Will we see Clegg’s new economic tone? Expect more of the same

Tom Bailey 

Image © Liberal Democrats

For those who believe that the coalition has profoundly misjudged its economic strategy, good news would appear to have come in the form of Nick Clegg promising a ‘massive amplification’ of state investment. This would appear to suggest support for the measures that Labour has been advocating for some time. Credit easing and state investment of the funds that bond purchasers are begging the UK to take could give a boost to the economy which we have just heard has sunk into a double dip recession. When Cameron’s economic record has struggled such that Eurozone leaders are telling him where to take his advice on account of their record on growth exceeding Britain’s, something somewhere has evidently gone desperately wrong. Ed Balls’s August 2010 Bloomberg speech seems vindicated by every new piece of economic news. His argument that the country needed a ‘credible and medium-term plan to reduce the deficit and to reduce our level of national debt, but only once growth is fully secured and over a markedly longer period than George Osborne is currently planning’, seems borne out by events. As Jonathan Freedland wrote, ‘Ed Balls is steadily acquiring the rare right to deploy one of the most powerful sentences in politics: I told you so.’ Robert Skidelsky, Keynes’ biographer, has unsurprisingly welcomed Clegg’s statement, stating that ‘drop austerity, go for growth and the debt will start to come down’. However, unfortunately, I think there is good cause to be sceptical of any major economic policy change. This is not just because I don’t trust Nick ‘No More Broken Promises, I pledge to vote against any increase in fees’ Clegg. Nor is it because he cannot leverage such a change in strategy from the Conservatives (he does not have Cable’s nuclear option)  on account of being the minor partner in a coalition government from which he cannot escape to any realistic prospect of electoral success given his party’s abysmal poll ratings. Instead, the reason for why change seems so unlikely is both how the coalition set out its plan and how the economic crash was defined. For the coalition government, this is a problem of path dependency. Having defined their rapid deficit reduction as essential to economic recovery, a change would be an enormous admission of failure for both political parties.

To change economic policy would demonstrate that the Lib Dems made the wrong judgement in signing up to the Conservative’s pace of deficit reduction. When the coalition was formed, the Lib Dems performed a volte-face on economic strategy. Their manifesto had stated that ‘if spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma.’ Whilst before the election they had supported a ‘one-year economic stimulus’ through to 2011, by mid-May 2010 Clegg and Cable had become advocates of immediate austerity. In 2009, Cable wrote that ‘the apocalyptic cries of “national bankruptcy” are unhelpful scaremongering’. By June 2010, he had of course come to support rapid deficit reduction, explaining his change was made because he had been ‘persuaded that early action is absolutely necessary’. Lib Dems fell over themselves supporting Osborne’s claim that ‘Labour brought Britain to the edge of bankruptcy’, statements for which he was justly slapped down by the Treasury Select Committee. All this was further justified with recourse to that moronic note left by Liam Byrne. It would be a major U-turn to take a more Keynesian approach to economic policy.

A change in strategy would also be incredibly difficult because it would undermine the narrative that the Conservatives have propagated about the economic crash. The choice was made by the Conservatives to present the Great Recession commencing in 2008 as primarily a crisis of state debt rather than as a crisis triggered by enormous systemic financial sector failures that then resulted in the large deficit. This choice was likely made because this seemed the best way to attack Labour. A mess resulting from overspending by a Labour government is a much easier message for a Conservative party leader to make than a more nuanced recognition that state finances had been more prudent than the private sectors’ before the crash despite the treasury’s dependence on unsustainable finance sector revenues. Cameron and Osborne certainly never trumpeted any foresight of the crash nor offered any serious alternative economic policy paradigm before the crash. In 2007 they pledged to match Labour spending plans while in 2006 Osborne wrote that Ireland, even more of a credit fuelled unsustainable boom than the UK, represented ‘a shining example of the art of the possible in long-term economic policymaking’. Having made the choice then to define the crisis as one of state debt, the Conservatives have limited their options now. They are the original proponents of the view now repeated in every right wing paper that state spending cannot contribute to recovery. Simon Heffer’s statement, that ‘borrowing money, or printing more of it, would simply hasten Britain’s progress to Greek-style bankruptcy and financial implosion, wrecking living standards of Britons for a generation, and quite possibly longer’, could have come out of Cameron, Cable or Clegg’s lips at any point in the last two years. It is far easier for the coalition to muddle through blaming the eurozone, the weather or the Royal Wedding for the economic slowdown rather than their measures. A serious change of economic policy would go against everything that they had said since 2009 and would be an admission of the failure of plan A. Read more of this post

