Archive for the ‘Neoliberalism’ Category

Obamacare critic at HHS


Trump named a vociferous critic of Obamacare and a policy consultant on Tuesday to help him overhaul the healthcare system that Republicans have targeted since Democrats enacted sweeping reforms in 2010. Republican Representative Tom Price, an orthopedic surgeon from Georgia, will be Trump’s Health and Human Services (HHS) secretary, and consultant Seema Verma will lead the Centers for Medicare and Medicaid Services, a powerful agency that oversees government health programs and insurance standards. Vice President-elect Mike Pence, arriving at Trump Tower in New York, promised a “busy day” as the team continues filling key positions. The president-elect planned to announce his pick for transportation secretary, Trump spokesman Jason Miller told Fox News. Trump, a Republican, cast Price and Verma as a “dream team” to help him once he takes office on Jan. 20 with his campaign pledge to repeal Obamacare, Democratic President Barack Obama’s signature health law formally known as the Affordable Care Act. Senate Democratic Leader Chuck Schumer denounced the choice of Price, calling him “far out of the mainstream” in his stance on government efforts such as Obamacare and Medicare, the insurance program for the elderly and disabled, and on Planned Parenthood, a women’s health organization. “Nominating Congressman Price to be the HHS secretary is akin to asking the fox to guard the hen house,” Schumer said.


Trump, asking for business favours?


A spokesman for Argentina’s president has denied that Donald Trump asked for a business favour when Mauricio Macri called the US president-elect to congratulate him on his victory. Local media reports have alleged that Trump asked Macri for help over a stalled construction permit for a 35-storey project called Trump Office in downtown Buenos Aires. A source told the Guardian that the information came from Macri’s staff. “Trump asked him to authorize a building he’s constructing in Buenos Aires – it wasn’t just geopolitical chat,” said journalist Jorge Lanata on his Sunday night news programme, Periodismo Para Todos. According the programme, the Buenos Aires building project became bogged down in bureaucratic red tape earlier this year, and was raised by Trump during the telephone call last Monday. “Macri told Trump that Argentina is welcoming foreign investment now, and Trump replied that he has a $150m investment in Argentina stalled because of a building permit in Buenos Aires,” journalist Romina Manguel, who described the alleged conversation on the programme, told the Guardian”.

Trump, bankers and populism


“According to CNBC, Trump is considering JPMorgan Chase chief Jamie Dimon as treasury secretary. Dimon is the leader of the largest of the Big Four banks in the United States, so he’s hardly unfamiliar with how business is done on Wall Street. Multiple reports also show that Trump is considering Steven Mnuchin, a former Goldman Sachs official, for the same post. Mnuchin served as the businessman’s campaign finance chief during the 2016 campaign. It appears as if Mnuchin is more likely to take the job, given his prior relationship with Trump. Dimon has said repeatedly that he has no interest in the job. The banker also bashed Trump’s policies in his 2016 letter to JPMorgan Chase shareholders”.


Misreading the Nordic model


An article by an extreme right wing economist criticizes the Nordic model, “Sanders, the left-wing populist who for months competed with Hillary Clinton in the Democratic primary, has popularised a simple vision for reform: introduce a Nordic-style welfare state in the United States. In a debate with Clinton, Sanders explained that his aim is to popularise the concept of Scandinavian democratic socialism: “I think we should look to countries like Denmark, like Sweden and Norway, and learn what they have accomplished for their working people.” Sanders and his supporters are not alone in praising the Nordic model. In 2013, President Barack Obama followed suit by making the first bilateral visit by a U.S. president to Sweden, complimenting his hosts about their country’s economic model. He escalated the praise at a U.S.-Nordic summit in May 2016, where he explained: “In a world of growing economic disparities, Nordic countries have some of the least income inequality in the world—which may explain one of the reasons that they’re some of the happiest people in the world, despite not getting much sun. . . . There have been times where I’ve said, why don’t we just put all these small countries in charge for a while? And they could clean things up.” Admiration for the Nordic welfare state runs deep among U.S. academics, journalists, and politicians on the left. It’s easy to understand why—at first glance, the Nordic countries appear prosperous yet enjoy equal distribution of wealth and good social outcomes”.

He argues that “A closer look, however, shows that what American liberals like about Nordic societies is not a product of socialism. The success of Nordic countries has more to do with their unique culture—and free markets—than with their welfare state policies. A 2015 story by PBS titled “What Can the U.S. Learn from Denmark?” is a good example of how many Americans view Scandinavia. The article heaps praise on the Danish social model, explaining that “Danes get free or heavily subsidised health care” and “compensation when they’re unemployed, out sick from work, or on parental leave.” It notes Denmark’s high taxes, strong labour unions, and heavy state involvement in the economy. It suggests that these policies explain why Danes live, on average, 1.5 years longer than Americans. All these statements are of course true, but they lack historical perspective. Danes today outlive their American counterparts, but not because Denmark has the highest tax-to-GDP ratio in the developed world. As late as 1960, taxes in Denmark were actually lower than in the United States (25 percent of GDP compared with 27 percent), yet at the time, Danes lived 2.4 years longer than Americans—well before the creation of the Danish welfare state. In Sweden and Norway, too, the gap in life span compared with the United States is smaller today than it was in the mid–twentieth century, when their public sectors were relatively less developed”.

He mentions that “The positive influence of the welfare state on overall prosperity is similarly exaggerated. In fact, prosperity in the Nordic countries has increased faster in periods of economic freedom than in those of democratic socialism. The example of Sweden is instructive. In the latter half of the nineteenth century, liberal politicians such as Johan August Gripenstedt, minister of finance from 1856 to 1866, introduced reforms designed to secure business freedom, free trade, and strong protections for property rights. From around 1870 to 1936, Sweden pursued pro-market economic policies and was rewarded with an average yearly growth rate of two percent—the highest of any western European nation during the period and twice as high as rates of leading economies such as that of the United Kingdom. In 1936, the Swedish Social Democratic Party was able to form its first majority government. The Social Democrats went on to dominate Swedish political life until 1970, slowly raising taxes and expanding the welfare state while, for the most part, leaving the market-oriented policies of their predecessors in place. During these years, Sweden’s growth rate rose to 2.9 percent. Although higher in absolute terms than before—a product of technological growth and the postwar boom—this was around the western European average”.

Giving context he writes how “between 1970 and 1991, Sweden—unlike other Nordic countries—experimented with third way socialism. The pinnacle of these policies was the introduction of “employer funds,” a system through which ownership of private firms would slowly be transferred to funds run by the labour unions. Sweden’s average growth rate fell to 1.4 percent, the second lowest in western Europe, and many successful businesses and individuals left the country. The socialist experiment was followed by an era of renewed focus on market reforms, reduced generosity of welfare programs, and significant tax reductions. The reforms paid off: between 1991 and 2014, Sweden’s growth rate rose to 1.8 percent—placing the country only slightly behind the United Kingdom, which had the highest rate in western Europe during this period. In addition to economic growth, American admirers of the Nordic societies often focus on their social attributes, such as high levels of income and wealth equality. Yet as I show in my book, many of these attributes largely predate the welfare state. For instance, in a 2008 study of top incomes in Sweden, the economists Jesper Roine and Daniel Waldenstrom explain that “most of the decrease [in income equality in Sweden] takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries.” A 2013 study by Anthony Barnes Atkinson and Jakob Egholt Sogaard reached a similar conclusion for Denmark and Norway”.

He attempts to further undermine the Nordic model, “Good social outcomes in the Nordic countries predate the welfare state because what makes Nordic societies unique is related not to policy—large welfare states can also be found in countries such as Belgium, France, and Spain—but to culture. Over 100 years ago, German sociologist Max Weber observed that Protestant countries in northern Europe tended to have higher living standards, better academic institutions, and more well-functioning societies than countries in other parts of Europe. He attributed their success to the “Protestant work ethic.” Swedish scholar Assar Lindbeck later built upon this theory by looking at factors other than religion. For instance, he explained that in the hostile environment of preindustrial Scandinavia, it was difficult to survive as a farmer without working exceptionally hard. The population therefore adopted out of necessity a culture with a great emphasis on individual responsibility, honesty, trust, punctuality, and hard work. These cultural attributes help explain why Nordic nations developed high levels of prosperity and low levels of poverty during the small-government era of the late nineteenth and early twentieth centuries. The welfare states were introduced only once Nordic societies had already become prosperous and equal”.

He notes that “The simple truth is that there is nothing magical about the Nordics. Like other countries, they have thrived economically in periods of free market reforms and have stagnated when taxes and government involvement in the economy have increased. Their social success predates the welfare state and is no more or less impressive than the social success of Nordic Americans. And as I show in Debunking Utopia, norms related to hard work and individual responsibility, which developed before the welfare state, have begun to change since it was introduced”.

He ends “It is easy to understand why so many Americans admire Nordic societies, even if they don’t always understand them. The point is not that Americans should stop admiring Nordic society, but rather that it is time to learn the true lesson from the Nordics—the importance of free markets, strong norms, and policies that encourage citizens to maintain those norms”.

“Plans to end its use of private prisons”


A report in the Washington Post notes the end of private prisons, “The Justice Department plans to end its use of private prisons after officials concluded the facilities are both less safe and less effective at providing correctional services than those run by the government. Deputy Attorney General Sally Yates announced the decision on Thursday in a memo that instructs officials to either decline to renew the contracts for private prison operators when they expire or “substantially reduce” the contracts’ scope”.

The article mentions how “The goal, Yates wrote, is “reducing — and ultimately ending — our use of privately operated prisons.” “They simply do not provide the same level of correctional services, programs, and resources; they do not save substantially on costs; and as noted in a recent report by the Department’s Office of Inspector General, they do not maintain the same level of safety and security,” Yates wrote. While experts said the directive is significant, privately run federal prisons house only a fraction of the overall population of inmates. The vast majority of the incarcerated in America are housed in state prisons — rather than federal ones — and Yates’ memo does not apply to any of those, even the ones that are privately run. Nor does it apply to Immigration and Customs Enforcement and U.S. Marshals Service detainees, who are technically in the federal system but not under the purview of the federal Bureau of Prisons. The directive is instead limited to the 13 privately run facilities, housing a little more than 22,000 inmates, in the federal Bureau of Prisons system. The facilities were meant mainly to house inmates who are mostly low security, “criminal alien” men with 90 months or less time remaining on their sentences, according to a recent Department of Justice Inspector General report. Yates said the Justice Department would review the contracts for those facilities as they come up for renewal, as all will do in the next five years. She said they would then be reduced or allowed to expire, though none would be terminated prematurely”.

Crucially the piece notes “the memo could spark broader change in the prison system. “This is a huge deal. It is historic and groundbreaking,” said David Fathi, director of the ACLU National Prison Project. “For the last 35 years, the use of private prisons in this country has crept ever upward, and this is a startling and major reversal of that trend, and one that we hope will be followed by others.” The Justice Department’s inspector general last week released a critical report concluding that privately operated facilities incurred more safety and security incidents than those run by the federal Bureau of Prisons. The private facilities, for example, had higher rates of assaults — both by inmates on other inmates and by inmates on staff — and had eight times as many contraband cellphones confiscated each year on average, according to the report”.

It adds later that “The problems at private facilities were hardly a secret, and Yates said Justice Department and Bureau of Prisons officials had been talking for months about discontinuing their use. Mother Jones recently published a 35,000-word exposé detailing a reporter’s undercover work as a private prison guard in Louisiana — a piece that found serious deficiencies. The Nation magazine wrote earlier this year about deaths under questionable circumstances in privately operated facilities. It is possible the directive could face resistance from those companies that will be affected. In a statement Thursday, Jonathan Burns, a spokesman for Corrections Corporation of America, criticized the Inspector General’s report, saying it had “significant flaws.”

It goes on to mention “Yates wrote that the bureau also would amend a solicitation for a 10,800-bed contract to one for a maximum 3,600-bed contract. That, Yates wrote, would allow the Bureau of Prisons over the next year to discontinue housing inmates in at least three private prisons, and by May 1, 2017, the total private prison population would stand at less than 14,200 inmates. She said it was “hard to know precisely” when all the privately run facilities would no longer have federal inmates, though she noted that 14,200 was less than half the inmates they held at their apex three years ago, a figure she said indicated the department was “well on our way to ultimately eliminating the use of private prisons entirely.” “We have to be realistic about the time it will take, but that really depends on the continuing decline of the federal prison population, and that’s really hard to accurately predict,” Yates said. According to the inspector general’s report, private prisons housed roughly 22,660 federal inmates as of December 2015, though Bureau of Prisons website indicates the total is now closer to 22,100. That represents about 12 percent of the Bureau of Prisons total inmate population, according to the report”.


Ireland’s choice, sovereignty vs money


An article notes the tax affairs of Apple in Ireland, “American tech giant Apple had $234 billion in annual revenues in 2015. Now, it’s going to have to pony up $14.5 billion to Irish authorities for skirting taxes. That’s according to the European Commission, which announced Tuesday that Apple had paid a tax rate of just 1 percent or even less — .0005 percent, in some years — on its European profits while some of the company’s operations were based in Ireland. The commission determined such a low tax rate was illegal because it creates an illegal trade incentive. “Member States cannot give tax benefits to selected companies — this is illegal under EU state aid rules. The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years, commissioner Margrethe Vestager, in charge of competition policy, said in a statementTuesday”.

The report adds “The massive penalty is likely to send shockwaves through boardrooms of companies like Amazon and McDonald’s that have extensive operations in Europe. European authorities are investigating both companies to see if they paid their fair share of taxes. The ruling also puts the Obama administration in a tight spot. President Barack Obama wants to keep American companies in the country to contribute to U.S. revenue. At the same time, he doesn’t want European authorities to target American companies simply because they’re American and doing business in Europe. In a statement Tuesday, the Treasury Department said it was disappointed in the ruling”.

The piece goes on to mention “Republicans share the president’s frustration. In a statement, House Speaker Paul Ryan of Wisconsin said, “This decision is awful. Slamming a company with a giant tax bill — years after the fact — sends exactly the wrong message to job creators on both sides of the Atlantic. It’s also in direct violation of many European countries’ treaty obligations.” Both Apple, which has been operating in Ireland since 1980, and the Irish government have said they would appeal the ruling”.

It notes “Andrea Montanino, director of global business and economics at the Atlantic Council who previously worked at the European Commission, put the blame for the mess on Dublin. “There are rules in Europe as there are rules in the United States,” Montanino told Foreign Policy Tuesday. “You have to comply with the rules. I would not say it’s the fault of Apple. Apple followed the rules. It is Ireland that broke the rules.”

Brazil after the Olympics


A piece notes the problems of Brazil after the end of the Olympics, “The Olympic torch was extinguished Sunday night in a carnival of song and dance, the good times rolled. But it is too early to determine whether or not the games were a success or just a muddling through difficult days. Swimming pools turned green. Some 85,000 soldiers and police were mobilised to provide security, but instances of muggings,stray bullets, and petty theft made headlines. The pollution in Guanabara Bay sickened at least one athlete. And, of course, six-time Olympic gold medalist Ryan Lochte and three of his fellow swimmers embarrassedthemselves. But the enthusiasm of many Cariocas — as Rio de Janeiro’s residents are called — partially compensated for the long lines to enter venues, food shortages, and challenging transportation delays. However the games will be remembered, it has at least been a temporary respite for Brazilians from the ongoing political and economic crises that have gripped the nation”.

More importantly it mentions “As the games end, the impeachment of President Dilma Rousseff will move to closure with Aug. 25 cited as the day the last phase of the process will open. Rousseff faces charges of violating budget laws by authorizing credit lines without congressional approval. That is the formal indictment. But there are many other elements involved in the accounting of her very public national downfall. Rousseff, by most accounts, was a terrible politician. Brazil is a multiparty political system, and the only way to get legislation approved is to constantly build short-term coalitions in Congress; instead, she refused and played to her base. Even worse, she was often petty: In particular, she sought to prevent the re-election of Eduardo Cunha as the speaker of the lower house. In retaliation, it is said, he initiated the impeachment process. Many blame her government for the economic and financial crises that now plague the country. By most accounts, she appointed mediocre functionaries to important cabinet posts. And her Workers’ Party (PT) never encountered a welfare program it didn’t like. As a result of massive public sector spending, the economy overheated. Inflation increased, as did unemployment. Foreign direct investment fell”.

It adds importantly, “the hallmark of the current crisis was the discovery that the state oil company, Petrobras, had become a major source of bribes and kickbacks that were used to finance party politics. Most of the country’s major construction companies were involved, and a host of political leaders across the party spectrum have been implicated in the scandal. It did not help Rousseff’s credibility that she served as the minister of mines and energy and chair of Petrobras while many of the crimes were committed. Of course, she denies any knowledge of what occurred. But the scandal is so large as to deem that defense laughable. A new generation of federal prosecutors have arrested or indicted many of the alleged participants of the conspiracy. Dozens of senior politicians and private sector officials sit in jail. Some are involved in plea bargains; most will serve some time in prison. For economic and political elites who believed they could act with impunity, the new reality that crimes will be punished is a shock — but one that will serve Brazil well in the future. The cozy, often crooked ties between the private sector and the huge, inefficient public sector have been dealt a serious blow”.

It goes on to point out that “though the sins of an economic giant are being laid bare, the country’s finances are still in great distress. A decade ago, Brazil was seen as a rapidly emerging economy — one of the skyrocketing BRICS (Brazil, Russia, India, China, and South Africa) that would own the future. Those were heady days, especially for Brazil. A sharp increase in demand for Brazilian raw materials and commodities, particularly from China, provided an ever-increasing amount of foreign exchange. Investment flowed in. Brazil was upgraded by all the rating agencies. But the PT didn’t understand that the economy was actually neither productive nor competitive globally. Priorities such as physical infrastructure were overlooked. Rigid labour laws, many on the books since the 1930s, made it difficult to fire unproductive workers and hire new ones. Skills were subpar; both technical training and general education languished. Public health, while universal, was substandard. Social security coverage extended benefits to both public sector employees and the private sector, but deficits ballooned and reform was postponed. Brazil’s tax collection was in disarray — leveed at the union, federal district, state, and municipal level, the burden surpassed 33 percent of the country’s GDP. Meanwhile, government grew bigger and bigger as the PT sought to employ as many of its party members as possible, often with little thought to their competence”.

The author mentions that “The acting president, Michel Temer, if confirmed at the end of August as the new chief executive, apparently wants to undertake a reform program. The first priority is to rein in government spending, cutting pensions and workers’ benefits. As might be imagined, the unions are outraged; there will be massive protests if the government decides to move forward”.

He points out its rising debt, partly due to an aging population, “Compounding the problem of a stable social safety net is Brazil’s profound inequality. There is a tremendous gap between the very rich, a struggling middle class, and the poor. The Olympics captured that disparity: As sweeping aerial shots panned from the beachfront condos of Ipanema to the mountainside favelas, or slums, the media didn’t shy from reports on the inability of the favelados to afford tickets for the events. Many of the favelas lack sanitation — a major cause of the pollution in Guanabara Bay, since raw sewage runs directly into the water. Promises to install processing plants have been on hold for decades. Security was frequently highlighted in the media coverage. While tourists and middle- and upper-class Brazilians cheered in the Maracanã Stadium, the favelas were home to the ongoing drug war between the gangs and the security forces”.

It concludes “As the games end and the impeachment process terminates, probably with the dismissal of Rousseff, the grim questions that mark Brazil’s present predicament will resurface. Can public education and health facilities be reformed to give security and opportunity to those in need? Can a corrupt, inefficient, and immense federal government be downsized? After decades of out-of-control growth, are there too many political interests at play to allow for meaningful reform? Can Brazil reinvigorate industry to provide new export products in a world where commodity prices will probably be flat for some time? The short answer is that changes are possible — but not without government reforms first. Most observers agree that much of the gridlock in Brasília is due to the dysfunctional political party system. Remarkably, ideology isn’t the problem: Politicians move from party to party with little regard for loyalty. But changing the system — creating electoral districts and reducing the number of political parties — will require congressional approval. Few analysts believe that there is a broad enough coalition in Brasília that will forgo perks and patronage to make selfless decisions for the good of the state”.

It ends “Local elections are scheduled for October of this year; the results may provide some insight into the impact of the current situation on the average voter. The expectation is that Rousseff’s PT will do poorly at the expense ofpersonalist parties. National elections will take place at the end of 2018. Temer has already said he will not be a candidate. The PT’s former two-term president, Luiz Inácio Lula da Silva, looks increasingly like a liability — and he may well be indicted as part of the ongoing scandal. Will new reform-minded candidates emerge? That is the hope — but there is no guarantee that fresh faces will be able to successfully address the reform agenda. Some argue that economic growth will begin to return in late 2017 or in 2018. If Temer becomes president after the impeachment, he has promised to work with Congress to approve much needed fiscal reforms. Brazil would also be helped if global commodity and raw material prices recover. Surely, Brazil’s working and lower classes will cheer, but the welcome relief may only delay the inevitable reckoning with the painful realities that need to be addressed”.


Chamberlain, Timothy and May


A piece from the Economist examines Threasa mays new chief of staff, “ON JULY 7th 1906 Joseph Chamberlain led an 80-car rally to celebrate his 70th birthday. Thousands of Brummies lined its 17-mile route. “Our Joe” had fought for Birmingham’s workers as mayor and, on the national stage, had advocated tariffs protecting its industries. The city was a palimpsest of his achievements: its schools for the poor, its magnificent parks, its grand civic buildings, its whirring workshops and clanking factories full of confident, well-fed workers. Still, eyebrows twitched when, in a speech almost precisely 110 years later, Theresa May cited him as an example. She was campaigning for the Tory leadership and, though he had ditched the Liberal Party over its tolerance for Irish autonomy, Chamberlain had never been a Tory. That the woman who today runs Britain praised him had everything to do with her closest adviser: Nick Timothy. He is one of the most interesting figures in her government. The son of a steelworker and a school secretary, he venerates Chamberlain’s interventionism and wrote a biography of the man. He even wears a long Victorian beard”.

The article goes on, “Those close to Mrs May differ on how much Mr Timothy influences her, but only between “quite a lot” and “enormously”. Like her he is a cricket fanatic (he lives a big six away from the Oval ground). He shares the post of Downing Street chief-of-staff with Fiona Hill. For most of their boss’s spell as home secretary this duo was her praetorian guard: bossing around civil servants, telling David Cameron’s aides to mind their own business and generally exhibiting an unflinchingly protective loyalty to her”.

Interestingly it adds, “Admirers credit this with Mrs May’s unusually long (six-year) stint in the job. Critics fret that the control freakery will now constipate Whitehall: “You couldn’t blow your nose without Nick or Fi knowing,” recalls one former colleague. It is not an exaggeration to discern a direct line between Mr Timothy’s upbringing and Mrs May’s vision. He provides a pragmatic prime minister with an idealistic edge. His credo is captured in an article he wrote in March (one of a series for ConservativeHome, a Tory-aligned website) about “modernisation”. Here a bit of history helps. Back in the early 2000s, when the Conservatives were in the doldrums and the reactionary old farts were doing battle against modernisers, Mr Timothy was with the modernisers. But with David Cameron’s rise to the leadership in 2005, the debate shifted to what modernisation should mean. There was “Easterhouse modernisation”, a focus on the poorest, named after a Glasgow housing estate. There was “Soho modernisation”, an urban social liberalism named after a trendy part of London. But Mr Timothy reckoned a third leg of the stool was missing: “Erdington modernisation”, a concentration on the struggling, patriotic working-class named after the industrial suburb of Birmingham where he grew up”.

The writer goes on to note how “His writings expatiate on the idea. At home: more intervention in the economy, a clamp on immigration, less greenery, tough measures against crime, more religious schools and selective education rewarding poor, bright kids. Abroad: closer links with the Commonwealth—akin to Chamberlain’s proposed imperial economic union—and looser ties to Europe, which features in Mr Timothy’s output only as a source of bad public policies, corrupt leadership and justifications for Brexit. It also means a cooling of Britain’s links to both America, to which he reckons Tony Blair was too close, and China, to which he believes Mr Cameron was too craven. Overall it means a government keener to confront foreigners, vested interests and especially the sort of polenta-munching elites who share each other’s globalising enthusiasms, holiday villas and platforms at Davos”.

It adds “May’s premiership is not a month old. But already it bears Mr Timothy’s stamp. Britain has lost a department dedicated to climate change and gained one devoted to “industrial policy”. She has sidelined the “Northern Powerhouse” programme to integrate the big northern cities and committed to reining in foreign takeovers. A Chinese bid to finance Hinkley Point, a nuclear power station, has been put on hold. The new prime minister’s speech to the Tory conference in October (in Birmingham, as it happens) should be a Chamberlainite symphony. Renewal, a think-tank founded in 2013 to promote working-class Toryism, is emerging as the new regime’s brains trust. Mr Timothy’s analysis of his party—that it can appear not to “give a toss about ordinary people”—is accurate. The Cameroons’ brand of modernisation owed too much to noblesse oblige, to a vision of society that treated the welfare state as the institutional equivalent of giving one’s gardener a Christmas bonus. Mrs May’s authoritative mien and middle-class roots, combined with Mr Timothy’s instinct for working-class priorities, makes her party newly formidable, propelling it into landslide territory (an early election is surely not off the cards). Moreover, she and he have a point. Britain is too unequal. The past years have been brutal to the sorts of left-behind places that have been denied the boom enjoyed by the big cities”.

It ends “Still, the new Chamberlainites have questions to answer. Britain has found confidence and relative prosperity as a linchpin of globalisation. It is good at the sort of service industries that demand flexible labour markets, urban clusters, worldly universities and fast-moving capital: think not just the City of London but successful provincial centres like Swindon, Milton Keynes and Manchester. Where manufacturing survives, it is often thanks to the country’s openness to foreign investors. All this has bypassed some towns. But for decades Britain has sought to make the most of its strengths while helping those who have lost out to adapt or move. Mrs May and Mr Timothy seem to reckon those strengths—and globalisation itself—are much more malleable than their predecessors have realised. The burden of evidence is on them”.

Cameron, the worst PM?


A piece calls David Cameron the worst prime minister for a hundred years, “David Cameron is not given to melodrama but he has starred in enough. For the time being, there are three moments of history to remember, outside that famous door. The time when he walked through it with Nick Clegg. The time – even more surprising – that he walked through it on his own, just thirteen months ago”.

It adds “And now this, which in time will be the only time that mattered. The UK out of Europe. The union with Scotland on the brink. Northern Ireland too. All for what’s being called a gamble but is in fact simply a strategic failure. “I love this country,” he said, his voice cracking. The 74th Prime Minister of the United Kingdom of Great Britain and, more latterly, Northern Ireland. And there will in all likelihood be just one more, before Little England is loosed upon the world. ‘Broken Britain’ is a term that has forced its way into public parlance and the Cameron years – six of them, now over. Well it will be broken, now. And this will be all that he is remembered for”.

It goes on to mention “It was a highlights reel. Significant achievements, some of them, but all were leading with insidious intent to an overwhelming admission. “I think the country required fresh leadership to take it in this [new] direction. I will steady the ship for the coming weeks and months. “There needs to no precise timetable in place,” he said, but “a new Prime Minister should be in place before the Conservative Party Conference in October.” It is more than ten years since he took over a factionalised and failing party. He transformed it, and now he leaves it as he left it. It is hard not to see how without him, it will always be thus. As he turned around and strode back through the door, the hair on the back of his head gone grey overnight. The youngest ex-Prime Minister since 1895, drawing his political pension. Yesterday’s man now, when the full peril of tomorrow is when his party will need him most”.

“Politics is never just about policy. It’s also about emotion”


A piece urges politicians to inspire people, “David Cameron. François Hollande. Hillary Clinton. What do they have in common? They’re all deeply traditional politicians. They all have long track records of public service, and they’re all thorough, meticulous managers. They make a point of exuding calm and competence.  All of which probably helps to explain why so many people dislike them. Despite helping France climb out of a long economic slump last year, Hollande’s popularity has been hitting historic lows. His compatriots despise him for his milquetoast manner and failure to move decisively against terrorism. Cameron achieved a remarkable record of growth during his six-year stint as British prime minister — but that didn’t matter to voters when he gave them a referendum on whether their country should stay in the European Union. His ignominious defeat in last month’s Brexit ballot, which prompted him to step down, will remain as the most memorable, and inglorious, achievement of an otherwise successful term in office”.

Aside from the author’s obvious lack of knowledge of the tenure of Cameron, his disastrous decisions and seemingly endless shifts which are anything but “meticulous” the overall point is still valid.

