Archive for November, 2016

CIA Warning To Trump

Wednesday, November 30th, 2016

One of the problems this blog is going to have with the Trump presidency is that I agree with him on some things but not on others. I support him on the trade, but not the tax, aspect of his economic policy and I applaud his fresh approach to the current train wreck of America’s foreign policy. But I disagree with his assertions on Iran. So I think the outgoing director of the CIA was right to warn Trump about tearing up the Iran nuclear treaty, but talking nonsense when he blamed Russia for everything in Syria, during a recent interview with the BBC.

Foreign policy is not a competitive sport, like football or swimming, where you support your team whatever they do. It is a political discipline which, if it goes wrong, leads to the death of millions, as history shows us. In a nuclear world it could bring human life to an end, so it is important to think it through. Each point of tension has to be dissected, analysed and tested to find where the tension is building, through what historical decisions, what the dangers are and what path will lead to the best, but usually far from ideal, outcome at the least cost overall, and especially in innocent lives. Force should be off the list, but if there is no other way, it must be a decisive knockout blow. It must not be used in restricted environments where it has enough punch to cause terrible suffering but not enough to deliver a decisive outcome. That is the military equivalent of slow torture. The brain dead souls who inhabit the present US State Department are about to be woken up by the hot blast of new thinking from the Trump administration. The same cannot be said for the UK foreign office, not least because the entire cabinet appears in a stupor brought on by a binge on Brexit.

As far as Syria was concerned, it was a perfectly stable country which had played a measured and sometimes positive role in the endless Israeli quarrel with its Arab neighbours, led by an anglophile married to an English born Syrian, in a family ruling dynasty which was politically intolerant and bolstered by a torture driven state security system, but in which all minorities lived and worshiped according to their own traditions in a secular state. They enjoyed life in a prosperous economy with excellent public education and healthcare.

Along came the Arab Spring, not a good name perhaps, and the Sunni minority, denied power in Syria always, and denied it in Iraq since it was invaded by the Anglo-Americans hell bent on creating a’ beacon of democracy'(!!), decided to rise up in revolution. The West backed them with silly rhetoric, a bit of cash, a few weapons of water pistol potency and goaded them on. Russia urged caution. Putin and Lavrov warned that a civil war in Syria would be disaster. The West dismissed them as ogres and declared  Assad would be gone by Christmas. How may years ago was that ?

You know the rest. So does Donald Trump.

Brexit: Now Another Legal Challenge

Monday, November 28th, 2016

The beleaguered May now faces another legal challenge to her stubborn insistence that she govern the Brexit process by Royal Prerogative. It appears that there is a strong legal opinion suggesting that leaving the EU will not automatically take GB out of the Europeans Economic Area, which is actually the free market extended to the likes of Norway. To exit that requires  triggering, so this opinion asserts, a certain Article 127 of a different treaty setting up the EEA.

Without wishing at this point to explore the merit of this interpretation, it casts yet another spanner into the works of a project at present going nowhere. This is because a Judicial Review is threatened causing more delay, which may end up with Parliament having a vote both on Article 50 and also on Article 127. Whilst most MPs have pledged to let Article 50 through once they have reviewed the terms, there would be no such assured majority for A127. Indeed many would argue that while the majority in the country voted for Brexit from the EU, they did not vote to leave  the EEA. Indeed recent opinion polls show a huge majority (90%) wanting to remain in the single market.

We now have a legal spider’s web, cabinet discord, no plan, the political weather changing in Europe and an increasingly restive population who feel they have voted for something which is not being delivered. This could turn nasty quite quickly. It is certainly the biggest UK political cock up for very many decades. Perhaps the biggest ever.

Castro : Passing Of An Icon

Monday, November 28th, 2016

He was arguably the world’s best known politician. Cuba was a tiny island of little consequence but Castro put it in the forefront of the politics and tensions of the cold war. He ousted by armed force a cruel and despotic dictatorship which made most Cuban’s lives a misery (which was inexplicably backed by the US and allowed organized crime to more or less run the country). He transformed the lives of his people for the better, but he was a cruel dictator who tolerated no opposition, which he executed in large numbers. He soon fell out with the Americans and became friends with the Russians. The Cuban Missile Crisis gave him a star on the sidewalk of history.