In Defence of Mrs Merkel

Daniel Crump 

Image © World Economic Forum

Back home in France, the election of Mr Hollande was hardly an occasion for national pandemonium, despite the usual clever camera shots to suggest otherwise. The French election has been dubbed by many in France as the day Sarkozy was defeated, rather than the day the French Socialist Party rose from the flames. The man they nicknamed ‘Mr Normal’ was, in many respects, the alternative to President Sarkozy, and not much else.

In Europe, however, he is firmly in the driving seat of the latest popular craze; all aboard the Anti-Austerity bandwagon! He has picked up some notable hitchhikers along the way, including Italy’s un-elected Prime Minister Mario Monti, who has taken a seat beside the un-elected Greek Prime Minister Panagoitis Pikrammenos. The most significant of these gentlemen is US President Barack Obama. In the past days he has been quoted as saying ‘’a responsible approach to fiscal consolidation should be coupled with a strong growth agenda’’. The bandwagon is now full to capacity, and carries the leader of the free world, probably riding shotgun. It is also travelling at alarmingly high speed straight towards Mrs Merkel and her Christian Democratic Union led coalition in Berlin.

Supporters of Hollande, and his merry men, are even claiming that the CDU’s poor performance in North Rhine-Westphalia last week is an indication that Merkel’s own citizens are turning away from Germany’s policies on the continent. This would be a slight misconception. According to the Economist, 82% of voters said that state matters were paramount, and that the CDU’s performance was mostly to do with former environment minister Norbert Rottgen, who failed to say whether he would stay in Dusseldorf to lead the opposition if he lost. He was simply no match for the campaign led by a minority SPD-Green coalition, which has held NRW since 2010.

Mrs Merkel remains Germany’s most popular politician, largely thanks to the German economy. German GDP expanded by 0.5% in the first quarter of 2012, and has kept unemployment well below the EU average. They have done this with the help of their much coveted ‘Mittelstand’ economic system. This comprises a group of small and medium sized businesses that cluster themselves around big manufactures and work closely with Universities and researchers. It is the perfect complement to Germany’s love of apprenticeships, which helps to keep the flow of qualified workers pouring in. Unsurprisingly, Germany is seen by investors and financial markets as Europe’s safe haven, keeping the cost of borrowing to below 2% for 10 year bond yields.  Read more of this post

Politicians should be wary of vested interests in the economic debate

Tom Bailey

Image © Alan Chan

On Monday the 2020 Tax Commission final report was published. Other websites have picked over the bizarre elements, the major problems and highlighted certain strengths better than I could. This blog will not discuss all of the report itself but instead use it to raise a broader point. These reports are productions by groups of self-interest and must be treated as such. Think tanks such as the Taxpayer’s Alliance often lack transparency about funding. I can’t find such information on their website and emailing to ask who funds them has not led to a reply (nor did it for George Monbiot). Polly Toynbee wrote a good piece a while back that articulated the problems of that think tank in particular. The TPA supports the self-interest of large business owners and leaders in lower taxes, regardless of the consequent costs for everyone else. What is more annoying is that they are sought whilst many intelligent economists without such evident self interest are ignored. Business leaders and their stooge think tanks seem to be given a preferential place in all economic debates.

