Archive for August, 2012

Romney’s View of the World

Friday, August 31st, 2012

In his acceptance speech Mitt Romney told the Republican convention that he would pursue a more assertive foreign policy than Barack Obama. We need to remind ourselves, especially American readers, just where things had got to before Obama was elected. The situation in international relations was this. The United States was the most despised country in the West since WWII and George W. Bush was viewed with polite contempt by every western leader other than Tony Blair.

Obama and Clinton have worked wonders to restore the reputation of the US overseas and whatever Romney feels he has to say to his divided and fractious party to gain its loyalty, he will need to watch his step if he makes to the White House. In particular his childish declaration that he will stand up to Putin and his hint that he will re-activate the futile plan to put air defence missiles in Poland shows a degree of ineptitude that we, in the UK, should find alarming.

Russia would immediately, and with good reason, put missiles into the Kaliningrad region, an area in which I have an historic family interest. Nothing would have been gained other than to give vent to the fundamentalist lust of the American far right since Confederate times, to pick a fight. Indeed it was the Confederacy absolute misreading of the attitude of Europe towards the split of one America into two, that more than anything cost it both the civil war and its independence.

With Bush II, the supine British Foreign Office became little more than a fellow traveller. Should America embark once more on such a barmy path, the FCO will have to look to British interests first and American friendship second. America is family and we must be willing to go the whole hog to a family quarrel. Let us hope not, but be ready and willing.

USA: The Presidential Contest Begins

Thursday, August 30th, 2012

Europe is preoccupied with the dominance of Germany and the fate of Greece. Britain should be preoccupied with the American Presidential election. It is not. It should be, because what happens in the US in November will have far more impact on the island nation than anything which may, and anything might, happen to Greece and the Euro.

This is not an election about foreign affairs. Neither side is spoiling for new war. Do do so would guarantee electoral disaster. It is an election about, and only about, the economy and within that envelope it is about, and only about, growth. America currently has growth, but not enough of it. In the UK there is none. In America there has been vast spending but little cutting. In the UK there has been vast cutting and little spending. The growth in America is offset by the borrowing to get it. The cutting in the UK has been offset by rising costs of negative growth. There is not a lot between the economics of Obama and Ed Balls. Nor is there much difference in the ideological views of money between Osborne and the new darling of the Republican campaign, VP nominee Paul Ryan.

The race is at present too close to call with polls showing the two parties neck and neck, though with the Democrats well ahead with women voters. Essentially Obama’s economic policy is European style left of centre and the Romney/Ryan ticket is American Dream (or Confederate) small government, low taxes, big cuts. Obama says government gives value and  makes a difference. The Republicans, especially the Tea Party, say government costs big and gets in the way.

The United States stands polarised and evenly divided, locked into its opposing visions of what America is and should be, save for a few hundred thousand swing voters in a handful of states. It is here that the die will be cast. If the economy continues to stutter, Obama will go down like Bush Senior and Jimmy Carter to a single term. If the economy begins to show real signs of recovery, the campaign will focus on the ultra conservative, anti-abortion, creationist activists  who have staked ownership to the party first led by Abraham Lincoln and the Republicans will go down to a big defeat.

Either way the outcome will have far more impact on Britain and its economy, than anything happening in Athens or Berlin. Ultimately Britain is much more a part of America, than it ever has been, or will be, of Europe.

Quantitative Easing

Friday, August 24th, 2012

The statistics released yesterday by the Bank of England show that quantitative easing has done little more than cause the economy to bump along the bottom or stop things getting worse. Moreover it has boosted asset prices, helping the wealthiest 5% of the population disproportionately to the rest. Not only does the current use of QE fail to stimulate growth in key areas, but it produces a skewed financial outcome which will  shock all those who saw value in the post WWII social consensus. Moreover by keeping interest rates artificially low it hurts savers and encourages growth through borrowing, both of which inhibit the prospects for a sound recovery.

Yesterday’s post discussed a different use of QE and it is worth repeating. The newly created money should go straight into economic regeneration via infrastructure development, public house building, school renewal, transport modernisation etc, to create new jobs and wealth without increasing borrowing. Moreover start up funds for neighbourhood industries are essential, to cut the ignored but vast trade gap. Using QE this way will boost economic growth for sure and assets will grow in value commensurate with rising profitability.