The piece notes “Clinton is burning through millions of dollars in her textbook campaign to win the presidency. But Donald Trump — dysfunctional, dishonest, underfunded Donald Trump — continues to hold his own. Clinton, Cameron, and Hollande are all very different politicians, operating in very different contexts. Yet they all seem to be suffering from a similar problem. The nature of their opponents may hold an important clue. Despite their impressive credentials, these establishment titans have proved vulnerable to exactly the same sorts of opponents — namely, fiery populists. Trump and Bernie Sanders are worlds apart ideologically, but together they’ve given Clinton a humiliating master class in the power of simple solutions and raw emotion. Hollande’s nemesis is National Front leader Marine Le Pen, who has ridden her blistering brand of far-right identity politics to unprecedented heights. Cameron was undone by his Conservative Party comrade Boris Johnson, the extravagant and ruthless former mayor of London (now turned foreign minister), and by Brexiteer-in-charge Nigel Farage, who has successfully channeled corrosive anxiety about migrants and globalization into a potent challenge to the status quo”.
He rightly points out that “To be sure, the U.S. presidential hopeful, the ex-British PM, and the struggling French president all have plenty of real flaws. Their problem is that we’re in a historical moment that plays up their shortcomings and undercuts what would normally be their strengths.  The Great Recession and the disruptions of technological change have transformed economies, fueling white-hot anger among those who have been left behind. Terrorism and immigration stir deep-seated fears, tapping into sections of the reptilian brain that don’t really respond to sedate calls for reasonableness and unity. Politics is never just about policy. It’s also about emotion. And that’s never been truer than today. It’s a sad fact of life that the most powerful political emotions aren’t always positive. The politicians of the far right have shown that appeals to nativism can be more effective in stirring people up than high-minded calls to idealism and common purpose. That’s a big reason why Euroskeptic nationalists are gaining the upper hand over the efficient, well-educated, and deathly dull officials who run the European Union. The British politicians who campaigned for the U.K. to stay in the EU — most notably Cameron and Labour Party leader Jeremy Corbyn — conspicuously failed to make emotionally compelling arguments for their case”.
The piece ends, “For Hillary Clinton, the answer is simple: Be more Margaret Thatcher, less Oprah. Something like this is what political satirist Jon Stewart had in mind, I think, when he astutely described Clinton as a “bright woman without the courage of her convictions.”  The problem goes beyond worries about some alleged lack of “authenticity.” Personally, I don’t give a damn about whether my president is someone I’d want to have a beer with. But we really do need to have a serious think about why some voters feel drawn to over-the-top buffoons. I suspect that it’s precisely because — in open defiance of the reigning ethos of focus groups, data mining, and sentiment analysis — the Trumps and the Johnsons and the Farages make a point of exciting a strong visceral response. So the Republican convention is a mess? Perhaps. But it’s generating a huge amount of nonstop coverage, social media attention, and passionate discussion. The Democratic version, coming soon, is shaping up to be a sleek, smooth, flawlessly managed machine. One wonders if anyone will tune in”.

IMF and neoliberalism


An unusual article notes how even the IMF might be seeing the problems of unrestrained free markets, “The research department of the International Monetary Fund dropped a political bombshell last month. The furor was set off by the publication of an article — “Neoliberalism: Oversold?” — that sparked a near-panic among advocates of free market policies and celebrations among their critics. The piece concluded that, over the past 30 years, the proponents of the economic philosophy known as “neoliberalism” have been systematically overselling the benefits of the two planks at its heart — namely, fiscal austerity during economic slowdowns and the deregulation of financial markets”.

The article adds “This is a huge concession for an institution long known for its ideological self-assuredness. Essentially, the article contends that these two policies, which the IMF has long championed, are of questionable utility. It finds that they “have not delivered” the higher economic growth rates that were promised and may have even done more harm than good. Additionally, according to the article, both fiscal austerity and increased financial openness have often exacerbated economic inequality, which itself could become a drag on future economic growth rates. In other words, the venerable institution had essentially everything wrong — at least as far as these two key tenets of neoliberalism go. Most strikingly, the article infers that three policy prescriptions long advocated by the IMF’s critics — regulation of some capital flows, Keynesian fiscal stimulus policies, and effective economic redistribution — all have more merit than the IMF has long contended. As Ben Norton wrote in Salon, these conclusions amount to heresy: “It is somewhat like the Pope declaring that there is no God; it is a volte-face on almost everything that the IMF has ever stood for.” Longtime IMF critic Naomi Klein tweeted sarcastically, “So all the billionaires it created are going to give back their money, right?” Presumably not. But the significance of the article — at least in the long term — is that it might signal a deeper reckoning, both within the IMF and more broadly across Western capitals, about the failure of 30 years of neoliberal policies to bring about financial stability or lessen widening economic divides”.

The author goes on to write that “In the meantime, unsurprisingly, the IMF leadership was quick to distance itself from the piece, making clear that it had no intention of abandoning neoliberalism. The organization’s chief economist, Maury Obstfeld, conceded that the shock of the 2008 global financial crisis has “led to a broad rethink of macroeconomic and financial policy in the global academic and policy community,” including within the fund, but argued that the troublesome article “has been widely misinterpreted” and “does not signify a major change in the fund’s approach.” Similarly, the Financial Times described the article as “more a reflection of the vigorous debates [underway] inside the IMF than a brutal takedown of the free market policies the fund has long advocated.” Indeed, despite the uproar, it’s not clear that the IMF’s approach to economic development is about to change”.

Crucially it mentions that “Many IMF watchers have noted that the fund continues to operate as usual, attaching austerity policies and other neoliberal reforms as binding conditions to its loans. Economist Jerry Epstein said while such internal debates within the IMF are healthy, they have so far had little or no impact at the operational, country level of IMF policy. Isabel Ortiz of the U.N. International Labor Organization wondered, “Will the operational side of the IMF even listen to the researchers?” The controversial article’s lead author, Jonathan Ostry — who is the deputy director of the IMF’s research department — said the piece focused on two specific policies and was not meant as an attack on “the entire neoliberal agenda or the Washington consensus.” On the other hand, he also hinted that he hoped the article would be the first of more to come and that it would set up the opportunity to more broadly examine neoliberalism this year”.

Correctly the author notes that “The fact that the IMF is using the word “neoliberalism” in such a high-profile way is telling, since it is employed almost exclusively by critics of economic liberalization. Advocates of neoliberalism prefer to avoid the term, assuming that the policies are so self-evidently right that they don’t need a name at all. The fact that the IMF’s own research department has acknowledged the term could be interpreted as a nod to the fund’s critics that some of its policies did reflect ideological biases and that other approaches are valid. If so, it’s about time. The challenges raised by neoliberal economic development policies were easy for Western leaders to ignore when they were limited to crises in the developing world, such as Latin America in the 1980s, East Asia in the 1990s, and Russia and Turkey in the early 2000s. But since the 2008 financial crisis struck the rich countries too, their shortcomings have been harder to deny. With economic inequality untamed, financial markets still unstable, and fiscal austerity having utterly failed to revive economic growth and employment to pre-2008 levels, it’s increasingly difficult to keep pretending that the status quo is working”.

The article writes that “Before Ronald Reagan and Margaret Thatcher repopularized the ideology of free markets in the 1980s, the need for Keynesian economics and financial regulation had been widely accepted for a 40-year stretch following the Great Depression, and the advocates of free markets languished on the sidelines. Western leaders had learned the best way to prevent socialist revolutions and fascist dictatorships was to adopt policies that would avoid financial crises and lessen economic inequality. But the Reagan-Thatcher revolution set about unlearning those lessons, and the worsening inequality and financial instability of the last 30 years were the unfortunate result. If the IMF’s article is the first sign of a swing back in the other direction, Norwegian economic historian Erik Reinert, for one, won’t be surprised. He has noted that the popularity of free market policies has risen and fallen cyclically throughout history, such as before and then after the French Revolution, before the 1847 financial crisis that was followed by a string of social revolutions across Europe in 1848, and before the stock market crash of 1929 that was followed by the Great Depression. During each of these cycles, free markets were championed for a while but then eventually abandoned as financial crises became more frequent and economic inequality more pronounced”.

The writer goes on to make the point that “Today, in a time when Thomas Piketty’s critique of worsening economic inequality is a best-seller, leading U.S. presidential candidates rail against free trade deals, right-wing anti-immigrant parties win elections across Europe, and even the Organization for Economic Cooperation and Development calls on its members to put the brakes on austerity, it’s clear that the political center, which has favoured neoliberal policies for the last 30 years, is no longer holding. The high-profile IMF mea culpa may well be a first shot across the bow, a sign that we are now entering what Reinert calls our own modern-day “1848 moment.”


The party of Brexit


Following the vote of the UK to leave the EU, Brexit, an article in the Guardian reports that the Conservative Party is now the party of Brexit, “ow different defeat feels in practice. Before the referendum David Cameron was consistent in his formula: the vote was not a test of his leadership or of his tenancy of No 10. Should he lose, he would continue to govern, providing the continuity and experience that the nation would require as it exited from the maze of the EU. There was a cool rationality to this argument, typical of the man and his distaste for drama. Those around him were ready to fight a confidence vote and believed they had sufficient numbers to prevail in such a test of his position. As collateral, they already had a letter to the PM signed by more than 80 Tory Brexiters urging him to stay on, even if he lost the referendum. At the very least, this would give Cameron – and his party – a breathing space to consider their options”.

The author writes “in the pitiless light of day, the plan collapsed like Dracula turning to ash in a sunbeam. In December 2005, the new Tory leader rebranded his party as “Cameron Conservatives”: compassionate, modernising, no longer “banging on” about Europe, green by inclination (Steve Hilton replaced the party’s torch logo with a tree), and supposedly at ease in contemporary Britain. This morning it became overwhelmingly clear that the party now belongs to the Brexiters and that the era of Cameron Conservatives is over. For now, the voters do not want to hear about pluralism, global interdependence, the complexity of modern society, or the difficulty of striking the right balance in migration policy”.

The writer goes on to make the point that people “want “control” – which is another way of saying that they want, and expect, the results that, in their opinion, the political elite has woefully failed to provide. How, to put it more crudely, could the defeated leader of the remain campaign preside over the negotiations to get out of Europe, and what would the leading Brexiters be doing while he got on with it? David Davis and others had tried to negotiate potential compromises in the past month. But there was no sense in a new government in which all the kinetic energy belonged to the victorious leave camp but the crucial actions were delegated to the very man it had defeated. Cameron had fought, as he admitted in Downing Street, with “head, heart and soul” to stay in the EU but been answered with “an instruction that must be delivered” to bring about precisely the opposite. There would have been no dignity in this – effectively, a return to coalition government but, in this case, an alliance between two wings of the same party”.

The piece ends with the writer noting “I will not say of Cameron that nothing became his career like the ending of it. More than Gordon Brown, he was the first prime minister to feel the unmitigated wrath of the electorate post-crash, amplified by social media, oxygenated by a broader contempt for elites of all kinds. The Brexiters will soon discover that the flames they fanned are not easily controlled. But that is a theme we shall address fully in due course. For now, let us say that Cameron made errors, but his record is not the litany of disaster that some obituarists are already claiming. He held the coalition together for five years and returned his party to government with a majority for the first time in 23 years. He pursued the austerity in practice that Alistair Darling had promised in theory: such decisions, by definition, are harsh and unpopular. Does anyone imagine that the Brexiters will be kinder? No government can sustain a rival government in its ranks. It must concede defeat, or destroy the pretender. Cameron knew the latter option was not open to him, and had the guts to follow where the implacable logic led. Better than most, he knows what lies ahead and how expectations of change, unmet by those who promise it, can compound anger faster than we imagine. As he reached the end of his speech, his voice broke. He yearned to weep, but I do not think his tears were principally for himself”.

Trying to oust Corbyn as Labour disintegrates


After the UK vote to leave the EU, the leader of the Labour Party is rightly being blamed for the disaster, “Labour MPs are preparing to launch a bruising leadership contest that will aim to topple leader Jeremy Corbyn after he reacted to an overwhelming vote of no confidence by declaring he had no intention to resign. Politicians want Angela Eagle, who has stepped down as shadow business secretary, or Tom Watson, Labour’s deputy leader, to agree about which of them will trigger the challenge if their leader continues to hold on in the face of massive hostility. MPs backing Eagle were on Tuesday night collecting names of colleagues who were prepared to nominate her in order to start a contest, but Watson supporters were calling for calm, insisting that Corbyn could yet stand down”.

The report mentions “The Labour leader has so far held on despite a dramatic and destabilising coup attempt, started at the weekend, which has now seen two-thirds of his shadow cabinet step down, as well as 28 shadow ministers and 11 private parliamentary secretaries. More than three-quarters of Labour MPs – 172 – voted to show that they had no confidence in his leadership, while 40 voted for him. Corbyn responded by issuing a warning that he had the support of Labour members, and that he was going nowhere. “I was democratically elected leader of our party for a new kind of politics by 60% of Labour members and supporters, and I will not betray them by resigning. Today’s vote by MPs has no constitutional legitimacy,” he said”.

The report goes on to mention “His allies said the only way to take Corbyn on would be for another MP to collect the 51 nominations of MPs and MEPs needed to start a contest, warning that he would stand and that they believed he would win. The standoff marks the start of a potentially bitter battle for the heart of the Labour party that will pitch MPs and local government leaders against pro-Corbyn members and trade unionists. David Ward said John Smith, the previous leader for whom he was chief of staff, had told him that any leader would have to resign after a vote of no confidence. “You cannot survive,” he said, arguing that it was the only mechanism in the party to force a leader out. Corbyn’s support among members is the reason that Labour MPs, desperate to oust him, want just one candidate to stand against him. People who were being talked about as potential contenders, including Dan Jarvis and Lisa Nandy, have now ruled themselves out of the contest”.

It adds “Eagle and Watson are now seen as the only two realistic possibilities. Jess Phillips MP echoed the view of dozens of her colleagues that the pair had to make a decision about who would run. “The party has to agree on one person. Just like Jeremy, people in the PLP should put aside any personal ambition and instead agree on one candidate who can save the party for the sake of the country,” she said. The former shadow education secretary, Lucy Powell, who was one of the first major resignations, urged Corbyn to give up: “This is a very clear result and if Jeremy is to show any leadership quality at all he must now reflect and respond to this overwhelming and unprecedented indication from the parliamentary labour party which includes all wings and all groupings.” Sources suggested that while Eagle’s team had been busily collecting names, Watson’s preferred action was to hold tight and wait for Corbyn to step down voluntarily after experiencing the reality of running an opposition with such a thin frontbench”.

It goes on to note that “Although the Labour leader has replaced most shadow cabinet positions, it will struggle to fill many of the vacancies, while he will have to face a parliamentary committee on Wednesday to discuss the confidence vote. On Tuesday night he emailed members of his party’s national policy forum to cancel a meeting in Nottingham this weekend, arguing that the result of the EU referendum meant it would be undemocratic to discuss policy options. He promised to put the party on a “war footing” in case of an early general election after the Tory leadership contest is decided in September. The prospect of an election is what has triggered the action against Corbyn and comes as a leaked poll commissioned by the party revealed that over one in four (27%) of Labour voters was less likely to vote for the party following the referendum campaign in which 214 Labour MPs called on people to vote to remain in the EU. The YouGov survey said 11% were more likely to back Labour. Corbyn is determined to keep going because of a philosophical belief that it is Labour members that should control the party and not its MPs. On Monday he weathered an explosive meeting of the PLP in which he was repeatedly begged to resign, and told by his former Scottish secretary to “call off the dogs” after pro-Corbyn supporters began protesting outside his constituency office”.

It concludes “The Labour leader left the meeting and then headed into Parliament Square to address thousands of supporters, organised by the grassroots movement Momentum, in a move that infuriated MPs. One told the Guardian that the move had increased the scale of the no-confidence vote, which was followed by further resignations, including that of shadow communities minister Liz McInnes, who had spoken up for Corbyn in the meeting.“It is clear his behaviour last night in whipping up a rally of largely non-Labour members and his refusal to accept any blame for the referendum defeat turned off a number of colleagues from the left who were considering abstaining or voting for him,” said the politician, who also argued that there was deep anger about the perception that Corbyn had not tried hard enough to mobilise Labour voters during the referendum campaign. Corbyn’s team strongly deny that charge, pointing to several speeches and regular media appearances. MPs have argued that Corbyn would struggle to secure enough nominations, but the leader’s advisers believe that he would be automatically placed on the ballot. Legal advice leaked to the Guardian does conclude that he would be able to run again without any set number of MPs backing him, but sources say that the party’s national executive committee has commissioned a separate piece of work that has the opposite finding”.

Saudi’s Vision 2030


A piece argues that the recent reforms will cause problems for the Saudi kingdom, “Saudi royal family has gambled its prestige on a bold economic reform plan, meant to revive an economy battered by sharply lower oil revenues. But the prescriptions of “Saudi Vision 2030” are fraught with risk, not least because it threatens to dissolve the social contract that binds the House of Saud to the Saudi people. Vision 2030, formally ratified this week by the Saudi cabinet as the National Transformation Program, provides a blueprint for a kingdom that offers less charity and more austerity. It calls for Saudi Arabia to reduce its dependence on the energy sector, privatise state-owned enterprises, and cut state largesse. The long-term objective is to prepare Saudi society for life in the twilight of the oil age. “We have an addiction to oil,” admitted Deputy Crown Prince Mohammed bin Salman, who leads the pro-reform camp within the ruling House of Saud. “This is dangerous. It has delayed the development of other sectors.” He hopes that, within two decades, the world’s greatest petro-state will derive most of its revenues from global investments and a diverse range of industries rather than energy”.

The report notes “The initiative amounts to future shock for a conservative society. Specific targets include tripling non-oil revenue by 2020, to roughly $141 billion, and the creation of 450,000 jobs outside the government sector. In a country where two-thirds of workers are on the state payroll, public sector wages will be reduced to 40 percent of the budget, down from the current level of 45 percent, over the same time frame. To finance these changes, public debt is expected to substantially rise by $200 billion over the next five years. No explanation was offered as to how any of these targets could be realistically achieved within their timeframe. Saudi Arabia is adopting Vision 2030 for the very simple reason that its current economic model is unsustainable. In the two years since oil prices tanked, wreaking havoc on the economies of major energy exporters, the kingdom finds itself trapped by the rising waters of a liquidity crisis. Last year, the country’s gross domestic product shrank 13 percent and net foreign assets plunged $115 billion as the government burned through cash to plug a $100 billion budget deficit. Though oil prices have rebounded to around $50 per barrel, the national budget calls for a break-even price of $66.70 this year — sharply down from last year’s $94.80 and a sign of the urgency to bring spending under control”.

It mentions that “In an effort to stem the hemorrhaging, the Saudi government in March signaled its willingness to take out billions in bank loans. Even so, the IMF issued a dire prediction of national bankruptcy in four years if current patterns of spending continued. Saudi Arabia’s fiscal woes date back to its ill-fated decision in the fall of 2014 to pump surplus crude into a buyer’s market. Though oil prices were set to tumble anyway — the market was oversupplied and consumer demand had slowed — Saudi intervention accelerated and intensified the collapse, driving prices down to levels not seen since the early years of the century. The Saudis insisted their action was motivated by the need to defend market share, but never hid their glee that lower prices would hurt the economies of geopolitical foes Iran and Russia (not to mention production rivals, especially the United States). But prices tumbled much lower and for far longer than they predicted, blowing a hole in state finances”.

Interestingly it notes “The situation was made worse by the fact that Saudi coffers had already been drained by a raft of new social and defence expenditures. Three years earlier, fearing the spread of the Arab Spring revolts against authoritarian rule, the Saudi royal family had announced lavish new subsidies and welfare programs estimated to cost $130 billion. The U.S. decision to not rescue traditional allies, like Egyptian President Hosni Mubarak, prompted Riyadh to launch a conservative counter-revolution — pouring tens of billions of dollars in aid and arms to allies threatened by social, political, and religious unrest. The kingdom committed billions more to defence expenditures meant to counter its archrival, Iran. This year, Saudi Arabia replaced Russia as the world’s third-biggest military spender, with $56 billion allocated to equip its armed forces”.

It continues “Saudi Arabia’s spending binge coincided with the emergence of the ailing King Salman’s young son, Deputy Crown Prince Mohammed, as the pre-eminent voice dictating policy in the kingdom. In less than a year, and to the obvious distaste of older members of the royal house, the ambitious, voluble 30-year-old prince has pushed for changes on issues ranging from the economy and defence to women’s rights and political reform. Germany’s intelligence service warned in a leaked report of the “latent risk that in seeking to establish himself in the line of succession in his father’s lifetime, [Mohammed] may overreach.” Some say he already has. In addition to his role as second in line to the throne and chief of the royal court, Prince Mohammed’s decisive interventions in military and economic affairs have earned him the moniker “the prince of war and oil.” With no apparent experience in military affairs, foreign policy, or strategy, his decision to take over the defence portfolio placed his family’s prestige and reputation squarely on the outcome of two open-ended wars in Syria and Yemen. It was a remarkable gamble: He did this knowing that the kingdom ranked well down the global pecking order in terms of military effectiveness”.

The piece concludes “But it’s in the economic realm where Prince Mohammed’s influence has been felt most acutely. With a bachelor’s degree in law under his belt, the prince decided that he should not only lead the effort to restore short-term fiscal solvency but embark on the monumental task of transforming Saudi Arabia from a rentier state to an industrialized economy freed from the constraints of the commodity markets. And his goal couldn’t be more ambitious: Saudi Arabia, he predicted, will be weaned off oil revenues within a generation. The Saudi template for reform titled “Vision 2030” mirrors an earlier reportthat appeared in December on the website of McKinsey & Co., a global consulting company that provides neoliberal solutions for real-world problems. Salman has admitted that the Saudi government works closely with the company. Saudi critics — and there are many — sneer that the Planning Ministry should be renamed the “McKinsey Ministry.” In recent years, McKinsey has cultivated a generation of young Arab princelings enamored with Western-style economic reforms, and with thoroughly mixed results. As one of the company’s more trenchant critics recently pointed out, “Many of the countries who drank the McKinsey Kool-Aid became epicenters of the Arab Spring. Bahrain, Egypt, Libya, Yemen — each was convulsed by demonstrations, often animated by economic grievances.” McKinsey’s approach to reforming foreign governments is dangerously flawed. The company’s school-lunch approach to economic reform — one size fits all, regardless of appetite and culture — makes no effort to consider each country’s unique history or social background. It also fails to consider whether the recipient’s political structures are robust enough to withstand the unrest that often emanates from job losses, privatization of state-owned enterprises and social services, subsidy cuts, and increases in the cost of living”.

It ends “In an interview with the Economist, Salman declared himself an admirer of former British Prime Minister Margaret Thatcher. But unlike Britain in the 1980s, Saudi Arabia today has no free press, no elected parliament, and no right to assembly. It lacks flexible political structures that might absorb and channel explosive social energies away from the center. Was the prince aware that even with these systems in place, his idol was eventually deposed? He did not say. Nor did the prince offer a convincing answer when asked if the Saudi people would continue to accept taxation without representation. “This is not a decision from the government against the people,” he insisted. “This is the decision of Saudi Arabia. With the government that represents the people.” Boiled down to its essence, that amounts to the classic autocrat’s response:L’état, c’est moi.”

TTIP, bad for Europe and America


An excellent piece by Hans Kundami argues that the TTIP is bad for both the EU and America, “For the last few years, almost everyone invested in Europe’s relationship with the United States, and vice versa, has become fixated on the free trade agreement known as TTIP. (For the uninitiated, that’s the Transatlantic Trade and Investment Partnership.) The deal, a counterpart to the now-concluded but not yet fully ratified Trans-Pacific Partnership (TPP) between the United States and 11 countries in the Asia-Pacific, aims to further integrate the European and U.S. economies, which together account for around half of the world’s GDP and nearly a third of world trade flows. Supporters of the project in Germany, Britain, and the United States often give the impression that the West’s entire future — the very concept of the West — hangs on its success”.

Crucially he argues “In truth, TTIP is just as likely to cause transatlantic friction as demonstrate transatlantic unity, as illustrated by media coverage in Europe of the leak by Greenpeace of papers from the treaty negotiations. Amid the fallout from the leaks, TTIP is as likely to discredit the idea of the West as revitalise it. Supporters of the project see it as a way to “renew and confirm” the transatlantic relationship, in the words of European Trade Commissioner Cecilia Malmström, the lead negotiator on the European side. Some, including former NATO Secretary-General Anders Fogh Rasmussen, have even referred to TTIP as an “Economic NATO”: a complement to the military alliance that guarantees the security of its members. Thus, Atlanticists — those who believe in the importance of the relationship between Europe and the United States — have largely bought the argument that TTIP is essential in order to maintain its relevance in the 21st century. Meanwhile, the treaty’s critics generally see the idea of “the West”as outdated, incoherent, or offensive. Thus, to be pro-Western has, in recent years, increasingly come to mean favouring TTIP. It is possible, however, to be a pro-Western sceptic of TTIP — especially if one believes, as I do, that the idea of the West should be defined by the common values, not just the common interests, of Europe and the United States”.

He continues “TTIP’s problems start with the hardly overwhelming case for its passage. In the early going, supporters claimed it would generate growth and jobs on both sides of the Atlantic. In 2013, the European Commission, for example, claimed that an ambitious deal could produce boost growth in Europe by €120 billion, and in the United States by €95 billion. But independent research done since then by various think tanks has concluded that the macroeconomic effects of TTIP would be lower than these claims suggested. Most serious studies, in fact, suggest it could increase the size of the European economy by between 0.1 and 0.5 percent of GDP over a 10-year period — in other words, by a modest to negligible degree. Many of the other pro-TPP arguments do not apply to TTIP either. For example, Adam Posen has argued that TPP could strengthen the democratic and market-based development of Asian economies, but EU member states are already democracies with market economies, so the same argument does not extend to TTIP. Similarly, one cannot claim that TTIP will raise environmental or labour standards in Europe as TPP could in Asia — what Europeans fear, in fact, is that their high standards will be lowered by the treaty. One can also hardly claim that an investor-state dispute settlement (ISDS) mechanism — a system of tribunals to adjudicate on disputes between companies and states — is needed to protect U.S. companies from expropriation in Europe as one could argue in the case of Asia. (ISDS is one of the most controversial aspects of TTIP in Europe, where citizens worry that the tribunals lack transparency and force governments to make concessions to corporations.) Moreover, while the upside of TTIP is questionable, there is a downside that should worry Atlanticists”.

He points out that “Fears about TTIP, whether rational or irrational, are already fueling anti-Americanism in Europe — particularly in Germany, where there is a massive “Stop TTIP” movement. Critics say the so-called TTIP papers have confirmed their worst fears about genetically modified food and a lowering of consumer protection standards in Europe are likely to further strengthen opposition. In particular, the papers showed U.S. negotiators putting their European counterparts under pressure to ease restrictions on genetically modified food in exchange for a reduction in barriers to the export of European cars — hardly surprising, but alarming to Europeans who distrust GMOs. According to a new poll, 70 percent of Germans oppose TTIP. If American and European negotiators reach the ambitious, comprehensive agreement they insist they want — which would include ISDS — this could be just the beginning of the transatlantic tensions to come”.

Interestingly he argues that “Europeans are likely to blame Americans for any lowering of consumer, health, and environmental standards, particularly in sensitive areas such as food safety. Americans, in turn, are likely to blame Europeans if they experience job losses in the automotive sector, and others, as a result of increased competition from Europe, regardless of the size of the overall boost to the economy on both sides of the Atlantic. In short, there is a real risk that TTIP will backfire and actually increase animosity between Europe and the United States”.

He goes on to argue that “Given the risk that it may prove impossible to pass TTIP, it is a mistake for its supporters to suggest it is essential to the future of the West. As the economic case for TTIP has failed to convince people, its supporters have increasingly sought to make a “strategic” case for it by invoking the concept of the West in this way. Although it is true that the transatlantic relationship needs to be reinvented, and that Europe and the United States must deepen their ties, a trade agreement is the wrong vehicle for this project. The danger of forcing TTIP to carry this weight stems from the fact that it redefines the concept of the West in terms of the economic interests of the EU and the United States. At a time when power is shifting from west to east, Europe and the United States will increasingly need to cooperate with other like-minded states, especially “global swing states” like Brazil and India. In this context, the West cannot stand for the particular, exclusive economic interests of Europe and the United States. Rather, it must stand for universal, inclusive values — above all, democracy – and not simply be measured by prosperity”.

