductions, and other contractionary measures) imposed on the country by the eurozone authorities. Consider the following beguiling example.

Greece’s companies fall roughly into two categories. In one category are a large number of small firms asphyxiating under the tax office’s demand that they pay in advance, and immediately, 100% of next year’s corporate tax (as estimated by the tax authorities). The second group comprises listed companies whose depressed turnover jeopardizes their already diminished share value and their standing with banks, suppliers, and potential customers (all of which are reluctant to sign long-term contracts with an underperforming company).

The coexistence, in the same depressed economy, of these two types of businesses gives rise to unexpected opportunities for shadowy trades without which countless businesses might close their doors permanently. One widespread practice involves two such firms, say, Micro (a small family firm facing a large advance tax payment) and Macro (a publicly traded limited liability company that needs to demonstrate higher turnover than it has).

Macro agrees to issue invoices for (non-existent) goods or services rendered to Micro, up to, say, €20,000 ($22,000). Micro agrees to pay €24,600 into Macro’s bank account (the price plus 23% value-added tax) on the understanding that Macro will reimburse the €20,000 to Micro. This way, at a cost of €4,600, Micro reduces its taxable revenue by €24,600, while Macro boosts its turnover figure by €20,000.

Alas, due to capital controls, Macro cannot reimburse Micro in FE, nor can it wire €20,000 to Micro’s BE bank account (lest they be found out by the authorities). So, to seal the deal, Micro and Macro approach a cash-rich vendor. This is usually a gas-station owner who is flush with cash at the end of each day and who, for security reasons and in order to pay for his fuel supplies, is obliged to deposit his cash daily at his bank, turning valuable FEs into less valuable BEs. The mutually beneficial deal is completed when Macro wires €20,000 in BE to the gas-station owner, who then hands over a smaller sum of FE (cash) to Micro’s owner, pocketing the difference.

The fact that this informal deal benefits all sides exposes the terrible inefficiency of current fiscal policy (namely, punitive business taxes) and how capital controls magnify it. The state collects additional VAT from Micro (at a loss of corporate taxes that Micro cannot pay anyway); Macro enjoys the benefits of seemingly higher turnover; and the gas-station owner reduces his losses from converting FE into BE. The downside is that economic activity is overstated and, more important, that reform becomes even harder as entrepreneurs internalize the necessity to find new, creative ways of bending the rules.

So, Varoufakis thinks 'Micro' will want to escape the 26 percent Corporation Tax by committing a crime which involves paying 23 percent VAT! What's more, Macro- a big company- and this cash rich petrol station owner will also be willing to commit crimes just to get a share of the 3 percent difference between the VAT rate and the Corporation Tax rate! Are Greek business men crazy? Who in their right mind will commit a crime for just a one percent margin? Suppose Greek business men really are like the utility maximizers of Game Theory. Will 'Micro' be any better off? No. He paid his Corporation Tax in advance. The assessment is based on previous earnings. The sudden appearance of an invoice for services from 'Macro' won't get him a refund but it may get him an audit. The immediate effect of Micro's action is that he first pays Advance Corporation Tax and then pays VAT on a bogus transaction, so as to reclaim some of that tax, but then, because Tax authorities assume people are rational and if their Cost of Sales went up, so must their profits, ends up either paying double or else getting caught and ends up paying a huge fine or going to jail. At no point does Micro end up with more money in his pocket than he would have if he had stayed honest.  

What about 'Macro'? By issuing the bogus invoice, he has to hand over not just VAT but also Advance Corporation Tax on his profit from the supposed sale.  Suppose his net profit is ten percent. Though, Revenue and Cost of Sales went up equally- by 20,000- Net Profit will be predicted to rise by 2000. The Advance Corporation Tax liability, at 26 percent, will be 520.  So, to chase a one percent illegal profit of 200 Euros, 'Macro' incurs an immediate Advance Corporation Tax liability equal to 520 Euros! What's more, sooner or later, he can look forward to a Tax audit and a big fine and a cozy jail term.

What about the Garage owner? He has cash Euros which he wants to deposit outside Greece (only a nutter would put his money into Greek banks after what happened last year). Many Greek businesses are re-locating to Bulgaria. They have a proven business model but need working capital which is costly for them to acquire because foreigners don't know them and will charge a premium. Clearly, this is an arbitrage opportunity of a sort which Greeks have been successfully exploiting since the the time of Homer! I don't know off hand what the cost of laundering 'Petrol Garage' Euros is but it can't be higher than what the local West London doner kebab king is paying because British enforcement is tougher than anything that yet obtains in Greece. 