House prices and rents will be stabilised by massive public house building of up to a million affordable homes, while benefit costs will fall as we draw back towards the old idea of full employment. Tax revenues will rocket. This will first reduce, then extinguish the deficit and push GB back into a budget surplus. The present use of QE is achieving more or less the opposite of all this. Boosting asset prices by printing money, but failing to generate significant growth of GDP and the real worth of the economy, is the road to something awful and nothing like the recovery everyone hopes for.

Naked Truth

Friday, August 24th, 2012

It was bound to happen that sooner or later the Sun would, under some self righteous cloak of press freedom, publish the pictures of Prince Harry naked. This blog does not usually venture into the area of privacy and press freedom, but it does tend to weigh into controversy, which is what this has now become.

Whatever everybody is writing and saying, the facts of the matter are these. Every day millions of pictures are being taken of people, naked and in every other form of compromising, indelicate and vulgar situation it is possible to think of and thousands of these pictures appear in social media and You Tube, the latter in the form of shaky videos. Almost all are taken on phones, mostly by friends, many of whom if not drunk have been drinking.  As those involved sober up and lose sight of the joke, these pictures and videos usually get taken down. That this happens is neither an assault on privacy, nor an issue of press freedom, nor an infringement of human rights. It is an inevitable consequence of high spirits and the ability to record, film, transmit and upload on the spur of the moment, in a split second from the palm of almost every hand sub middle age.

These are essentially private communications which go public as a consequence of the revolution in information and communications technology. To try and inhibit them is as futile as it was once to make a man walk in front of the first motor cars carrying a red flag to warn others of the approach of the alien, spluttering conveyance beyond general comprehension.

What makes this set of photographs special is that the naked person is a prince, not a minor member of a defunct royal house, but the third senior prince from the best known and most successful reigning royal house in the world, whose personal media profile is golden. He is a soldier prince, a bachelor and under thirty years old. That he gets naked at a drinks party with friends in a hotel room  in Las Vegas, comes as a surprise only to fools. Somebody takes a picture. It goes viral. Anyone interested can find it everywhere.

British newspapers decide to accede to a request from St. James’s Palace to show discretion. They do, some with a pious explanation. Actually it is old news anyway and nobody is going to buy a paper simply to get a picture which they can view elsewhere for free. Moreover, most newspapers are beginning to learn that they cannot compete with the Internet with its blogs and networks on even terms. They have to offer something different, which is interesting in a different way, if people are going to go on buying them long term, once tablets become universal.

Then the Sun breaks ranks and publishes, shrieking press freedom as it does so. Only one thing in the controversial decision is clear. It tells the world a good deal more about the Sun, than the nudity of a prince tells the world about a young man universally admired. And admired still.

Osborne’s Recovery: Where Is It?

Thursday, August 23rd, 2012

The shock deficit requiring unexpected government borrowing of £ two thirds of a billion for July, has set economists off on an urgent media round to expound their theories. As usual these are conflicting, though a degree of unanimity is beginning to emerge across the piece: the present growth element, such as it exists, is not working well enough to allow the whole deficit reduction plan to come good in the end. However, both ends of the economic theory spectrum are flawed in current conditions.

Cuts alone will not deliver. They did in Canada because at the time the US was having a boom, so the Canadians had a bull market to sell to. Here our main market, the EU, is affected by a structural crisis for which there is no clear solution, predicating years of stagnation, so the Canada model, which informed much of the economic planning when the Conservatives were preparing for government, no longer applies.

On the other hand the government is right to stick to the mantra that you cannot borrow your way out of debt and it is a debt crisis, both private and public, which ails us now. Additional imbalances in the economic model, including asset inflation and banking dysfunction make matters worse. What is missing is a clear idea about what money is and what function it needs to play in setting the economy on a better path.

This is why the Blog disapproves of quantitative easing being used to fund banks with a few to making them easier on loans. What is needed is newly created money to directly fund infrastructure renewal and development, a massive public housing programme for rental properties, which will drive down rents and mortgage costs to sustainable levels. There is also a need for start up funds for neighbourhood industries to manufacture consumables and help close the trade gap.