He concludes “Those who try to make a strategic case for TTIP often insist it is about values because it will allow the West to “set the rules for the 21st century.” It is not clear that other countries — those in Asia, for example — will really follow the rules set by Europe and the United States in TTIP (as opposed to the different rules in TPP). But even if they do, it will be only in limited areas like phytosanitary standards. This is surely not so much “revitalizing” the West, as trivializing it. The biggest threats to the West in the 21st century come from authoritarian and revisionist powers. It is difficult to see how TTIP will be of much help in responding to those threats (though TPP may be). Supporters of TTIP should take a step back and think more carefully about the West, as both a geographic and a moral concept. In order to reach out to rising powers that are not part of the West in a geographic sense, Americans and Europeans need to emphasize the moral definition of the alliance and de-emphasise its geographic definition. But this is the exact opposite of what those who invoke the West in order to make the case for TTIP are doing. By identifying the West with the economic interests of Europe and the United States, they are as likely to discredit it as “revitalize” it”.

“Cameron himself bears some of the blame”


A pertinent article discusses how David Cameron, while having done nothing illegal, has had his “chickens come home to roost”.

The piece opens, “The Tarbert Estate, on the ruggedly beautiful Hebridean island of Jura, off the west coast of Scotland, is one of David Cameron’s favourite bolt-holes. Jura, which has a population of some 200 people, spread over 142 square miles, was once described by George Orwell, who wrote Nineteen Eighty-Four on the island, as marvelously “ungetatable.” That is part of the attraction. It’s why I holiday here, visiting my in-laws; it’s why Cameron likes to holiday here, too, visiting his. Not that we should expect the prime minister to be visiting Jura anytime soon, though — however much the idea of escaping the turbulence thrown up by the leak of the so-called “Panama Papers” must appeal at the moment. The sprawling 19,000-acre Tarbert Estate is run by the prime minister’s stepfather-in-law, Viscount Astor. Technically, however, it is owned by a company headquartered in Nassau, in the Bahamas. Yes, Cameron’s offshore retreat is itself an offshore enterprise. And so Cameron’s favourite Scottish escape now also serves as an inconvenient reminder that the lives of the rich and famous are ordered according to their own rules and norms, vastly different — as the Panama Papers reveal — to those that govern the rest of us. That Cameron is rich is hardly news to Britons. He has never hidden his gilded upbringing. The son of a stockbroker, he was educated at Eton College, arguably Britain’s most prestigious, and certainly most famous, school. He was born with a silver spoon in his mouth and soon graduated to using a silver knife and fork, too. As he told the House of Commons on Monday, “[aspiration and wealth creation] are not somehow dirty words.”

The piece adds “Cameron has always acknowledged his good fortune, but, until now, this good fortune has never caused him serious difficulty. The revelation in the Panama Papers that his father established an offshore investment trust based in the British Virgin Islands has changed that. Worse still was the clumsily handled admission — which was only wrenched out of him a few days later — that Cameron himself held shares in the ironically named Blairmore Holdings Inc. until January 2010, at which point, just months away from becoming prime minister, he sold his interest. It should be stressed that there is no indication that Cameron ever broke the law and that he paid tax on the dividends accrued from his late father’s offshore investments. Nevertheless, the taint of unearned privilege is not easily removed. Making matters worse, Cameron had previously criticized high-profile celebrities who took advantage of complicated offshore financial vehicles to minimise their tax liability. He hosted a G-8 summit in 2013, which was supposed to create new arrangements by which governments could crack down on international tax avoidance, and then, that same year, as we now know, he helped water down EU proposals to shine a more powerful light on potentially shady offshore practices”.

The report goes on to mention “Stung by criticism — and scrambling to contain the fallout — Cameron published his most recent tax returns last week, a move that, though standard in the United States, is considered a radical break from convention in Britain. But these, in turn, simply demonstrated the extent of Cameron’s wealth. The revelation that he had — again, legally — been gifted £200,000 by his mother five years ago, the better to avoid inheritance tax obligations, only added to the sense that the prime minister is too rich to be wholly in touch with the concerns of the average voter. Unfair? Perhaps. But politics is not a game of fairness.  The Panama Papers drama is another helpful reminder of the distinction between what is legal and what is seemly. The opportunity to minimize tax liability is not the same as a license — particularly as an elected official — to do so. This helps explain why, remarkably, Cameron has endured calls this week that he ought to resign, even though no one has yet satisfactorily demonstrated why he should step down. His tax affairs, though small bore in comparison to those of the truly ultra-wealthy, just feel mildly dodgy. And in today’s Britain, mildly dodgy appears to be enough to prompt the citizenry to break out the pitchforks”.

Correctly the writer argues “If this is the case, however, Cameron himself bears some of the blame. In the six years that he has been prime minister, Cameron has repeatedly stressed, “We’re all in this together,” as if repairing Britain’s battered public finances post-crisis was not just a matter of economic prudence but also, in some inchoate sense, a moral necessity. Every part of society was expected to contribute. As it turns out, however, some would contribute more than others. One of Cameron’s first decisions was to increase the rate on the so-called value-added tax — a levy on consumption that is unavoidably regressive — to 20 percent. Almost as quickly, he cut the rate of income tax paid by the wealthiest 1 percent of Britons from 50 percent to 45 percent. This was justified on the grounds that doing so would actually increase revenue by making avoiding tax less attractive — but, even so, the political symbolism was only too apparent: The Tories cut taxes for the rich, because that is what Tories exist to do. Meanwhile, the local government services upon which the poor depend, to a disproportionate extent, have been squeezed like never before”.

The piece ends “The sense that there is one set of rules for the wealthy and another for the ordinary is widely felt. In 2008, the government agreed to bail out some of the country’s largest banks; yet, in 2016, the government is reluctant to bail out a stricken steel industry upon which as many as 40,000 jobs depend. One rule for the City of London, another for the remains of Britain’s manufacturing base. That the comparison is inexact matters little. (The banks were rescued because abandoning them to their otherwise wholly merited fate risked destroying the entire British economy; the steel industry, by comparison, is of less account.) The economics make sense; the politics are more painful. There remains a sense that there has not been a full reckoning with the crash and the ensuing recession. The bankers most heavily implicated in it have resumed their plutocratic ways. London has become a playground for the global 1 percent, as Russian and Persian Gulf money pours in. The divide between the have-lots and the have-less has rarely been so obvious and so dramatic. That has consequences — not the least of which is an uptick in public cynicism and a corresponding diminishment of trust. A kind of social fabric is wearing thin. And without trust, public institutions, upon which the governance of the nation rests, are corroded to the point at which they eventually collapse. It is a breeding ground for festering discontent and populist revolt. The ability of massive multinational corporations, such as Google, Apple, and Amazon, to effectively negotiate their own tax rates only adds to an increasingly pervasive sense of unfairness. In other words, we are all in this together only if you take a very generous definition of “we” and “in” and “together.” It is a question of morals, not laws”.

He concludes “Cameron will survive this storm. The Labour Party, led by veteran left-winger Jeremy Corbyn, remains in the business of demonstrating its own unelectability, and so the Tories will slog on — even though, perhaps perversely, the lack of a credible opposition actually magnifies the anger felt at a government that is safe, but increasingly unpopular. But the damage to Cameron’s reputation is done. It is enough to leave the prime minister pining for the peace and quiet of Jura — a retreat he will now probably only enjoy again after he has retreated from front-line politics. He has, to this point, been a lucky prime minister, who has paid little price for his failures — the most notable of which being a persistent inability to meet his own government’s economic targets and balance Britain’s public finances. But all generals, even lucky ones, run out of luck eventually”.

“A Panamanian law firm that specialises in offshore tax havens”


A massive leak of secret files from a Panamanian law firm that specialises in offshore tax havens has revealed the often-murky financial wheelings and dealings of some of the world’s most powerful political players, such as Russia’s Vladimir Putin, the king of Saudi Arabia, Iceland’s prime minister and the family of Prime Minister Nawaz Sharif, among dozens of others. In a data dump that is described as being larger than leaked US diplomatic cables, around 2.6 terabytes of information drawn from the internal database of Mossack Fonseca has been made public. The data from the Panama Papers, available on the website of the International Consortium of Investigative Journalists — one of around 100 news organisations and 300 journalists that worked on mining the data simultaneously — also reveals the offshore holdings of members of Prime Minister Sharif’s family”.

“So that their benefits are more widely shared”


A piece in Foreign Affairs asks if American is “great”.

It opens, “Defeat in Iowa aside, whether or not Donald Trump secures the Republican presidential nomination, his campaign has certainly captured the deep disillusionment among many voters about America’s place in the world. “This country is in big trouble,” he said in the first GOP debate, a theme he has repeated in countless speeches since. “We don’t win anymore. We lose to China. We lose to Mexico both in trade and at the border. We lose to everybody.” Trump isn’t the only candidate to make this point. Scratch below the surface of either the Republican or Democratic presidential contests, and it is clear that much of the debate is over the United States’ economic standing in the world, and what it will take, in Trump’s words, to “make America great again.” The important word being “again.” Trump’s rhetoric—and much of that from Democratic insurgent Bernie Sanders—longs for an earlier time in which the United States was the strongest and most productive economy in the world and faced little in the way of global competition. It is no coincidence that both candidates find common ground in rejecting trade agreements, such as the Trans-Pacific Partnership (TPP), that would intensify the competition”.

The writer adds, “nostalgia isn’t a good guide for policy. Strategies designed without an appreciation for where the United States actually stands could end up undermining its strengths without fixing any of the weaknesses. So how does the United States stack up? According to the World Economic Forum’s most recent Global Competitiveness Report, the United States is the third most competitive economy in the world, behind only tiny Switzerland and Singapore and slightly ahead of other large economies such as Germany, Japan, and the United Kingdom. That is several notches up from the seventh-place spot the United States held as recently as 2012. U.S. job creation over the past five years has outpaced that of any other advanced economy, and the U.S. dollar has surged as investors flee Europe and Asia in search of better returns. In our own research, we have looked in detail at how the United States measures against other advanced economies on many of the attributes that underlie national competitiveness, from innovation to education. The picture is a pretty good one. On innovation, for example, which drives economic growth in wealthy nations, the United States is far ahead of any country in the world. Corporate taxes and regulations, although both in real need of reform and modernization, do not pose the serious competitive disadvantage that many Republicans have suggested. The United States has slipped in global education rankings, but there are encouraging signs of progress, with high school graduation rates recently reaching record levels”.

The piece goes on to note, “So if the United States is doing so well compared to its economic rivals, what accounts for the political appeal of claims that it has been a loser in global competition? The answer lies in the growing disconnect between the macro-level performance of the U.S. economy, which has been reasonably good, and the economy as it is lived by many Americans, which has been far from good. The economist Michael Porter and his colleagues at Harvard Business School have called it “an economy doing only half its job.” Porter defines a competitive economy as one in which companies can compete successfully in global markets while also supporting rising wages and living standards for ordinary citizens. U.S. companies such as Amazon, Apple, Facebook, and Google account more than half of the top 100 companies in the world by market value, and such firms have only gained ground over the past five years. But despite this competitive triumph, wages and living standards for the average American have stagnated for decades. Real wages have been flat since the 1970s, which roughly corresponds with the time when the United States began facing tougher overseas competition, first from Japan and Germany and later from China. Young men today, who have been hit particularly by the disappearance of manufacturing jobs, on average earn less than their fathers did”.

Crucially they argue, “Porter and his colleagues argue that the biggest cause of this growing divide is the failure of governments, and of companies themselves, to invest in Americans—to give them the education, skills, infrastructure, and access to capital they to need to prosper along with U.S. companies. Our own research supports this conclusion. Compared with governments in other advanced economies, Washington is doing a decent job of supporting the competitiveness of its companies. But it is doing less to help bolster the competitiveness of workers and to help them prosper as individuals and families”.

Pointedly the article argues, “Meanwhile, when it comes to investing in Americans to help them secure a bigger share of the gains, the government has done less. Consider the challenge of retraining workers to fill the demands of a rapidly changing economy. During the Great Recession, long-term unemployment in the United States spiked to European levels, and even with recent strong job growth, overall labour market participation is the lowest it has been since the mid-1970s. Yet the United States spends next to nothing retraining its workforce, even as more than five million jobs go unfilled. In fact, U.S. spending on “active labour market” measures—job retraining, apprenticeships, and job search assistance—amounts to just 0.1 percent of GDP; in contrast, Germany spends 0.8 percent of GDP and Denmark an astonishing 2.3 percent in helping unemployed workers find their way back into the job market. Although those economies have not outperformed that of the United States, they weathered the recession with less disruption to the lives and economic well-being of their citizens”.

The piece points out that, “On education, the United States spends a lot of money, but most of it goes to those who need it least. The achievement gap between children from wealthy families and those from poorer families is much larger than it was a generation ago. Yet public schools in poor neighbourhoods get fewer resources than public schools in wealthy neighbourhoods, and federal financial support for universities mostly benefits the better-off students attending those institutions. Community college funding has languished, and American students in vocational and technical colleges get less support than similar students in most European countries. The result of such failures is a massive disconnect between the economy of U.S. companies and the economy of average Americans. That is the fuel on which insurgent campaigns are built. Both Trump and Sanders, in different ways, are appealing to Americans who feel like they have been the losers”.

Worryingly he adds, “The risk now, however, is that such sentiments will overwhelm sound policy. Trump’s few forays into actual policy prescriptions suggest that he would make the problems much worse. He wants huge tariffs on imports from China and Mexico, which would result in retaliation that would shrink trade with two of the three largest markets for U.S. companies. He calls for deep cuts in corporate and individual taxes, which should help to attract investment, but his tax plan—and those of several other GOP candidates—would cut revenues so deeply that it would be impossible to pay for programs to boost the skills of American workers or invest in infrastructure. Sanders’ campaign is longer on specifics, and he promises a great deal to correct ongoing underinvestment in Americans. He calls for eliminating tuition at public universities, and creating a $1 trillion Rebuild America fund, which would put millions of Americans to work rebuilding the nation’s infrastructure, creating “jobs that cannot be shipped offshore or outsourced overseas.” But to pay for these programs, he wants vast increases in corporate taxes that would drive more companies to look for other places to invest”.

It concludes “Sadly, the failure of Congress and the Obama administration to make any real progress on these challenges has opened the door to more radical approaches. And the more voters are persuaded by the “America the loser” campaign rhetoric, the likelier government will be to embrace policies that will do real harm to the United States’ economic competitiveness. Instead, it is time to take another look at the many underlying strengths of the U.S. economy and build on them so that their benefits are more widely shared. As former President Bill Clinton put it in his inaugural speech in 1993—following an election in which a weak recovery and growing foreign competition had similarly fueled insurgent campaigns for the presidency—“there is nothing wrong with America that cannot be cured by what is right with America.” As the presidential campaign enters a critical phase, the candidates and the voters need to rediscover that truth”.

IDS resigns, Osborne falters


On Friday Iain Duncan Smith resigned from the Cabinet as secretary of State for Work and Pensions. A report in the BBC notes that “Duncan Smith has warned that the government risks dividing society, in his first interview since resigning as work and pensions secretary. He attacked the “desperate search for savings” focused on benefit payments to people who “don’t vote for us”. And he told the BBC’s Andrew Marr his “painful” decision was “not personal” against Chancellor George Osborne. Downing Street said it was sorry to see Iain Duncan Smith go but was determined to help “everyone in our society”.

The piece adds “Duncan Smith told the BBC he had supported a consultation on the changes to Personal Independence Payments but had come under “massive pressure” to deliver the savings ahead of last week’s Budget. The way the cuts were presented in the Budget had been “deeply unfair”, he said, because they were “juxtaposed” with tax cuts for the wealthy. He criticised the “arbitrary” decision to lower the welfare cap after the general election and suggested the government was in danger of losing “the balance of the generations”, expressing his “deep concern” at a “very narrow attack on working-age benefits” while also protecting pensioner benefits”.

A report in the Guardian notes that the resignation will damage the leadership hopes of George Osborne, “By uttering the heresy that George Osborne’s fiscal targets are “arbitrary”, forcing the government to make “unfair” cuts, Iain Duncan Smith risks pulling down the whole doctrine of austerity that has sustained the chancellor’s reputation. An admiring biography of Osborne by the Financial Times journalist Janan Ganesh styled him the “austerity chancellor”; but Duncan Smith carefully set his view that the pursuit of the targets, ceilings and rules Osborne has erected have ultimately perverted the “one-nation Conservatism” that should protect the most vulnerable. George Osborne has long-coveted the prize of the Tory leadership. But Duncan Smith’s sudden and dramatic resignation crystallised nagging concerns about the chancellor within his own party. The bookmakers William Hill said on Saturday it had pushed Osborne’s odds of being the next prime minister from 2/1 favourite to 7/2 second favourite, and shortened Boris Johnson from 3/1 to a 15/8 clear favourite. William Hill’s spokesman, Graham Sharpe, said: “So sure-footed for so long, Mr Osborne was widely regarded as Cameron’s natural and chosen successor, but recent blunders seem to have dealt him a serious blow to achieving that outcome.” It is a sentiment increasingly widely shared in Westminster, where what one backbencher said an “Anyone but George” campaign was gathering force”.

The report goes on to make the point that “The climbdown over disability benefits and the loss of Duncan Smith is just the most damaging of a series of recent revolts, including a defeat in the House of Commons over Sunday trading laws and the “tampon tax” rebellion, which forced the prime minister to discuss the issue with his EU counterparts. And last summer, in what was boldly styled Osborne’s first Conservative budget after the party unexpectedly won a majority in May’s general election, he introduced the deep cuts to tax credits that were subsequently overturned by the House of Lords, another embarrassing U-turn. In his devastating interview with the BBC’s Andrew Marr on Sunday, Duncan Smith said he had also had qualms about these plans, which were introduced to meet the Conservatives’ bold pre-budget promise of cutting £12bn from the nation’s welfare bill. This time, in a bid to avoid similar embarrassment, some budget proposals, including a fuel duty rise and a cut in tax relief on pensions contributions that would have hit higher earners, were ditched even before they went to the printers, as Downing Street sought to avoid any noise in the runup to June’s referendum. In order to secure the leadership, when the prime minister steps down at some point before 2020, Osborne would have to win over enough backbenchers to make it through to the final two candidates, who are then put to grassroots members for a vote. Osborne had already been eclipsed by Brexiteer Boris Johnson in the hearts of many individual members, who tend to be more Eurosceptic than the Tory party in parliament”.

Crucially the piece notes that “Osborne, and to some extent Cameron with his pre-election pledges to pensioners and other groups, has trapped himself and his party in a straitjacket of his own making. His promise to deliver a surplus on the public finances by 2020 was far more about stymying a Labour party struggling with its own attitude to austerity than the national interest. And the welfare cap, similarly, was more a political stunt, aimed at isolating Labour as the friends of scroungers and skivers, than a well-thought-out policy. Yet by tying himself and his party up in all these pledges, promises and targets, the chancellor ended up delivering a budget that – as Duncan Smith pointed out – couldn’t possibly be construed as fair in its own terms”.

Pointedly the article concludes “While the public may approve of the general idea of bringing down the welfare bill, they also understand that politics is about choices, and targeting the disabled while giving extra cash to wealthy shareholders fails the most basic tests of fairness. It also plays to the most damaging caricature of Osborne, as the privileged son of a baronet, keener on protecting his wealthy friends than helping ordinary Britons: something he has fought hard to shrug off by introducing his “national living wage”, for example”.

A related piece discusses the place IDS played in “reforming” welfare, “was midway through complicated reforms that he has struggled to make work. In office he displayed a reforming zeal that mixed Victorian morality with a determination to tear up the bureaucratic framework underpinning the Department for Work and Pensions. It has been a troubled department, with five ministers for disabled people in six years. Aside from accusations of unfairness, Duncan Smith’s reforms have often been characterised by incompetence in their implementation, and a failure to save the money promised”.

Similarly a report notes why IDS really resigned. It posits five main reasons the first of which is what is said at face value, “Duncan Smith says he is resigning because he cannot accept the cuts to the personal independence payment (PIP), and his argument on this sounds sincere. He says the cuts are “a compromise too far” (meaning a compromise with austerity too far). He says he cannot justify the cuts if they are part of a budget that also cuts taxes for the rich. Duncan Smith has questioned the way cuts have been targeted in the past; before the election he let it be known that he thought there was a case for putting the squeeze more on wealthy pensioners, and means-testing the winter fuel payment, so it is not as if his concerns are 100% new. But nevertheless it is odd that he has decided to resign now, when his department announced the PIP cuts a week ago”.

The second point the article makes is PIP being the last straw, “Resignations are not normally triggered by a single event, and Duncan Smith’s decision to go is the culmination of a feud with the Treasury that has been going on for years. It has been focused on universal credit, Duncan Smith’s flagship policy at the Department for Work and Pensions, and a measure that is currently being rolled out nationwide. Universal credit is supposed to simplify the welfare system, by combining six benefits in one, but, crucially, it was also intended to increase the incentive to work, by ensuring that working always pays more than staying on benefits. However, under pressure from the Treasury,the mechanics of universal credit (tapers, the work allowance etc) have repeatedly been changed, with the effect of making the benefit less generous and the work incentives much weaker”.

The article goes on to argue that there was a personal feud between Osborne and IDS that also helps explain the resignation, “Duncan Smith blames George Osborne and the Treasury for undermining universal credit. But this is partly personal too. Relations between the two have never been entirely harmonious since Matthew d’Ancona published his book about the coalition in which he quoted Osborne telling allies that he thought Duncan Smith was “just not clever enough”.

The article does mention that the EU is a factor, “Duncan Smith’s resignation is not directly related to the EU referendum. But he is one of the six members attending cabinet who is backing Brexit, and for him fighting the EU is one of the great causes of his political career. Normally a sense of collective enterprise helps cabinet ministers to stick together even when they disagree strongly, but what the EU referendum has done is loosen those bonds”.

Lastly it contends that IDS may have been pushed from DWP and therefore decided to jump, “David Cameron is expected to hold a significant reshuffle if he wins the EU referendum (if he loses, it will be another prime minister’s reshuffle) and Duncan Smith was widely expected to be moved or sacked at that point. In the last parliament Cameron tried to get him to move from DWP to Justice. On that occasion Duncan Smith said no, and his status as a former party leader helped keep him in post, but after more than six years in office this summer, he would no longer be in a strong enough position to resist. Sensing that his career at DWP was coming to an end anyway, he may have decided it was best to go on his own terms”.

Amid all the chaos the government quickly appointed the Welsh Secretary, Stephen Crabb MP as the replacement of IDS. His firs act was to concede that the cuts to PIP were not only counterproductive but immoral and would be reversed, “David Cameron has been forced to concede that a £4.4bn black hole created by the U-turn over disability benefits will not be filled by further cuts to welfare as he fought to shore up his credibility following the shock resignation of Iain Duncan Smith. The spending climbdown was announced on Monday by Stephen Crabb, the new work and pensions secretary, an hour after Cameron addressed the political crisis engulfing the Conservative party by offering his support to George Osborne and praise for the work of Duncan Smith. Aiming to strike a conciliatory tone in the Commons, Cameron said Duncan Smith had “contributed an enormous amount to the work of this government” in his work campaigning for welfare reform, which he said had reduced child and pensioner poverty and inequality”.

Brazil, privatising its energy sector?


An ill-timed article,given the price of oil, suggests that failing Brazil can use its deep water oil reserves to salvage itself, “Brazil is wracked by the Zika virus, rising inflation, a deep recession, massive political and corporate scandals, and worries that athletes at the 2016 Summer Olympics will have to compete in dangerously polluted waters. Yet, despite it all, Brazil might have cause for celebration — if politics don’t get in the way. That’s because Brasília is finally taking steps to open up its oil and gas sector and make it more attractive to foreign investors, reforms that are as controversial as they are necessary to help the country tap the energy resources it has long eyed but only partially developed”.

He writes “Brazil unveiled new rules meant to kick-start investment in oil and gas production, part of a suite of measures that Energy Minister Eduardo Braga thinks can lure billions of dollars of new investment from foreign firms, including some in the United States and Europe. Even bigger changes are afoot: Brazil’s lower house of congress is wrestling with legislation that, if passed, would throw open the door for foreign oil and gas firms to develop the country’s massive offshore oil deposits without needing to go hand in hand with the debt-ridden and scandal-plagued Brazilian national oil company. That could finally make it possible for Brazil to realize the promises of its potential offshore oil wealth, first discovered almost a decade ago. Those offshore deposits, estimated to hold more than 60 billion barrels of oil — as much as the North Sea fields that fueled decades of British and Norwegian oil exploration — were expected to turn Brazil into one of the world’s big oil producers. As recently as 2013, the International Energy Agency said that Brazil, next to Iraq, would be the world’s biggest source of new oil production for the next two decades”.

He goes on to mention that “The initial promise floundered. Brazil, expecting oil companies to beat a path to its door to tap what could be world-class oil resources, failed to offer enticing terms for investors. Restrictive laws, like strict rules about using locally made oil-field equipment, made it hard for international oil companies to develop the fields. And state-owned Petróleo Brasileiro, known as Petrobras, was forced by law to take the lead in developing all of the offshore fields. But Petrobras today is staggered by a massive corruption scandal and a mountain of debt; it simply doesn’t have the financial or technical muscle to turn the offshore promise into reality. Petrobras has slashed its own investment budget four times just since last summer, and it has repeatedly cut its estimates of future oil production. For a country facing back-to-back years of economic contraction, getting the energy industry back on track is crucial”.

The writer goes on to make the point “The measures are part and parcel of a wholesale reassessment of “resource nationalism” taking place across Latin America, from Mexico to Argentina. For decades, governments in the region have sought to control mineral wealth like huge offshore oil fields and ensure that most of the benefits from those resources go to their people, rather than foreign companies. That formula can work when oil prices are high, and companies are desperate to get their hands on any promising resources, whatever the terms. But when oil prices are low, and there is fierce competition for an ever-shrinking pool of energy investment, those nationalist policies can backfire”.

He notes that in response to low prices Mexico and a host of other nations are reverting to privatisation, “Argentina, under new President Mauricio Macri, is moving quickly to regain the trust of international investors, reaching a deal with creditors and courting foreign players for the country’s potentially vast reserves of shale oil and gas. Now Brazil, prodded by opposition politicians and business groups increasingly frustrated with 14 years of rule by the same party, is on the verge of rewriting its own restrictive laws. That could move the country one step closer to fulfilling its promise as one of the biggest sources of new oil production in the world”.

Crucially he writes that “the Energy Ministry announced a series of changes to the oil and gas investment framework meant to entice the kind of international capital that could turn things around. That includes steps like extending concessions given to foreign firms years ago, giving companies the option to expand their holdings if they see promising potential nearby, and compelling companies sitting on nonproductive leases to drill or get off the pot. At a time when low oil prices make investment decisions tougher for everyone, the ministry said that “new investments in the oil industry require stable and effective rules” that will offer long-term certainty for oil companies struggling with the worst capital-investment climate in decades. But much bigger changes are potentially on the way. Last month, the Brazilian senate passed legislation that would essentially dismantle the administration’s signature approach to resource development, which was to give Petrobras a leading stake in every oil field project. Given Petrobras’s woes — a battered balance sheet and a far-reaching corruption investigation — that has proved a recipe for stagnation, not for quick development of those fields. With Petrobras unable to take on big, challenging new projects, Brazil under the current law can’t auction off any offshore blocks for development. Taken together, the energy minister said, the changes could attract as much as $120 billion in new investment”.

He ends “The political scandals, and public dismay at the state of the economy, have reached such a level that even much-needed reforms like the oil-sector changes could take a back seat to a settling of political accounts: Opposition politicians are increasingly calling for Rousseff’s impeachment. Until Brazil sorts out its political mess, it will be hard to make progress on the energy-sector overhaul”.

Brexit and the rise of English nationalism


A piece discusses the Brexit debate in the UK, “If a sizeable majority of English voters support Brexit in the forthcoming referendum on membership in the EU, the tottering European project of “ever closer union” will have lost its momentum. The EU would stagger on, attempting to weather a refugee crisis, a dysfunctional financial system, a sluggish economy, and threats on its borders, but who would bet on its permanence, let alone on its effectiveness? Many would look back to the prescience of French President Charles de Gaulle when he vetoed Britain’s first application to enter the European Economic Community in 1963: “England is an island,” he said, “sea-going, bound up, by its trade, its markets, its food supplies, with the most varied and often the most distant countries” — marked, in other words, by its difference from the rest of the Continent”.

The piece goes on to make the point that “It is the gut feelings of the people of England that will be decisive. I stress England because feelings here are very different from those in Scotland, Wales, and perhaps Northern Ireland. England is at the core of British euroscepticism: The largest overtly eurosceptic political movement in Britain, the U.K. Independence Party, despite its name, is a largely English party. The largest semi-eurosceptic party, the Conservatives, are also predominantly English. In a recent front-page pro-Brexit editorial, Britain’s Daily Mail roared, bold and in all caps: ‘Who Will Speak for England?’ Without specifically English support, Brexit would be a nonstarter”.

