Archive for February, 2014


Friday, February 28th, 2014

This is a moment when the West has to upgrade its diplomacy to a much more sophisticated and flexible model than the gung ho shambles post 9/11. The world is no longer a place of goodies and baddies, nor is it one of independent interests. It is a spider’s web of interlocking and related interests, where issues have many threads leading in opposite directions, linking those in argument to share common purposes which override grandstanding and point scoring. Russia has been better at adapting its diplomacy to this new environment than the US and UK.

Khrushchev gave the Crimea to Ukraine, when it was a constituent part of the Soviet Union and not an independent country. Khrushchev was himself Ukrainian, yet boss of the Soviet Union. The Crimea sees itself as Russian and the majority of the population is Russian speaking. Russia has a major naval base at Sebastopol. Like the territories in Eastern Ukraine its main trade link is with Russia. Small wonder that its people become alarmed when the government in Kiev collapses, the President flees the country and a new government is appointed according to the demands of the mob, from which it sought actual approval.

The former president claims, like Morsi, that he is still the legal president and he is probably right, but he allowed or provoked the situation to move beyond legal niceties. The practical reality is that there is a new government in Kiev, it is already throwing its weight about and saying partisan things, but it is there until a democratically elected replacement can be organised. Meanwhile Russia cannot allow mayhem to engulf its naval base and the regions who regard themselves as ethnically and culturally Russian. It has ordered military exercises and deployed some form of specialist militia to keep order at critical points in the Crimea.

This is not a bad thing. The less bloodshed and chaos from now on, the easier to find a long term solution for a country which has so mismanaged its affairs as to face bankruptcy and disintegration at the same time. Russia is best placed to halt further disintegration, which always leads to suffering of the innocent, while the West is best placed to construct some kind of financial package to avoid financial collapse. It is important for both east and west to see this crisis through a modern perspective and not to apply cold war barriers to solving the problem. Then it was a case of squaring up and not blinking. Things are quite different now.

Meanwhile cries from Kiev that Ukraine has been ‘invaded’ are ridiculous. Somebody needs to remind this so called government that if it misjudges the reality on the scale of Georgia some years back, it will lose half its territory, as the Russian population demand to secede and probably will do so. The alternative would be a bloodbath and nobody wants that.

Northern Ireland: Here We Go Again!

Thursday, February 27th, 2014

This Blog, like very many people across the United Kingdom and the Republic of Ireland, is fed up with confected political crises got up by Unionist politicians and the latest row about immunity letters is typical. Without going into the details of the latest hullabaloo, it is worth getting at the core issue.

In the whole of Ireland, which is a single island, there is a population of just under 6.4 million. I.8 million of these live in the North; that is 28% of the total. Of this about half are protestant. So the ratio of protestant to catholic in Ireland as a whole 14% protestant, 86% catholic. This shows that in a democratic election the protestants are a minority by a margin in the total, but because they are concentrated in the north, they manage to turn themselves into a local majority. That does not alter the reality of what they are.

In Northern Ireland only about 380,000 voted for the Unionist parties in the 2011 Assembly elections. This tells us that this noisy, bombastic, opinionated minority with its divisive perspective and its provocative and triumphalist culture, is out of step with everybody except itself. It should be treated as a minority interest. Not more and not less.

Instead it rules the roost. If it is indeed true that these various letters and pardons, essential to advance the peace process, were issued without its knowledge, it is because it is in the world the most intransigent and inflexible political configuration outside North Korea and the only way forward for realists who have peace and harmony in their sights is behind its back. The message to Robinson should be short and simple. If you want to, go and be damned. It is time to put a stop to this nonsense once and for all.

Scotland is presently making up its mind whether to vote to separate from the rest of the United Kingdom. If a referendum were held in England and Wales asking if the people would like Scotland to stay, the answer would be a resounding yes. Scotland before the Union was an independent country. Northern Ireland, on the other hand, refused to join the country of which it is a part, when Ireland gained independence, so in spite of the nastiness of a good deal of the Unionist cause, the UK let it stay.