The Americans hated the notion of a communist regime on their doorstep and did everything possible to oust him, including a blockade which has lasted fifty years, but he survived everything and became a hero to half the world. The other half reviled him as a wicked tyrant. He was a bit of both but in absolute terms neither and there will never be agreement about his life or his legacy. His elderly brother, more of a reformer but still a communist dictator, soldiers on, but the time surely approaches for America to end this pointless blockade which did no more that hurt the innocent Cuban people and cement the Castros in power. Without that childish blockade the Castro reign would have ended decades ago.

Europe Threatened: But Not By Russia.

Friday, November 25th, 2016

This blog, as regular readers know, is constantly critical of the attitudes of the EU and NATO to Russia. Post Soviet Russia should have been brought into both the EU and NATO. The failure to do so made Russia feel threatened, especially after the eastward expansion of the union and the alliance. The ridiculous support and encouragement for largely far right anti-Russian elements in the Ukraine, encouraging mob rule which overthrew the legitimate, democratically elected government, forced the return of the 90% Russian Crimea back into the Russian Federation. The eastern half of the Ukraine remains in rebel hands and guarded by Russia. The EU shrieks aggression by Moscow, but good strategists can identify defence in the face of an actual threat.

Such is the detachment of the EU political class from all manner of realities about economic management and international relations, that it has allowed a combination of circumstances which do actually threaten its own survival.  The strategic threat comes not from Moscow, but from Berlin. Of course Berlin is not an aggressor nor does it mean the EU ill. At the heart of the issue is this question, posed by Helmut Kohl shortly after the reunification of the two halves of Germany.  Does Germany become part of Europe, or does Europe become part of Germany?

Europe saw the former was best, especially France, which in order to create a Europe into which Germany would be absorbed, proposed the single currency and led the complex negotiations which created the European Constitution, which France, perversely voted down in a referendum, killing it. This left the euro project in the air. Then came the deeply flawed decision to press ahead with it, while having no common government and no common economic policy. This meant that in effect the Euro became a de-valued Deutschmark, notionally controlled by the European Central Bank. However the ECB was headquartered in Frankfurt not far from the Bundesbank, which was heavily represented on its governing board.  Either consciously or subconsciously Europe has been managed in Germany’s interests, especially the euro.

The new currency was generally at a much lower level than the d-mark would have been, making German goods relatively cheaper, but higher than the lire or franc, making Italian and French goods more expensive. Meanwhile because the currency was backed by Germany, the likes of Ireland, Greece and Portugal were able to borrow and spend at cheap rates on a binge that lasted until they all went bust. However Germany would not agree to default or serious haircuts (grade one) so these economies tottered forward in an austerity programme of monastic severity.

This blog has said on countless occasions  that the euro cannot succeed, because it has no government. But it carries on against the odds because actually it does have one; in Berlin. Germany decides and, because the world knows that Germany decides, it is happy to use and trade euros. But it is also true that you cannot have a sovereign government without a currency, since without control of your own currency, you are unable to control the economic fundamentals, which would enable your policies on all the critical social issues, to take effect. In other words whoever is master of the currency has sovereignty. Thus Germany has sovereignty over the Eurozone and with it de-facto the EU. This is the opposite of what was intended. Because of Germany’s success, Europe has become part of Germany.

In the old world this might have passed unnoticed. It is easy to forget that in Europe, before the world wars, democracy was in meagre supply and that the EU represents the first democratic unification of a continent which has spent most of its post Roman history at war. But in democracy you have power vested with the people. So although the political class is comfortable with German leadership, there is increasing evidence that the populations at least of France and Italy, are not. If the far right win the Austrian presidency in ten days time, which is possible, there may be an Auxit referendum. Certainly if Le Pen wins in France there will be one for Frexit.