He goes on to make the point that euroscepticism has historically been prominent in Scotland but a change has occurred, “One straightforward answer is the politics of the EU itself. In the 1970s, left-wing politicians and poorer voters in less prosperous areas were suspicious of “Europe” as a capitalist conspiracy set up to serve the interests of big business, international banks, and the political elite. And as prime minister in the 1980s, Thatcher indeed promoted free trade and deregulation with her plan for a single European market. But French Socialist Jacques Delors, president of the European Commission, responded with a raft of social and environmental protection measures designed to restrain Thatcherite neo-liberalism, flipping the politics of the EU on their head. The British left was converted to Europeanism — Delors was given a standing ovation by the 1988 English Trade Union Congress — while British Tories took umbrage. Part of the division over EU membership in Britain today, then, is between neo-liberals — strongest in England — who see EU regulations as a dangerous handicap to trading success in a globalized world, and their opponents — strongest in Scotland — who see EU regulations as a defense against predatory global capitalism. But economics don’t fully explain the depth of the resistance to more Europe that many English voters see as a fundamental part of their national identity. For that, we must turn to history”.

Correctly he makes the argument that “It is only in recent years that a distinctly English national identity has resurfaced. As the core of a United Kingdom of four nations, and previously the center of a multinational empire, the English had been happy to be “British.” They had no national anthem other than “God Save the Queen”; the old red St. George’s Cross flag rarely made an appearance. As long as the United Kingdom seemed both united and effective, “England” was a matter of poetry, not politics. But Englishness as a political identity has accelerated as a response to two novelties. First, the rise, since the 1980s, of Scottish and Welsh nationalism, which came up in opposition to the free-market policies imposed on the outer regions, from England, by the governments of Thatcher and Tony Blair. In the hope of calming nationalist demands, Scotland, Wales, and Northern Ireland — but not England — were given semi-federal governments, creating a new sense of distinction and difference. People in England began to complain of unfair treatment — about English taxes subsidizing Scottish welfare policies and the like. The second stimulus has been the ambition of European idealists to make “Europe,” and not the nation-state, the ultimate source of sovereignty and focus of citizens’ loyalty. At first this seemed just a matter of rhetoric. But the rhetoric, combined with the legal right it has given to large numbers of EU citizens to live, work, and draw welfare benefits in Britain — but mostly, in fact, in England — has fueled a growing sense that England’s parliament, government, and voters no longer have control over their own borders, laws, or population. It was these growing English grievances that helped propel David Cameron’s Tory Party to an unexpected majority in last May’s general elections; the major themes of his campaign were the Labour Party’s supposed dependence on Scottish nationalist support, and Cameron’s promise to renegotiate the terms of Britain’s EU membership”.

Pointedly he goes on “Impatience with the workings of the EU is fueling left- and right-wing populism across Europe — often in forms far more angry and extreme than in England. Yet only in England is there a real possibility of a majority actually voting to leave. Why is England contemplating this bold step, when other large and assertive nations such as the French are not? In part, it’s because the idea of a united Europe fits much better with the broad narrative of history in countries such as France, Germany, or Italy, who naturally feel themselves to be inherently continental. The French often present the whole project of European integration as their own design, traced back not only to Jean Monnet and Robert Schuman in the 1950s, but to Victor Hugo in the 1860s, Napoleon in the 1800s, and the 18th-century Enlightenment. England fits far less easily into this idea of a European destiny — most obviously, as Gen. de Gaulle was aware, because its history is far more global. It’s worth noting, too, that several key EU nations, including France, Germany, Italy, Poland, and Ireland, have histories in which great national decisions have been taken by an enlightened vanguard, with the mass of the people eventually acquiescing — sometimes willingly, often not”.

Perhaps the most important point he makes is that “the greatest difference of all is psychological. European integration is a project based on fear. Fear of war, of foreign domination, of civil conflict, of authoritarian government, of Communism. France and the other pioneers in the 1950s feared Germany. Germany feared being hated. Of the newer members who joined in the 1980s and ‘90s, Spain, Portugal, and Greece feared a return to right-wing dictatorship. The Eastern European countries feared Russia. “Europe” offered a new beginning, an escape from the fears of the past. Some of these fears have lessened, but not all. Most moderate people in most Continental countries are genuinely scared of a breakdown of the EU. England is very different: At least half the population is willing to contemplate Brexit. The basic reason is obvious. England suffered far less from Europe’s great 20th-century disasters. It hasn’t lost a major war since 1783, and hasn’t been conquered since 1066. The country’s take-it-or-leave-it attitude to the EU is found in other lucky parts of Europe — Scandinavia and Switzerland. If large nations like France still fear the ghosts of their history too much to go it alone, many small nations such as Catalonia, Flanders, and also Scotland and Wales, continue to see the EU, whatever its failings, as indispensable to their independence and self-esteem, their protection against big neighbours — including England. In England, on the contrary, many see the EU as such an impediment to political autonomy that they would be willing to face a possible breakup of the United Kingdom by supporting Brexit even as Scottish voters oppose it”.

It concludes “When the campaign begins, the “Out” faction will appeal to history, to ancient rights of self-government, to a brighter future as an autonomous global nation. The “In” faction will revive fears of decline and isolation, arguing that Britain will be more vulnerable, poorer, and less influential should it leave. Much of the discussion will be about bread-and-butter issues — jobs, investment, profits, prices, immigration. But behind this will be the deeper question: Are English voters confident about the ability of Britain — or, if necessary, England, if Scotland goes its own way — to function and prosper outside the EU? Or will they be persuaded that they are too small and too weak? In an uncertain world, the advantage lies with the status quo: Doing nothing seems safer. It may be that a majority of the people of England are inclined to leave the EU, but their politicians and bureaucrats mostly shrink from the task. That English nationalism is on the rise is clear; the results of the coming referendum will reveal whether it has yet to find an effective mouthpiece. If effective leaders emerge during the coming days or weeks, then Brexit is a real possibility”.

End of free markets and interventionist foreign policy?


A piece in Foreign Policy argues that the liberal order is ending, “In 1967, Britain unexpectedly announced the end of what, for decades, had been a genuinely global foreign policy. In response to the depreciation of the pound sterling, expensive decolonisation campaigns, and the evolving attitudes of the baby boomer generation, Prime Minister Harold Wilson’s Labour government abruptly announced that his government would change course, prioritising welfare over warfare”.

Of course the writer omits the context to this, the fact that the UK was bankrupt after the Second World War and was shedding colonies as fast as it could in order to right the finances. At the same time, under Wilson, it was making London a tax haven, a policy whose consequences are being witness today.

The article goes on “If the New Hampshire primary — where populist candidates Donald Trump and Sen. Bernie Sanders resoundingly thrashed their establishment rivals — gave us anything to go by, the United States could be approaching a similar moment. Populist candidates threaten the two pillars that have dominated establishment views on U.S. foreign policy since the end of the Cold War: liberal economics and liberal interventionism. Take the liberal economic commitment to open markets, represented in the 2016 presidential race by support for the Trans Pacific-Partnership (TPP) trade deal. Rapid globalisation since the end of the Cold War has generally benefited skilled workers in Western countries in the middle and upper class, those who can sell their services to the world and enjoy cheap and varied goods. But for many lower-middle class Americans, globalization is perceived not as a warm summer breeze, but as a biting winter wind. Their once-stable manufacturing jobs have been sent overseas, immigrants compete with them for low-paying jobs at home, and incomes have stagnated. Shockingly, blue-collar white men are the only group in America whose life expectancy has actually declined since 1999, due mainly to suicide and substance abuse. Yes, globalization brings blue-collar Americans cheap goods too, but that makes no difference to social mobility: it’s unsurprising that the link between individual freedom and economic liberalization pushed by establishment candidates rings hollow to all too many American ears”.

Correctly the writer points out that “Trump and Sanders have channeled this visceral and inchoate anger in their rejection of the TPP. More recently, Sen. Ted Cruz has jumped on the anti-TPP bandwagon, although he has equivocated on exactly what his position is — perhaps not surprising, given his vexed claim to be running as an anti-establishment candidate, his Princeton and Harvard Law School pedigree and marriage to a Goldman Sachs banker notwithstanding. By announcing their opposition to the TPP, the populists have sent Hillary Clinton running for cover, despite her role in sculpting the deal as secretary of state during President Obama’s first term. Gov. John Kasich is for the TPP, saying he is “pretty much for open” trade. But he too has equivocated, saying that “American workers have been shafted” and that he “want[s] to make sure that the workers in this country are protected.” The only candidates to have thrown their full weight behind TPP are Jeb Bush and Sen. Marco Rubio”.

Of course there is nothing wrong with free trade, per se, but there must be safeguards built in to both weaken its power and soften its effects. Then and only then will the remaining blue collar workers see sense in its benefits. Nations such as Sweden and Denmark have government programmes that seem to provide the best of balance.

The report oges on to mention “liberal internationalist economic policies may still find a thin majority of support after the November election, given their benefits to much of the middle- and higher-earning tranches of the American electorate. Moreover, there is a good argument that you can’t reverse globalization anyway, since the information revolution is here to stay and protectionist policies won’t do much to insulate blue-collar workers from a rapidly changing information economy”.

Worryingly the writer notes “the other pillar of post-Cold War U.S. foreign policy — liberal interventionism — is on the verge of policy oblivion. The failures of Iraq and Libya have been a stick that Trump, Cruz, and Sanders have used unrelentingly to beat Hillary Clinton. With nothing to parry them with, she’s simply had to take these blows, and the bruises are increasingly starting to show in the polls. In her last debate with Sanders, Clinton argued that a vote against invading Iraq in 2002 — which Sanders cast and Clinton did not — is not a plan to defeat the Islamic State now. She’s right, but this argument suffers from the fatal defect that the Islamic State would not exist in its current form were it not for these interventions”.

Yet the problem is not with intervention, it is with half hearted intervention. The cycle is that an event happens that needs US power but politicians are afraid of public opinion so they only do a half hearted intervention. This results in a disillusioned public which further begets the cycle of public dismay. Instead what is needed is powerful intervention not done on a budget but done well with appropriate planning. Then when leadership is shown support for these plans will subsequently rise. However, this also means that until such action is taken the cycle will continue unabated. Yet, this argument by the author need nuancing. Trump, for all his stupidity, and Cruz, have both, at times, called for more interventions. Cruz is especially true on this point, while Trump has staked out no clear position calling for both more and less intervention. Thus to say that interventionism is dead is perhaps a stretch too far.

The writer goes on to argue “The force of the populists’ argument on this point isn’t hard to grasp. As should be rather obvious from the label, regime change can create ungoverned space, into which transnational, networked terrorist groups will flow, especially when there’s no replacement plan, as the experiences of Iraq and Libya showed us. The Kurds aside, this is the problem with arguing for regime change in Syria. The West has no alternative to the Assad regime even if the man himself goes, so regime change would very likely create a political vacuum filled by a cocktail of radical Islamic terrorists. The United States would ultimately be forced to accept that reality, or to redeploy American forces to pacify the region — both outcomes for which the U.S. electorate has zero enthusiasm. This geopolitical reality has left Clinton with no choice but to more or less avoid the issue of regime change, and instead focus only on the narrow question of the Islamic State, and on humanitarian precautions such as no-fly zones that won’t change the direction of the conflict. The only candidate fully on board with regime change in Syria appears to be Rubio, who has clashed vigorously with Trump and Cruz on the issue. While Rubio claims, not unreasonably, that Assad encourages the likes of the Islamic State, he also has no explanation whatsoever for how regime change would prevent a Libya-like jihadi-fest”.

The article goes on to mention “the broader idea of spreading democracy and human rights seems to be grinding to a halt. Apart from some vague statements of “concern,” none of the candidates has seriously challenged Egyptian President Abdel Fattah al-Sisi’s ruthless political repression in Egypt, or the widespread allegations of ethnic cleansing by the Iraqi government’s Shiite militias against the Sunni population. Of course, the implicit narrative now is that the Islamic State, not democracy, is the priority. But this masks a more fundamental reality flowing from the 4,500 U.S. dead and $2 trillion-debt burden for an Iraq War that handed Baghdad to Tehran on a platter. Whatever the Iraq War was supposed to be in the world of counterfactuals — if the weapons of mass destruction had been there, if the Iraqi Army had not been disbanded, if Bush had extended the status of forces agreement to keep troops in Iraq beyond 2011, if Obama had not withdrawn troops in 2011, and so on — the war that actually took place was, without a shadow of a doubt, the biggest U.S. strategic disaster since Vietnam. With that plain reality in mind, Rubio’s zealous enthusiasm for regime change seems wildly out of touch with the U.S. electorate”.

It ends “Ultimately, only economic superpowers or dictatorships can drive foreign policy independently of domestic considerations — and Britain was neither in 1967. America is an economic superpower, but also a democracy, which explains both why foreign policy can be pushed beyond domestic considerations for long periods of time, but also why it can all too suddenly come crashing down”.

Rubio, GOP’s last hope?


A piece in the Economist notes that the best hope for the GOP is Marco Rubio “HIS father Mario, a struggling bartender; Oriales, a hotel maid and devoted mother; Pedro, his garrulous, cigar-smoking grandfather, known to the grandchildren as Papá; an elder brother, also Mario, who became a Green Beret: the supporting cast in Marco Rubio’s back-story is a technicolour pageant of striving Cuban immigrants turned patriotic Americans. If Mr Rubio somehow manages to seize the Republican nomination from Donald Trump—a feat that, after his second-place finish in South Carolina, he seems best-placed to achieve—Americans will hear his story often”.

The piece goes on to note that the Rubio story “is also, of course, a story about Mr Rubio’s own exceptionalism—as some voters, knowing American meritocracy is often more promise than reality, intuitively understand. “It’s really cool,” said a young man cradling a baby after a rally in Rock Hill, South Carolina, “that he could navigate through all these obstacles—it wasn’t just handed to him on a silver platter”. The contrast with some other candidates, privileged in money, schooling or connections, is plain. As for his difficulties with mortgage payments and ill-advised property dealings, which some have used against him: Mr Rubio adduces them, like his student debt and rueful talk of post-dating cheques in pinched times, as yet more evidence that he alone can “talk to people who are living the way I grew up”.

The article goes on to mention “These attributes bolster his claim that, in a field of Republican gargoyles, he is likeliest to prevail in November. Yet the longer he remains in the race, the louder two key criticisms will become. They seem contradictory, but both contain elements of truth. One is that, beneath the altar-boy haircut, winning smile, chirpy voice, football talk, jokes and jokes about football, Mr Rubio is as ideologically extreme as anyone in the contest. The other is that the feel-good narrative masks a void”.

It goes on to note that “Jeb Bush was Florida’s governor during Mr Rubio’s lightning rise through its house of representatives, which took him, in short order, from whip, to majority leader, to become, aged 34 (he is now 44), its first Cuban-American speaker. Alongside the portraits of his grizzlier predecessors that hang in the capitol in Tallahassee, his is startlingly boyish. Mr Bush presented him with a sword, symbolising conservatism; at least, that is what it symbolised then. Strikingly, in the tussle that ended with Mr Bush’s withdrawal on February 20th—a face-off that, in a saner primary season, might have been the headline drama—most of Florida’s Republican establishment lined up behind the former governor”.

Interestingly it contends that “if Mr Rubio could not rely on a parental Rolodex, as he puts it, his career has been blessed in other ways: seats opening up at serendipitous moments, money and well-paid jobs magically materialising. Norman Braman, a Miami car-dealing tycoon, took a lucrative shine to him, donating generously and employing his wife. Not long after he secured the Florida speakership, Mr Rubio landed a $300,000-a-year post at a politically connected legal firm (he once specialised in land-use law). Some of his jobs were not terribly demanding, suggesting, to his critics, a pattern of absenteeism stretching to his poor attendance record in the Senate. “He’s just like Barack Obama”, worried a woman in Florence, where Tim Scott, a South Carolinian senator, whooped Mr Rubio onto the stage like a boxing announcer. The implicit concern is that he has more offices to his name than achievements, or, some say, principles. They point, above all, to his gymnastics over immigration: running for the Senate, he opposed a path to citizenship for illegal immigrants, then embraced it as part of a doomed reform in 2013; now, in the xenophobic heat of the campaign, he downplays that idea, arguing that terrorism has upended even unrelated aspects of his policy”.

The piece notes interestingly, “anyone who thinks Mr Rubio entirely devoid of convictions should watch his farewell speech in Tallahassee in 2008. “God is real,” Mr Rubio passionately declared: “He loves you…whether you are an embryo or behind bars.” God’s providence, and Mr Rubio’s gratitude for it, often feature in his story. His faith is longstanding: as a boy, he would don a sheet after mass and pretend to be a priest. (It is also ecumenical: in Miami, he attends both Catholic and Baptist churches, and during a childhood spell in Las Vegas went to a Mormon one.) And for all his pole-climbing, his philosophy has been consistent. A better reading of his flip-flop-flip on immigration may be that his liberal stance was an anomaly. His tougher line today—no Syrian refugees; fewer family-reunion visas—fits into an ultra-conservative outlook that his story has sometimes camouflaged”.

The piece notes that the usual GOP obsession with making society more unequal persists, “Take his avowed commitment to helping the little guy. He acknowledges the alienation some members of minorities feel, drawing on his own experiences in cosmopolitan Miami. He speaks warmly of early intervention for disadvantaged toddlers, and of leniency towards mildly straying youngsters. He can be insightful about America’s precarious place in a globalised, post-industrial economy. But when it comes to taxation, his priorities lie elsewhere. One of his favourite lines is that the poor are not made richer by making the rich poorer. Under his plans there is no fear of that: his proposal to scrap taxes on capital-gains and dividends would instead make the rich richer”.

On foreign policy the piece makes the observation that “he may not be quite as hawkish as his revered Papá, who thought Margaret Thatcher should invade Argentina as well as the Falklands, but it is close. He says he would cancel the nuclear deal with Iran on his first day in office, and undo the normalisation of relations with Cuba. He wants to send American troops into Syria, and take on Bashar al-Assad and Islamic State at once. He threatens to pack off more terrorists to Guantánamo”.

The article concludes, “he shows little appetite for compromise on the neuralgic issues that will continue to divide America under its next president. That might hamstring him in the White House; more immediately, it might prevent him reaching it. His well-honed formula—robust conservatism with a smile—will attract some voters who share his instincts but are repelled by harsher rhetoric. Whether it can convert moderates in sufficient numbers is unclear. That is where the story comes in. “It makes him a whole person, a real person”, said a supporter in a barn in Gilbert, as the obligatory country music rolled. Transmuting astringent economics into compassion, promising tolerance without a cost, wreathing jeremiads in sunshine, the story might even do the trick. Mr Rubio’s inauguration is the climax its logic demands. In the end, its meaning is simple. The moral of the story is its teller, Marco Rubio”.

The EU and Boris’s view of sovereignty


A piece in the Economist notes that Boris Johnson has decided to support Brexit, “the commentariat, and almost no one else, has been waiting excitedly for Boris Johnson to show his colours in Britain’s upcoming EU referendum. The great moment came at 3:30pm with the BBC’s confirmation of prior reports that London’s mayor would back a Brexit vote. This news is bad for the In campaign—he is the country’s most popular politician, after all—though not nearly as much as some excited Eurosceptics will claim in the coming hours. It positions Mr Johnson to run for the Conservative leadership should David Cameron lose the referendum, and perhaps, though not as immediately, if he does not. But shamelessly self-interested and probably contrary to his real views on the EU though it is, the mayor’s move is perhaps not entirely disingenuous. He has always insisted that his decision would turn on his concerns that EU membership is incompatible with British sovereignty. Expect him to concentrate on this objection in the coming days”.

The report mentions that “Johnson has thus aligned himself squarely with Michael Gove, the justice secretary with whom he consorted earlier in the week and who declared his support for Brexit on Friday in a 1,500-word statement that overwhelmingly concentrated on national self-rule. The “decisions which govern all our lives”, Mr Gove argued, should be taken uniquely by “people we choose and who we can throw out if we want change”. It is worth taking this variety of Euroscepticism seriously—partly because it comes from the more thoughtful, liberal wing of the movement (Mr Gove is not the Little Englander of Europhile lore, for example). But also because it will feature very prominently in the debates between now and June 23rd, especially as Mr Johnson will now presumably become the face of the Out campaign”.

Interestingly the piece goes on to make the point that “The Johnson-Gove argument goes something like this: unlike many continental countries, Britain has an unbroken tradition of liberty and representative democracy (a “golden thread”) dating back to Magna Carta and shared by other Anglophone nations. This tradition is almost uniquely uncompromising about accountability, steadfast in the conviction that power should rest only in the hands of leaders elected by and answerable to a nation constituting a demos, a community of shared assumptions and experiences. Thus the EU, accountable to foreigners as well as Britons, breaks the sacred bond of mutual power between decisionmakers and those on whose behalf they act”.

Correctly the writer argues that “The flaw in this case lies in the tradition’s idealistic definition of sovereignty. For Mr Johnson and Mr Gove, being sovereign is like being pregnant—you either are or you aren’t. Yet increasingly in today’s post-Westphalian world, real sovereignty is relative. A country that refuses outright to pool authority is one that has no control over the pollution drifting over its borders, the standards of financial regulation affecting its economy, the consumer and trade norms to which its exporters and importers are bound, the cleanliness of its seas and the security and economic crises propelling shock waves—migration, terrorism, market volatility—deep into domestic life. To live with globalisation is to acknowledge that many laws (both those devised by governments and those which bubble up at no one’s behest) are international beasts whether we like it or not. If sovereignty is the absence of mutual interference, the most sovereign country in the world is North Korea”.

He goes on to note “Thus the EU is just one of thousands of intrusions on the sort of sovereignty that the likes of Mr Johnson so cherish. Britain is subject to some 700 international treaties involving multi-lateral submissions to multilateral compromises. Its membership of the UN similarly infringes its self-determination, for it can be outvoted there just as it can in Brussels. Likewise the WTO, NATO, the COP climate talks, the IMF, the World Bank, nuclear test ban treaties and accords on energy, water, maritime law and air traffic all require Britain to tolerate the sort of trade-offs that Eurosceptic souverainistes find distasteful: influence in exchange for irksome standardisation, laws and rules set mostly by foreigners not elected by Britons (regulations that Britain would not apply, or would apply differently, if left to its own devices). Yet it submits to all of these knowing that, as with the EU, it is free to leave whenever it wants—but at a price not worth paying”.

The argument goes on to deride Johnson’s view of the UK outside the EU, “This is precisely why the two models for a Britain outside the EU often cited by Eurosceptics (including Mr Johnson), Norway and Switzerland, constitute such weak arguments for Brexit. Under the Johnson-Gove view, these countries are quite dramatically more “sovereign” than Britain. But in practice their economies and societies are so intertwined with those of their neighbours that they must subject themselves to rules over which they have no say. This exposes a false choice: in an increasingly interdependent world, countries must often opt not between pure sovereignty and the pooled sort, but—however distasteful the choice may seem—between the pooled sort and none”.

The piece argues against the view of the special UK and its common voters all standing together, “The media is fragmenting and internationalising. The citizens of a given country do not all watch the same television programmes and read the same newspapers any more. Across Europe there is evidence of growing political polarisation along cultural lines: for all their differences in experience and outlook, voters in declining, post-industrial parts of England and France have much more in common with each other than with those in cosmopolitan London or Paris. Language divides people less all the time. Sub-national allegiances are growing in strength (note Scotland’s slide towards independence) and form an increasingly appropriate and effective basis for government (consider all the recent literature on the “age of mayors”). So while one can still argue that power exercised at a national level is more democratically valid than that exercised at a supra-national one, that case becomes less pressing with each passing year”.

The report concludes “Talk of foreigners imposing their will on Britain’s elected government is usually (and especially in Mr Johnson’s case) accompanied by a patriotic flourish: the assertion that, as one of world’s great economic, cultural and military powers, the country deserves to get its autonomy back and can make it on its own. But this chest-puffing diverges from the underlying sovereignty argument, which only works if, deep down, you think Britain a bit puny. Consider the trade-off: let foreigners have some influence over your country of 64m and in return receive quite a lot of influence over a union of more than 500m. When Eurosceptics only mention the first half of this bargain, they imply that Britain is too weedy to take advantage of the second. Which is odd, as the national strengths they otherwise celebrate give the country a tremendous ability to do so. Its diplomatic service, its global alliances, its language, its historical heft—not to mention the absence of a power similarly well positioned to exercise continental leadership—all put it in a fantastic position to set the agenda in Brussels at those rare moments (for example, at the time of the Lisbon Agenda and the union’s eastwards expansion) when it puts its mind to the task. The EU is Britain’s to run, if only it could overcome its insecurity about scary foreign bullies. In an interconnected and ineluctably integrated 21st century, it is that, far more than the Eurosceptics’ purity games, that is real sovereignty”.

Cameron’s foreign policy: profit over action


A report details the weak response of the British Government to a report on the murder of Alexander Litvinenko, “The present era has been defined by globalization, financial globalization above all, and true to form, Britain has positioned itself in recent years as the global capital for capital. The city of London has become a hub for the world’s money, clean and dirty; London property is now the investment of choice for the world’s leading plutocrats and kleptocrats. Dean Acheson’s 1962 quip that Britain has lost an empire and not found a role is pretty but untrue — the role is evident in the glass skyscrapers and condo buildings now planted across the capital city. But Britain’s new status as global financial hub comes with its own contradictions — contradictions that have become painfully clear with Thursday’s release of the public inquest into the 2006 murder of Alexander Litvinenko in London. It concludes that Litvinenko was “probably” assassinated on the direct orders of Russian President Vladimir Putin, with “prime facie” evidence that the Russian state was involved. So how should Britain behave when the powers whose money it relies on feel so emboldened as to ride roughshod over the United Kingdom’s security? Litvinenko was a Russian intelligence agent who had received political asylum in the U.K. in 2001, was granted British citizenship, and was helping MI6, Britain’s foreign intelligence service, research the connection between the Russian government, organized crime, and money-laundering networks in Europe — research that led a Spanish prosecutor to call Putin’s Russia a “mafia state.” A few days before flying to Spain to help with the investigation, Litvinenko was murdered with radioactive polonium”.

The writer argues that “There was no shortage of reasons to suspect the Kremlin was involved. Polonium is a highly rare material, which very few states produce under strict security — Russia is one of the few. Police and journalists quickly followed the polonium trail and killer to Moscow: A former KGB officer called Andrey Lugovoi had met with Litvinenko in London shortly before he fell ill and left the country shortly thereafter. As evidence mounted about Lugovoi’s involvement, the Russian government made him a deputy of parliament, thus granting him immunity”.

Crucially he adds that “That the Russian government would respond in stonewalling fashion was unfortunate, but predictable. The British government’s behaviour was more surprising, and disappointing. It initially blocked all efforts for a public inquiry, seemingly for fear of jeopardizing its trade ties with Russia. Those ties are, by all accounts, considerable. BP (formerly British Petroleum) owns nearly 20 percent of Russian state oil company Rosneft, which is controlled by Putin’s close ally Igor Sechin. Russia’s rich, who have invested heavily in the U.K. property market, receive a quarter of the “investor visas” that the U.K. hands out to those who can pay a million pounds for them. Vladimir Ashurkov, a Russian anti-corruption campaigner, claims to have reported multiple cases of senior executives in Russian state companies, such as VTB and Transneft, laundering money through London, but with no follow-up from the U.K. financial security services. “At some point, it becomes a question of political will,” said Ashurkov”.

After the widow of Litvinenko demanded a hearing “Not long thereafter, Foreign Secretary William Hague preemptively submitted a public interest immunity certificate, a move designed to keep the government’s classified files on Litvinenko from being made public. The home secretary then claimed an inquest would incur too many “public expenses.” The lawyers for Litvinenko’s family argued, in reply, that the “British government, like the Russian government, is conspiring to get this inquest closed down in exchange for substantial trade interests which we know Cameron is pursuing.” In 2014, the High Court sided with the lawyers, ruling that the home secretary’s refusal to have an inquiry was not “rational” and legally erroneous. The inquiry was opened later that year, led by Sir Robert Owen. The final report is a personal victory for Marina Litvinenko and a reward for her persistence. It is also a defeat for the British establishment, some of whom still oppose her search for justice”.