If the Unionists continue to grandstand and posture to feed their near insatiable appetite for quarrelling and discord, the UK may be pushed to hold a referendum whether to allow Northern Ireland to remain. There is little doubt it would be kicked out by a healthy majority. The Unionists are forever seeing what advantage they can gain. The time has come to show them what they could lose. In reality that is everything.

Ukraine: A Warning

Tuesday, February 25th, 2014

Let nobody in the West fool themselves that what is happening in the Ukraine is a good idea. A legitimate democratic government favoured by half the population has been overthrown by street protestors from the half who did not like it. The fact the regime of the ousted president was corrupt, had tinkered with the constitution and had centralised power is a factor certainly, but in a democracy, elections or impeachment are the basis of change, not and never the mob. New regimes born out of violence and disorder are fractured and incapable of fair government. They are obsessed with vengeance and rent by conflicting rivalries and diverse objectives.

Egypt, which is ahead of Ukraine, but has followed a very similar path, is about to dump its whole revolutionary project and replace it with a tough and popular general. The reason he is popular is that he is going to restore order to the country to enable people to get on with their lives. Freedom will be the price, but it is one the nation will pay, because the chaotic alternative has been tried and people are fed up with it. So it is back to something not that different to Mubarak, who followed Sadat, who followed Nasser.

In Ukraine the German leaning western half presently has the upper hand, but the interim government assembling itself has no democratic legitimacy whatever and must go to the country for a mandate very soon. The protestors must go home and go back to work. Government by helmeted paramilitaries wielding clubs, yelling on the steps of parliament until agitated MPs come outside, then rush back in and enact new laws to meet their demands, which become law in minutes, is not government. It is a fiasco.

As this Blog points out so often, the West has a very bad track record of siding with so called freedom movements which foment national disintegration and then turn out to be too divided and unstable to offer effective government for reconstruction, leading to prolonged suffering of the populations involved. This must not happen in Ukraine. There is no doubt elements of the EU helped stoke up the protests. Now a more nuanced message is coming both from the EU and also from Moscow. This is good and it needs to go a long way further. Partition of the Ukraine into two would be a defeat and should be a solution of very last resort.

Meanwhile bankruptcy looms for this traumatised nation. Bailouts must be conditional on organising fair, democratic and inclusive government which reconciles differences and heals splits. Russia has already said as much. The Western financial authorities need to do likewise. They must not let the fear of the impact a Ukrainian default on their own undercapitalised and overleveraged banking system drive them to invest in a future of continued chaos, with dipartite factions struggling to get on top of each other.That would throw good money after bad and make the eventual bust even bigger.

Ukraine: Handle With Care

Monday, February 24th, 2014

Russia’s premier Dmitry Medvedev spoke some truth when he said that the new authorities in the Ukraine lacked legitimacy and had achieved power through an armed mutiny. These are not words western diplomats would use to describe what has happened, but nevertheless a legitimate government, albeit heavy handed and unpopular, having been properly elected in a democratic process has been brought down by protesters, Egyptian style. This may be good or bad but it is not democracy and as we have seen before, rushed elections do not always produce a durable outcome in a society which allows the power of the street to override the authority of the ballot.

What is now critical is for everybody to hold back and accept that Russia and ethnic Russian Ukrainians have interests and rights which must be protected in just the same way as those on the other side who lean towards Europe. The era of power blocks in diplomacy is over. For over one hundred years the UK Foreign office has been trained in the notion of friends and enemies. This suited the post Napoleonic era which fell apart when Germany fell out of favour in the lead up to 1914. The rise of fascism and communism adapted well to the diplomatic model and operated with commendable judgement and restraint throughout the cold war.

