Archive for November, 2010

Tuesday, November 30th, 2010

Nick Clegg, the Lib Dems and Tuition Fees

The Deputy Prime Minister, together with his Lib Dem colleagues in the Coalition are in some difficulty over tuition fees. They all signed a pledge. Now they have to make excuses why they have to renege on the pledge. Not just an off the cuff pledge; one they all signed on camera. Oh dear.

Their supporters, especially students, are very unhappy. They are young and having something of a baptism of fire into the ways of modern, dishonest and duplicitous politics. This is a good thing, as enough of them may be motivated to change the style of politics and make it more honest and honourable. When they have graduated and are busy paying back much bigger student loans than they were promised in the notorious pledge.

The Party grandees argue that they did not realise the state of the books and now they know how bad things are they have had to trim their ambitions for this parliament. They should have read this blog more carefully before the election. We knew exactly how bad things were. We had all the figures. Why did not the Lib Dem leadership?

There are two answers. All politicians of all parties, even the Tories, were in a state of denial about the scale of the crisis, which was the outcome of policies over the last twenty years or more, involving all parties of government. The Lib Dems went with the flow. The second answer is that the third party in our democracy enjoyed the luxury, once again, of making campaign pledges it could not keep, because it knew it would not have to, because it would not win. Then it did, or sort of.

Tuesday, November 30th, 2010

Hillary Clinton and Wikileaks

It is understandable that the U.S. Secretary of State, one of the most respected politicians on the world stage, expressed outrage over the potential damage of the mass leaking of confidential, rather than secret, material. Nevertheless this Blog remains of the view that this is a sign of the times and no bad thing.

These are not the blueprints of an American weapons system or a new missile defence. This is the stuff of diplomatic assessment, even gossip. Some of it shows Americans quite prim and unreal. When we learned a ‘royal’ had behaved inappropriately we thought of trysts with tabloids lurking. In fact he said what he thought in rather blunt terms. We like that. Prince Andrew’s stock has risen. At this blog anyway. The shocked U.S diplomat should be invited to spend a day with Prince Philip.

After the annoyance, America will learn fast. It will learn, as the younger generation the democratic world over already knows and feels, that people are no longer willing to be governed on the basis that they are told one thing, while those they elect to govern them do another. If they are to pay taxes, fight wars and endure economic austerity, they want the full picture. They expose more of their thoughts and feelings on social networking sites than was ever thought conceivable in the past and they expect their leaders to do the same.

Moreover these cables were shared, it appears, among three million Americans. If three million why not all? Why does some NCO so far down the chain to be almost buried, have the power to ping all this stuff to the world? The lesson is that in the modern world the Internet, even password protected secure channels, is no place for real secrets. These still have to be passed by word of mouth in bug free rooms or by packages left in trees. The Internet is for gossip and gossip is for all. Like this Blog.

Monday, November 29th, 2010

Iran and North Korea

Many will be surprised by the Wikileak disclosure that Arab leaders, namely those of Saudi Arabia, Jordan and Egypt would like America to bomb Iran. These are Sunni Arabs who previously regarded Iraq as a bulwark against Shia domination. The outcome of the negotiations to end the impasse in Iraq has produced a Shia government leaning towards Iran in which Sunnis play a part but have limited power. This was not an outcome which the Iraq war was supposed to produce.

These disclosures could harden attitudes towards Iran and its image will be dented by the wider realisation that it has Arab enemies. Nevertheless this Blog remains of the view that there is far too much anxiety about an Iranian nuclear bomb, which has derailed coherent foreign policy, especially in London and Washington, and is in nobody’s interests.This is in part because a younger generation of politicians have forgotten the principles of deterrence.

It is fair, if not desirable, for Iran to have a bomb if it makes it feel safer (not an idle aspiration as the Wikileaks show). It must be told therefore that in that event any first use or attempt at it would bring about a massive nuclear counterstrike which would wipe Iran from the map. This is how the cold war stayed cold and why we are all still here today. The same can be said to North Korea, a missile collaborator with Iran. It was said by Bill Clinton when he was President when he warned Pyongyang that any use of the bomb would ‘mean the end of their country’.