A mix on these lines would deliver and any inflation created by printing money can be readily controlled by shrewd use of interest rates and taxation, because all who are fit will have jobs and the true role of wealth creation in the real economy will be re-established.

The alternative is to blunder on with increasing benefit costs  and falling revenues, until the markets start to lose confidence and dump our bonds. In the global market with electronic money, it is not currencies which come under attack from speculators, it is government paper.

British Foreign Office Blunder

Thursday, August 23rd, 2012

It is difficult to imagine a more inept move by the FCO, than threatening to enter the embassy of a foreign country and seize an asylum seeker who had sought refuge within. Not only would it breech international law but it would put at risk every embassy and diplomatic mission of the UK  across the world.

The law which provides for the British government to suspend the diplomatic status of premises and enter them was enacted to allow the authorities to restore order when an embassy was being used for non diplomatic purposes, i.e shooting people in the street below, as in the shocking case of  WPC Yvonne Fletcher.

There is nothing improper about the operation of the Ecuadorian embassy, although the granting of asylum to Mr Assange is controversial. The Ecuadorian government might have been hard pressed to defend their decision internationally, but for the smokescreen of the idiotic threat to storm the embassy and arrest the Wikileaks founder, wanted for extradition to Sweden in connection with allegations of sexual assault.

This is a major foreign policy blunder which is being used to stir up further antipathy to Britain in South America, already under pressure from a frustrated Argentina. The mission of the Foreign Office is to further Britain’s interests by cultivating partnerships and alliances, while promoting the principles which inform our policies in our dealings with international issues.

This imbecile threat, from which even North Korea would shrink to utter, achieves none of these goals. Indeed quite the reverse. With our principle market, Europe, in long term economic difficulty, our recovery depends on forging new markets. Many of these opportunities are in South America.

Oh Dear.

Assange and Pussy Riot

Sunday, August 19th, 2012

There are some odd similarities in the controversies surrounding the Wikileaks founder and the now jailed Russian pop group. Both are protesters, seeing themselves as justified in breaking the law in order to bring to world attention the issues which drive them. Both have broken controversial laws under the banner of free speech. One is trying to evade justice, one has faced it and its members are now serving  what is, to their sympathisers, a harsh sentence.

Two points are worth making, whatever the headline issues which grip the world. If Pussy Riot had sung their anti-Putin song in a public place which was not a Holy sanctuary in a Russian church, whatever their supporters say, they would still be free. If Julian Assange had not hit the town in Sweden and put himself in a position where he could be credibly accused by not one, but two women, of sexual assault, he would be free too.

This is why the stories surrounding both have gained traction. It is also why sympathy for them is considerable but by no means universal. The British Government has received no extradition request for Mr. Assange from the US over his involvement with Wikileaks disclosures, but it has received one from Sweden over alleged sex crimes, which it is obliged by international law to enforce, following the failure at appeal by the accused at all levels of the British judicial system. The Swedish constitution prohibits extradition of a suspect to a country which enforces the death penalty for the crime of which they are accused, so Mr. Assange’s fears of re-extradition to the US from Sweden do not appear to make sense.

Whist the Pussy Riot ensemble serve their sentences which will conclude their clash with the Russian authorities, it is difficult to see how the Assange drama, now a cause celebre, is going to resolve, particularly since so many people appear to be talking at cross purposes, perhaps deliberately. Meanwhile he is likely to remain an effective prisoner in the Ecuadorian embassy for months or even years. There surely must be a better way.

Euro Drift: It Is Not How It Seems

Friday, August 17th, 2012

Nothing much is going on in the Euro crisis. Meetings come and go. Plans are announced and fade away. We are now at the stage where there are planning committees about making plans. Meanwhile the debtor countries are grinding living standards ever nearer to the bone and economic activity across Europe is stagnating. Yet the Euro itself exhibits none of the features of a currency under pressure. Nobody is dumping it big time. Predictions of its collapse appear unfulfilled. This blog has been strident in its declarations about the impossibility of having a currency without a government and the absolute need to establish the institutions to run it.

It is clear that the debtor countries will never be able to pay off their mountainous liabilities without devaluation. This they cannot have, so they either need the ECB to buy their existing debt and cancel it or to be propped up by German money. None of that will happen. Their only option is to leave the euro and devalue to re-establish an economy structured to function within their social fabric at a sustainable level. They may or may not do this. Either way the euro will go on.