This is a cross-party phenomenon that has been going on for far too long. Sure, business support is all well and good, but it should not be the be-all and end-all in economic debates. Tony Blair wrote in his memoirs that he knew Labour had lost the 2010 general election when business came out in support of the Conservatives. He wrote that once you lose chief executives, ‘you lose more than a few votes. You lose your economic credibility. And a sprinkling of academic economists, however distinguished, won’t make up the difference.’ (681) Given Blair’s obsession with courting business support, it seems it was more than just another cheap shot against Gordon Brown. The Conservatives have had a more established deference to business. Appeal to business authority was one tactic used in 2010 by Osborne trying to make the case for deeper austerity than Labour favoured. He said in his Mais Lecture in 2010 that his view was supported by ‘many leading business figures and crucially by international investors’. Both reveal an the misplaced confidence that credibility is primarily derived from business, a theme constantly repeated by journalists. For instance, in January the ever critical Dan Hodges welcomed Labour’s declaration that they could not reverse cuts as a demonstration that ‘Labour “flat-earthers”, who argued for no retreat in the face of the coalition’s austerity measures, or an electorate that views them as a necessary evil, have been routed.’ It has been a common critique of Labour despite the slowdown since the election of the Conservatives in 2010. Personally, I think credibility should be what works rather than by default with what business vested interests support. Business lined up behind Tory levels of austerity arguing that it would support recovery. As we have now gone into a double dip (or if the figures are off, are still flat lining at best), can we be a little more sceptical about their wisdom on all economic matters?

Read more of this post

Are Israel’s days numbered?

Alex Clackson 

Image © Maxnathans

The saga between Israel and Palestine has been ongoing for many decades now, resembling a long dark corridor with no end in sight. For many years, through the financial and military support from the United States, Israel has been able to develop and prevent any moral or physical assault from Palestine and its allies. However, over the last few years we have seen a slow, but sure change in opinion. Through non-mainstream media and organizations like BDS (a campaign of boycotts, divestment and sanctions against Israel) and finally individual human rights activists, the world is waking up to the realisation that Israel is not the perfect liberal state among the “dangerous” Arab nations as it wants to be seen. As Norman Finkelstein has said in his most recent book, “Even the American Jews are turning their backs on Israel.” It is becoming clearer that the only life support system the Israeli machine can rely on is the American Israel lobby.

Despite the fast changing opinion on the Jewish state, Israel continues to act in a way which further pushes it away from the support Israel is so used to receiving from the Western powers. The Palestinian’s quest for a state of their own has been as futile as ever, as the Israelis continue to build on land that is supposed to form the basis of Palestine. Nearly three years ago Mr. Netanyahu said he accepted the principle of two states, Jewish and Palestinian, existing side by side in peace and security. But he has since shown precious little appetite for putting that principle into practice. Despite admonitions from the State Department, Netanyahu’s government has continued to approve and/or legalize settlement constructions in Jerusalem and the West Bank following the expiration of a freeze on settlement construction in September, 2010.

Even the Israeli politicians are starting to understand the thin thread the Jewish state is walking on.  In an interview published in the Times of Israel, Dan Meridor, the Israeli minister delivered harsh words to his colleagues who have overseen the expansion of Jewish settlements in the West Bank. Meridor warned that the current calm in relations with the Palestinians might be producing “an illusion” among Israelis “that this is sustainable in the long term. It is not. It is an anomaly. We need to change it.”

In addition, the deputy prime minister of Israel has urged the government to freeze further settlements “across the line of the [settlement] blocs or the fence or whatever you call it,” a reference to the Israeli West Bank barrier which is partially built along the 1949 armistice line, or “Green Line.”  Read more of this post

Obama vs. Romney: the world is watching

Daniel Crump 

Image © Rivarix

Matters of foreign policy do not tend to be first on the list of a voter’s priorities coming up to an election, especially in times of economic turmoil. When US voters go to the polls in November they will be asking themselves when unemployment is going to fall, whether the health care system will continue to be of benefit to them and how much money they will have in their pockets once they retire. Perhaps, then, the sensible move on the part of the contenders is to downplay talk of foreign issues and concentrate on the economy.

However, history has taught us that many a presidency has come to be defined by a set of decisions related to manoeuvrings on the world stage. Kennedy’s record was arguably saved from the humiliation of the Bay of Pigs by his firmness during the Cuban Missile Crisis. What respect George Bush Sr. may have lost in failing to capture Saddam Hussein in the first Gulf War, he made up for with his role in German Unification in the early 90’s.

Are we asking the right question?

In the run up to November’s vote, it is perhaps unhelpful to ask whether Barack Obama or Mitt Romney would best serve the US’s interests on the world stage. The question people ought to be asking is whether a first term president is preferable to one in his second term. This is the case for two main reasons. Firstly, a President’s first term in office has always been more about dealing with the footprint left by the previous administration than about imposing his own foreign policy vision. Secondly, foreign policy is by nature reactionary. No matter how concise a doctrine exists at the outset, there are certain events that one can simply not prepare for.