This is all because Brexit changed everything. It showed that the political class, the bankers and the rich could be defied and the aspirations of ordinary people had to be brought back centre stage. It is likely that without Brexit, there would have been no Trump. In ordinary EU homesteads as opposed to EU political offices, Brussels is seen as a burden not a blessing and far too many have suffered either stagnation or a fall in their standard of living. But not in Germany. Suddenly it is beginning to dawn that there is a way out. If France and Austria were to exit, Italy would follow. The EU would become fundamentally different. It would be likely to regroup on a less prescriptive model, providing a looser more relaxed confederation with which GB could build fair trade. The alternative is a federal government democratically elected controlling the euro and running an economic policy which works across the union. But it is probably too late for that because there is no longer a reliable majority to see the project through.

Whatever happens Berlin will be blamed. Berlin will blame London. That might be right, because history will judge that it was from the island capital that the fatal blow, Brexit, was struck. Moscow never came into it. On the other hand, the Green candidate may secure the Austrian presidency, Le Penn may be defeated in France, Merkel and Renzi may be returned to power, Germany may ease its economic policy to accept that if the EU is to survive intact, account must be taken of the needs and aspirations of all the countries in the EU, so that restive populations fall into line and settle down. The only thing which is certain is that there are now, so to speak, so many balls in the European air, anything can happen.

Including, even, No Brexit.

Perhaps we could call it Noxit?

Hammond: A Failure

Thursday, November 24th, 2016

This blog tended to predict that Hammond would come forward with something bold and inspiring which would kick start a period of sustained growth independent of Brexit, driven by massive house building of affordable rental homes, modernization of hard infrastructure like roads, railways and hospitals and soft infrastructure as in broadband, 5 G, universal mobile cover everywhere and a skills upgrade across the piece. This would drive up economic activity so as to increase revenue and create enough income to fully fund public services, made even better if supported by taxation reform such as a turnover tax. He has failed to do this.

He needed to come up with a plan which would pump up to £500 billion into the economy over the next seven years, part borrowing, part DQE and part private. This would have sent a signal to the world and moreover to the British people, that GB was going to motor, whatever the direction, length or outcome of Brexit negotiations, to  become the number one global choice to build a business. If soon matched by a similar reflation programme in Trump’s US, the global economic drive would pass back from China and a stagnating EU to the old Anglo-American couple who led the industrial revolution. At its heart it is a vision thing. Trump has it (rather surprisingly to many) but May hasn’t. She fusses and fiddles and soothes with platitudes.

So the nation is now engulfed in gloomy forecasts (why does anybody listen to this stuff and how on earth were we so stupid as to set these wild guesses onto a statutory basis?) and a little bit of this and that. £20 billion into infrastructure, a few houses, innovation and skills over five years. In an economy with a GDP of about £1.8 trillion annually and over five years £9 trillion, the effect at best can only be marginal, if visible at all. There was a tax tweak here and there; easing off the austerity package a little, but keeping it in force and bearing down on those with the least.

What this tells you is that, not only does this government have no clear idea about what it wants Brexit to look like, but neither has it a clue how to either safeguard the country from any economic shock, or worse, how to prepare it for a great leap forward. No wonder national productivity is so poor. Just look at the meagre output of the government.

May, Trumzp And Farage

Wednesday, November 23rd, 2016

Reports multiply of angry ministers complaining that Downing Street has made a horlicks of the incoming Trump transition and allowed Nigel Farage to steal the show. Certainly Don and Nige are big mates, see eye to eye on a good deal and Don wants Nige to be the Brit Ambassador to Washington. May has become all prim, like the bossy headmistress of an independent school, who nevertheless gets little actually done.

Boris has been left to offer support for our actual man already there, whom nobody has ever heard of. At the heart of all this is the chaotic state of the internal Brexit debate in the cabinet, leaving no spare time to focus on the epoch making change which has occurred to the American body politic. Gone are the niceties of diplomacy, the rituals, customs and protocols at which GB is gold star brilliant. Instead here is a non-politician billionaire incoming president, propelled to office by a revolution few saw coming or if they did shut their eyes, who communicates via Twitter and announces policy on YouTube. The biggest trade deals in history, one with the pacific Rim and one with the EU, have been killed off over night.