What is emerging from leaks and from a shift from prescriptive style diplomacy towards one based on self interest, is that China and Russia are allies of Europe and America over the twin problems of Iran and North Korea. Officially their pronouncements may look as if they are backing these unpredictable regimes, but in reality they know that they do pose a significant problem. This is not an alliance of ideologies. It is an identity of interest. In this alliance, however, certain elements will be different. Engagement will be the driver, avoidance of military action with unpredictable repercussions and uncertain outcomes will be the thing to avoid and America will not be the only voice, neither will it have the last word.

Monday, November 29th, 2010


This is more profound than politicians and diplomats realise. It is also a very good thing. The information revolution requires that those in authority keep those who put them there truthfully informed about what is really going on. The age of suppressed democracy, when people were influenced by a perception of events which would have altered had they known the truth, has gone for good. This will make democracy stronger, although it may well require a different style of politician and a different style of government. Clearly countries governed by less open systems are less affected, but even they will find secrets laid bare, if their governance requires modern technology. If it does not they will be left behind anyway.

The wild declaration by standard bearers of the American Right that Wikileaks is a terrorist organization is abject drivel. What Wikileaks does is to make it much more difficult to be duplicitous in governance and in international affairs. That cannot be bad.

Sunday, November 28th, 2010

More Worrying Figures and a Challenge for Labour.

This Blog, as regular readers know, approaches economics in a more fundamentalist way than many sophisticated commentators and economists, who in their wisdom, pass the understanding of ordinary people. Thus there is a culture which says ‘I am not an economist, so I will leave it to them’. But everybody is a basic economist. We all have to run our personal budgets, so we all know those basics. In the fifties and sixties politics were dominated by the phrase ‘cost of living’ whereas today ‘fiscal deficit’ and ‘quantitative easing’ fly round the airwaves and people do not listen.

Eventually things reach the point where the issues are so big everybody understands, as in Ireland. It comes as a shock. People feel betrayed, conned even. This is why they are marching in Dublin and the government totters. Meanwhile the hard nosed officials from the ECB and the IMF drive a very hard bargain which will squeeze the poor, the middle and the better off, for years. Not only that, Ireland has lost a good chunk of its precious sovereignty, hard won in centuries of struggle. That would hurt any country but it hurts the proud Irish people more than most.

Over here the Coalition has gained the confidence of the markets. Our manufacturing and exports are rising and there are good signs that the private sector is expanding to create a better economic model, in which we borrow less, earn and save more, make what we use and sell overseas more than we consume at home. There is a long way to go, but our Chancellor has surprised everyone by his competence and is on the right track. So should we, in the UK be worried?

Yes we should. We have to do much more than engineer a recovery. We have to create a Tiger Economy growing at between 5  and 7 per cent per year. Bulldog economy would be a better term for Britain, but whatever we call it we have to do it. AND we have to do it on earned money, not borrowing, and without inflating assets beyond their worth. Indeed we have to reduce the value of housing relative to everything else. To do this we have to think out of the box and release the vast potential, crippled for decades by the dead weight of the public sector, of the British people.

Why? Because of the figures. They are very simple. This Blog has presented them before, but will now put them into persective. The last official figure for total external debt of the UK, including private, business and government, was $9.08 trillion. This was more than all the foreign exchange reserves held by all countries in the world put together. They are the figures from the IMF for June 2009. Since then they have grown and are growing still. The only country in the world to owe more is the U.S. at $13.5 trillion. But the GDP of the US is 7 times bigger than the UK and its population more than 5 times bigger. The next country in line is Germany, owing half as much as we do, with a bigger economy, more people and a huge surplus balance of trade. 

If Labour wants to appear other than silly on its economic pronouncements it has to come up with some answers. It was on its watch that this catastrophe was created under the gleeful slogan ‘an end to boom and bust’. It has taken us nearer than we have ever been to the end of everything.