The report ends, “Britain should be able to square its dependence on international capital with its traditional ideas of sovereignty, security, and values. Scratch the surface, and the former is intrinsically interconnected with the latter: Foreign money wants to come to the U.K. precisely because it has values — for instance, the rule of law — and decent security. If London becomes a mere butler to the super-rich, prepared to sacrifice its legal system for the sake of cash, it loses its value as a financial safe house: Why put your money in a country where your enemies can bump you off if they can afford to pay off the powers-that-be? But such long-term thinking is beyond a government trying to bring in as much global money as possible, as fast as possible, in order to balance the budget in the immediate future. 2015 saw the U.K. roll out the red carpet for China, with the government welcoming Chinese investment into British nuclear power. Rights groups and the security ministries lodged protests, but were ignored. When the Chinese bump off a dissident in London, what will we do? The satirical website “Russia in Your Face” caught the present mood best: It portrays the British Foreign Ministry meekly requesting that Putin carry out assassinations in the U.K. somewhat less conspicuously than has been his habit. The portrait is only as distorted as the U.K.’s current financial role on the global stage”.

Remaking the Saudi state?


A report from the Economist discusses the radical changes planned in Saudi Arabia in the Deputy Crown Prince Muhammd bin Salman, “THE Al Sauds once again hold court in Diriya, their ancestral capital that was laid waste by the Ottoman empire and is being lovingly restored as a national tourist attraction. This is where the Al Sauds forged their alliance in the 18th century with a Muslim revivalist preacher, Muhammad Ibn Abdel-Wahhab—a pact that to this day fuses the modern Saudi state with the puritanism of Wahhabi Islam. And this is where Muhammad bin Salman, the 30-year-old deputy crown prince who is the power behind the throne of his elderly father, King Salman, receives foreign guests in a walled complex. One side of his reception room is decorated with the spears, swords and daggers of tradition. The other is dominated by a large television, showing the casual horrors of the Middle East and the repercussions of his own actions play out on rolling news: the execution of a prominent Shia cleric, Nimr al-Nimr, (and 46 others accused of terrorism and sedition, mostly linked to al-Qaeda jihadists) led to a mob ransacking the Saudi embassy in Tehran and, in retaliation, to the kingdom severing diplomatic relations with Iran”.

The report goes on to mention “Talking late into the night with the news left on throughout, Prince Muhammad discusses his country’s interventionist foreign policy and its uncompromising response to terrorism and sedition. Asked whether the kingdom’s actions were stoking regional tensions, he said that things were already so bad they could scarcely get any worse. “We try as hard as we can not to escalate anything further,” he says; and he certainly does not expect war. But for his entourage, Saudi Arabia has no choice but to stop Iran from trying to carve out a new Persian empire”.

The article notes that “If his defence of Saudi foreign policy was unrepentant, even more striking was his ambition to remake the entire Saudi state by harnessing the power of markets. No economic reform is taboo, say his officials: not the shedding of do-nothing public-sector workers, not the abolition of subsidies that Saudis have come to see as their birthright, not the privatisation of basic services such as education and health care. And not even the sale of shares in the crown jewel: Saudi Aramco, the secretive national oil and gas producer that is the world’s biggest company”.

The writer continues, “At 80, the newish King Salman is part of the same gerontocracy that has run the country for decades. But he has entrusted much of his realm to Prince Muhammad, who is in a hurry to awaken it from its torpor. He knows that, for all its ostentatious luxury, the country faces huge problems. The oil price has plunged. Arab states all around have collapsed. In the vacuum, Iran, the Shia power that has long alarmed Sunni Arabs, has spread its influence across the region, particularly through the militias it grooms—in Lebanon, Iraq, Syria and most recently in Yemen, Saudi Arabia’s underbelly. The Arab world is confronted not just by a Shia Crescent, “but by a Shia full moon”, says one confidant of the prince. As well as Shia militants, Saudi Arabia also faces resurgent Sunni jihadists: a revived al-Qaeda in Yemen to the south, and Islamic State (IS) in Iraq and Syria to the north. Both seek to lure young Saudis raised on the same textbooks and homilies that the jihadists use. The Al Sauds have survived by making three compacts: with the Wahhabis to burnish their Islamic credentials as the custodians of the holy places of Mecca and Medina; with the population by providing munificence in exchange for acquiescence to absolutist rule; and with America to defend Saudi Arabia in exchange for stability in oil markets”.

Interestingly the piece mentions “Yet he knows that change must come, and fast. He has injected new energy into government, and is taking huge gambles. What he lacks in experience and foreign travel, he compensates for with confidence, focus and a battery of consultants’ reports. He reels off numbers and policies with ease, pausing only to take a call from John Kerry, America’s secretary of state. He speaks in the first person, as if he were already king even though he is only second in line. Over five hours King Salman is mentioned once; his cousin, the crown prince, Muhammad bin Nayef, does not figure at all, though he is in charge of internal security and may be biding his time”.

The writer goes on to mention that “Such is Prince Muhammad’s frenetic activity that officials reel and outsiders regard him as a bullock in a china shop. Just weeks after his father made him defence minister, fighter jets from Saudi Arabia, the Arab world’s richest state, led a coalition into action against the Houthi militias of its poorest, Yemen. To critics who say he was rash to intervene in a land that has bloodied foreign armies before, Prince Muhammad says the action, if anything, came too late: the Shia Houthis, with Iran’s help, had taken the country and sophisticated weapons, such as jets and Scud missiles. Scuds are occasionally fired at Saudi targets; thousands of Saudis living near Yemen have been evacuated to avoid rockets and artillery fire. In Syria he plans to send special forces against IS”.

Crucially he author adds “Prince Muhammad’s most dramatic moves may be at home. He seems determined to use the collapse in the price of oil, from $115 a barrel in 2014 to below $35, to enact radical economic reforms. This begins with fiscal retrenchment. Even after initial budget cuts last year, Saudi Arabia recorded a whopping budget deficit of 15% of GDP. Its pile of foreign reserves has fallen by $100 billion, to $650 billion. Even with its minimal debt of 5% of GDP, Saudi Arabia’s public finances are unsustainable for more than a few years. His budget, unveiled in December, cuts subsidies on water, electricity and fuel. These were aimed mostly at big consumers, including the myriad royal princes. “I don’t deserve these subsidies,” he says. Even so, Saudis witnessed the rare sight of people queuing to buy petrol before the prices rose by 50% on January 1st. This month Saudis accustomed to leaving on the air-conditioner when going on holiday will receive dearer electricity and water bills. Within five years, the plan is that Saudis should be paying market prices, probably with compensation in the form of direct payments for poorer citizens. Ministries have halted expenditure on cars, furniture and showcase projects. The government is scrutinising allowances and overtime claims to save money. Soon Saudis will for the first time pay value-added tax of 5% on non-essentials, in a move co-ordinated with other members of the six-country Gulf Co-operation Council. Prince Muhammad is adamant that there will be no income or wealth taxes, but he plans to balance the budget in five years”.

Importantly it notes that “Under his “Transformation Plan 2020”, set for publication by the end of the month, the prince wants to develop alternatives to oil and drastically to cut the public payroll, which acts as a form of unemployment benefit. To do so he wants to create jobs for a workforce that will double by 2030. Ministers speak of doubling private education to cover 30% of students, establishing charter schools and transforming public health care into an insurance-based system with expanded private provision. In addition to Aramco, the prince wants to sell stakes in state assets from telecoms to power stations and the national airline. The government is to sell land to developers, such as the 4m square metres it owns around Mecca, the most expensive real estate in the world. The prince sees huge promise in developing Islamic tourism to the holy sites; he hopes to boost the 18m annual visitors to 35m-45m in five years. Sceptics abound. Reform has long been talked about but never implemented. Prince Muhammad’s ministers are astute, have PhDs from Western universities and speak the jargon of key performance indicators, but much of the government is deadweight. Even the unemployment figures are subject to doubt. “Few bits of the bureaucracy actually function at a high level,” says a Western diplomat. Even senior advisers question the kingdom’s capacity to find and absorb the trillions of dollars on which the plan is predicated”.

The piece presents problems when it mentions that “In Jeddah, the commercial capital on the Red Sea, some businessmen remain sceptical, and speak more of exporting their wealth than investing it in the country. There is also suspicion of hidden motives. With each new elderly monarch, they say, favoured sons have indulged in self-aggrandisement, leaving courtiers to disguise their acquisitions as privatisations and economic reforms. Media reports of Prince Muhammad’s lavish parties in the Maldives and the crown prince’s house-hunting for a Sardinian villa worth half a billion euros are fodder for social media, of which Saudis are keen users. As the man who ultimately controls the Public Investment Fund, the destination for many assets to be sold, and who has taken direct oversight of Aramco, the prince is already the subject of some muttering. What is true is that, for all his talk of transparency, his government continues to treat royal and state expenses as one and same; the royal component is a state secret”.

The political ramifications for this are noted when “A bigger challenge for the reformers is the fact that the prince’s dizzying changes amount to, in effect, a rewriting of the Saudi social contract. Why, mutter some Saudis, should we tighten our belts when the princes continue to enjoy untold riches? And for all his boldness in economic matters, he remains obtuse when it comes to political liberalisation that might help secure consent for the economic revolution. A tiny number of women have recently campaigned for and won seats in municipal elections, under changes brought in by the late King Abdullah; who more than a decade ago had promised Saudis “true democracy” in 20 years. It is nowhere in sight”.

Further to this the plan to transform the country come across internal problems, “In a country where concerts, public movies and female performances are banned, the prince talks of the “entertainment crisis”, and about his own children lacking things to do. Here and there, he seems ready to try to loosen the grip of the clerics. His latest education minister, Ahmed al-Eissa, is an academic whose book on the dreadful state of Saudi schools, which he blames in part on the restrictions placed by “religious culture”, remains banned in the kingdom. Private schools, still barred from teaching evolution, would have a freer hand to set their curriculum and choose pedagogic materials beyond those designed by the clerics”.

It ends noting the importance of the United States, “for a Saudi royal with no Western education, Prince Muhammad speaks about America passionately. “The United States has to realise that they are the Number One in the world, and they have to act like it,” he says; the sooner America steps back into the region—even with boots on the ground—the better. Prince Muhammad’s schemes do not appear to be inspired by ideology. Many of the ideas he is pursuing have lurked in ministers’ drawers for years. Others follow examples from elsewhere, be it charter schools in America, public-private partnerships in Britain or the abolition of fuel subsidies in Egypt (and Iran). Instead they are born of necessity. The conjunction of a fall in oil prices, a geopolitical crisis and a hyperactive prince afford a once-in-a-generation chance to modernise the country. The Arab spring has shown time and again that post-colonial Arab states are singularly dysfunctional (see page 41). That raises serious doubts about Saudi Arabia’s ability to reform. But the regime has little choice: its survival may depend on it”.


Mexico, oil privatisation at any cost


A piece in Foreign Policy notes the relationship between Mexico and oil, “When, in 2013, Mexican President Enrique Peña Nieto announced a broad reform package that would end the government’s monopoly over the country’s oil sector, his argument was fairly straightforward: Foreign investment could be just the thing to reverse a decade of production declines and revitalise a state that has historically relied heavily on oil for its income. Dazzled by the promise of numbers, Peña Nieto suggested that, by wrenching open the long-closed sector, Mexico could attract more than $60 billion in investment within just a few years, while adding at least a percentage point to its annual GDP growth and creating 2 million jobs”.

The author goes on to mention that “The president’s idea was a revolutionary one in a country whose modern identity was forged thanks to the nationalisation of its black gold in 1938. Critics, unsurprisingly, were quick to argue that Peña Nieto’s reform was nothing less than a wholesale dismantling of Mexico’s heritage. But the president knew that, without a shock to the system, his country could soon turn into a net importer of oil. That meant giving up, at least in part, the keys to the energy industry. Mexico, along with Russia, has long been a poster child for resource nationalism, or the tendency for governments to claim outright ownership of all mineral resources and to monopolize pretty much all parts of the energy sphere. Nearly 80 percent of global oil reserves are under the control of national oil companies, according to a 2007 report by the Baker Institute at Rice University, leaving relatively little energy in the hands of multinational corporations”.

Of course that is not to say that due to this nationalisation policy oil production has stopped. Instead a balance has been found in places as diverse and Norway and Saudi Arabia where the state and oil companies can work together rather than oil companies both owning and producing the resources that should belong to the people of the country in question.

The author controversially claims that “Argentina, Brazil, and Venezuela have little choice but to track Mexico’s experiment closely, considering that they all compete for the same investment dollars and that Big Oil will go where it sees the best prospects with the best terms. What’s more, these countries have an even stronger, inescapable reason to follow Mexico’s lead: Resource nationalism is a long-term recipe for disaster”.

Such strong wording is not only dangerous but his examples are highly questionable with no mention of European countries such as the Norway that has taken a very different route to what the author has claimed and been hugely successful. Thus it is not that nationalisation is bad but the conditions under which it takes place and the kind of deal agreed between the oil companies and the state.

He goes on to note “Take Argentina. It has the world’s second-largest shale reserves but is currently a net energy importer after nearly a century of whipsawing between nationalism and an open market. Foreign capital created windfalls in the 1920s and 1930s, but greedy governments snatched back those oil wells in the 1940s, until production dwindled; they then returned, cap in hand, to wildcatters and oil majors just a decade later—a Groundhog Day pattern that continues today. Most recently, in 2012, Argentina lurched toward nationalism again, expropriating its former national oil company from Spain’s Repsol. Argentina now has the unenviable task of trying to lure foreign money and know-how to help tap Vaca Muerta (Dead Cow), a shale formation roughly the size of Belgium that it cannot develop on its own”.

His next example only demonstrates his point, “Venezuela has the world’s largest crude reserves, yet it too must import some basic fuel. For a brief period in the liberalizing 1990s, the government attracted foreign capital and boosted production. But in the 2000s, under strongman Hugo Chávez, resource nationalism returned with a vengeance; oil production in the country has fallen by about one-quarter from its peak levels in 1997. Much more than in Mexico, such decline threatens societywide economic and political meltdowns because Venezuela gets about 95 percent of its export earnings—and half of government revenues—from oil sales. The shrinking pie has imperiled social programs and has limited the country’s ability to import basic staples, such as toilet paper, and even to keep the lights on”.

He argues that “Mexico, of course, has also been crippled by resource nationalism. It coasted for years on the back of hugely prolific offshore fields discovered in the 1970s, but production at those fields peaked around 2004, falling by about three-quarters the following decade. That left Mexico with a bloated, inefficient state oil company that was responsible for a big chunk of the Mexican treasury but had little wherewithal to reverse the slide or to embrace new technologies. So in 2013, when Peña Nieto proposed upending the energy industry, he managed to pass reforms without any real challenge in the legislature. Fast-forward to last July, when, for the first time in nearly 80 years, Mexico auctioned off some shallow-water tracts in the Gulf of Mexico to foreign firms; onshore tracts in northern and eastern Mexico will be awarded this winter. Mexico didn’t offer attractive enough terms, however, and the auction in July flopped. As a result, the country has postponed the auction of deep-water blocks, while it tries to strike the right balance between enticing foreign firms and ensuring that enough revenue still makes it to the national treasury”.

Pointedly he notes that “Of course, such change won’t be easy, particularly because global oil prices have recently tanked, dampening investment appetite everywhere. Then there are security threats from narcotraffickers, especially around Mexico’s potentially energy-rich northern fields. And while proximity to the United States is in many ways a blessing—the world’s best service companies are a short flight away—it’s also a curse: Why make a risky play south of the border when the U.S. shale revolution remains steady? Even still, for Latin America’s once and future oil giants, there’s something to be said for being in the right place at the right time. Demand for energy, especially oil and natural gas, is shifting east: In 2013, for the first time ever, oil demand in developing countries (led by China) surpassed that of rich countries”.


Millennials and the end of the American Dream


A report in the Washington Post discusses the end of the American Dream, “When Harvard’s Institute of Politics asked 18- to 29-year-olds if they considered the American dream to be alive or dead, the result was an even split. About half said they considered the American dream alive and well for them personally. About half said it was dead as a doornail”.

The report mentions “Harvard also asked millennials about a number of other issues, too; people in that age bracket like Donald Trump and Bernie Sanders more than other Republicans and Democrats, for example. But this bit of data on the American Dream stood out. Particularly in light of data released on Thursday by Pew Research. Pew found that the beating heart of the American dream, the middle class, has shrunk significantly over the past 40 years”.

The piece goes on to note “young Americans are sceptical of their ability to get ahead. Pew’s data also shows that the age range looked at in the Harvard IoP survey saw the biggest drop in income status since 1971, with the biggest gain of any demographic group going to those 65 and over. Within that American dream data was a noticeable split. Those with a college degree thought that the American dream was alive and well at a rate 16 percentage points higher than those who weren’t in college or who had never attended. Non-college-graduates also saw broad decreases in income in Pew’s analysis, with the research firm writing that “[t]hose Americans without a college degree stand out as experiencing a substantial loss in economic status.” We’ve known for some time that people with college degrees have done better in recent years. But two threats still exist. The first is student loan debt, which continues to be a massive burden to recent college graduates. The second is wage stagnation. In analysis by the Economic Policy Institute, for example, wages for young college graduates have been dropping since the year 2000. The trend is more widespread and older than that, but this number certainly might make a new graduate pessimistic”.

It concludes “The idea of the American dream is somewhat nebulous, relating mostly to the idea of the equal opportunity for economic success. Half of people under the age of 30 are sceptical of that idea, and even those with a college degree might still see clouds on the horizon. The results of Harvard’s survey aren’t surprising, even if we might think they should be”.


Osborne, the new Victorian


A piece from the Economist lauds George Osborne as he quickly dismantles the British state, “GEORGE OSBORNE is the ultimate Westminster operator. On November 25th, setting out the government’s five-year spending review, he praised colleagues, ditched unpopular cuts to tax credits that had formed the centrepiece of his budget only five months ago, cracked jokes—“We’re not going to make that mistake again,” he deadpanned of a botched government attempt to privatise forests in the last parliament—showered Tory-leaning pensioners with cash and favoured MPs with oinking heaps of pork. A grant here, a spending guarantee there and a kind word for the other guy: the chancellor of the exchequer, who talks of professional politics as a “guild”, was plying his trade with panache”.

It seems Osborne can do no wrong as he makes it harder to be poor, increases the taxes on the poor, makes life for the rich easy by not introducing a rise in income tax and pares back the state either giving it to local government (without the resources) or privatising it, with cuts to policing and health care while continuing the march of the State out of the education system and proposing a market system despite all that has previously happened when such systems have been introduced. The writer makes no attempt to excoriate Osborne for even thinking that his plan over tax credits may have dented his ability to govern for the poorest and most vulnerable in society instead of adhering to nonsense about a smaller state and freer people. The Economist has been criticised elsewhere for its positions.

The piece goes on “It is easy to see why Mr Osborne, with his hurricane of micro-announcements, feints and sleights of hand, is compared to Gordon Brown, his predecessor-but-one. Like Mr Brown as chancellor, he craves the premiership and is prone to short-term fixes and populist gambits. Yet when Mr Brown became prime minister in 2007, it transpired he had little long-term vision. The vacuous, headline-chasing mores of that period were captured by “The Thick of It”, a sardonic television comedy featuring a hapless minister for “social affairs and citizenship” whose grand plan was a “Fourth Sector Pathfinder Initiative”. Mr Osborne walks in the footsteps of a Moses who descended from the mountain with an Etch A Sketch”.

Interestingly the piece does mention, “Is he condemned to the same fate? The consensus is: yes. On the left Mr Osborne is seen as an aristocratic, louche, post-moral dandy. On the Tory right he is considered a metropolitan, louche, post-moral luvvie. Both sides start from the assumption that the chancellor has no big plan and few fixed beliefs. This is wrong. Mr Osborne is a liberal idealist. He bombards aides with accounts of the great Victorian reformers. He badgered Bagehot to reread Mill’s “On Liberty”. Consider the few subjects on which he differs from David Cameron, the prime minister from whom he is otherwise inseparable. Unlike his boss, Mr Osborne was an early Tory supporter of gay reproductive rights, cried at Margaret Thatcher’s funeral and has little time for tax breaks for married couples or Sunday trading restrictions”.

Yet Osborne makes the same mistake as many in the United States whose mantra is to end/abolish/shrink the state and let “people” flourish. Yet what will probably, and to an extent is already, happening is that only the richest best connected people will flourish in this new Victorian age that Osborne seems bent on introducing. The poor will become poorer, less heeded and more irrelevant to the political process than ever become as money and politics continue their sickening march together. The state, according to this view has no moral purpose and is seen as an inherent blockage to “progress”. The fact that there are Sunday trading restrictions is good, to abolish them in order to boost economic growth makes little moral sense and diminishes the common good and ignores the social implications.

The piece goes on to praise him “From this outlook stems a vision of the state evident despite Mr Osborne’s tactical tacking. New Labour, the political project that he filleted for lessons for the Tories, governed in the tradition of Jean-Jacques Rousseau. Its underlying view was that a civilised society needed the state’s corrective hand. Because he differs from this, many Labour types consider the chancellor a follower of Thomas Hobbes, with his brutal, dog-eat-dog vision of human nature. The chancellor has, it is true, sometimes nurtured this image, characterising welfare claimants as lazy scroungers, for example. Yet Mr Osborne is broadly loyal to the third pole: John Locke, who believed that people tend to be decent, wise and fair. His is an outlook essentially optimistic about human nature but wary of state bloat”.

What the piece omits is that a smaller state will only hurt the poor and be of immeasurable gain to the rich. Without regulation the market will eat itself and effectively take society with it.

The article continues in its praise, “That comes across in his policies—including those outlined on November 25th. The chancellor transferred to councils responsibilities for homelessness and social care and announced that he would wind up their government grant. But he is also letting those authorities control and retain local business-tax receipts. The essence of his vision is thus to scale down the great Whitehall subsidy machine, pushing responsibilities down to citizens, companies and local authorities. Hence the cuts to tax credits should be partly mitigated by a higher minimum wage. Big cities outside London are rapidly gaining powers over their public services and economic fortunes. Housing benefit is being cut as more support is going to housebuilders. Grants to trainee nurses and students are being replaced with loans, and state services increasingly carry user charges (for visa applications and, in some cases, court time). Big companies will soon foot the bill for the apprenticeships from which they benefit. Mr Osborne, in other words, is reducing government’s compensatory role”.

The report goes on to spin this shrinking state as a positive, “Instead the chancellor proposes an enabling state: one that, though offering a limited safety net, concentrates on creating the conditions in which actors can solve their own problems. Thus in 2013 Mr Osborne pushed successfully to lift a cap on university student numbers, has cut corporation tax (and wants to cut it further) and is now pumping cash into infrastructure and science. He often fails to live up to the credo; he has done too little to curb old-age and middle-class welfare, spur house-building, or plug gaps in skills. Yet this does not detract from the vision that—once the thick layers of hyperactive political pragmatism are stripped back—serves as the lodestar of his chancellorship”.

The piece ends frightenly, “The chancellor stands a good chance of running Britain for a while if, as seems probable, he succeeds Mr Cameron in a few years. If he does, his priority will be to win the next election. But in the process, and especially if he succeeds, the outcome could be a state transformed: committed to forging a benign environment for individuals, firms and municipalities, but less willing to meddle in how they proceed—or to catch them when they fall”.

A strong Saudi economy?


An interesting piece argues that the problems facing Saudi Arabia are not as some have argued, “The collapse in oil prices, which have more than halved from their previous peaks, has not been painless for Saudi Arabia. However, it’s far too soon to start writing the kingdom’s obituary: Its economy is far better insulated now than it was during the slump of the 1980s and 1990s, when oil reached below $10 a barrel in 1998. Although spending increased in the oil boom years of the 2000s, Saudi Arabia saved quite a bit of money during this time. Cash reserves as a ratio of GDP reached close to 100 percent in 2014, whereas in the 1980s and 1990s they barely reached 35 percent. Inequality is also declining: As per the latest household and income expenditure survey, the Gini coefficient, a common measure of inequality, stood at 45.9 in 2013, down from 51.3 in 2007″.

He correctly argues that “Saudi Arabia will not incur a fiscal or currency crisis of any sorts for the next few years. Its balance sheet has recently made tremendous improvements: Public debt fell from a peak of 119 percent in the late 1990s to 1.6 percent in 2014, lowest in the world. This would be the envy of any developed economy. During the years of plenty, Saudi Arabia amassed a significant war chest that will help it survive the current low oil prices. It is sitting on foreign reserves of more than $650 billion and has plenty more firepower sitting in other public sector coffers. The recent chatter that low oil prices are leading to speculation against the Saudi riyal will amount to nothing: Saudi authorities are very cognizant that this is not the right time to be thinking of any currency regime change. Moreover, the Saudi Arabian Monetary Agency (SAMA) is perfectly financially capable of defending the currency. In the past, speculators have taken punts on the currency in the 1990s and 2000s with large losses”.

Interestingly he argues “The International Monetary Fund is forecasting that Saudi Arabia will run a nearly 20 percent budget deficit for 2015. History shows this to be perfectly manageable: From 1983 to 1991, the kingdom’s budget deficit averaged 52 percent, with 1991 being the highest on record at 77 percent. Saudi Arabia has long departed from these years of appalling fiscal numbers, and the economy is far away from being in the recessionary spiral of the 1980s and 1990s. Saudi Arabia’s financial sector is also well-positioned to weather the growth slowdown. Non-performing loans are low, coming in at just 1.1 percent of total loans at the end of 2014. Bank reserves are very high: For every 1 million riyals in non-performing loans, there are 1.8 million riyals in bank reserves. As the IMF noted in its most recent report on Saudi Arabia, banks would only come under significant liquidity pressure in the event of substantial deposit withdrawals — something that has not happened in previous periods of oil price declines”.

He makes the point that “The size and duration of the drop in oil prices will be essential in determining its economic impact. But whether this is a long-term shift or something more temporary, government spending will not rise endlessly. Over the medium term, the growth of government expenditure is expected to slow as one-off spending measures instituted this year end. A number of large ongoing infrastructure projects will also be completed soon, while others — such as the Riyadh and Jeddah metro — will be prolonged; still others, such as the building of new sports stadiums, will be postponed. The government is also keenly aware that ports and airports, as well as other infrastructure facilities, will have to be privatised, and is moving in that direction. Privatisation of state-owned enterprises has already begun, with the sale of part of the government’s stake in the National Commercial Bank. The government is focusing on developing industrial clusters around oil and mining, and joint ventures in refining, mining, petrochemicals, automobiles, pharmaceuticals, and banking. As part of the government’s continuous drive toward economic liberalisation, the Saudi stock market — one of the largest in emerging markets and one of the most liquid in the region — opened its doors earlier this year to foreigners. The presence of foreign investors in the past has been very limited, as they were previously allowed to invest only through equity swap arrangements and participate in mutual funds or exchange-traded funds”.

He does concede that “Saudi Arabia still remains hugely dependent on its energy exports — some 87 percent of its revenue came from oil in 2014. And it’s true that diversification has proved easier said than done. Education and human capital enhancement is a prerequisite: Employment grew by 3.2 percent in 2014, with non-Saudi employment growing by 2.2 percent and Saudi by 4.4 percent. This is a positive step for an economy that was hiring only expats in the private sector for decades. Labour market reforms, together with investments in affordable housing to help younger people and the less well-off population enter the housing market, are key elements of the government’s policy agenda. The government has also introduced a number of initiatives targeting mainly youth and female workers, including opening a number of sectors to female employment”.

He concludes “It’s a truism that the era of abundance, high fiscal surpluses, and rising over-spending has come to an end. But Saudi Arabia is also not about to come apart at the seams: Its economy is a long way from bankruptcy, and the kingdom is far better equipped to tackle the challenges of job creation, education, and diversification than it was in years past. Saudi Arabia faces many challenges in the years ahead, but reports of its demise have been greatly exaggerated”.

Economist tries to take down Bernie


A piece in the Economist tries to negate the popularity of Bernie Sanders, “BERNIE SANDERS is due on stage. But a stream of Bostonians—mostly hip, twenty-something, often lightly bearded—is still flowing into the waterfront convention centre, pressing politely forwards and flustering the similarly youthful volunteers who are organising the Vermont senator’s Democratic primary bid. When the doors are eventually closed, over 20,000 people are crammed inside, warming up to John Lennon and Hunter Hayes (“Baby, kids on the run/Gonna party like we just turned 21”) as they await the 74-year-old socialist and grandfather of seven. Thousands more are shut out, watching on giant screens: it is said to be the biggest primary rally in Massachusetts ever”.

The report goes on to write “When Mr Sanders stalks into view, all white hair, bony limbs and baggy suit, a glowering scarecrow-prophet, the roar is tremendous, the atmosphere hilarious. It is tempting to think the huge support he is drawing could be America’s biggest-ever student prank”.

The Economist, who for decades has defended a failed mode of capitalism has sought, through cheap tricks to compare Sanders and his ideas to a clown, as if he were Donald Trump. Sanders who has been remarkably consistent in his ideas about poverty, inequality and its attempt to deride him in order to defend a morally bankrupt system only demeans the publications credibility.

