Saturday, July 30, 2011

"Think it possible you may be mistaken"

Oliver Cromwell is one of the more quotable political figures in history. From his instruction to Sir Peter Lely to

"Paint me as I am, warts and all",

to his irate dismissal of the rump Parliament:

"You have sat here too long for any good you have been doing lately. Depart I say, and let us have done with you. In the name of God, Go!",

Cromwell is still widely quoted, even if people may not be conscious of the source.

It was this last quote that came into my head as I contemplated the self serving cant put out by the Tea Party Congressmen in the seemingly never ending debate to increase the US debt ceiling. As various of the malcontents noisily slipped away to various chapels to commune with their Creator in a hypocritical display of discount piety, I began to believe that it might be impossible for any bill to be passed by the House of Representatives. In the end, one has been, passed, albeit an unworkable one and even that only by the slimmest of margins.

I was not aware that it was any kind of morality, still less right-wing morality, to repudiate your debts, yet that is what the Tea Party is prepared to do. The bills are already in, the money has been spent, but Congress has dithered about whether it wants to pay. The minority faction in the Republican Party has held their shallow and ineffectual leader, Mr Speaker Boehner, up to ridicule and the the rest of the United States to ransom, because they think it justified, even moral, not to pay their debts.

Like many, I have watched appalled as the United States has created the largest debt in history. The irresponsibility of cutting taxation whilst still increasing expenditure on everything from the Armed Forces to welfare rolls and expecting the rest of the planet to pay the difference, was an act of astonishing economic vandalism. Ever more, I rue the day when George W. Bush entered the Oval Office, despite losing the popular vote by half a million, and embarked on an irresponsible frenzy of tax cuts- which even accelerated when it became clear that the 43rd President would now face massive expenditure to face down the threat of Al Qaida after the horrors of 9/11. Truly, if ever a President could be judged economically foolish and irresponsible: it was he. No wonder he has kept a low profile since leaving office.

So the Republican Party, having destroyed the economic stability of the Federal Government through ill judged and irresponsible decisions by George W Bush, now seems set to complete the process through total irresponsibility in the handling of the credit crisis by the Republican controlled House of Representatives.

Yet what of President Obama? As with all politicians, he too has made his compromises, his health care polices, well-intentioned as they may have been, still need major work if they are to deliver what is expected of them. US health care costs are now the highest in the world by some margin, and it is even possible that the new program will increase them. Yet in a time of American economic weakness it is hard to see that it makes sense to leave the welfare-dependent poor penniless and without health care. This, of course is what Mr. Obama accuses his critics of wanting, yet it is easy to point out that the President too is working for his constituency as much as the Congress works for theirs.

My experience of mainstream US Republicans does not reflect the accusations that the President makes. However, if we are take seriously the statements of the Tea Party leaders, then there is now a new species of economic illiteracy at large in America: the dogmatic "right".

The Tea Party takes a contemptuously Puritian view of compromise. Informed by the professed certainties of invincible faith in the autarkic dogmas of a limited number of ideologists, they refuse to countenance any truck with views at odds with their own. It is this inflexibility that lies at the root of the split in the Republican Party, which has been so damaging to the country.

As another Puritan in another time might have put it:

"I beseech ye, in the bowels of Christ, think it possible that ye may be mistaken".

Tuesday, July 26, 2011

What happens after a US debt default

The US Republicans are in real danger of not being able to deliver any deal at all.

There is a better than 60% chance that no deal can be done to raise the US debt ceiling before August 2nd.

In which case the US AAA debt rating is now 80% going to fall this week.

We are being constantly bombarded with the quote from the half American, Churchill: "the US always does the right thing, after it has exhausted the alternatives".

Yet, what happens if the House Republicans do not do the right thing and the United States of America defaults on its debts?

I think the enormity of that question provides its own answer.

We are seven days away from a fundamental break down in American power.

If the US defaults, it is not the same as previous crises: it will substantially and permanently degrade US standing in the world. All of the U-S-A chanting fans will be chanting for a degraded power. Those politicians who pretend that the US is an untouchable power will be seen for the frauds that they are. No longer an example, but more of a warning, the country that creates such fools as Rush Limbaugh and Glenn Beck will become increasingly derided.

OK so there can be no rival to the Dollar, apparently, in which case, it will be no other currency but Gold: which will shrink the global money supply by four fifths.


The US political disfunctionalism turned out to be important after all.

Right Wing Nutters

I see Glenn Beck has managed to show a fine display of human fellow feeling by comparing the Norwegian victims of the right-wing murderer to the Hitler Youth.


But then again the US ultra-rightists are not noted for tact or, indeed, intelligence.