Saturday, November 27th, 2010

The Squeezed Middle

No wonder there is confusion as to what it means, because it is nonsense. Ed Milliband knows that. It was a quick soundbite. It has no substance. Everybody feels squeezed.

If we go back to the founding of the modern welfare state after WWII by the Attlee government and the introduction of universal benefits, we find a fairly threadbare middle class too proud to seek help but happy to receive it,  along with the poor for whom it was a lifeline. The Conservatives  accepted this and became the champion of welfare, because their supporters liked it. The middle classes were slower to embrace state education (and still are at the more affluent end) but all used the NHS,  pocketed the Child Benefit and collected (no bank credits then) the  Old Age Pension, as it was known. This could be done with discretion at Harrods Post Office in Knightsbridge. I had an aunt who made use of the peculiar facility. Apparently she was bold among her posh friends, who were too proud and went without.

We are now in a completely different world. The middle class has sprawled to include almost everyone, leaving an underclass, an ignored aristocracy and a celebrity class; the latter living a lifestyle involving an orgy of spending because  for very little reason, money is thrown at them. All this is slowly beginning to fall down. First the banks tottered. Rescuing them has put whole countries at financial risk and sent one, Ireland, to the wall. Cutting is now in hand on an undreamed of scale, yet its full impact is yet to be felt. There is no certainty that the vast borrowings can ever be paid off.

We cannot tell what will come after. We can tell that the middle classes with three cars and two homes who have been getting child benefit, free healthcare and state education for their kids, all on the taxpayer, are going to have to get real. Too much of their income has been used to spend for fun, not to meet family obligations and responsibilities. The money has fuelled property prices so that these assets are now valued way above their worth. It has put up costs so that we cannot even produce simple things like light bulbs competitively for the home market, let alone for export. This will have to stop. The model has crashed. It is very near collapse.

In future people who can afford to will have to make a proper contribution to the basic obligations of citizenship and family life and go without handouts they do not need. Call it squeezing the middle if you wish. In fact it is simple arithmatic. Follow the numbers. Start at the £10 trillion national indebtedness. The thing about numbers is they are not open to interpretation. They are matters of fact.

Saturday, November 27th, 2010

Ed Milliband and Labour

Ed Milliband is right when he says New Labour lost its way and it is time to move on. This is important because a vibrant democracy needs an effective party operating left of centre. The trouble is that nobody seems to be sure where left actually is. It is where it always was, at the less fortunate mass of society, seeking greater equality and an end to injustice, exploitation and deprivation. This is where Labour has to be. There is no party there at the moment, just lip service and waving, as, caught up in the endless chase for wealth, now called aspiration, shallow politicians dash past.

Labour has to look at and question big time, our economic model which sucks money through debt from the poor to the rich. It has to find a way of bringing discipline to energy markets which fries speculators and warms the old and cold. It has to regain a model of public ownership through taxpayer shareholding, without creating flabby state monopolies. It has to turn the welfare sate upside down so that a depleted cash flow goes to need.

It has to understand that creating a public sector of more than half the county’s GDP and twice that of communist China, is a break on growth and a fuel for poverty. It has also to understand that public borrowing to excessive levels cannot be sustained and achieves nothing of value. It is folly, as New Labour did with such gleeful abandon, to cut income tax and increase spending. If you want to splash out on a vast bureaucratic infrastructure of quangos, regulators and busybodies, you have to tax to the level to pay for them and if you do that you will never be elected.

You can relieve poverty with benefits, but you can only get rid of it by creating real jobs which earn money and build wealth. You will not do that unless you set people free. How to do that without setting bubbles, booms, greed and selfishness free and holding the good, decent and hard working back, is the question. If Ed Milliband and his re-focused Labour Party can answer that, they will win. If they cannot, they will not. Moreover they will not deserve to. 

The Labour Party has a lot to do in the next two years. Time to get cracking.