The author adds “It is unexpected, admits Tad Devine, a veteran Democrat strategist who is working for him. When Mr Sanders declared his intention to stand in April, he says, “many people were incredulous. There was a feeling that there was no way this guy could knock such a formidable front-runner off the top spot.” Yet Hillary Clinton has been damaged by her peculiar use of a private e-mail server while secretary of state. And Mr Sanders, boosted by large, well-publicised rallies in student-heavy cities such as Portland, where he drew 28,000, and Seattle, where he drew 15,000, has soared. Polls suggest he could win the first two Democratic ballots; he is running Mrs Clinton close in Iowa, which votes on February 1st, and has a handsome lead in New Hampshire. An average of national polls puts him on 25% and Mrs Clinton 42%. Joe Biden, the bereaved vice-president, who is still making up his mind whether to stand, is on 19%—a wedge of which, Mr Sanders’s aides believe, is an anti-Hillary vote that could come their way”.

The author tries to dismiss Sanders further by drawing a false anology from a decade ago when things were very different, “The Democrats have been here before. In 2004 another left-winger from Vermont, Howard Dean, dazzled in the early campaigning, then died in the polls. Mr Sanders looks a bit different, however—not least because he is much more left-wing. The only socialist in Congress, he believes capitalism is screwing over 99% of Americans and, moreover, that the resultant “grotesque levels of income and wealth inequality” are no accident, but a scheme of the boss class to beggar the rest. “Why is it that with all the improvements to productivity from technology, people are being forced to work for longer hours, with lower wages?” he snarls on the stump”.

The piece then derides the ideas that the magazine and its ideology actually benefit from, “To peg back the plutocrats, he would abolish the corporate funding of elections that he himself disdains. “I don’t represent the interests of the billionaire class and the corrupt men on Wall Street and I don’t want their money,” he says. He would nationalise health care, break up banks and swell the size of the state. He would provide free college education for all and convert outstanding student debt into soft loans, at an annual cost of $70 billion, paid for with a special tax on Wall Street. The crowd in Boston loved that”.

Pointedly the piece adds “Sanders’s recent progress suggests he may be drawing broader support than his predecessor. In some polls, he is outgunning Mrs Clinton against the leading Republican contenders, which suggests many Democrats are at least thinking through the consequences of him winning. A survey last month put him ahead of Mr Trump by five points and level with Jeb Bush. Those kinds of numbers attract money. Mr Sanders raised $25.5m in the three months to October, mostly in small contributions; the average was around $25. By comparison, Mrs Clinton raised $28m, much less than she had managed in the previous quarter. This puts Mr Sanders within reach of the $50m Mr Devine says he needs to be competitive through to Iowa and New Hampshire, where he already has nearly 100 paid staff. The southern states, where he is only starting to build his organisation, are a tougher prospect. Black Democrats in the South like Mrs Clinton and hardly know Mr Sanders. Yet his advisers trust that early success and the prevailing anti-establishment mood will awaken a storm of interest in him, obliterating these weaknesses”.

The author, sounding concerned goes on to write, “If that is not entirely laughable, it is because Mr Sanders’s rise is being propelled by some novel factors. A combination of economic uncertainty and political polarisation has discredited the mainstream: the way Republicans are being bewitched by Donald Trump, another man selling simplistic solutions to complex problems, is further evidence of this”.

To compare Senator Sanders to Donald Trump is laughable. One, an elected official with legitimacy and decades of policy experience in Congress, the other an arrogant and moronic gas bag.  To say Sanders’ ideas are simplistic is both stupid and correct. These ideas have been tested for decades in nations that continually top rankings for quality of life, low levels of poverty and crime and a civilised society. Indeed the Economist itself has praised the very Nordic model that the author in this article is deriding.

The writer then tries to end the hopes of those who follow Sanders by saying that even if he is popular he won’t get elected because “The trouble with the millennials who dominate Mr Sanders’s rallies is that less than half of them actually vote. And there is still no reason to believe the wider support he is drawing will prove stickier than it was for Mr Dean. “The problems with candidates like that—and like me,” Mr Dean, who is backing Mrs Clinton, has said, “is that as you get closer to election time…you’re going to tend to want to see somebody who you think looks presidential.” That is, the joking stops there. Those who argue that this time will be different perhaps misunderstand the role anti-establishment feeling is playing on the left. The anger Mr Trump is drawing on is primarily directed at the Republican establishment; by contrast, Democrats like their party leaders, and hate Republicans. That makes them likelier to revert to the primary candidate who looks most likely to win the presidential election—which, as even some of the enthusiasts in Boston ruefully conceded, will not be Mr Sanders”.

It ends “His advisers understand this, which is why they are increasingly looking to turning blue-collar Republicans and the formerly apathetic—an effort in which Mr Sanders’s strong support from trade unionists is considered crucial. Over 70,000 union members have signed up to a support group, Labour for Bernie. In Larry Cohen, former leader of America’s largest communications union, Mr Sanders has also recruited a powerful ally. “The support we’re finding for him in working towns is overwhelming” said Mr Cohen, recently returned from an eight-city campaign tour. Yet the unions have never been weaker; only about one in ten American workers belongs to one. That is partly a consequence of the deindustrialisation Mr Cohen laments, but also of a dwindling of the class-based loyalties and faith in collective action he shares with Mr Sanders. They also share a strong protectionist urge; yet, while most Americans recognise that globalisation has made the jobs market harder, over two-thirds want more of it. This is why, as a political movement, able to mobilise large sums of money and get its candidates elected, the hard left in American politics that Mr Sanders represents is almost dead. He is not about to revive it”.


Francis, pressing for economic justice


Daniel Altman writes that Pope Francis is a great economist, “a quick look at his speech to Congress and other remarks this week reveals that his true strength may lie in the dismal science — and there’s much American politicians could learn from his understanding of the economy. One of the biggest themes of the pope’s visit has been helping people in need. “A political society endures when it seeks, as a vocation, to satisfy common needs by stimulating the growth of all its members, especially those in situations of greater vulnerability or risk,” he told Congress. And in economic terms, these comments could not be more pertinent to the United States. The workforce is essentially stagnant in size, with virtually zero growth in the number of people in their prime working years and a low participation rate to boot. As a result, increasing the economy’s output means raising productivity”.

Altman goes on to make the argument that “It’s easiest to raise the productivity of people at the low end of the scale; a bit more education or training makes a much bigger difference to a burger-flipper than it does to a medical device engineer who already has a doctorate. And when productivity rises a lot, so do income and tax revenue, while demand for social services falls. This boost to the government’s budget is exactly what helps society to satisfy those common needs. So those people in vulnerable and risky situations — typically poor, handicapped, or lacking social support networks — are the right ones to think about as the source for future growth. The pope’s speech also drew a parallel between the global refugee crisis and mass immigration to the United States. “On this continent, too, thousands of persons are led to travel north in search of a better life for themselves and for their loved ones, in search of greater opportunities,” he said. “Is this not what we want for our own children?” As a guide for dealing with incoming migrants, he suggested the Golden Rule: “Do unto others as you would have them do unto you.” If future growth is the goal, economists would probably offer an identical prescription”.

Altman notes “The pope also condemned homelessness in the United States during remarks at St. Patrick’s Catholic Church in Washington. “We can find no social or moral justification, no justification, no justification whatsoever, for lack of housing,” he said. This rings true for economists as well. Does it make sense never to provide housing to someone who can’t pay for it? It’s illegal for most hospitals to deny medical care to people with emergency conditions, regardless of their ability to pay. Housing somehow doesn’t fall into the same category, though it can be just as important to safety and well-being — and possibly to being productive in the economy. By comparison, any disincentive to work that might arise from access to free housing would likely be of minor economic importance. Despite his discussion of poverty, hunger, homelessness, and other byproducts of the American economic system, the pope never mentioned the word inequality. Yet he did warn against the “polarization” that fed a “simplistic reductionism which sees only good or evil; or, if you will, the righteous and sinners.” This us-versus-them dynamic has a long and unfortunate history in American economic policy, from the demonised welfare recipients of the Ronald Reagan era to Mitt Romney’s deadbeat 47 percent. It’s the sort of dynamic that leads Congress to cut food stamps for 850,000 households at a stroke — they didn’t earn that food, even if their state governments think they need it and should get it. When members of Congress themselves are mostly millionaires, it’s not hard to figure out why the concerns of poor Americans are so far from their minds. And so polarisation feeds greater inequality, which pulls us and them still further apart”.

He ends the piece “It’s a recipe for economic ruin, especially in a nation that needs to harness all of its talents to grow. The creation of an economic underclass does nothing for the social stability that an economy needs to function, and wasting the potential of smart kids who happen to be born poor just means that productivity and economic growth will continue to lag. The pope gets this, and he delivered his sermon in language that was allegorical but still rather easier to grasp than the testimony of most Federal Reserve officials. Hopefully, his audience was paying attention”.


Francis meets America


As Pope Francis begins his first full day in the United States a report from the New York Times notes why how the pope has avoided the United States until now, “During his first private meeting with Pope Francis in the Vatican two years ago, Cardinal Timothy M. Dolan said, the pope took out an atlas with a map of the United States and asked Cardinal Dolan, the archbishop of New York, to point out the various regions and cities and talk about how they differed. Francis seemed to recognise that he had some homework to do: When he travels this month to Washington, New York and Philadelphia, the visit will be his first to the United States. Both of his most recent predecessors, Benedict XVI and John Paul II, traveled to the United States before rising to the papacy. Other Catholic prelates from around the world have come for fund-raisers, speaking engagements or global Catholic events, like World Youth Day in Denver in 1993″.

The report goes on to mention “Francis, a former archbishop of Buenos Aires, had steered clear of the United States, which has the world’s fourth-largest Roman Catholic population. Something of a homebody, preferring to hang out with the poor than the rich and powerful, he has waited until 78 to visit the economic giant that likes to think of itself as the center of everything. “He’s a little nervous about coming,” Cardinal Dolan said at an interfaith event in New York in May. “Not that he lacks any confidence in the reception of friendship that he knows he’ll get, but he readily admits he has never been to the United States.” Those who have known Francis, both before and after he became pope, say the reasons for his absence have everything to do with his distinctive identity. He is a Latin American critical of the United States’ economic and political hegemony, a Jesuit of Italian ancestry who looks more to Europe than to North America, a Spanish speaker who is not all that comfortable speaking English, and a pastor who disdains “airport bishops” — his term for prelates who spend more time jetting around the globe than serving in their dioceses”.

The article adds that “He is not opposed to all America represents. But he is troubled by privileged people and nations that consume more than their share and turn their backs on the vulnerable. The message he will probably deliver when he comes, they say, is that the United States has been blessed with great gifts, but that from those to whom much is given, much is expected. “I think what he criticizes in the U.S. is the absolute freedom and autonomy of the market,” said the Rev. Juan Carlos Scannone, a professor emeritus of philosophy at Colegio Máximo, a prominent Jesuit college near Buenos Aires. He taught the young Jorge Mario Bergoglio, who would become Francis, as a seminarian and became a friend. “We should admire the U.S.’s democracy and the well-being of its people, but what Bergoglio would criticise is the consumerism: that everything is geared toward consumerism.” Francis has long been troubled by what some Argentines of his generation call “savage capitalism.” They see the United States as the home of mining companies and agribusinesses that chew up natural resources, as the military power that propped up dictators during the Cold War and as the neighbour that tries to close its border to migrants fleeing hunger and violence”.

Not surprisingly the piece adds that “The Rev. Richard Ryscavage, a Jesuit who is the director of the Center for Faith and Public Life at Fairfield University and has met Francis twice, said Francis’ views should be seen “in the context of many Latin Americans who see the United States as really a problem, not actually a positive force in the world.” “I’ve seen this among Latin American Jesuits who have similar approaches,” Father Ryscavage said. “And it’s often rather difficult for the North American Jesuits to completely accept their perspective on things, because we come from such a different angle.” The United States will be the 15th country Francis has visited in his more than two years as pope. His travel priorities have been a demonstration of his motto: “Go to the peripheries” to encounter those who are marginalised. His first official trip outside Rome was to Lampedusa, a Sicilian island where he greeted migrants who had survived their exodus from Africa”.

The report rightly mentions that “He has also frequently denounced a global economic system that values “profit at any price,” and a colonialist structure that “reduces poor countries to mere providers of raw material and cheap labour” — a critique widely interpreted to include the United States. And yet, those who have studied him and know him say Francis has also expressed an appreciation for the United States — for its lively democracy, its religious diversity and its identity as a nation formed by absorbing successive waves of immigrants. Francis himself is a son of immigrants: His father moved from Italy to Buenos Aires in 1929. Austen Ivereigh, the author of a biography of Francis, said last weekend at a conference of the Religion Newswriters Association, “He could easily have ended up in Philadelphia or Chicago, as well as Buenos Aires, and he can easily relate” to the American experience”.

Pointedly the piece goes on to note that “And many Americans relate to Francis. In a poll conducted last month by the Public Religion Research Institute, two-thirds had a favourable view of him. Polls also reveal, however, that he has work to do to persuade Catholics to adopt his views on combating climate change, ending abortion and welcoming immigrants. At the Vatican, he has welcomed many prominent American visitors, including President Obama and Vice President Joseph R. Biden Jr. But for a pope who speaks through his gestures, his itinerary in the United States conveys his message. After Francis addresses a joint meeting of Congress in Washington on Sept. 24, he will be driven directly to a lunch with homeless, mentally ill and immigrant clients of Catholic Charities, which will be held under tents set up on a street. Instead of lunching with legislators in the halls of power, he will break bread with the poor”.

“Tsipras caved to many European demands”


David Francis writes that “The Greek government is now in default to the International Monetary Fund, and the stark reality of the financial upheaval Athens is facing appears to have Prime Minister Alexis Tsipras in a panic. Tsipras executed an about-face Wednesday, agreeing to spending cuts he previously rejected. But Europe isn’t having it. Pensioners stormed Greek banks, which are closed to the rest of the public, to collect a maximum of 120 euros, or $134. More and more ATMs in Greece are empty. And as concerns reached a fever pitch, Tsipras tried to reassure Greeks that their bank deposits were safe. “I provide my personal guarantee that I will do whatever is possible to make these difficulties temporary,” the prime minister said in a televised address Wednesday evening”.

He goes on to argue “even a casual observer of the five-year crisis knows this isn’t the case. As part of a $270 billion bailout package, the European Central Bank had given Greek financial institutions emergency lines of credit when they were short on cash. With the expiration of the bailout Wednesday morning, that lifeline no longer exists. It’s why Greek banks are closed until Monday, at least, and withdrawals from accounts are limited to 60 euros, or about $67, per day. Perhaps sensing the growing unease within his population, Tsipras caved to many European demands late Tuesday. In a letter to his creditors — the European Central Bank, the IMF, and the European Commission — he acquiesced to many previously rejected austerity demands, including pension reforms. In exchange, he wants a guarantee that Europe will help Athens pay its bills for the next two years. Officials from Syriza, Tsipras’s party, hinted an agreement would cancel Sunday’s referendum for the Greek people to decide”

Interestingly the writer reports that “Olaf Boehnke, head of the Berlin office of the European Council on Foreign Relations, told Foreign Policy on Wednesday these comments reflect the sentiment within the German government. Simply put, Berlin wants Greece out of the Eurozone. “People are really fed up with them. They’re trying to provoke the establishment as much as possible,” Boehnke said”.

The problem with this view is that, as Merkel has said the euro is the EU. Thus, a member that leaves the euro and thus the EU would end the fiction that the EU will last through this crisis. If Greece does leave the euro and thus the EU then the “markets” will turn to Spain or Italy or Ireland. The integrity of the whole project will be seen for what it is, a sham. Thus while the Germans may be tired of Greece they also know that if Greece leaves the EU someone else will be next.

The report ends “It now appears Merkel and Schaeuble might not get the “no” vote outcome they want from Sunday’s upcoming Greek referendum. A poll by ProRata found that support for rejecting the bailout is shrinking. Before Greece closed its banks, 57 percent of Greeks wanted to reject European austerity. Now, that percentage has dropped to 46″.

“United Kingdom’s outsized and overleveraged financial sector made the nation suffer disproportionately”


A report in Foreign Affairs discusses the recent British general election. It argues that both main parties mislead the public about their economic policies.

It opens “This May’s general election wins for British Prime Minister David Cameron and his Conservative Party confounded opinion pollsters and surely surprised Cameron himself. Despite presiding over five years of budgetary austerity and welfare cuts, a drop in wages by over eight percent from their 2007 peakzero growth in national productivity (which reflects the growth of part-time low-skill employment since the crisis), and missed budgetary targets, the electorate punished not Conservatives but rather their junior coalition partner, the Liberal Democrats, who lost all but eight of their 57 seats in the House of Commons. The Labour Party’s failure to improve significantly on its weak 2010 performance, paired with the quirks of the United Kingdom’s first-past-the-post electoral system, did the rest of the work needed to secure a Conservative victory”.

The author correctly notes that “Commentators on the right have been quick to interpret this result as a triumph for austerity politics and fiscal rigour over supposedly anticapitalist (or at least pro-Keynesian) policies advocated by former Labour Party leader Ed Miliband, who resigned following the results. The Conservatives’ political message throughout the election revolved around the “tough decisions” it had made to cut government programs in order to reduce the budget deficit left behind by the previous Labour administration. Meanwhile, on the center-left, Labour’s failure is seen as proof that it should never have abandoned Tony Blair’s “third way” strategy of socially progressive neoliberalism, which had successfully attracted aspirational middle-class voters”.

He goes on to argue that “A closer look at this election’s results suggests that both of these interpretations are off the mark. Although Labour gained only 700,000 votes since 2010, the true cause of the Conservatives’ success is the spectacular collapse of the Liberal Democrats. By associating with the Conservatives’ austerity policies, the Liberal Democrats forfeited some 4.5 million votes—two-thirds of its vote share. The Conservatives’ real vote share—although the party claimed that it provided Cameron with a mandate to govern—only increased by half a percent”.

As ever in UK politics the major culprit for these skewed figures is the wacky electoral system of fptp, a system that should only ever by used in a two party system. Now however the two party system is dead but the two main parties are trying desperately to cling onto it instead of having some form of PR and a more representative and democratic system of electing MPs.

He mentions that “Cameron’s party may have another five years in power, but the real winners of this year’s election were fringe parties such as the UK Independence Party, which advocates a freeze on immigration and an exit from the European Union, and the Scottish National Party, which wants Scottish independence and an end to austerity. Both of these parties took millions of votes that Labour was hoping to claim, clearing a path for Cameron’s victory despite most of the British public actively rejecting his party’s policies”.

Pointedly he argues that for all the talks about cutting the deficit the Tories did not really do want they proudly said they would, “Despite Conservative spending cuts, the United Kingdom’s deficit was reduced by only half of what the party anticipated when it took office in 2010. The nation’s economy did not start to grow until late 2013, after a panicked treasury minister, George Osborne, relaxed austerity measures. The United Kingdom’s economic problems, the Conservatives maintained, were the result of Labour’s supposed profligacy in running budget deficits during the boom years of the early 2000s, leaving the economy exposed to the financial crisis. This, they argued, made draconian spending cuts inevitable. However, as the crisis hit in 2007, the United Kingdom had the lowest debt to GDP ratio in the G7, lower than when Labour had taken power a decade earlier. And if Labour was supposedly running excessive deficits, the markets remained strangely unconcerned, with market rates on British bonds running close to pre-collapse lows. This left many wondering why the British budget exploded in 2008 and what it might say about coalition rule in the United Kingdom”.

The writer makes the excellent point that “Cameron did not discuss why the United Kingdom’s outsized and overleveraged financial sector made the nation suffer disproportionately from the worst financial crisis since the 1930s. Financial deregulation and the unsustainable growth in private, not public, credit fatally exposed the United Kingdom’s banks to the United States’ subprime credit crisis. The collapse in credit growth in 2007–09 hurt the United Kingdom’s budget not because the Labour government was too deep in debt but because the national economy was more dependent on financial activity than elsewhere. By 2007, the British Exchequer was taking nearly 25 percent of total tax revenue out of the financial sector just prior to the crisis, which was a mere ten percent of the economy. With the financial crisis, these revenues plummeted, leaving the government short of cash and needing to borrow heavily”.

He correctly writes that the poor suffered most under the government, “The Conservative–Liberal Democratic coalition diagnosed the nation’s woes as symptoms of Labour spending excessively on welfare and wealth redistribution. The government then set about reducing the deficit by slashing social programs and public employment. Austerity policies very quickly pushed the economy back to a near recession, averted only by slowing the pace of deficit reduction and encouraging private sector credit growth through government guarantees on home loans. The coalition’s spending cuts were never reinstated once the economy began to recover, and its austerity policies were politically selective. Health care and pensions were spared the ax—programs that disproportionately benefit older citizens who tend to vote Conservative. The government focused its cuts instead on the younger end of the working population. Spending on these groups was already lower than on the elderly, which required cuts to be deeper in order to provide substantial savings”.

He concludes “The economic crisis that hastened New Labour’s demise had nothing to do with overspending and everything to do with its uncritical acceptance of twenty-first-century financial innovation and its excesses. Before analysts conclude that Labour has no choice but to shift to the right, we need to remember the lessons of the global financial crisis: a balanced budget will not save a government from the failures of a banking sector that is too big to bail out, and mere economic facts seldom defeat ideologies”.

Laudato Si, the environment, the human person and the limits of technology


Michael Sean Winters writes about the encyclical released today by Pope Francis.

He begins “Laudato Si’ indeed! On one of the most important issues of the day, our Holy Father has blessed the Church with a document that is accessible to virtually anyone, rich in the collected wisdom of the Catholic faith, attuned to the signs of the times, forceful in its call to urgent action on behalf of our sister, Mother Earth. Here are five things that jump out at me based on a first reading of the text”.

Winters correctly argues that “the theology is very traditional. The quotes from Saint Pope John Paul II remind us that there was more to John Paul than what his neo-conservative “interpreters” in the U.S. chose to highlight. Pope Francis quotes from his encyclical Centesimus Annus, writing, “Every effort to protect and improve our world entails profound changes in ‘lifestyles, models of production and consumption, and the established structures of power which today govern societies.’” Likewise he quotes Pope Benedict XVI, who so far from the caricature of a reactionary, called for “eliminating the structural causes of the dysfunctions of the world economy and correcting models of growth which have proved incapable of ensuring respect for the environment.” Interestingly, having cited his predecessors, Pope Francis gives even more attention to the writings of the Ecumenical Patriarch Bartholomew, who wrote, “For human beings… to destroy the biological diversity of God’s creation; for human beings to degrade the integrity of the earth by causing changes in its climate, by stripping the earth of its natural forests or destroying its wetlands; for human beings to contaminate the earth’s waters, its land, its air, and its life – these are sins.” And, he cites the Patriarch on the call “to accept the world as a sacrament of communion, as a way of sharing with God and our neighbours on a global scale. It is our humble conviction that the divine and the human meet in the slightest detail in the seamless garment of God’s creation, in the last speck of dust of our planet.” I do not recall any previous papal document devoting such attention to a Christian leader who is not a Roman Catholic in an official document such as this”.

Winters goes on to write “The spirituality of St. Francis has touched Pope Francis deeply. Francis’ reflections on his namesake, St. Francis of Assisi, almost bring one to tears:

He shows us just how inseparable is the bond between concern for nature, justice for the poor, commitment to society, and interior peace.  Francis helps us to see that an integral ecology calls for openness to categories which transcend the language of mathematics and biology, and take us to the heart of what it is to be human. Just as happens when we fall in love with someone, whenever he would gaze at the sun, the moon or the smallest of animals, he burst into song, drawing all other creatures into his praise. He communed with all creation, even preaching to the flowers, inviting them “to praise the Lord, just as if they were endowed with reason”. His response to the world around him was so much more than intellectual appreciation or economic calculus, for to him each and every creature was a sister united to him by bonds of affection. That is why he felt called to care for all that exists. His disciple Saint Bonaventure tells us that, “from a reflection on the primary source of all things, filled with even more abundant piety, he would call creatures, no matter how small, by the name of ‘brother’ or ‘sister.’”

Winters goes on to make the point that “What follows in this encyclical, all of it, the commentary on science, the analysis of socio-economic structures, the call for political action, all flow from these spiritual insights into the relationship between the human person as creature, Creation and the Creator”.

Winters argues that Pope Francis does not dispute the science, “The heart of the Holy Father’s handling of the issue that has caused such controversy, at least in the US, the issue of how he would deal with science, is found in Paragraph 23 and it is remarkably straightforward:

A very solid scientific consensus indicates that we are presently witnessing a disturbing warming of the climatic system. In recent decades this warming has been accompanied by a constant rise in the sea level and, it would appear, by an increase of extreme weather events, even if a scientifically determinable cause cannot be assigned to each particular phenomenon. Humanity is called to recognize the need for changes of lifestyle, production and consumption, in order to combat this warming or at least the human causes which produce or aggravate it….The problem is aggravated by a model of development based on the intensive use of fossil fuels, which is at the heart of the worldwide energy system. Another determining factor has been an increase in changed uses of the soil, principally deforestation for agricultural purposes.

We cannot overstate the degree to which these sentences are unremarkable outside the US. It is only here, where think tanks and pseudo-think tanks, and some political candidates, are so dependent on extraction industries, they are loathe to accept what is, in fact, virtually common knowledge”.

Winters goes on to make the link Laudato Si’  and Evangelii Gaudium, “The section on Global Inequality develops some of the themes Pope Francis articulated in Evangelii gaudium, and applies those themes specifically to the issue of environmental degradation. Our laissez-faire friends will be gnashing their teeth, of course, over these words of his:

In the meantime, economic powers continue to justify the current global system, where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment. Here we see how environmental deterioration and human and ethical degradation are closely linked. Many people will deny doing anything wrong because distractions constantly dull our consciousness of just how limited and finite our world really is. As a result, “whatever is fragile, like the environment, is defenceless before the interests of a deified market, which become the only rule”.

He goes on to an extensive analysis of the modern, technological mindset and its limits. On Monday, I suggested that I wished Benedict XVI had written an encyclical on this issue because we would have certainly gotten some of von Balthasar’s trenchant critique of the Cartesian cogito and its progeny. Pope Francis delivers his critique via the theology of Guardini, who, of course, had a profound effect on von Balthasar and Benedict, and was the intended subject of Pope Francis’s never completed doctoral dissertation. I will leave it to the theological pro’s to explain how Guardini differs from Balthasar on this point, but the essential critique is the same: The modern, technological mindset tends to see human persons as commodities, and replaceable commodities at that, it presents a truncated vision that pushes out the transcendent and, just so, makes authentic relationships impossible, and, in the context of the environment, it prevents us from seeing Creation as a gift. Creation is, like everything else, a tool. The next time a free marketer says that capitalism is merely a tool, to be used well or badly”.

Crucially Winters makes the excellent point that “Francis’ ringing call for attention to the common good is an ethical call. It questions not just the current pro-market ideology of both parties in the US, but some of the basic assumptions of Madison and Hamilton in the Federalist Papers, where the competition among self-interested individuals and groups is seen as the guarantor of liberty. Society is about more than liberty, Francis is telling us, better to say, liberty is about more than a lack of government interference. The Holy Father calls us to the freedom of the children of God, not to the negative freedoms ordained by our Founding Fathers. Francis follows his critique of the modern technological mindset with a beautiful meditation on human work. He is again building on the writings of his predecessors, but his style is so accessible and so obviously rooted in experience. Reading that section, you know that this pope really has spent time with people who work hard to earn their daily bread”.

Winters ends the piece, “The calls of previous popes for a conversion of lifestyles went unheeded if not unheard. Will it be different this time? I do not know. I fear that things must get worse in our culture before we learn again to acknowledge our God with humility, just as the human body, towards the end of its time on earth, breaks down, reminding us of our dependence upon our Creator. I may be doubtful, but the pope is hopeful. “Yet all is not lost. Human beings, while capable of the worst, are also capable of rising above themselves, choosing again what is good, and making a new start, despite their mental and social conditioning,” he writes”.

He concludes, “When the issue is the environment, it is not only our lives or our souls that are at stake. It is the planet. It is future generations. The evidence of the danger is all around and the cure will require more than a successful round of agreements at Paris this autumn, although we need them too. Pope Francis does not cite Abraham Kuyper in his text, but last night, reading James Bratt’s biography, I came across Kuyper’s most famous line: “There is not a square inch in the whole domain of our human existence over which Christ, who is Sovereign over all, does not cry, Mine!” That sense of God’s presence permeates the text of Laudato Si’, and the Holy Father extends the cry to the whole domain of Creation. He wants us to look at Creation and see the handiwork of the Creator, at all times and in all our decisions. He is brutally frank about the entrenched ways of thought and powerful interests that hope we will do nothing of the sort. But, I am betting Pope Francis can and will change the conversation. At a time when the leadership of the world seems so unequal to the challenges, there is a giant in our midst, who took the name Francis. Some will be upset by this encyclical. No one should be surprised”.