Since the fall of the Berlin Wall the FCO and the US State Department seriously lost their touch, leading to one blunder upon another, with a trail of misconceived wars, failed states and revolutions turned sour in which western backed rebels appear to be the last people the west should want to be associated with. The modern world is not about power blocks; it is about interconnected people, factions, rivalries and revolutionaries, united in what they are against but divided about what they are for. It is so much easier to makes things worse, sometimes much worse, than to make them better.

What has happened in Ukraine is a tragedy at a human level with the guilt for the pointless loss of lives on the shoulders of both sides, though the security forces appear to have been the more violent, especially in the hours before the government fell. Now there must be reconciliation and reconstruction with the rights of all citizens guaranteed, including those who speak Russian. Any aid or encouragement from the EU must require that this is a primary objective of whatever government is formed by whomever, and as an absolute condition of any dialogue about association and non-humanitarian aid. The new government must recognise that the country has a border in the east as well as the west and that it has to rebuild a positive relationship with Russia, upon whose energy and trade it significantly depends.

Ukraine must demonstrate that it has a working model of democracy before there is any prospect of joining the EU. This will not be possible unless there is give and take on all sides of the split and the factions within it, which have brought the country to the brink. That will also require the EU and Russia to walk in step. Catherine Ashton will be kept busy. This surprising lady is more than up to the challenge.

Osborne Takes Hold: But What About Vince?

Thursday, February 20th, 2014

Although the performance of the Tories in bye elections is awful and they look set for a drubbing in both the upcoming local and European elections, George Osborne is at last beginning to stand out as a Chancellor who knows what he is doing and is sure of his grip. Readers will know that this Blog has been very critical of stoking a consumer boom with a stimulus of house price inflation, which is what Osborne has undoubtedly done, but he has indicated that he is fully aware that this cannot go on for long.

More investment and exports are required, he rightly says. So is less reliance on borrowing to fund consumption. He has said that too. His man at the Bank of England, Mark Carney, has said the recovery is neither secure nor sustainable. This shows the Treasury and the Bank singing from the same sheet. That creates an aura of competence and when it comes to voting in the General Election in 2015, it is to the party with the credibility to run the economy that the most votes will go. That is why Labour’s lead is slipping, although it is still enough to give them a working majority if sustained to polling day. But polling day is more than a year away.

If Labour is not going to face disappointment in 2015, Ed Milliband will have to move out of his quirky mode of discount politics, offering a bargain freeze of energy prices here and a guarantee of jobs there into a more sophisticated grand plan for sustained recovery. For this he must turn to his shadow Chancellor, Ed Balls. Here lies the problem. Ed Balls is going nowhere in economic credibility. He neither looks nor sounds nor acts as if he knows what he is doing and the only offer on his stall is more borrowing. As a welfare minister yes, or transport maybe; perhaps even the poisoned chalice of the Home Office presently held nervously by his wife. But on the economy no; he leads to a dead end for Labour. He is a political cul-de-sac.

Ed Milliband has always been a much sharper operator than his geeky persona suggests, leading people to underestimate him time and again, including his brother. He knows that he has a talented clutch of young up and coming politicians with whom to replace the other Ed, but none has quite the experience or clout to ride into a general election campaign as Labour’s economic champion. He tried Alan Johnson at the start, a popular and level headed politician, who was a disastrous shadow chancellor who knew next to nothing about economics.

There is of course one name which stands way above all others. Unfortunately he is already married to somebody else. Yet he makes no secret of the fact that he would rather be married to Labour. We are of course talking about Vince Cable. If the Labour leader could ditch the other Ed and pull Vince to head his Treasury team, Labour would most likely win in 2015. Comfortably.

The Scot Nats: A Weird Campaign!

Wednesday, February 19th, 2014

As this Blog has already remarked, it looks as if the Yes campaign of Alex Salmond is now without all of its wheels.