Meanwhile GB is struggling with Brexit, or at least political GB is, popular GB seems to have shrugged it off,  its greatest upheaval since the end of WWII. The new president is an Anglophile and wants to help. That’s good news missed by May who is so busy-busy that she doesn’t open her post, so she missed it. Sorry open her Twitter feed. Perhaps she should refer to Churchill.  Struggling Prime Ministers often do. He built up a very close relationship with Harry Hopkins, a confidante of FDR, during the dark days of 1940/41. Hopkins reported directly to the President of his conversations, by-passing both country’s respective ambassadors. He gave Churchill direct influence over the thinking in the White House.

Maybe something like that in reverse involving Farage would be a shrewd move now. Trouble is this blog fears May used up all her shrewd plotting for the leadership of the Tory party. There has been little sign of it since.

The Brexit Judgment: Should May Move On?

Sunday, November 20th, 2016

Three senior Tory backbenchers, all Remainers, but supported by a prominent Tory Leaver, have urged May to drop her appeal to the Supreme Court and get on with pushing a bill through parliament to activate Article 50. They fear she will lose and thus waste time and a good deal of public money. Downing Street spokespeople, who nowadays sound like a backstreet PR department of a dodgy goods company under siege, insist she has a strong case and will win. I am not a lawyer but I have read the judgment of the High Court and I have an interest in and comment on our constitution or lack of it. The four grandees also think that if the nations are separately represented, as they now intend, it is not impossible that the Supreme Court might rule that they in effect have a veto, in the case of Scotland and Northern Ireland, who voted to Remain. That would be a loss to May of custard pie in the face proportions.

Unless there is a technicality in the way in which the 1972 Act was drafted which has been missed, or in which the Referendum Act was drafted so that it somehow overrides the 1972 Act,  she cannot win. Yet on refection there is perhaps a way of winning, which might constitutionally be far worse than losing. It is this. When stripped down to the bare bones, our constitution is an Absolute Monarchy.

The Queen owns everything including the land we hold free and in perpetuity, and all public bodies have a title which starts with Her Majesty’s, including both the Government and the Opposition. It could therefore be that when such nostrums as the Crown in Parliament are added, it begins to look as if the Sovereign Power remains with the Queen, but it is ceded to parliament which can then pass laws which the Queen must sign to make lawful, because the power remains hers. By that reasoning it could be argued that if the Queen should decide, in the persona of her prime minister, to withdraw that concession, bypass parliament and act directly on a mandate given by her people, she can do so.

Winning by that style of judgment would sort out Article 50, but would make clear to the country,  the world and not least to an enraged parliament, that GB is not  what it proclaims on the tin; a parliamentary democracy. Such is the hate of the people for politicians and all their works in most parts of the UK  (but not in Scotland) that, while parliament will be in a tumult of protest, the people might breathe a sigh of relief.

Brexit: Is It Undeliverable?

Thursday, November 17th, 2016

This must now be a question, even if there is not yet an answer. The scale of the legal complexities now emerging on every front are beginning to frighten even those who understand them. Not only are there problems with the constitutional process, but parliament has to enact something watertight, or else there could be a legal challenge all the way to the EU Supreme Court from some angry anti-Brexiteer or corporation. There are no civil servants and very few lawyers who were active in 1972 and recall what our law and process was like before we joined the EEC. So everybody is on a learning curve.

Moreover it is becoming clear that political problems are emerging in the EU itself, arising out of a failure to deliver an even share of prosperity across the EU, not least because of the failure to recognize that a currency, the euro, cannot operate without a government. Greece is bust but Germany pretends it isn’t and everybody does as Germany says. But unrest is building in Italy and France and to a lesser extent in Spain and Portugal. Electoral stirrings are felt in Belgium, Holland and Denmark. By the time the May government works out what its negotiating position is and has a legally untouchable mandate to trigger Article 50, the EU could itself be so politically convulsed that it is in no position to agree anything, as unanimity is the requirement for such a significant event as Brexit. Thus at the end of two years we could find ourselves out, with multiple legal and contractual issues and liabilities unresolved, yet still half in because these unresolved issues would not allow us fully to detach. Like a ghost haunting the corridors of an increasingly weather beaten EU Commission.