Obama’s trade legacy


A piece writes about the positives of Obama’s foreign policy concerning trade, “While U.S. President Barack Obama’s national security team remains adrift, strategy-less, incremental, and reactive in crisis zones worldwide, the rest of his international team seems poised to achieve a series of successes that could make 2015 the best year yet for Obama’s foreign policy. The key question will be whether progress with acronyms and abbreviations like TPA, TPP, and Exim can drown out the setbacks and frustrations associated with others, like IS, ISIS, and ISIL, the plethora of shorthand monikers by which we refer to the brutal thugs rampaging through Syria and Iraq. Approval of the Trade Promotion Authority (TPA) in the House of Representatives on Friday will clear the way for the final agreements to be worked out on the Trans-Pacific Partnership (TPP) trade agreement. That deal will remove trade barriers for countries — on both sides of the world’s largest ocean — whose combined economies comprise 40 percent of the world’s total output. It will be the most significant international trade deal struck in over two decades, and it will be one for which President Obama will deserve great credit”.

The piece adds “According to one senior administration economic official, the president and his team “put their shoulders into this deal with a kind of effort I haven’t seen since the fight to pass healthcare reform.” It has not been easy. As has been the case since the 1990s, trade deals are among the few things that bring together the far left and the far right — both sides hate trade deals though for very different reasons”.

He notes “The result has been old-fashioned horse-trading and a refreshingly intensive effort by the White House to use the president’s power, prestige, and persuasive capabilities to eke out the votes they needed to win the day. Friday’s vote will be close. But with “fast-track” TPA assuring that there will be only an up or down vote on the ultimate TPP deal that is struck, the way will be clear for U.S. negotiators to hammer out the final details of the agreement with the Japanese and others who have open issues”.

The writer goes on to meniotn “The president has made passage of the deal, which he argues will both promote export-driven job creation and send a message to China — not a party to TPP — that it will have to rise up and meet international trade standards or risk getting left behind economically. The positive impact on both fronts is probably somewhat overstated by the White House, but that’s always the case in such campaigns for a new deal. Nevertheless, the deal strengthens economic ties with some of the world’s most dynamic economies, removes key barriers to exports, and represents the most important progress on global trade since the Uruguay Round and NAFTA in the early 1990s”.

He goes on to argue that “While slam-dunks have gotten a bad name in Washington ever since George Tenet abused the term in the days before the Iraq War, the reauthorization of the U.S. Export-Import Bank (or Exim) should have been one of them. The bank is led by another of the Obama team’s standouts, Fred Hochberg. Hochberg has overseen a vast expansion of its lending, major pushes to extend its reach and support to small- and medium-sized enterprises, measures to ensure more lending on green projects, and active support for creating U.S. jobs through leveling the playing field against the super-aggressive tactics of other governments in the export financing space. Deals and lending have achieved all-time highs under his tenure and unlike most parts of the government, this one is actually profitable, returning over $1 billion to U.S. government coffers. That’s right, to shut down the bank, Congress would actually have to come up with new revenue to make up for that which the bank regularly produces. Think about that. Despite the fact that Exim is a profitable agency that creates much-needed jobs, supports businesses of every size from coast to coast, and also ensures fairer global competition, some in Congress have targeted the agency and tried to shut it down. Why? Because to some, it represents “corporate welfare.” (Meaning that it is seen as a subsidy to big companies that don’t need the help.) But not only does it finance many deals that couldn’t get commercial financing and many for smaller businesses, it also ensures that U.S. companies don’t lose out when other governments subsidize financing to their own companies”.

He ends “At a time when turning on the news in the morning typically makes one want to roll over and go back to sleep, it is worth noting and celebrating when progress is achieved. Of course, in some areas, such as the impending nuclear deal with Iran, we need to be careful about celebrating apparent successes when the real test of accomplishments occurs over extended periods of time. But even with such caveats included, if the Obama team can achieve TPA, TPP, reauthorizing Exim, continued U.S. economic leadership through the example of our sustained growth, a climate agreement in Paris, and a nuclear agreement with Iran, there will be no denying that the second half of 2015 will be the high-water mark of a foreign policy that has often spluttered and stumbled”.


When Raul met Francis


A report from Foreign Policy notes the recent meeting of Raul Castro and Pope Francis.

It begins “In 1962, in the depth of the Cold War, the Vatican excommunicated communist-revolutionary-turned-Cuban-president Fidel Castro after he banned religious celebrations and the building of new churches in Cuba, which would later declare itself an officially atheist state. But half a century later — two decades after the Cold War’s end — Fidel’s brother Raúl, Cuba’s current president, says he’s so impressed by Pope Francis that he’s considering going back to church. After a very friendly visit with Francis at the Vatican, Castro told reporters on Sunday, “I read all the speeches of the pope, his commentaries, and if the pope continues this way, I will go back to praying and go back to the church, and I’m not joking.” Castro visited Francis on his way back from Moscow, where he was reportedly the only Western Hemisphere leader to attend celebrations marking the anniversary of the Soviet Union’s victory over Nazism”.

The report adds “Warming relations between Havana and the Vatican demonstrate a broader trend of reconciliation between the once-hostile ideologies, which has accelerated under social welfare-minded Francis. The basic principles behind Communism and Catholicism have been fundamentally at odds ever since Karl Marx famously wrote that religion is “the opiate of the masses.” Antipathy arguably reached its height with the Vatican’s 1949 “Decree against Communism,” which excommunicated all Catholics involved with communist groups. It continued with Pope John XXIII’s endorsement of democracy over other forms of government in 1963″.

The report goes on to mention that “More recently, and particularly with Francis’s emphasis on egalitarianism and fighting poverty, the two ideologies’ goals, at least as preached by Francis and the Castros, have started to sound more similar. After the Cold War ended, Cuba  lifted restrictions on Catholic practice, allowed Catholics to join the Communist Party, and removed its constitution’s declaration of atheism. Catholics – nominally about 60 percent of Cuba’s population — no longer have to practice in secret, although many who’ve been baptized don’t practice regularly”.

Communism and Catholicism are not the same. The authors’ assertion that they are “starting to sound more similar” is a misreading of Catholic Social Teaching. The Church, following the teachings of Christ seeks an “option for the poor” but it does not seek to overthrow capitalism or abolish property. Instead it seeks a via media between the two on the one hand respecting property and the general goals of the free market but at the same time it seeks to avoid the idolisation of wealth and the accumulation of profit at any cost, irrespective of the social or moral cost.

The writer continues, “Fidel Castro visited the Vatican in 1996, paving the way for Pope John Paul to become the first pope to visit Cuba in 1998. Pope Benedict met Fidel and Raúl, both of whom were baptized and have showed some religious tendencies in the past, in Havana in 2012. Last year, the BBC reported that building was underway on the first new church since a freeze on construction after the Cuban Revolution. Now, as a 2013 Atlantic article titled “The Vatican’s Journey from Anti-Communism to Anti-Capitalism” points out, Francis has declared “a new enemy for the Catholic Church: modern capitalism.” According to Francis, “Some people continue to defend trickle-down theories, which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world.” But “this opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system.” With the Cold War long over and communism soundly defeated as an ideology in all but a handful of countries – Vietnam, Cuba, North Korea, Laos, and (nominally) China — Francis argues that for the welfare of mankind, states need to exercise more, not less, control over financial markets”.

Here this reflects the believe of the Church that man goes first and the profit of the market must come second.

The piece ends “Still, Communism and Catholicism now have more to talk about than they have for the past several decades. As the Atlantic’s Emma Green pointed out, Argentina-born Francis’s message seems to be crafted less for North America and Europe — the epicenters both of recent church scandals and of what Francis sees as individualistic capitalism’s corrupting influence — and more for Latin America and Africa, where economic development has left many behind. On Sunday, Castro and Francis spoke in their native Spanish, building on a dialoge that Castro has credited with helping thaw relations with the United States under President Barack Obama and move toward a lifting of sanctions that – along with communist rule itself — have helped impoverish the country”.

Economist 2015:NHS


A piece from the series of the Economist dealing with the NHS discusses how it has been used in election campaigning. It begins “BRITONS will not hear a bad word said about the National Health Service, but its problems are becoming hard to ignore. A combination of austerity and an increasingly needy population has left it short of money. It also suffers from a kind of developmental disease. The NHS was built in the 1940s, when health care was mostly about treating broken legs and infections in hospital. Its biggest task now is to improve the quality of life of chronically ill old people. The NHS needs to change profoundly while running flat out. Managing that will be a mighty challenge for the next government. In 2010 the Conservative Party put up posters promising the party would “cut the deficit, not the NHS”. The Tory-Liberal Democrat coalition stuck to that promise, yet the health service is feeling the pinch. Although NHS spending has risen by an average of 0.7% a year in real terms, spending per person has been falling in England since 2013”.

The author writes that “The Conservative Party is again pledging to protect the NHS budget if it returns to power, with up to £2 billion extra a year until 2019-2020. Labour has promised to shell out £2.5 billion more than the Conservatives, spending it on new doctors and nurses, although the cash might not be available until 2017-18. The Liberal Democrats plan to spend £8 billion more a year by 2020, the sum NHS executives say is needed, increasing yearly spending after tackling the deficit in 2017/18. If the Tories have a plan to reform the NHS, they will probably keep quiet about it: after all, they spent the second half of the 2010-15 parliament rowing back from an immense reorganisation that they had launched in the first half. This reform, which aimed to stimulate competition and enabled groups of local doctors to purchase services, was unpopular with voters, caused much upheaval and delivered few obvious benefits. The Tory health secretary, Andrew Lansley, was replaced by Jeremy Hunt, who has mostly tried to keep the NHS out of the news”.

He writes that “many think structural reform is overdue. Healthcare is currently separate from “social care”—a catch-all category encompassing mental-health services, nursing homes and the like, which are often run by local councils. Fusing the two seems sensible. And it would probably save money, if hospital beds could be emptied of people who could manage at home with a bit of extra help. Labour has claimed the idea as its own, dubbing it “Whole Person Care”; the Tories quietly back a similar plan by Simon Stevens, the head of NHS England. But no party will be drawn into discussing specifics. Moving care into the community might mean closing hospitals, which would be desperately unpopular. And it would not be easy to keep the current service ticking along while the new one is built”.

He continues, “Labour will accuse the Tories of plans to shrink and privatise the NHS. In fact, by signing up to Simon Stevens’ plan Labour has committed to stepping up privatisation, and in any case much of the private provision in the system appeared as a result of reforms launched by the last, Labour, government. Under the coalition, on the other hand, competition has not grown much. The Tories retort that Labour’s line is mere “political posturing”. Polls suggest most people do not much care about how NHS services are delivered, as long as they are good and free at the point of access. The Liberal Democrats are likely to talk about their Better Care Fund, which has managed to shift small amounts of money from the NHS to social care. Nick Clegg is also keen to prioritise mental health. Both ideas, of course, could starve other NHS services of money”.

The piece ends “Conservatives were outraged when it was suggested that Ed Miliband, Labour’s leader, wanted to “weaponise” the NHS as a political issue in the election. But it is already so. Scottish separatists claimed last year that the country must break away to protect its health service from free-market Tories in London. David Cameron has attacked Labour’s management of the NHS in Wales. Every party will wield health care as a weapon, regardless of the strength of its arguments”.

Economist 2015:Cuts and savings


Continuing the coverage of the Economist of the UK general election. It notes the differences of the parties on the economy. It begins “ALL the big political parties agree: Britain badly needs to get its public finances in order. The country probably borrowed about £90 billion, or 5% of GDP, in the 2014-15 fiscal year—more than Italy, France or even Greece. Yet the parties do not agree in the slightest on how much further borrowing ought to fall, or how to bring it down. The Conservative-Liberal Democrat coalition came to power in 2010 declaring that deficit reduction was “the most urgent issue facing Britain” and that it should be achieved mostly by cutting spending, not by raising taxes. Barely a month into his new job, the flinty Conservative chancellor, George Osborne, laid out a bold plan to do this. It turned out to be considerably more flexible than he implied”.

It goes on to mention “Osborne set out two targets. First and most important, the structural current deficit—that is, the deficit adjusted to reflect the economic cycle, and excluding investment—would be forecast to be in balance five years in the future. Second, national debt would fall as a percentage of GDP by 2015-16. At the time both targets sounded like a plan to finish the job of deficit reduction in one parliament. A euro crisis and sluggish growth quickly messed it up. The Treasury brought in less tax revenue than it had expected and had to spend more on benefits. As a result, borrowing stayed high”.

The author seems to think that this was all out of Osborne’s control. He could have easily borrowed less or taxed more but instead he was too afraid to do either of these as it would cut against his narrative of “fixing the country”. The result was the worst of both worlds.

The writer does admit that “ever more of the output lost to the recession was written off as gone forever, making more of the deficit look structural. Mr Osborne could have got back on track by cutting spending more deeply or raising taxes. Instead, he quietly allowed the completion date to slip. As long as the job was still forecast to be completed five years in the future, he had not missed his main goal”.

The piece goes on to mention that “Beyond the protective “ring-fence” the coalition erected around the NHS, schools and international aid, departmental budgets have been slashed by 21% on average. Local government is getting by on two-thirds of its pre-austerity budget. Public-sector employment has fallen from 6.3m to 5.4m. Civil servants’ pay was frozen for three years and then rose by only 1%. The government saved about £25 billion from the welfare budget, mainly by limiting annual increases and means-testing child benefit, a previously universal handout. (Other welfare reforms grabbed headlines without saving much money.) But an ageing population and generous increases in the state pension—which accounts for 40% of the welfare budget—have offset these savings. Overall, welfare spending has barely changed since 2010”.
This means that the cuts inflicted were worst on areas like defence, where the UK still insists on thinking of itself as a great power when it is really nothing of the sort. The refusal to cut the international aid budget is laughable but seems to be based wholly on polling data. The refusal of both main parties to cut it and transfer the money to defence or have smaller cuts elsewhere has not been countenanced. At the same time the savage cuts to welfare and the refusal to tax the richest in society has made this “rebalancing” not only immoral but in the long run dangerous. It has transferred vast amounts of wealth to the richest in society in the wrong belief that it will “trickle down” and all of society will therefore somehow benefit.

The piece adds “If the Tories win, Mr Osborne must do it all again. Provided the recovery is sustained, the chancellor wants a £7 billion overall surplus by the end of the parliament in 2020. Current government plans imply a further cut of 16% to departments outside the ring-fence, according to the Institute for Fiscal Studies, a think-tank. That will be tough, for three reasons. First, the easiest cuts have been made. It is hard to see local government repeating the big savings made during this parliament, for example: councils will soon run up against their legal obligations to provide services. Reforms to university funding, which provided the bulk of the business department’s savings, were a one-off. Second, holding down public-sector salaries will become harder as private-sector pay rises. Third, the population is older and needier. The NHS says a freeze in its budget will not do—it wants an £8 billion boost”.

He goes on to note that “Labour promises only a surplus on the current budget, excluding investment—which on current plans will be £30 billion in today’s money (or 1.4% of GDP) in 2019-20. The party has not specified when exactly it would achieve this. By contrast, both coalition parties want current balance in 2017-18, which would demand deep cuts for two years. From then on, the Lib Dems would borrow about half the investment budget, putting them, as so often, in a middle ground. The SNP does not want to cut at all, and instead suggests a 0.5% annual boost to departments’ budgets. That would leave a small current budget deficit in 2020”.

The piece concludes “The gap between Labour and the Tories is huge—£30 billion amounts to about a quarter of the entire health budget. The IFS reckons Labour could, as a result, make no cuts and instead raise departmental budgets by 2%. The two parties have not been so far apart on fiscal policy for at least five elections. Labour does not emphasise this difference, for fear of looking spendthrift. But the choice facing voters is stark”.

Economist 2015:Economy


The Economist has published a series of reports on the UK general election which is to take place on 7th May. The piece begins “LISTEN to a Conservative politician for more than one minute and he or she is sure to utter the words “long-term economic plan”. The slogan is projected behind them when they give speeches and plastered across their campaign literature. It has been shoehorned into any number of policy announcements, no matter how uncomfortably. A scheme to give miscreant drivers 10 minutes’ grace before they are slapped with parking tickets, for example, was said to be part of a long-term economic plan. The phrase bores Tories to tears—yet it might win them the election. Just two and a half years elapsed between the run on Northern Rock bank, which marked the start of Britain’s financial crisis, and the formation of the coalition government in May 2010. In the meantime the economy took a huge hit. From the peak in early 2008 to the trough in 2009, GDP per person fell by 6.9%”.

The author notes “The new government promptly dedicated itself to fixing the resulting hole in the public finances (see article). But the big economic problem was weak demand. Fearing for their jobs, consumers were paying down debt rather than splashing out on new cars or televisions. Businesses were not investing. Unemployment rose to 8.5%—lower than in other wealthy countries, but still painfully high. And many of those in work had too little of it: part-time jobs and self-employment had replaced many full-time jobs. Then, just as things began to look up, the euro crisis crushed Britain’s biggest export market. By 2013 the IMF was complaining that Britain remained “a long way from a strong and sustainable recovery”. Moody’s, a credit-rating agency, downgraded the country’s debt from AAA to AA1, citing “continuing weakness” in growth. And the Labour Party, which had lost economic credibility during the financial crisis, began to close the gap with the Conservatives on economic competence”.

Predictably with the Economist everything and everyone is boiled down to numbers. The fact that the author tries to minimise the 8.5% unemployment figure shows where its priorities lie. The closeness of the Tories to the banking sector, having sold Northern Rock cheaply to Richard Branson and let the taxpayer taken the hit does little to help their economic reputation. At the same time the cuts they inflicted have been criticised on both the left and the right. The real point however was that it was the worst of both worlds. They did not commit fully to their (savage) cuts and have firm ideological principles, nor did they admit that their cutting was mitigated by massive borrowing. They had the worst of both worlds and now are only associated with cuts to the great annoyance of a raft of academic economists and many in the public.

The article chimes with the Tories excuse of blaming the euro zone crisis but the fact that they expected the economy to improve in time for the 2015 general election and held off shows that they are little more compentent than Labour. The veneer of competence given to them by being allied to the banking industry, that supports them heavily, shows their competence is really only a vested interest in the City of London at the expense of a more mature, rounded economics.

The author goes on “Then things began to turn round. The economy grew by 1.6% in 2013. The next year, growth accelerated to 2.8%—faster than any other member of the G7 group of rich countries. On the way Britain created a million net new jobs, taking the employment rate to its highest ever level, 73.3%, and unemployment back down to 5.7%. In January Christine Lagarde, head of the IMF, praised Britain’s leadership as “eloquent and convincing”. The recovery would appear to set the Conservatives on course to win the election. Voters often tell pollsters that they are most concerned about things like immigration and health care, but their behaviour suggests economics trumps such worries: Labour won big victories in the 2000s despite dire ratings on immigration, for example. And the public is crediting the Tories. David Cameron and George Osborne, the chancellor of the exchequer, have a 15- to 20-point lead on economic competence over Ed Miliband, Labour’s leader, and Ed Balls, his economics spokesman. But it is not as simple as that, because Britain’s recovery has been so joyless”.

Pointedly the author writes that “Real wages had already been falling for two years when Mr Osborne entered the Treasury. For most of the 2010-15 parliament they continued to decline. This was all the more painful because Britons had become accustomed to steady rises in living standards. From the turn of the millennium to the eve of the crash, real earnings had grown by an average of 2.6% per year. Since then they have fallen by an average of 1.2% a year, putting Britons through the longest period of real wage falls since records began in 1855, according to the Bank of England’s data”.

He notes “Much of this was caused by imported inflation. The tumble of the pound after the crisis made imports more costly, before energy and food prices soared in 2011-12. In the government’s first two years, inflation was more than a percentage point above its 2% target for 22 of 24 months. Little could be done about this: tighter monetary or fiscal policy would have strangled a weak economy and further pummeled wages”.

The piece does make the fair point that “Labour and the Conservatives go into this election talking across each other. The Conservatives argue that the economy is recovering. Labour says that households are struggling. Both are right. Yet this is something of a puzzle when one considers what has driven Britain’s growth over the past few years. A few years ago it was an article of faith among all the major parties that the economy would have to be sustained by something less gluttonous than consumer spending. There was talk of Britain paying its way in the world through stronger exports, and of a manufacturing revival. That has not happened. Instead, the recovery has been domestic. Since 2013 consumer spending has grown at a healthy annualised rate of 2%. Buoyed by the return of consumer confidence, firms have boosted investment in tandem”.

He does thankfully admit that “Another, classically British, stimulus kicked in at about the same time. House prices went up by 5.5% in 2013 and by another 9.8% in 2014. In crowded London they have risen by 27% in the last two years. This made household finances healthier and may have given consumers the confidence to open their wallets. The sober-headed will not celebrate that trend. Young people—nicknamed “generation rent”—find it ever harder to buy a home. To address this, in 2013 the coalition launched a scheme—named “help to buy”—to top up some mortgages with government loans and guarantee others. That, of course, probably pushed prices even higher. In his final budget, Mr Osborne announced subsidies for those saving for a first home. That would be likely to create still more demand. The fundamental problem is too few houses: in the decade to 2014 only 176,000 were built per year on average, when perhaps 240,000 were needed. Antiquated planning regulations constrain supply, especially in the prosperous south-east. Britons are ever more desperate to get on the housing ladder before it is pulled up out of reach. As a result, the Bank of England worries about a debt-fuelled bubble and in 2014 intervened in the mortgage market to curb excessive lending”.

In a damning indictment of the Tories he writes “Britain has returned to its old ways: growth has been led by consumers and fuelled by house-price increases. Net trade has in fact made a slightly negative contribution since 2009, as British firms have struggled to export to a Eurozone that is only starting to recover. British consumers, meanwhile, continue to import aplenty. This, together with a drying up of income on Britain’s overseas investments, has pushed the current-account deficit to fully 5.5% of GDP”.

He ends “A consumer-driven recovery is not necessarily a concern. There is nothing inherently good about exports or inherently bad about consumption. But in the long run, more household spending must be funded by wage rises, not declining saving or a boom in house prices. The next government’s main challenge will to boost productivity rather than demand. That will require careful thought, targeted investment, and an acknowledgment that cutting the budget deficit is not the be-all and end-all of economic policy”.

An excuse for independence?


An opinion piece from the Daily Telegraph argues correctly that the SNP will go to any lengths to breakup the United Kingdom. It opens “‘The SNP is a social democratic political party committed to Scottish independence.’ That is how the SNP defines itself, and that commitment must never be forgotten when assessing the party and its consequences. Independence is the objective; everything else is just a way to bring it about. So while any other party might regard the sort of general election results the SNP is heading for as a triumph in its own right, for the Nationalists overwhelming victory will be just another step in a longer journey”.

The only question is how would the SNP do such a thing so close after its defeat in the independence referendum. All parties after the failed independence vote said they would deliver more powers to Scotland. If the SNP would be satisfied with this then a compromise could be reached. However it would be unusual for the SNP to do this and end its raison d’etre. If however they push too hard they could get an independent country but at the same time they could fundamentally divided Scottish society for generations to come.

He author writes “How would the SNP use its 40 or even 50 MPs to advance the cause of independence? The answer depends a little on who is prime minister, but perhaps less than many would expect. Yes, another David Cameron premiership would allow the SNP to trade off Scottish unhappiness at being ruled by an English-led Tory party that is still hated by some Scots. But the Labour Party is these days not much more popular with Scots, and its leader Ed Miliband actually polls worse than Mr Cameron. A UK government of either sort can equally easily be portrayed as “the Westminster establishment” indifferent to Scots’ interests”.

The author adds “the SNP accepted some years ago that grievance alone will never lead Scots to independence. Instead of fixating on constitutional principles, its focus is on bread-and-butter politics, trying to prove to Scots that the more they are left to their own devices, the better everyday life is. Since 2011 the party has run Scotland’s devolved government, and winning more money and power for that administration is central to SNP strategy”.

He posits the theory that “The thinking is that the more power the Scotland (and thus the SNP) gets, the more different the country grows from the rest of the UK, the better things get for Scots. So why not take the next step to full independence? So instead of trying to wreck a London government’s agenda for ideological reasons, the SNP leadership (though maybe not some wild-eyed new MPs) would be likely to take a more hard-headed approach: yes, they’d withhold support on key votes if they didn’t get what they wanted. But they’d always have a price, if ministers in London were willing to meet it. Wrecking Westminster for its own sake – even bringing down a UK government — would win fewer votes for the SNP at future elections than forcing Westminster to give Scotland more money and power”.

It ends “And future elections matter very much to the SNP. Winning the Scottish Parliament elections next year matters at least as much as next month’s likely triumph. If the Scots chose a party committed to independence at both UK and Scottish elections, the nationalists would be in a strong position to claim a new mandate for independence – and perhaps even hold a second referendum whether politicians at Westminster agreed to it or not. After all, that was the threat that led to last year’s vote”.

Labour seeks tax justice


As the 2015 UK general election continues it seems the voters have a stark choice. The Labour Party has said it will abolish the role that allows those that are not domiciled in the UK, and therefore pay no real taxes. The Tories meanwhile have said nothing about the patently immoral rule that benefits only the tiniest portion of the wealthiest.

A report from the Guardian notes “Labour has accused the Tories of deliberately misleading voters by editing an interview with Ed Balls as a row broke out over a pledge by Ed Miliband to abolish the non-domicile tax status for anyone living in Britain for more than three years. The Tories moved to unpick the announcement by the Labour leader by releasing a video of a BBC interview back in January in which the shadow chancellor said that abolishing non-dom status might lead to a fall in tax revenue. But the Tories edited out a crucial final sentence in which Balls told BBC Radio Leeds on 9 January: “But I think we can be tougher and we should be and we will.” Labour seized on the Tory editing of the Balls interview to accuse the Tories of misleading people to defend their refusal to tackle tax avoidance. The shadow chancellor blogged: “The Tories have edited my words from January in an attempt to deliberately mislead people because they can’t defend their own refusal to act on tax avoidance”.

Labour have a point. When the Tories should be agreeing with Labour to abolish this unjust and immoral rule that seeks to have people in London in the hope that their wealth would “trickle down” they in fact are more comfortable to play politics than seek the common good and protect those who do pay taxes and protect the poorest in society.

The report goes on to mention “The row has lit up Britain’s general election campaign after Miliband promised to abolish the non-dom rule, which allows many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide income, for those who are based in Britain for more than two to three years. Labour said the rule, introduced by William Pitt the Younger in the late 18th century, has been open to abuse and offends the moral basis of taxation. Everyone who has made the UK their permanent home should pay full UK tax on all their income and gains, Miliband argued”.

The piece adds “George Osborne, conscious of poll findings that the Tories are seen as the party of the rich, realised overnight that he had to tread carefully in response to a Labour plan to crack down on multi-millionaires. Osborne therefore moved to unpick the announcement by saying that Labour was merely planning to tinker with the non-dom tax status on the grounds that the rule would remain in place for beneficiaries who stay in the UK for under two to three years. The Tories then released a video of the shadow chancellor’s January interview in which Balls suggested that abolishing the non-dom rule could lower tax revenues by encouraging some wealthy people to leave the UK. The edited video shows Balls saying: “I think that it is important that you make sure the non-dom rules work in a fair way. I think they were too lax in the past. Both the last Labour government and this Conservative government have tightened them up”.

In an attempt to defend these people who generally do not pay tax and yet use all the services in the UK some have argued that there will be a flight from the UK. However, this argument overlooks the obvious fact that they pay only £90,000 a year, at most, on an income that is millions a year. Whatever “loss” to the coffers of the state would be minimal as so little money is raised anyway. Labour should have launched this policy years ago but all the Tories could do was pick at a few words while avoiding the larger issue.

Intervention of Cardinal Nichols


A report from the Telegraph details the intervention of Vincent Cardinal Nichols in British politics, urging justice. It opens “The leader of the Catholic Church in England and Wales has condemned the Government for presiding over “shocking” levels of poverty and deprivation. Cardinal Vincent Nichols called on Tuesday for Catholics to judge candidates in this year’s General Election by what they intend to do to improve the lives of the poor. He said: “I’ve commented before on what I believe to be some of the unintended consequences of social welfare reform we see. I repeat; it’s shocking that in a society that is as rich as our there are people, even people in employment, dependant on food banks and hand-outs.” The Cardinal was speaking at the launch of a leaflet being sent to all Catholic parishes in England and Wales, urging members of the church to become actively involved in the political debate in the run up to May’s election”.