England has ruled out a currency union and the President of the EU commission pointed up serious problems about joining Europe with any kind of a smooth passage, if at all. The response has been bluster about the pipe dream that an independent Scotland will be so sexy that everybody will cave in and agree to everything she wants. This is patently absurd.

Moreover if a currency union with the UK and membership of the EU are central to Scotland’s best interests as well as those of the UK and EU, why campaign to leave both by becoming independent? The whole argument is becoming incoherent. To be a member of either or both as a separate country will not only require a major surrender of sovereignty to London but also to Brussels, which has to do the bidding of Berlin. Moreover neither is on offer.

The vote when it comes will turn on the question of economic risk v advantage. At the moment the Yes campaign is offering uncertainty, confusion and potential chaos. Were Salmond (this is all Salmond- without him the Yes campaign and the whole independence project would collapse overnight) to present to a plucky nation with its own history, culture, heritage, legal and education systems, a genuine independence offer which included a currency, central bank, foreign policy and a Treasury with an appropriate fiscal and economic policy, it may well prove an offer worth taking. It would at least be a genuine offer, clear and unambiguous, which would have the potential in due time to join this and become part of that.

Instead the proposal is essentially to leave the sterling zone in which the Scots have over fifty seats in the parliament which controls it, and leave Europe in which it has a lot of clout (the last two Prime Ministers of the UK were Scots and the current one is Scottish pretending to be English), then to rejoin both, nominally independent, but under the direction of forces of vastly greater weight in which it has no say at all.

How has the project ended up in a mess bordering on farce? Well, if you cast back to the time when the referendum was being mooted, it was the Salmond plan to offer a choice; full independence or what was called devo max. This was greater devolvement of powers to Edinburgh, but remaining in the Union. Alex Salmond was certain he could get a majority for devo max, but far from sure he could for full blown independence, which frightens even him.

So when only one question was allowed, stay or go, Salmond tried to come up with a compromise. Go, but keep the Queen, the pound and the EU. The Queen is already Queen of Scotland anyway, so her future was not up for discussion and the other two have said firmly no or likely no. So who is going to vote for that?

The truth is clear. Even Salmond realises that it is better to stay.

The Two Archbishops

Wednesday, February 19th, 2014

It is ironic that at a time when the Roman Catholic Church and the Church of England both are in crisis, the two men at the helm of each in England, Archbishop, soon to be Cardinal, Vincent Nichols and Archbishop Justin Welby, are the strongest leaders either church has had for decades. Both comment freely on social issues and make a worthy contribution.

It is a very great pity that the C of E’s negative pre-occupation with the equality of women and gay marriage in all their manifestations and the Vatican’s tardy response to the appalling revelations of institutionalised paedophilia by its priests across the world, reduce the wider value of their interventions to a shade above zero. Both men are significantly better than the organisations they serve.

Same Sex Marriage: The Bishops Are Wrong

Saturday, February 15th, 2014

The decision of the senior Church of England bishops to deny to its gay members blessings to support civil gay marriage and to further deny its clergy the right to gay marriage and also to continue with the edict that civil partnerships among clergy are acceptable ‘provided the partners remain celibate’ is ungenerous, cruel, unfeeling, idiotic and above all un-Christian.

During my lifetime, the influence of the C of E in public policy has plunged by at least seventy five per cent. This is due in large part to its internal quarrels and its obsession with sex and the bedroom. There is so much it could do and should do to enrich the lives of the needy and offer to the nation as a whole a moral compass for the conduct of public policy. The refreshing pronouncements of the new Archbishop of Canterbury on many current issues are undermined by this mean streak which poisons every aspect of the Church’s life.

The Church of England, in trying to appease its evangelical nutters whose shrill declarations are conspicuous for their lack of humanity and compassion, has destroyed its traditional foundation as the most enlightened of the various segments of the Christian religion. In so doing it has put at risk its own survival as a serious player in the country’s life. Indeed the vast majority no longer care whether it survives or not.

Infrastructure Renewal: But How To Pay For It?