His fellow travelers continue to hold the World hostage through their manufactured deadlock of the negotiations to raise the US debt ceiling in the US Congress.

Vince Cable, in his usual blunt way, has called those Congressman and Senators responsible "Right Wing" nutters. Hard not to disagree, when we hear that the leader of the refuseniks would not even take the telephone call of his head of state.

The US AAA debt rating is now quite likely to go. If the deadlock continues, then the damage of a default will be permanent. Once it becomes clear that the leverage created in the Western world since 1945 is now no longer sustainable, even by the US Federal Government, then a major financial reordering is set to take place.

In 1931, there was series of bank failures, followed by a sovereign debt crisis. In 2011, there is a sovereign debt crisis which could lead to the total breakdown of the banking system. The impact of the nightmare scenario can not be judged at this moment, but it does appear that the ultimate breakdown of the financial system is firmly on the cards. 1931, here we come.

If that nightmare scenario does indeed take place, it will be the dogmatic arrogance of Beck and his right wing cohorts who will be most largely to blame.

Monday, July 25, 2011

Latvia raises its voice and takes a decision

It is not often that a country has the constitutional right to dissolve a Parliament by referendum. It is even rarer that this right is exercised. Thus the decision by the Latvian voters,to dissolve the Latvian Seima, and by a fairly substantial margin is a fairly unique set of circumstances..

But then again Latvia is a fairly unique country.

Latvia came under intense pressure as the Great Recession began- its largest domestic bank went under, and the government budget fell out of control. The result was not chaos but determination. The technocratic government of Prime Minister Valdis Dombrovskis slashed the budget, rescued the bank with the assistance of the IMF, and set about getting Latvia's economy in order. The result was a recovery nearly as rapid as the initial collapse: a classic V shaped recession.

More impressively still, the Prime Minister was able to be re-elected. Unfortunately that government was forced to rely on a disparate party: the "Greens and Farmers" which was in fact a vehicle for oligarchs, that is to say a group of Latvian businessmen who acquired great wealth in questionable ways and who had, before the recession, become dominant political figures.

In the midst of all this was the then President, Valdis Zatlers, who was widely derided as a light weight figure.

He is not derided now. His last act as President was to initiate the recall referendum. It was an all or nothing gamble, with the target of making a point against corruption in Parliament. It has succeeded perhaps even beyond the expectations of its initiator.

Latvia now faces a new election, but the leading political force is now set to be the Reform Party, founded by President Zatlers only in the past month. In combination with the Prime Minister's own Unity Party, this would be a powerful force to clean up Latvian politics (and indeed its business) and bring Latvia to the same "new Nordic" status now enjoyed by neighbouring Estonia.

There are many difficulties to be overcome, but no one can deny that the Latvian people have spoken up against the political class that has taken the voters for granted and corruptly shared the loot. It was indeed a huge gamble, but with such a big win, perhaps Valdis Zatlers can now do what his predecessors could not and work to create a fair and open politics that works for all of Latvia, not just those with the deepest pockets.

Wednesday, July 20, 2011

Britain needs an ideology

In the face of the repeated shattering blows to the old order: the Royal divorces, the Parliamentary expenses scandal, the Police failures in the NoTW scandal, and indeed the Murdoch scandal itself, it is easy to pronounce that Britain is a country in an inevitable decline. There is even the prospect of the dissolution of the UK in the near future, if the separatist agenda of the SNP gets its way in Scotland.

The national debate is incoherent, with much evidence of retrenchment in hard power: our armed forces; soft power: our foreign ministry and overseas broadcasting; and financial power: the decline in the power and role of global finance, where London remains a global centre.

Yet Britain remains a highly significant power, albeit that we only acknowledge our strengths in a rather sideways kind of way: "Britain can still...". This, of course, still suggests decline, because the implication is that once upon a time, Britain could do so much more. Yet fifty years after the real end of the British Empire, it must surely be time to establish a new role - to understand what we really have. It is time for the country to review itself and to set out an agenda for the future.

As we carry out even the most cursory national audit we may notice that British demographics are very strong. The combination of a relatively higher growth rate and the generally successful way that Britain has integrated immigrant communities (notwithstanding the hysteria of the Daily Mail) could make the UK the biggest member of the European union within only a couple of decades, and furthermore that larger country could well have the largest GDP in Europe too. Within Europe, Britain is certainly not a second ranking country: it is all set to become the largest and the richest in the continent.

Neither can it be said that our business or cultural lives are anything but globally powerful. The English common law has become the most used for international contracts, and the success of our professions, not just law, but accounting and others too has created millions of high quality, well paid jobs. More to the point, it has allowed the country to be, quite literally the ultimate arbitrator in the world of business. Then of course there is the English language. To be a native speaker of the global language is a huge advantage in a world where a modern citizen must be able to drive, use a computer and speak English. The richness and power of English- a language that adds hundreds of words and millions of speakers every year- is a formidable benefit.