The report mentions that “He emphasised that it was the duty of Catholics, and other citizens to engage in discussion, cast their votes and ignore commentators such as Russell Brand, who claim there is no point voting because ‘all politicians are the same’. Cardinal Nichols said: “I’d ask them to pay more attention to me than to him [Brand]. We are citizens and we are called on to take part in society. Stir yourself”.

The piece goes on to state “The Cardinal’s call for more to be done to help the worse off follows a letter issued by the Church of England’s bishops last week, attacking the effect of the coalition’s policies on the poor. In their letter Anglican bishops condemned the legacy of Thatcherism and its emphasis on consumerism and individualism. The 52-page letter was attacked by Conservative politicians as being a ‘shopping list’ of left-wing demands.  Although the Catholic bishops’ letter to parishioners neither attacks nor endorses any party by name, it urges voters to decide on the basis of where candidate stand on the issue of poverty”.

The article adds “In its letter the Catholic Bishops’ Conference of England and Wales urges Catholics to ask “where does your candidate stand on directly helping the poorest and most vulnerable people in the UK and also helping to transform their lives”. Addressing education policy it says politicians should be trying to “ensure the best outcomes for the poorest children.” The four-page letter, 700,000 copies of which are being sent to parishes up and down the country, bemoans the fact that “rising inequality, increased loneliness for older people, job insecurity and over stretched community services” has made life more difficult for many and calls for business and the private sector to do more to meet people’s needs. “The market economy exists to serve humanity. People are not merely economic units to be exploited,” it states”.

The report rightly ends “The Cardinal repeated the Catholic church’s strong support for the living wage, saying that party candidates should be quizzed on their attitude to fair pay. He said that all Catholic organisations and charities tried to ensure not only that they paid their employees the Living Wage, and – in the case of those working in the capital – the London Living Wage, but that the church’s suppliers and contractors did so too.”



“It can obtain a fairer deal for the Greek people”


A piece in Foreign Policy notes that Greece is right morally and economically. He writes that Greece has more leverage than many assume.

It opens “Ever since the initial bargain in the 1950s between post-Nazi West Germany and its wartime victims, European integration has been built on compromise. So there is huge pressure on Greece’s new Syriza government to be “good Europeans” and compromise on their demands for debt justice from their European partners — also known as creditors. But sometimes compromise is the wrong course of action. Sometimes you need to take a stand”.

He makes the excellent point that “no advanced economies in living memory have been as catastrophically mismanaged as the eurozone has been in recent years, as I document at length in my book, European Spring. Seven years into the crisis, the eurozone economy is doing much worse than the United States, worse than Japan during its lost decade in the 1990s and worse even than Europe in the 1930s: GDP is still 2 percent lower than seven years ago and the unemployment rate is in double digits. The policy stance set by Angela Merkel’s government in Berlin, implemented by the European Commission in Brussels, and sometimes tempered — but more often enforced — by the European Central Bank (ECB) in Frankfurt, remains disastrous. Continuing with current policies — austerity and wage cuts, forbearance for banks, no debt restructuring or adjustment to Germany’s mercantilism — is leading Europe into the ditch; the launch of quantitative easing is unlikely to change that. So settling for a “compromise” that shifts Merkel’s line by a millimeter would be a mistake; it must be challenged and dismantled”.

It is something of a misnomer to compare the US to the Eurozone as one has a central bank the other, the ECB, is only this in name. Yet, the EU and the ECB led by Germany have made things irreparably worse with long term consequences that could be severe, both for democracy on the continent and the EU generally.

Nevertheless he adds “For the first time in years, there is hope that the dead hand of Merkelism can be unclasped, not just fear of the consequences and nationalist loathing. More immediately, Greece can save itself. Left in the clutches of its EU creditors, it is not destined for the sunlit uplands of recovery, but for the enduring misery of debt bondage. So the four-point plan put forward by its dashing new finance minister, Yanis Varoufakis, is eminently sensible. This involves running a smaller primary surplus — that is a budget surplus, excluding interest payments — of 1.5 percent of GDP a year, instead of 3 percent this year and 4.5 percent thereafter. Some of the spare funds would be used to alleviate Greece’s humanitarian emergency. The crushing debts of more than 175 percent of GDP would be relieved by swapping the loans from eurozone governments for less burdensome obligations with payments tied to Greece’s GDP growth. Last but not least, Syriza wants to genuinely reform the economy, with the help of the Organization for Economic Cooperation and Development (OECD), notably by tackling the corrupt, clientelist political system, cracking down on tax evasion, and breaking the power of the oligarchs who have a stranglehold over the Greek economy”.

Pointedly he writes “Had the Varoufakis plan been put forward by an investment banker, it would have been perceived as perfectly reasonable. Yet in the parallel universe inhabited by Germany’s Finance Minister Wolfgang Schäuble, such demands are seen as “irresponsible”: Greece must be bled dry to service its foreign creditors in the name of European solidarity”.

He continues “The belief that Greece has little leverage in its negotiations with eurozone authorities is false. If no agreement is reached and Greece is illegally forced out of the euro by Berlin and Frankfurt, it would doubtless default on all its debts to both eurozone governments and the ECB, as well as the Bank of Greece’s Target 2 liabilities. Speculation would soon start about which country might be next to exit the euro — Portugal? — and the single currency would suddenly look eminently revocable”.

He ends the article noting “Do Berlin and Frankfurt really want to push Athens over the brink? I doubt it. Especially since, freed of its external debt and an overvalued exchange rate, Greece would doubtless be growing again once the immediate chaos subsided. After all, even an economy as badly managed as Argentina started growing again only a year after the government defaulted and junked its dollar peg in 2002. Of course, eurozone authorities may miscalculate, or allow their emotions to trump economic logic. And since Athens does not want to leave the euro, it also has a fallback option, as Willem Buiter, chief economist of Citigroup, and John Cochrane of the University of Chicago have pointed out. The Greek government could meet its domestic obligations, such as pension payments, by issuing tradeable IOUs that could also be used to make tax payments — in effect, creating a parallel currency. This virtual money could also be used for other purposes: for instance, to recapitalize ailing banks. That would enable the Greek government to default on its EU creditors relatively painlessly, while remaining within the euro”.

He concludes “The eurozone establishment and much of the media think Greece is foolish to stand up to Germany. But what would be truly foolish is giving in. That would leave only the neo-Nazis of Golden Dawn in the anti-Merkelism camp, which might portend ill political omens. So long as the Greek government is willing to stand firm — as a vast majority of Greeks and many Europeans are urging it to — it can obtain a fairer deal for the Greek people and, with luck, the Eurozone”.


“Germany’s selfish and destructive agenda”


An article describes the backlash that has been seen with the election of Syrzia in Greece.

The author begins “‘Yes We Can’ may be a stale slogan in Obama’s America, but in crisis-hit Spain it is the rallying cry of a year-old radical-left party that is taking the country by storm. In a show of strength, more than 100,000 supporters of Podemos (the party’s name means “We Can” in Spanish) filled the streets of Madrid on Jan. 31 to protest against austerity, crushing debts, and the country’s corrupt political system — and demand change. The demonstrators don’t represent a fringe group, either. Podemos is leading in the polls, ahead of both the mainstream center-left and center-right parties in elections that will be held by the end of the year”.

He adds “The election of a radical-left Syriza-led government in Greece on Jan. 25 has electrified European politics. After years of being told that there is no alternative to bowing to German demands for crushing austerity and wage cuts, the plucky Greeks have dared to stand up to Angela Merkel’s government in Berlin — and other Europeans have stood up and noticed. While the immediate focus is on the showdown between the new Greek government and eurozone authorities over demands for debt relief — and the (unlikely) possibility that Greece could end up ejected from the currency union — Athenian defiance is already having wider political repercussions”.

He goes on to note that “Long accustomed to treating Greece as an unruly but ultimately submissive colony, horrified German policymakers and their eurozone minions can scarcely believe that it is in outright insurrection. (Just look at the body language of Jeroen Dijsselbloem, the bespectacled Dutch finance minister and head of the Eurogroup of his eurozone counterparts, at a press conference with his new Greek counterpart, Yanis Varoufakis, in this video clip.) Debtor-country governments that have obediently complied with the German diktat — notably Spain, Portugal, and Ireland — suddenly feel very exposed politically. Governments that have mounted a mild challenge to Merkel (think France and Italy) are in a delicate position: They spy an opportunity to advance their own agenda, while fearing that they may be outflanked by those with a more radical one. And not without reason; anti-establishment parties of various stripes have the wind in their sails”.

He makes the valid point “Whenever voters throw out a government, as they have done in nearly every election since the crisis began in 2008, officials from Berlin, Brussels, and Frankfurt — whom they did not elect and cannot hold to account — loudly insist that the incoming administration must stick to the failed policies of the outgoing one”.

Rightly he notes that “Since voting for establishment parties of the center-left or center-right makes little difference, it’s hardly surprising that voters are seeking a genuine alternative. And for the moment this exists only on the extremes. Sometimes, as in Greece and Spain, the insurgents are on the radical left. In Ireland, which is not due to vote until next year, Sinn Féin, a left-wing party that was formerly the political wing of the Irish Republican Army, has a narrow lead in the polls. In other cases, the upstarts are on the far right. In France, Marine Le Pen’s racist National Front is out in front, winning by-elections and pulling ahead in polls for the 2017 presidential election. In Italy, where reformist Prime Minister Matteo Renzi remains popular, all three main opposition parties — the far-right Northern League, the anti-establishment Five Star Movement, and former Prime Minister Silvio Berlusconi’s center-right Forza Italia — are now anti-euro”.

He goes on to make the point that “More broadly, it is neither feasible nor fair for debtors to bear the full costs of the financial crisis. For every reckless borrower there is a reckless lender. In the eurozone’s case, those were primarily German and French banks, which lent vast sums to southern Europe, both directly and via local banks. While the bailouts of Greece, Ireland, Portugal, and Spain are portrayed as gestures of EU solidarity, they were in fact covert bailouts of those foreign banks that would otherwise have suffered huge losses on their reckless lending. Southern Europe’s huge debt burden — primarily private in Spain, mostly public in Greece — is stifling the economy and is unpayable in full”.

He concludes arguing “Nor is it politically sustainable for the eurozone to be run, in effect, by a German hegemon that acts in its narrow interests as a creditor rather than in the broader interests of the monetary union as a whole. If countries are to share a currency, they must do so as equals, with EU institutions representing the common interest, rather than acting as instruments for creditors to impose their will on debtors. Denying people basic democratic choices over how much governments can tax and spend is bound to lead to a backlash — especially when EU fiscal rules are economically harmful. “No taxation without representation” is the stuff of revolutions”.

He ends the article “None of this is radical or extreme, let alone anti-European. Outside the eurozone, many sensible people of all stripes would agree with it. The tragedy of the eurozone is that the policy establishment in Brussels and national elites are destroying political support for the European project by advancing Germany’s selfish and destructive agenda as a creditor. With luck, they will change course before it is too late. After all, while Syriza and Podemos want to make the eurozone fairer, the far right wants to destroy the EU altogether. Europe urgently needs mainstream alternatives to Merkelism — or it risks a President Le Pen”.


Greece, the eurozone and German bankers


An excellent article reports on the problems in German bankers.

It starts, “Why did Germany try so hard to stop the European Central Bank from giving the eurozone a trillion-euro boost? Why did Germany decree fiscal austerity for Greece instead? And why, despite Greece’s travails and alleged duplicity, does Germany insist that Greece stay in the eurozone? These actions may have seemed irrational and contradictory, but the same people benefited in every case. First, consider Germany’s recent economic history. In 1990, the reunification of the East and West added an enormous, low-wage population of Germans to the labour supply. Though integrating them into the West’s business environment took time, these millions of new laborers in the workforce instantly made German exports more competitive. Then, with the launch of the euro in 1999, Germany diluted its currency — among the strongest in the world — by mingling it with those of less stable economies from across the European Union. Again, the effect was a huge boost to German exports”.

He adds “Indeed, in the first decade, incomes for Germans from top to bottom on the economic ladder rose by about 7 to 8 percent in real terms. But with the advent of the euro, things started to change. Incomes at the top kept rising, with gains for the top 10 percent of earners continuing apace for the next decade as shareholders reaped record profits. At the bottom, however, there was a sharp dip that eventually left incomes exactly where they started at the beginning of the 1990s”.

Of course, as is often the case, the poorest are hit most, “The effect on inequality was startling. By itself, the integration of East and West should have reduced German inequality substantially. In a country where labor retained some bargaining power, the export boom might have been expected to encourage this convergence as well. Yet Germans at the top of the income distribution saw such an upturn in their fortunes that inequality actually rose. With incomes continuing to diverge, Germany’s wealth inequality was the worst in the eurozone and almost on a par with that of the United States, which was no mean feat”.

He argues that QE was opposed by bankers and others in the ECB, “Instead, they decided that countries in need of an economic lifeline — like Greece — should keep making massive cuts in public services while servicing debts on terms set by wealthier nations such as Germany. For most economists, this was an impractical prescription that would only make the patient suffer more. So why did the Germans insist on it? The bankers in Berlin realised that inflation eroded the value of savings, of which their wealthy countrymen had quite a lot, and also made German investments less attractive to foreigners. As long as Germany continued to grow, they had no use for inflation. In fact, growth with low inflation — and thus little upward pressure on wages — was a perfect formula, especially for owners of capital. Indebted and unemployed Germans might have benefited from a weaker euro and more inflation, just like the Greeks, but they clearly weren’t the bankers’ top priority”.

Thankfully he notes that “Greece is calling Germany’s bluff. A few years ago, the Germans wanted Greece to stay in the eurozone enough to bail them out of their fiscal deficits, but the cost was penury for the Greeks. Back then, Germany seemed to have all the bargaining power. But Greece’s new leftist government has apparently realized that the real bargaining power lies in Athens, because Germany will now do anything to hold the eurozone together. Germans have read plenty of articles alleging that Athens never should have been allowed to join the eurozone in the first place. But the bankers in Berlin know that each weak country that leaves the eurozone now is likely to push up the value of the euro”.

He concludes “Today, this cluster of threats is unacceptable to Germany. As its growth rate slowed, so did its bankers’ priorities and, as a consequence, the balance of power in the eurozone. The Greeks figured this out, and other countries are cottoning on. But it was a good run for wealthy Germans while it lasted”.

A deal with Tsipras?


A report from Foreign Policy seems to posit the theory that the deal could be reached between Greece and its creditors after the election of the new government.

It opens “Left-wing European politicians have in the last five years faced an uncomfortable question: Why, in the midst of an economic crisis that has seen the rich get rich and the poor get poorer, have leftists failed to gain elected executive office? But with Alexis Tsipras’s electoral win in Greece this past weekend, all that has changed, and the continent’s left now has tangible power in hand and a seat at the bargaining table with Europe’s most feared creditors. Tsipras — whose Syriza party won 149 seats in parliament, falling just two short of an outright majority — has now partnered with a right-wing populist group, the Independent Greeks, to form a government”.

He continues, “Nonetheless, the two parties agree where it matters most: the need to oppose the imposition of austerity-minded budget policies on Greece, whose social safety net has been devastated as its creditors force it to slash its spending as a way of balancing its budget. The International Monetary Fund has admitted to underestimating the damage measures like cuts in health and education spending would impose on the Greek economy, and Tsipras’s electoral triumph, the first such victory by a staunchly leftist politician in the post-crisis years, represents the culmination of a backlash against dismal unemployment figures and what can only be described as a social crisis in public health, drug use, and homelessness”.

The fact that the IMF underestimated the scale of the damage the cuts to Greece should be cause enough to relent on what has been done to Greece. Anyone who seeks to keep the Greek people on this track is either heartless or is so wedded to what has patently not worked, should be ignored.

The writer fairly notes that “To be sure, the Greek economy collapsed in the first place as a result of astounding budgetary profligacy and corruption, and it is that era of excess — underwritten by frequently predatory Western banks — that Greece is now paying off”.

Yet, this overlooks the fact that the Greeks fed the German export boom and created jobs by using the credit from the artificially low interest rates set by the ECB, to help Germany, to buy German products. To then say that the Greeks are to blame is laughable.

The writer goes on to note “Tsipras campaigned on a vague platform of debt reduction and a renegotiation of the terms of Greece’s bailout, but on Monday European politicians rushed to say that they will staunchly oppose any serious write-down in Greece’s outstanding debt, which stands at about 175 percent of its GDP”.

Naturally the Germans are wedded, unbendingly to the old view, “‘In our view, it is important that the new government take measures so that the economic recovery continues,’ German Chancellor Angela Merkel’s spokesman, Steffen Seibert, said Monday. ‘A part of that is Greece holding to its prior commitments and that the new government be tied in to the reform’s achievements.’ Jeroen Dijsselbloem, the head of the eurozone’s group of finance ministers, was even more blunt. ‘There is very little support for a write-off in Europe,’ he told reporters”.

Interestingly he notes “even as Tsipras’s future negotiating partners stake out hard-line positions, there is little evidence that Europe is barreling head-first toward another economic crisis. In fact, the outlines of a deal between the two partners are already readily apparent. The only real question is whether Tsipras can sell it to his coalition. Greece’s creditors have already provided the country with some relief in the form of repayment extensions, interest rate reductions, and a decision to return any profits from the loans to Athens. The average maturity of Greek debt — or when the bill comes due — now stands at 16.5 years. That figure compares favorably to other exposed European economies, including Italy, Portugal, and Ireland. Extending maturity would give Greece more time to pay up”.

He continues “Germany and other creditors could easily extend such concessions further. Tsipras campaigned mostly on a platform of debt reduction, and these proposals would allow him to make a reasonable case of having achieved that goal, though in reality they focus on the cost to Greece of financing its debt. According to calculations carried out by the Bruegel think tank, further reducing interest rates on current loans, a move it says wouldn’t hurt lenders’ bottom lines, would save Greece 6.4 billion euros, or 3.4 percent of its 2015 GDP. Extending when the loans come due by another 10 years would save Greece 4.5 percent of 2015 GDP. Extending the due date for loans provided by the European Financial Stability Facility by 10 years would save 17 percent of 2015 GDP. Implemented together, these options would save Greece 31.7 billion euros, or 17 percent of 2015 GDP”.

There is some questions however if this will be enough. Such is the state of Greece debt that whole tranches of debt will need to be written off. For the Germans this would appear to be a “red line”. Yet, there a few other measures that can bring life and dignity back to the Greek people and its economy.

He ends “Still, one can envision a scenario that’s politically acceptable to European leaders, most notably Merkel, that sees borrowing costs slightly reduced and in which a stimulus package for the Greek economy is cobbled together to help restore the Greek social safety net. Unsaid in all of this is that the Greek economy has quietly rebounded. Its economy is growing, and the government is running a budget surplus. That does little to do away with its mountain of debt, but it does reduce the impetus for a Greek exit from the eurozone. The left-wing political project in Europe, then, faces several key tests in the coming weeks. Tsipras’s allies in Spain, the political party Podemos, will be closely watching to see whether Syriza is able to extract financial concessions from Berlin. And if all Tsipras can deliver is marginal concessions on the neoliberal economics that have defined the last half-decade in Greece, his supporters are bound to come away disappointed, and Tsipras may face a crisis inside his own government”.

The Germans have to decide, how badly they want the euro, and the EU for that matter. Do they want it enough to give Greece enough of a writedown so it can stay in the EU, or are they so inflexible that they are willing to see Greece, then Ireland and then probably Spain or Italy leave the euro and thus the spectacular collapse of the EU as a whole.

Welby poses some questions


An article in the Daily Telegraph has reported on a new book launched as the 2015 General Election campaign begins, informally at least.

The piece starts “Britain under the Coalition is a country in which the poor are being “left behind” and entire cities “cast aside” because politicians are obsessed with Middle England, the Church of England says today in a damning assessment of the state of the nation. In a direct and unapologetically “political” intervention timed for the beginning of the General Election campaign, the Archbishops of Canterbury and York, warn party leaders are selling a “lie” that economic growth is the answer to Britain’s social problems”.

Yet the same newspaper defends the fact that the Church of England is a state church. At the same time they moan that the Church of England has a voice in politics. Which is it to be? The other alternative interpretation is that they are against those with religious views having a say in the public sphere at all.

The real reason for the paper’s reaction was the questioning by the Church of England of a bankrupt economic theory that has destroyed the world and brought misery to millions, while making a small elite even wealthier. This is the true reason for the reaction of the paper to the comments by the bishops.

The report goes on to note that the prelates were “Questioning David Cameron’s slogan “we’re all in this together” they condemn inequality as “evil” and dismiss the assumption that the value of communities is in their economic output as a “sin”. Britain, they argue has been “dominated” by “rampant consumerism and individualism” since the Thatcher era, while the Christian values of solidarity and selflessness have been supplanted by a new secular creed of “every person for themselves”. And while London and the South East forge ahead, much of the rest of the country is still “trapped in apparently inevitable decline”, they argue”.

It is true that the South East has been almost recession proof, apart from the parts that are already deprived which will soon be filled with wealthy people and push those who have been living there for years out, but this is not the fault of Cameron per se but is more down to geography and other long held factors that he has chosen not to fix. In reality the point of the bishops is correct. A toxic individualism has prevailed and is bearing its rotten fruit in the form of societal decay and sin.

The piece adds that “The challenge to politicians and voters alike is contained in a new volume of essays to be published next week, edited by the Archbishop of York, Dr John Sentamu, and including lengthy contributions from the Archbishop of Canterbury, the Most Rev Justin Welby, the former Labour Cabinet minister Lord Adonis and others. It sets out an excoriating critique of a country “ill at ease with itself” amid a widening “gulf” between rich and poor, between the capital and the rest of the country and between politicians and voters. The book, entitled “On Rock or Sand?”, explicitly invites comparisons with Faith in the City, the Church of England report published 30 years ago which was attacked by Conservatives as “pure Marxist theology””.

Yet this is exactly the kind of thing Rush Limbaugh said about Pope Francis. All this has done however is made fools of those who attack the Gospel and its values while they try and defend greed, sin, gross inequality, materialism and excess.

The article ends “The book characterises the welfare state as the embodiment of the Christian command to “love thy neighbour” and warns that people should not rely on what the founding father of free-market capitalism Adam Smith called the “invisible hand” of the market to create a fair society”.

It closes “Archbishop Welby provides a bleak assessment of the economic recovery in Britain claiming that “entire towns and regions” have been excluded and “trapped in an apparently inescapable economic downward spiral”. “Our economy appears to be, in one sense, a tale of two cities – one being a growing and constantly improving London (and the South East generally), and the other being most, but not all, other cities, alike in that they are each trapped in apparently inevitable decline,” he writes. Spending cuts have, he adds, helped widen that gap. “The hard truth is that many of these cities are in what appear to be lose-lose situations”.

The report concludes “But the archbishops go on to reject what they characterise as an obsession with economic growth as the solution to social problems. “There is a general social assumption that the economy has the power to dictate what is and is not possible for human beings,” Archbishop Welby writes. “We believe that if we can fix the economy, the fixing of human beings will automatically follow. “That is a lie. “It is a lie because it is a narrative that casts money, rather than humanity, as the protagonist of God’s story.” Dr Sentamu adds that a post-war vision through which the welfare state and NHS developed has “given way to an individualist and consumerist vision, with public goods such as health … and education … increasingly becoming privatised, where society has become a market society, with everything going to the highest bidder and the poor being left behind in the unceasing drive to increase the nation’s Gross Domestic Product.” Setting out his own vision, Archbishop Welby adds: “Our human journey is not a journey of individuals, it is a journey held in common, and no individual can safely be left behind”.

In a related article, though hardly a surprise, David Cameron defends a system based on radical inequality, mass poverty, unemployment, deprivation and greed, “David Cameron has said that he “profoundly disagrees” with the leaders of the Church of England after they accused the Coalition of creating a country in which the poor are being “left behind”. The Prime Minister pledged to speak “vigorously in defence” of his Government’s economic record after the Archbishops of Canterbury and York accused him and Britain’s other political leaders of selling a “lie” that economic growth is the answer to social problems”.

The sad fact is that all the figures say that Cameron is wrong. They all point to the fact that poverty levels are rising and people are being punished for being poor with all the ignorance that comes with this. They are accused of being lazy but politicians in safe seats with half a dozen directorships to top up their income are in no way fit to judge in such harsh terms the lives of others.

The report mentions that “Cameron insisted that the Coalition has is successfully tackling poverty and that improving people’s lives across the country can only be done when the economy is strong. He said: “Also, we are tackling poverty by giving 1.75million more people a job in our country. Actually under this Government inequality has fallen so I don’t think the picture they paint is accurate. “I look forward to debating and discussing it with them. They have a right to speak out as long as they don’t mind when I speak pretty vigorously in defence of the excellent economic and social record of this government. “The fact is you can’t do any of these things in terms of tackling poverty, growing opportunity, rebalancing the economy unless you have a strong economy and we have restored or are restoring the strength of the British economy.” The Archbishops said that Britain has been “dominated” by “rampant consumerism and individualism” since the Thatcher era”.

“Pessimism and widespread hostility toward the euro”


With the impending Greek elections  some have been discussing the possibility of the exit of Greece from the Eurozone, others have been questioning this assumption. In a piece in Foreign Policy an article raises the problem of Italy.

He opens “As the new year begins to unfold, political instability coupled with ingrained economic malaise is likely to conjure up a perfect storm in the eurozone. If 2014 was the year when the world pretended to ignore Europe’s problems, 2015 will be when Europe hits the headlines again. And the euro will be at the center of it all. Hostility towards the euro is on the rise in the countries that have been severely affected by the continent’s economic and financial crisis. In Italy, only 54 percent of people surveyed in the latest Eurobarometer poll support Europe’s single currency. In Cyprus, only 51 percent do. And in Portugal and Greece as many as 35 percent would like to scrap the euro altogether”.

He makes the point that “In Italy, the Northern League and the Five-Star Movement, both openly anti-euro, together hold about 30 percent of the votes. In Greece, Syriza, the party that is due to win the snap general election at the end of this month, is prepared to live with the euro, but advocates a radical change in the economic policies that underpin Europe’s monetary union”.

He goes on to note “Having moved in synch with the euro area during the crisis years from 2008 to 2010, since 2011 the United States has been growing steadily. In 2014, the U.S. economy expanded at 2.2 percent — a good performance relative to that of other advanced economies — and is expected to hit 3.1 percent this year. The eurozone’s GDP, by contrast, will grow by 1.3 percent this year, from 0.8 percent in 2014. But even this modest growth is far from certain. In its latest World Economic Outlook, the International Monetary Fund suggests that the euro area faces a 40 percent chance of returning to recession in 2015 and a 30 percent chance of deflation”.

This however is not to be seen as a justification for the brand of economics that has been wholly discredited and was largely adopted not just in America but whole swathes of the European continent. Indeed it was the US system where the current crisis began when, in a desire for ever greater profits irrespective of the social costs, worthless debt was graded at the highest grade. The fact that the United States is growing again is certainly welcome but should not be taken as a sign that it is the economic model to follow.

The writer continues, “Across the eurozone, the unemployment rate stands at approximately 10 percent, with peaks of almost 13 and 26 percent in Italy and Greece, respectively. For the respondents to the Eurobarometer, unemployment is by far the most pressing concern (45 percent) followed by the economic situation (23 percent). Yet more worrying is the sense that there is no improvement down the road: 45 percent of people in the Eurobarometer survey do not expect any significant economic recovery. Economic malaise is now so deeply rooted in some areas of Europe that rekindle domestic demand has become almost a titanic task”.

He rightly asks “Should we be worried? Deep-seated pessimism and widespread hostility toward the euro could produce a potentially destabilizing mix in both Italy and Greece, where political restlessness could spill over into the economy and seriously undermine Europe’s monetary union. In both countries, the forthcoming elections of heads of state have opened a number of uncertain scenarios. The likely victory of Syriza will push Greece to renegotiate the terms of its bailout. In Italy, Matteo Renzi, the prime minister, needs all help he can possibly get to elect the new president, and he may be tempted to promise a dilution of fiscal discipline for support to ease this process. But, with Italy’s debt at more than 132 percent of GDP and the deficit close to the 3 percent threshold, any suggestion for more flexible fiscal adjustment will fall on deaf ears in Germany”.

He concludes “Italy is the country that will determine the future of Europe’s single currency. Popular discontent is directly correlated with prolonged economic problems. The current recipe does not work and continuing to ignore the evidence is unwise and potentially very disruptive. But for Germany and other member states, tough fiscal rules are the only way to frame unpredictable domestic politics. Political stability and institutional regeneration are therefore essential to put Italy’s economy back on track”.