Friday, February 14th, 2014

In the chaos and distress now experienced in large parts of the country as the result of quite unprecedented weather patterns, among the multitude of things which have become clear, one above all stands out. The infrastructure, whether it is drains, power lines, railways or the maintenance of natural systems like dykes and rivers is just not up to the standard which will hereafter be required for the modern post climate change world.

Why the climate is changing, whether such changes are natural to earth’s evolutionary progress or unnatural and man made, is not the issue in this context. It can be debated and argued over, but the need to do something practical to deal with the consequences is now no longer up for discussion. The problem is how to pay for the massive programme needed to make the country more able to cope and recover from these events in the future.

In the post WWI era government borrowing has been the way to finance public works. This approach has been abused by governments for nearly one hundred years to the point where the nation is now over borrowed and in debt with an annual interest bill of £50 billion to pay for its existing debt mountain. To add significantly to that is difficult.

The answer, but one nowhere on any government or central banking agenda, lies in Dynamic Quantitative Easing. This differs from the ordinary QE with which we have become familiar and which uses new money to buy in government bonds to increase the liquidity of the financial markets. That new money enters the financial industry and has done much to ensure the City was more or less insulated from the downturn. Quite a bit of the new cash goes overseas into emerging market countries. Very little of it filters down into the real economy and none of it goes towards, for instance, building robust flood defences.

Unlike regular QE where the Central bank issues the new money, Dynamic QE is new money issued by the Treasury. In WWI this took the form of Treasury Banknotes, but now it would be electronic money. This new money is then used directly to create new wealth by funding, with direct payments, infrastructure renewal and public works and can also be used for industrial development. The economy grows and the ratio of debt is reduced without further borrowing.

A side benefit is that the increase in the volume of sterling would drive down its value, helping exports and making imports more expensive, giving home industries an opportunity in the domestic market. Clearly the bank of England would have to monitor the money supply carefully and use a combination of interest rates and special deposits coupled with lending restrictions if the economy begins to overheat. This is a very different approach but it is one that Whitehall will have to get its collective head around, if Great Britain is ever to climb out of the hole it has dug for itself over several decades.

Salmond’s Campaign Crashes.

Thursday, February 13th, 2014

This Blog has already advanced the view that the form of independence which Alex Salmond is offering to the Scottish people is a pig in a poke, since his model of a free Scotland sharing the pound would be dominated by the economic policy of Westminster, whose parliament and government would contain no Scottish MPs whatsoever.

Bonnie Scotland would become to England as Greece now is to Germany. Moreover if eventually Scotland went for the Euro, its economy would fall under German control anyway, so it would line up behind Ireland, Portugal, Greece and Co. It may do better than they did first time round but it would have to surrender a very large slice of its newly won sovereignty.

The Scottish National Party, faced with the destruction of the economic core of the Yes campaign by the triple announcement today from all three main parties at Westminster that a currency union will not happen or even be discussed, have taken refuge in a fatal swamp of wishful thinking and denial.

Even if their wishes were to come true and a currency union were achieved, it would require a surrender of sovereignty to a Tory dominated England by a left leaning Scotland. If we detach the Scottish contingent to the Westminster Parliament, we find that in England and Wales there are a total of 573 constituencies of which 300 are Tory and only 216 are Labour.

That leaves 57 held by other parties and if Northern Ireland is added, we get a further 18. If all the NI MPs and all the other parties in the commons were to join with Labour, it will still be short of a majority. This suggests a UK without Scotland will be Tory led, just as Scotland has been Labour led at Westminster for decades.

The conclusion must be that without its own currency, Scotland would gain no independence worth having. In the face of having the rug of currency union pulled from under him, Alex Salmond must come forward with a credible plan for a Scottish currency or accept his cause is lost. The project will not be helped by the fact that Scotland’s two big banking groups RBS and HBOS are technically bust. Not a good foundation upon which to build.