This blog would have, in the past, argued that it would not be able to without the implementation of political and fiscal union. This has been talked of and aspired to but nothing meaningful has happened. Why? Because the euro as it has been presented and thought of, imagined and handled, does not exist. The euro is Germany’s currency, managed to the rules, constitution and political preference of Germany and those countries who find it convenient to use it must operate to rules set down by Berlin and Frankfurt.

The European Central Bank can do nothing without the approval of the Bundesbank. The gaggle of European union Presidents are powerless without the backing of the German Chancellor and she has to answer to the German, and only the German, voters. This is not how it was meant to be. This is not how it was thought to be. But it is how it is.

The Euro is safe in German hands. Everybody else has to fall in line. It will be painful. If they cannot stand the pain they will have to step out. Simple when you think about it. No? Well it is if you think in German.

Russia and GB: Old Allies Must Be New Friends

Wednesday, August 15th, 2012

Readers of this Blog and my book will know that I am sorely tested by the blinkered and unhelpful policy of  the Foreign Office, regardless of the party in power, to modern Russia. This is rooted in the ideological challenge of Soviet Communism and a muddled belief that Russia should be judged on organising its institutions of government to the western European model. This guarantees a perpetual sterility in a relationship where mutual self interest demands much more productive engagement.

It would not have been possible to defeat Napoleon, the Kaiser or Hitler without Russia as our ally. Any attempt to do so without her would almost certainly have failed and cost countless British lives. Just how significant Russia’s contribution was in WWII can be found in the casualty figures. Britain lost  just short of four hundred thousand military and civilian dead, Russia about twenty five million. It was Russia, not the Allies, who broke the back of the Nazi war machine. Put simply without Russia on our side, Hitler would have won.

This glance into history tells us something of the present. Many of the intractable problems of Europe and the Middle East today cannot be reliably solved without Russia’s participation. Russia is the eastern bookend of Europe as Britain is the western. Both have considerable reach into the middle east. Both have been historically threatened by central European powers, but today the threats are more subtle and mostly based on economics. Working together Britain and Russia could have brokered a joint approach to Syria which would have saved the slide into civil war and saved much human suffering. Working together Britain and Russia could help euroland to extricate itself from its deepening crisis which affects both the British and Russian economies. Working together the two countries could lift Britain out of recession and pull Russian infrastructure into the twenty first century.

Of course it cannot be denied that Russian democracy has many raw edges and its society many dark elements. It is also true that the majority of Russians value a strong leader above a pluralistic democracy American style and we have to accept that this will never change. But then we value our hereditary Monarchy, the honours system and titles, now unique in the modern world, above American style democracy too, so it should not be difficult for us to value common interest and shared objectives above odious comparison of each others domestic arrangements.

The Russians were good sports at the Olympics and after lagging behind, caught up and overtook us in the medals table, but not in the coveted golds, which outrank the others. We earned ourselves a new respect from across the world for not only the staging of, but our performance in, the Olympics. This should boost our confidence to be bold and reach out. Time for Hague to bite the bullet and call the Kremlin.

A Closing Spectacular

Monday, August 13th, 2012

When I posted the most recent Blog praising Team GB yesterday, I had imagined a closing ceremony a little more connected to the actual games. There was no opportunity for the welcome roar for Team GB I anticipated and the unifying parade of informal mingling was probably the better plan. Team GB will have to share that roar which spurred Mo Farah to his victory on Saturday. It was perhaps a sporting achievement which will never be surpassed and it is right that it should be the supreme moment of audience engagement.

As for the musical extravaganza featuring so many celebrities of yesterday (the spice girls!), some will love the closing ceremony, some will not. As a spectacle it was superlative and once again showed a confident nation at last able to declare itself proud to have been as well as proud to be, willing to laugh at itself, yet meaning business and able to deliver on a scale which has caught the the rest of the world short. Most remarkable last night was the tableau of the Union Jack. The rehabilitation of our national flag, for long hijacked by extremist groups and the far right, is one of the most heartening legacies of what can truly be said to be an Olympic triumph.

The United Kingdom may be the  title of our country, but its name, Great Britain, is back. All the world knows why.