Friday, November 26th, 2010

Euro Slide

As Ireland grapples with a political crisis as well as what is currently a banking crisis with a vengeance, triggering a request for Euro aid, the currency slide goes on and the pressure on Spain and Portugal mounts. There is a touch of gloating in Britain, especially on the Right, that we are not embroiled because we are not in the Euro and our banks are not as toxic. True for the first and maybe for the second.

But, but it is not as straightforward as that. This crisis is not fundamentally about the Euro, although the weakness of the idea of a currency without a government is being fully exposed. This is a crisis about debt, the size of it and whether it can ever be repaid. If the contagion spreads, we may not have the immunity we imagine. Moreover a falling Euro makes our exports in our primary market, Europe, more expensive and hots up competition from Europe in our new and developing markets in Asia and South America.

All in all the portents are sobering. This is no moment to gloat. It is time to reflect and prepare.

Friday, November 26th, 2010

Vince Cable in Russia

This Blog has always seen Russia in a better light than the moribund foreign policy of New Labour. Yes the Russian  ideas of democracy and ours are not the same. Yes, there were atrocities under the Soviets and cruelties under the Tsars. Yes, there are historic difficulties about the bizarre murder of the Russian ex-pat and spies (on both sides). There was the Cold War. There are also substantial numbers of Brits who originated in Russia and whose families fled pogroms and persecution and who have an abiding suspicion of the Russian Bear.

Yet it is also true that we would not have defeated Napoleon, the Kaiser or Hitler without Russian help. Our ally in all three wars their losses for the common interest of our joint cause were horrific. In WWII they took on the mass of the German army and defeated it. Russia and Britain sit at opposite ends of Europe, like bookends; we each engage in Europe, but also like to keep our distance.

There is no doubt that  the national interest of both countries will be served by coming closer together and that economically we need each other; especially we need the business opportunities of the modernisation of the antiquated Russian infrastructure to aid our own economic recovery. Europe depends on Russian oil and gas, especially the gas. Russia is critical to European advancement and security and is actually a real component of European life in a way that America is not.

This is why Vince Cable’s visit to Russia, heading up our largest trade delegation ever to go there, is so very welcome in itself and as a sign that we really are developing a foreign policy in the British national interest. We should rejoice that the sterile, prescriptive and abrasive approach, which got nowhere, everywhere, of the Milliband D. foreign office is over. We lament the wasted years of its supremacy.

Thursday, November 25th, 2010

University Fees and Education Reform.

These two issues, though separate, are together. Universities have to charge for their services, whether the student, the taxpayer or a combination. Up until New Labour the taxpayer paid all of it. Then through the unpopular student loans, some of the burden fell to the students. Now a much bigger burden is to be borne in the shape of much bigger loans. The less well off, or those who take on the critical less well paid jobs, will bear a heavier burden because the loan will represent a proportionally larger debit against their net worth and their earnings. This may be necessary, but it cannot be right.

Into this unhappy situation comes Michael Gove and his proposed far reaching reforms. I have been critical of this clever minister and I did not altogether warm to his early plans for independent schools to be set up on a whim, but funded by the state. What he is trying to now is much more interesting. He is planning to empower teachers and upgrade their competence, rationalise the exam regime and the subjects taught and require the basics, rather than the fads, to have priority. What students actually know and what use is this knowledge in the wider world will once again drive the learning train, not the crackpot theories of academic good- for- nothings and gullible politicians.

This is important because it is the crass failure of the general education system to bring young people to school leaving age with any useful outcome, which has put such demand upon the universities to offer them a credible start in working life. If this can be sorted out, very many fewer students will need to go to university or gain any practical advantage from so doing. Instead they will be able to go into commerce, industry or public service, with a first class eduction. Those who do go to to university will be able to put their extra learning to good use for the benefit of us all. This is not happening now. This will change the cost base and make paying, by whatever method, a good deal easier.

It is morally questionable to make young people take out loans for thousands of pounds to pay for something they should already have been given free by the age of eighteen. A really good education to give them a start in life. I think the clever minister understands this. I hope so.