Varoufakis thinks the Garage owner will invoice Macro for 20,000- incurring God knows how much VAT and fuel tax liabilities in addition to the Advance Corporation Tax on the supposed profit from this transaction- in order to get a wire transfer of 'BE'. Why on earth would he be crazy enough to do this? If he is so patriotic as to want to keep his money in a Greek Bank, he can do so at zero risk and less than one percent cash collection cost rather than getting in bed with Macro and Micro. If he wants to get into the Currency black market- handing out paper packages of 20,000 euro notes to guys he's never met- he should do so without getting involved in a paper trail. In any case, the guy needs to be super-liquid to pay his suppliers. He's the last person on earth who wants to be caught currency poor if the Banks close again.

The sole purpose of the capital controls imposed on Greece last summer was to force the country’s rebellious government to capitulate to the eurozone’s failed policies. But an unintended consequence was the formalization of two parallel (euro-denominated) currencies. Combined with the punitive taxation caused by Europe’s refusal to recognize the unsustainability of Greek public debt, the dual-currency regime produces unforeseen incentives for informal transactions in a country that desperately needs to defeat informality.

The reality of Greece’s two currencies is the most vivid demonstration yet of the fragmentation of Europe’s monetary “union.” In comparison, Arizona has never looked so good.

The Greek Government, not the ECB, passed the law Varoufakis complains off. Exchange Control was never demanded by the Eurogroup. The Greek Government, of course, is perfectly at liberty to introduce 'FE' auctions, or formalize a multiple exchange regime, like other IMF defaulters. The course they have taken is that of least resistance. However, it must be said, Varoufakis's own plan would have been significantly worse. 

Last August he wrote as follows-

In Greece, where the central bank is unable to support the state’s endeavours, government arrears to the private sector — both companies and individuals — have been a drag on the economy, adding to deflationary pressures since as far back as 2008. Such arrears consistently exceeded 3 per cent of gross domestic product for five years.

The phenomenon is both the cause and consequence of delayed tax payments to the state, reinforcing the cycle of generalised illiquidity.

To address this problem, our simple idea was to allow the multilateral cancellation of arrears between the state and the private sector using the tax office’s existing payments platform. Taxpayers, whether individuals or organisations, would be able to create reserve accounts that would be credited with arrears owed to them by the state. They would then be able to transfer credits from their reserve account either to the state (in lieu of tax payments) or to any other reserve account.

Suppose, for example, Company A is owed €1m by the state; and it owes €30,000 to an employee — plus another €500,000 to Company B, which provided it with goods and services. The employee and Company B also owe, respectively, €10,000 and €200,000 in taxes to the state. In this case the proposed system would allow for the immediate cancellation of at least €210,000 in arrears.

Okay, lets try this. My cousin Vivekides Iyeromogolou pays 100 Euros cash in bribes to get a Govt. contract to supply 100,000 of worthless rubbish- profits to be split according to the time honored formula such that all relevant wheels are greased. 
Currently, since the ECB won't play ball, Vivekides gets nothing because the Govt. has no funds to disburse - which discourages him from such activity. 
Under Varoufakis's scheme, however, he can immediately- no questions asked- trade this notional 100,000 to some guy who genuinely owes that much in taxes. Vivekides can now proceed to pay off the Greek Bank Accounts of the other crooks involved such that it appears that the worthless rubbish has been delivered and found to be of acceptable quality. Currently, Vivekides's conter-party  is paying the Greek Treasury in Euros using his domestic Bank account because that Bank might go bust anyway. Under Varoufakis's new scheme, however, he can have his cake and eat it too. Vivekides will trade his 100,000 for a fraction of the counter-party's Bank Balance. The Govt. gets stuck with 100,000 of worthless rubbish and also loses whatever Vivekide's share of Greek Bank Euros could otherwise have legitimately purchased. 
But the game doesn't stop there. Essentially you now have the possibility for a complicated deal whereby a criminal with some 'black Euros' can get a 10,000 credit in his Bank account so as to create a 'legal' front for his criminal gang, by paying Vivekides 1000 Euros cash down in return for which Vivekides hands over his 100,000 credit for worthless rubbish. This 100,000 credit eventually finds its way to a genuine tax payer- a, perhaps, not over scrupulous businessman holding 'blue Euros' (on an analogy with the Argentinian blue dollar, which functions like an unofficial foreign exchange auction)  arising from off the books, or falsely invoiced, transactions by exporters, who now settles with the Greek Treasury at a much smaller sacrifice of Internationally accepted fungible assets than would otherwise be the case. Everybody wins- except the Greek Treasury which gets stuck with its own worthless scrip. Varoufakis just fucked over his own Govt.- again!