To argue the first case, we need only go back four years when Obama officially inherited two wars from George Bush Jr. It was clear, despite his commendable desire to ease tensions with Iran, that his Middle Eastern policy was going to be dictated by how the wars in Iraq and Afghanistan played out. It is certainly no secret that Iranian involvement in the Iraq War was one of the biggest obstacles the President was going to have to overcome if peace between Tehran and Washington was reachable. U.S officials insist that the training of Militant Shiite groups in Iraq by Iranian forces has been a huge challenge for the US army. Iran is said to view Iraq as a potential buffer zone from any future invasion, most likely by the US’s main ally, Israel. Similarly, George Bush’s unavoidable presence in Afghanistan was always going to make Obama’s relationship with Islamabad one on permanent knife edge.  Read more of this post

Gay marriage takes one more step forward

Dominic Turner

Image © Fritz Leiss

When President Obama yesterday announced his support for gay marriage he made an important and symbolic gesture, not merely of his own ‘evolution‘ on the issue, but of the Western world. It goes without saying that Obama, in trademark timidity, waited until the polls indicated that gay marriage was supported by a majority of Americans, and that even whilst he is personally comfortable with gay marriage, he is bringing forth no legislation to make it a reality. Nevertheless, yesterday marked a historic moment in the Gay rights movement.

I am not gay, and neither are any members of my immediate family. I have many friends and members of my extended family who are, but the issue of gay rights has never affected me personally. But the struggle for equality of all peoples is not a cause to be fought by only those who are affected. Good white men and women marched with their black brothers and sisters to end segregation and apartheid in the 20th Century. Gay rights are fundamentally civil rights and another articulation of the cause for equality.

Here in Britain we have come a long way since the 1980′s and the despicable s.28 Local Government Act, which outlawed the supposed “promotion” (and by that they meant discussion) of homosexuality in schools. Civil Partnerships now allow gay couples to enter into the legal equivalent of mariage. The Human Rights act has been used to allow the same rights of succession in housing for gay couples. One of the most encouraging aspects of the last decade is the leadership of the Conservative Party’s support Civil Parternships, and gay rights. But the hesitation from the lunatic fringe of the Tory Party to recognize gay marriage reveals, at its heart, a regressive and dogmatic conservatism. Civil Partnerships but not Marriage? Those who hold this counter intuitive position march under the same ideological banner that sustained segregation. Seperate but equal. Read more of this post

Pakistan, India and the Bi-Polar World Order

Daniel Crump

Image © Omer Wazir


Fukuyama’s ‘The End of History’ essay may not have correctly predicted everything it was supposed to, but one realisation certainly holds true to this day: Realist manoeuvrings and proxy inter-state wars have always been an inevitable feature of a Bi-Polar world. With the fall of the USSR, and the US’s securing of uncontested, top dog status, inter-state warfare has fallen to its lowest level since World War II, making this the most peaceful period of modern history.  The explanation being that in a world with two competing super powers, fragile alliances are held together by mutual enemies.

Although not yet a Bi-Polar world by most people’s evaluations, the rising influence of China will undoubtedly lead to nations asking serious questions of themselves and who they choose to associate with. This week, while the US ambassador to Pakistan stepped down for what Washington insisted was for personal reasons alone, The Chinese ambassador to Pakistan met with President Zardari to discuss matters of mutual cooperation and bilateral trade.

In recent years, Ambassador Munter may well have held the least coveted role in international relations. Following the arrest of a CIA contractor in Lahore and the US led mission to capture and kill Osama Bin Laden, Munter has had to deal with the killing of 24 Pakistani soldiers in November 2011 when the US strayed across the border from Afghanistan. His resignation may appear, after all this, to be the icing on a rather stale and crumbling diplomatic cake.

A Difficult Friendship

The most worrying aspect of these recent events is the fact that they do not come as much of a surprise to anyone. The US and Pakistan have quite a history of sharing mutual enemies and their relationship has, therefore, always been one of convenience and insincerity. Whether it was Nixon and Kissinger using Pakistan’s friendship with China to make Sino-US inroads, or Pakistani support of anti Soviet groups in Afghanistan, the US has always been able to find some beneficial reason to keep Pakistan within arm’s length.

