MANJIKIAN: Cyprus bank tax sets disturbing precedent

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In 1922, the German political theorist Carl Schmitt wrote a book called “Political Theology,” in which he made the now often quoted statement, “Sovereign is he who decides the exception.” What he meant was that the best way to tell who is truly in charge in a nation is to see who the person is who has the power to change the rules – even if changing the rules means changing or suspending the constitution and invalidating the rule of law.  

The true leader is the person in government who seems to have the power in a crisis – whether a genuine crisis or some series of events being interpreted to look like a crisis — to effect sweeping changes. This person utilizes the rallying cry that “this situation is so exceptional, so historically unique, that we must rally around to defeat it in whatever way we can, even if it means temporarily abandoning some of our most cherished national values, such as a respect for the civil rights of our citizens.” 

Real power means being able to suspend or trample the constitution – to be able to decide to use drones without having to inform anyone, or to deny an ever-increasing number of Freedom of Information Act requests, or to be able to increasingly make policy via executive order rather than through the legislature. Schmitt’s personal interest was in the mechanisms by which dictatorship was established, and most of his experience was derived from living in Weimar Germany.

However, I can’t help wondering what Carl Schmitt might think, if he were alive, about the events that unfolded in Cyprus last weekend. The European Central Bank threatened to cut the Emergency Liquidity Assistance which Cyprus had been receiving unless Cyprus’ major banks implemented legislation which would “tax” all investors who have accounts in Cypriot banks an amount up to 9.9 percent of their total deposits. The tax, which the Cyprus parliament rejected on Tuesday, would have wreaked havoc on small businesses, corporations holding funds in Cypriot banks and even elderly European pensioners who have retired to Cyprus to enjoy its warm breezes and low cost of living.  

The proposal led to runs on Cyprus banks and angry protests, including from Russia’s Vladimir Putin, as many Russians have money in Cyprus banks. In explaining why such a move was necessary, Cyprus’ president Nicos Anastasiades argued that without this unprecedented step, Cyprus’ largest banks are likely to collapse. In this statement, he noted that “We would either choose the catastrophic scenario of disorderly bankruptcy or the scenario of a painful but controlled management of the crisis.” The danger here, of course, is that if all citizens are summarily required to forfeit 10 percent of their hard-earned life’s savings in order to bail out the government, then a new precedent has just been established.  

As an American, I can’t help but think that we too have a financial crisis. We too have an unmanageable debt, much of it owed to China, which is growing larger by the moment. At what point could our “sovereign” decide that we too face a catastrophic situation and order similar unconstitutional, draconian measures in our own society?  

The Cyprus scenario is also worrying because it illustrates a cycle which sometimes occurs – once the government starts acting irrationally, citizens are sure to follow. Once Europeans lose faith in their governments and in the European Union, then the stage has been set for the rise of extremist parties. In Britain, citizens were shocked by the results of the recent by-elections in the district of Eastleigh, where more voters supported the UK Independence Party than the Conservatives. The Independence Party has been described as anti-immigrant and anti-EU, and many are shocked that so many citizens are willing to voice support for their platform.  

However, given the recent events in Cyprus, perhaps we should not be shocked. In a world where the most basic facets of democratic government are being violated, it would be more shocking if citizens simply stood by and watched as the politics of exception became the rule.  

Mary Manjikian, assistant professor of government at the Robertson School of government, Regent University, is a fellow of the Institute of Advanced Study at Durham University.

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