Archive for September 15th, 2013

Syria: New Hope

Sunday, September 15th, 2013

The vote by the British parliament to block the military strike on Syria was described by this blog as historic and has turned out to be so. It caused chaos in Washington, which suddenly realised that without its closest ally it lost the mantle of protector and took on one of aggressor. The American people backed the British people in opposing air strikes and Obama was pushed into a corner looking very unhappy.

Putin stepped in, seized the agenda and suddenly bestrode the world stage riding a wave of public opinion. The Obama administration was caught like a rabbit in the headlights. It did the only thing it could. It grasped the lifeline offered by Putin to avert the need for cruise missiles and agreed a deal which should in the end lead to the destruction of Syria’s chemical arsenal. America has been outsmarted by its own voters in partnership with the Russians. This is a seminal moment for American politicians and those of both parties need to grasp the new reality of a shift of diplomatic gravity.

Under the Soviets the theme of their foreign policy was peaceful co-existence and non interference in the internal affairs of other countries, held together by a sphere of influence which must be maintained if necessary by force, and which could be expanded by coercion. America’s foreign policy was to counter the whole project, if necessary by force.

The Soviet empire then imploded. For many years Russia was something of an onlooker on the diplomatic scene, though it was slowly putting together  a new theme for the post Soviet Russian Federation to use as the bedrock for its future role in the world. America got on with its own thing. This was to become the world’s policeman and impose its will everywhere, backed by military assets of a scale several times above any other nation on earth.Its foreign policy did not have a theme other than the preservation of rather ephemeral ‘American interests’. This led to Iraq, Afghanistan,  Libya and the failure of all three.

Now the Russians proclaim the rule of international law as the first objective and oppose regime change by force and or foreign intervention not authorised by the UN. They argue that small countries who feel unprotected by failure of the UN to control its most powerful member, will seek protection through developing their own weapons of mass destruction. Russia also argues that America is confused when it sees itself as exceptional or endowed with exceptional power. The majority of thinking world opinion now backs the Russian theme as does the majority of the American people who argue it differently but mean the same thing.

The governments of America and Britain and to some extent France have been outflanked by President Putin speaking a language in tune with the feelings of their voters. This is a most extraordinary development that has changed the whole dynamics of the template of western diplomacy, which has been suddenly shown as out of date and out of favour. Moreover, unlike the grey suited Soviets and their unfathomable culture, Putin speaks directly to the American people through the New York Times and the TV channel RT, which is drawing ever bigger audiences. This does not mean it is always right but it does mean that Americans, whose international news coverage is not very good, now have access to an alternative view before making up their own minds.

This is a new experience for the US political and military establishments. They will not like it, but it could in the end bring about some overdue changes which will revitalise a war weary nation and re-energise the American dream. This is about Americans in America, not about being world policemen.

Meanwhile the Foreign and Commonwealth Office needs to burn some midnight oil.

House Price Inflation

Sunday, September 15th, 2013

The Chartered Surveyors were right to call on the Bank of England to keep house inflation at moderate levels, but their suggested rate of 5% per year is too high. House prices are already far too high and must actually fall in real terms over the next decade, if the economy is to enjoy any kind of sustained recovery based on the creation of new wealth as opposed to the failed model of continuous asset inflation. To compete in world markets labour costs must not be too high, but if housing costs are above average either workers have to be paid more or the government has to subsidise them with housing benefit.

I have argued since 2009 that house prices must not be allowed to rise more than inflation and must be reduced in the long term by a huge programme of house building. It is good to see the surveyors are now adding their influential voice to this self evident economic truth, but the figure they have chosen is wrong. You can only store up problems leading to another bust if house prices rise faster than inflation. The two must be linked (or house prices held lower) and the market must be brought under the official inflation remit to the Bank issued by the Chancellor.

In the near term a preferential mortgage rate can be available for new homes, to encourage building, but the government mortgage guarantee is a serious miscalculation, widely criticised by economists and commentators, which will eventually lead to an unwelcome house price surge and the unravelling of the credibility of the Chancellor.