Suddenly, an economy such as Greece’s would acquire important degrees of freedom within the existing European monetary union. In a second phase of development, which we did not have time to consider properly, the system would be made accessible through smartphone apps and identity cards, guaranteeing that it would be widely adopted.

In other words all current tax payers with access to black or blue Euros would immediately be able to buy 'tax Euros' for pennies. The Treasury gets worthless 'tax Euros' which no one will be willing to receive for the supply of stuff which aint worthless simply. Govt. can't buy anything. It can't raise any revenue. The State has withered away- thanks to Varoufakis's genius. No doubt, as a former President of the Black Student's Alliance at Essex university circa 1978, Varoufakis will be declared President for Life by the grateful Greek people whose desire to adhere to the 'Europeanist' project actually meant joining Zimambwe and Somalia and Sudan as IMF defaulters because as Varoufakis said 'Greeks are the Blacks of Europe'.

What is your verdict on Varoufakis as Mathematician? Yes he can multiply 20,000 by the VAT rate and get the right answer which is 4,600. He says that a total of 24,600 can be deducted by 'Micro' from his taxable revenue. This isn't true. It is a bogus transaction bound to attract an audit unless Greek tax authorities are incompetent- in which case the simpler and safer method is simply to lie to them ab ovo. 

Moreover, since Greece is moving to 100 percent Advance Corporation Tax, this does not mean Micro gets any money back today. It seems, Varoufakis can multiply all right but if he does so then he can't subtract properly.

Moreover Micro has to pay a commission to the Garage Owner. Thus he is losing more than 4600 today in order to avoid paying 5200 at a later date and committing a crime in the process. Assuming even purely computerized checking by the Tax authority- the increase in his Cost of Sales by 20,000 will actually cause him to receive a demand for as much as 10,400 extra Euros (assuming typical Gross Profit mark ups for micro enterprises) ! Of course, if the Greek Tax authorities are utterly worthless, this may not happen- but in that case why not just under-report Profits in the first place? Even if this were not the case, would any sane person sacrifice liquidity at this time for so paltry and problematic a reward?

What about the counter-party- the big firm 'Macro'? Varoufakis correctly calculates that they have to pay 4,600 in VAT at the end of the quarter. But he forgets to add the Advance Corporation Tax on the profit from this transaction.  Furthermore, he neglects the role of the external auditor (Macro, presumably, is a public quoted company). 
Assume Macro's net profit margin is ten percent- then it has incurred 520 in immediate tax liability purely on the basis of increased turnover. However, because of its bogus transaction with the Garage owner- which boosts Cost of Sales and thus projected Gross Profit (unless the two transactions are set off against each other- which would immediately raise red flags and give the game away)  the total expected net contribution from the bogus transaction (because fixed costs remain unchanged) will look double that of genuine transactions- i.e. it will be close to the VAT rate. This happens even if the payment to the Garage owner isn't shown as 'above the line' (i.e part of Gross mark up) but appears to be directly related to boosting contribution to fixed costs. Since the relevant marginal contribution on novel below the line items must be high- otherwise the external auditor objects- the net profit rate appears to have increased. The more 'Macro' indulges in this sort of bogus transaction, the more it looks as though its net profit margin is actually much higher than what it really is- viz. eleven percent of which ten percent is legal and one percent illegal- and that it is hiding money.  This means, sooner or later (assuming Greek Tax authorities are competent) Macro gets a huge tax bill based on total turnover but computed at this new, purely fictitious, net profit rate. Of course, if tax authorities aren't competent, everybody would just pretend to be making a loss to avoid Corporation tax altogether. In either case, rational agents (even the artificial sort who figure in Game Theory) will never act in the manner Varoufakis suggests. Unless, that is, they are equally stupid and ignorant.

What is our conclusion? Varoufakis can multiply correctly but if he does so he then loses the ability to add or subtract relevant totals. Essex University gave this guy a Degree- a lower Second admittedly- in Mathematical Economics. They must be so proud.