The most recent chapter of this tale has certainly been the trickiest yet. Shortly after 9/11, President Musharraf ended his alliance with the Afghan Taliban while officially entering the Bush Administration’s War on Terror. Since 2001, Pakistan has handed over 5000 members of Al Qaeda to American authorities and received nearly $10 Billion in aid for its troubles. Despite this closeness, Pakistan has constantly been accused of ‘looking both ways’ when it comes to terrorism. Pakistan’s Inter-Services-Intelligence Agency (ISI) has been accused of training and sponsoring groups that the Americans claim to be fighting across the border in Afghanistan. Indeed, it was Pakistan’s Intelligence Agency that was instrumental in bringing the Taliban to power in Afghanistan in the mid 90’s with a view to setting up a favourable regime in a neighbouring country. With the US planning to withdraw a substantial number of troops from Afghanistan in 2014, all bets are off as to what condition Pakistani – US relations will be in if the Taliban were ever to re emerge in Afghan political life. Read more of this post

Guest Blog: What the French election means for the Left

Jasper Cox

Image © The Prime Minister’s Office

If, as is expected, François Hollande wins La Présidentielle this weekend, it provides a boost for Ed Miliband and Labour party: a sign that perhaps the Left in Europe is, unlike the economy, on the road to recovery. In the United Kingdom, from the marginal Occupy movement to disgust over bankers’ bonuses, there is emerging subtle dislike of unregulated neoliberalism (even if most people don’t know what the term means). Meanwhile, Miliband leads in the polls, by perhaps 11%,  despite being unpopular personally with voters. However, there is a danger that the correlation between the French election and the state of British politics today is overstated.

Firstly, when faced with criticism over their handling of the economy, David Cameron and his government have been able use two simple excuses: our economy is heavily affected by the Eurozone crisis; and over-spending by Labour makes austerity necessary. Sarkozy cannot do this. Sarkozy came into power in 2007, before France’s GDP fell, before France lose its AAA rating and before public debt rose significantly. He has been a key figure in determining Eurozone policies. Going further back, he was an interior minister under the last government, and the Right has been in power since 1995. This means neither he nor the Right can be given ‘the benefit of the doubt’, and so he has a harder challenge defending his economic policy in the presidential election.

The gripes with Sarkozy are not (just) about austerity, whereas anger in the United Kingdom at the centre-right administration is directed at cuts and public sector reforms predominantly. Sarkozy has introduced some reforms to the state but has also indulged in anti-immigrant rhetoric (the link is but one example) and “Countless voters have told pollsters that Sarkozy’s personality and style turned them off”. As The Economist, which has generally been supportive of the UK coalition government, despairs:

Read more of this post

Why did the Labour Party indulge Ken?

Frederick Cowell

Image © Amplified2010

If you are a Labour party member and disappointed at Ken Livingstone’s second defeat, go to a mirror, look at yourself – you are looking at one of the people responsible for his defeat.  Now, this article comes out before the official result; the Sack Boris campaign and the get out the vote drives undertaken by many local Labour parties could have helped turn the tide. But it is unlikely. So go and look at yourself in a mirror. If you are Labour you should use this as an opportunity to learn how to find a credible winning candidate – but then if you were part of the delegation that booed the mere mention of Tony Blair’s name last year you are a lost cause.

 In the primary election to be mayor two thirds of all London Labour members voted for Livingston over Oona King. Deep structural reasons and problems that go to the heart of the Labour party explain why this happened. King started her primary campaign late in mid- May 2010 when all the political action was focusing on the novelty of coalition government, whereas Ken had been unofficially campaigning the day after he was ejected from office in 2008. The primary also fell in the middle of the most contested Labour leadership contest for 30 years. Blame acting Labour leader Harriet Harman for that one – it is difficult to accept that someone of her political experience could not have foreseen that this would effectively make it a one horse race. King also had voted for the Iraq war in 2003 although, like many other Labour MPs, it was a decision she thought was wrong in hindsight and may have been less pertinent had she not lost her seat to George Galloway in the 2005 General Election. This gave a sense of permanence to her pro-war vote back in March 2003 so much so that seven years later it stuck with her as she tried to reach party members in the mayoral primary. Blame Tony Blair for that one – Blairites who bemoan the current state of the Labour party often have an attack of amnesia about the toxicity of the Iraq war and don’t seem to understand how much harm it did to an entire generation of centrist Labour MP’s. For example it did David Miliband’s leadership campaign no favours when he penned an article effectively asking people to ‘get over the Iraq war’.