It may still turn out well and all is not lost, but it is a bigger project than previously foreseen. The biggest mistake of all was to fail to investigate the feasibility of Brexit and plan what would need to be done, under what legal structure and with what objectives, before the referendum was called. The lack of such a plan and the seeming inability to put one together by the fractious May government is reported to have reduced senior civil servants to ‘despair’. Another Cameron mistake in an ever growing list. The country is now in the position of having voted for something that was not available on anything like the terms promised. Like a holiday sold for a luxury experience in a hotel which, on arrival it is found, is not yet built.

But, and this is another scenario not foreseen, something strange is happening. The economy continues to grow (albeit at the very low western level), manufacturing is picking up due to the lower pound and consumers appear to be spending with some confidence. The reason may be this. Our economy has a massive trade imbalance, the second highest in the world, as much because of too many imports as because of too few exports. If we simply walked away from the EU in the style of leaving a party which had lost its zing, having failed to reach any worthwhile agreement with the other twenty-seven, by then in their own political turmoil, two things could happen. Either trading arrangements stay as they are or the EU slaps tariffs on our goods. In which case we slap the equivalent on theirs and create vast opportunities for home manufacture of almost everything. And viable home food markets for  farmers no longer undercut by produce from eastern Europe. So either way it might not really matter quite as much as we think.

If you are now confused because this blog appears to be debating opposites with itself, you are right. It is to make the point that there may be actually a lot more in bureaucratic process in the EU than there is substance and effect. Everyone has to live and when push comes to shove they will go on doing so. Even EU member states. The power of Brussels may be a mirage. If that is the case the concentration should be not arguing with each other and with the EU, but building a Brexit proof economy which will prosper on its own terms, through its own initiatives, developing opportunities of its own making.

Back to Hammond.



NATO: Is It Over?

Wednesday, November 16th, 2016

Not yet. However reform is long overdue. At the end of the cold war I declared that with the disbanding of the Warsaw Pact, NATO too should stand down, since the threat which it was designed to deter had gone away. The problem with military alliances is that if they are not needed to counter a threat, they can easily create one, because their very existence is threatening to those outside it.

As long ago as 2009 I wrote and published that if NATO was to remain, especially if it was to expand east into the old Warsaw Pact territories, Russia should become a member, as it was a European power. Future threats to Europe would come from outside Europe not within. This did not happen and Russia found not only that it was excluded, but that everyone else, right up to its border, was to be included. Alarm bells rang in Moscow. Recalling invasions from the West by Napoleon, the Kaiser and Hitler, Russia set about modernizing its military. We know the rest.

Meanwhile NATO, although it had the wits to refuse to join in the invasion of Iraq in 1991, engaged itself in the Balkans and Afghanistan then blundered into Libya. The Balkans were stabilized, Afghanistan is a mess, Libya is a chaotic mess, Al Qaeda has morphed into IS and, as part of the chain reaction, Syria has been all but destroyed in a terrible civil war.  The same fate now seems to be engulfing Yemen. Clearly reform, realignment and remodeling across the whole international scene is a matter of priority. Whilst NATO sees itself as part of the solution, it is also part of the problem. The wind of change must blow though its corridors also. It very likely will, because President Elect Trump has expressed sentiments very similar to those set out above.  The terms will be simple. If NATO wants his money it will have to do his bidding.

Tensions In Trump Tower

Wednesday, November 16th, 2016

There are reports that Donald Trump’s transition process is proving bumpy. This is not surprising. Like Brexit, few believed even in his own team that he could actually win and preparations for such a dramatic outcome were limited. But the biggest problem Trump will be battling just now is that he is his own man, the presidency was his project and during the journey he was abandoned by his party, for whom in the end he not only delivered the White House, but also both Houses of Congress.

Quickly Republicans of every stripe rush to his side. Obama sets off overseas to assure nervous Europeans that Donald is a good guy with their interests at heart. The idea, of course, is to tame the outsider, so that the firebrand of the campaign trail becomes the pussy cat in the Oval Office.

Well dream on. Donald Trump is his own man and will be his own president. He owes nothing to nobody, but such as Republicans have, they owe in large part to him. Expect a lot more firings yet. This will be Donald Trump’s White House and nobody else’s. There will be a few kind words and a little reaching out, but nothing to compare to the reaching, of the  Republican establishment, for a slice of humble pie.