As even the Economist noted at the time King was a good choice; her background reflected London’s nature as modern dynamic city, her policies were centre leftish and she was unencumbered by Livingstone’s foot-in-mouth tendency. Yet canvassing in the primary some workers for King noticed that a large numbers of Labour party members seemed to have a rose-tinted view of the race; a Tory PM promising cuts was in Number 10, wasn’t it time to get Red Ken back in city hall so he could fight them just like he fought Thatcher? Except this wasn’t 1981 it was 2012, and Ken lost to Maggie the first time round and is set to lose to Boris second time around. This is the answer to Dan Hodges, a Labour journo who took pride at voting Boris, but did quite sensibly ask the question – why does the Labour party indulge Ken? The new leadership aren’t really to blame; Ed Miliband was lumbered with him and as consequence had to defend him.  Instead party members decided to ignore the fact that in spite of a very strong first term record as mayor there were several features about his last two years in office, in particular his proximity with extremists, and the 2008 campaign that made him basically unelectable. This was known in 2010 yet members backed him – if you did that in 2010 look in the mirror today; you are responsible for giving the Conservative party a boost nationally in what should have been their worst election in a decade.

Read more of this post

Beware: Anti-politics

Frederick Cowell

Image © John Kirriemuir

With two days to local elections and four days to the anniversary of an unloved event, anti-politics is everywhere. The surprise from-behind victory of George Galloway in Bradford west and UKIP’s sudden surge in the polls are both symptomatic of a rise in anti-politics. The local election result are likely to result in the expected drubbing for the governing parties but also a boost for anti-politics candidates and well placed sources have detailed Labour’s panic at the thought of by-elections later this year, in particular in Birmingham Snow Hill which they fear could be lost to another Respect insurgency.

Anti-politics is becoming a feature of UK politics – Matthew Flinders of the University of Sheffield has identified a complex tendency among the public to dislike all political parties and politicians. To an extent voters should be healthily sceptical of politics and for many years those who have cared about the environment have voted Green, those who have cared about the national identity of regions have voted SNP or Plaid Cymru and those who have cared about immigration and race have voted BNP. Both UKIP and Respect make a different appeal to voters in that they deliberately stoke and then feed off the anger of anti-politics.

The ascent of UKIP in the late 1990′s was triggered by rage at the Maastricht generation of Tories and their 2010 election slogan “sod the rest – vote UKIP”, whilst a little to naked for many voters taste’s, basically described their electoral strategy for the previous decade. On the Left, the Iraq war provided the catalyst for the Respect Party to absorb those alienated by New Labour. To be clear, UKIP and Respect are single issue parties but the issues that both parties run on, Euroscepticism and anti-imperialism< are defined by the inability of the mainstream Left and Right blocs in British politics to fully absorb these issues. Both parties also mercilessly attack government as the great diluter of principles to create a betrayal narrative out of every decision that governments make, whether they be foolhardy (invading Iraq) or pragmatic (not pulling out of the EU).  This can poison political debates during local and city elections as the supposed betrayal of the former supporters of Labour and the Tories drowns out other concerns and scrutiny of local issues. Previously the Lib Dems benefited from this but after entry into government they are no longer able to take advantage of this phenomenon. A key part of the upsurge in both UKIP’s and Respect’s support in the last year is that they, like many other anti-politics parties across Europe, offer a rhetorically appealing account of how to fix the economic woes currently facing western economies. As appealing as these messages may be many of them are ultimately unworkable, socially divisive or both, but the fury many voters feel as living standards fall generates a lucrative gig for the Nigel Farages and George Galloways of this world.

Read more of this post

Follow

Get every new post delivered to your Inbox.

Join 1,342 other followers