In the political world, despite- or even because- of the recent scandals, Britain remains a free society. The point being that the scandals have unveiled public challenges to all of our political institutions and yet those institutions have proven capable of reform and restructuring. Pragmatism and flexibility are much lauded British virtues, yet they are founded on the deep roots of a free society and democratic government. Britain is of course capable of become more open and more democratic, but compared to the current regimes in Syria, Libya, Russia or even Italy, our institutions are enviable as the protectors of freedom.

It must surely be in the field of universal political rights that Britain can find its raison d'etre. Tolerant, free and rich, the UK has its enemies: not least in Russia, where there is much support for the SNP and therefore the potential break-up of a strategic rival. The Kleptocracy in the Kremlin is indeed a threat to the values that Britain makes its own, yet they can not succeed if we can develop more self confidence. The greatest strength of a free society is social trust- and as the thieves in Moscow gain fabulous riches at the expense of the rest of their country, social trust in Russia continues to decline- as indeed does Russia itself.

The idea that Britain should possess power for power's sake, to "punch above its weight" is rooted in a culture of decline. The point is that the military power of the UK should serve some purpose. I would argue that the military intervention in Libya is indeed part of that wider purpose: the struggle for democracy in the Arab world is absolutely one where a free society should take a supportive role. Of course there must be limits to where and when British forces are committed: foreign policy may be a matter of idealism, but it should also be fully rooted in the realism of picking the battles in the ideological war against tyranny. A national principle for Britain can still be founded on a universal ideal.

So, as the joyful spectacle of the Murdochs' before the House of Commons reminds us that no one can ultimately be above the law, we should also remind ourselves that despite the political and constitutional failures of the past few years, we continue to live in a democratic and open political culture, and to be all the more determined to nurture and protect it.

Monday, July 18, 2011

Another day, another resignation

The Murdoch scandal.

The sky is dark with chickens coming home to roost.

Rebekah Brooks resigns and a day later is arrested. Les Hinton resigns. Further arrests are on the way. The noose grows tighter ever tighter around James Murdoch.

Meanwhile Sir Paul Stephens resigns as the Met Police commissioner- inevitable sooner or later, but interesting that it was sooner.

Some of the more excitable may say that Cameron himself is under threat, but in the political game of mutual assured destruction, he is no more guilty than most, and a lot less guilty than many. Tony Blair has probably not been sleeping too well recently either. In fact, although not good for the PM, it would take a far more dramatic escalation for his position to be under real pressure. Cameron may have made some new enemies, not least Sir Paul Stephens, apparently, but that is the swings and roundabouts of politics.

Meanwhile the Liberal, Democrats came under attack for being the only party with completely clean hands -not just because "Murdoch would not take their call" (thank you, Cristina!), but because the loathing of Murdoch was mutual. I think it takes a certain kind of prejudice to argue that the Lib Dems have behaved badly in this affair. Vince Cable may have shot his mouth off in a moment of vanity, but the Lib Dems have detested the Dirty Digger for decades and despised almost everything he represented with great ferocity.

So what is the real end game?

The scandal will continue to spread.

Murdoch will face ruin.

The Police will be investigated further and more News International and Police resignations and indeed arrests will take place.

On the other hand, while Ed Miliband may have won the first phase, it is not in his interests for much more than that to happen.

After all, if the can of worms of the last Labour government is opened, then the scale of the scandal will indeed enter the stratosphere.

Thursday, July 14, 2011

Murdoch: into the Endgame

Two weeks ago Rupert Murdoch-controlled News International has a minority holding in BSkyB and full ownership of four national Daily and Sunday newspapers. True, He had explored turning his Dailies into seven day operations, but that looked to be a little while away. Also true, he was bidding for 100% control of BSkyB.

Now he has a minority holding in BSkyB and full ownership of three Daily and Sunday newspapers. A seven day Sun looks to be only a few weeks away and although the current bid for BSkyB has been shelved, another bid could be tabled within a few months, if need be.

It rather looks as though Murdoch has lost a battle, but not yet lost the war.

Yet there is still the ongoing political shitstorm to get through. Though the pressure from the BSkyB bid may take some of the heat away, there is still the ongoing police investigation and the political and judicial inquiry and the real possibility of a backlash in the US.

From the point of view of the UK, Murdoch has had a small defeat: his papers can never again behave with such impunity, and British politicians will now be extremely wary in their dealings with the press. We will see if that will be enough to satisfy the wrath of political and public opinion.

I suspect it will, which will mean that the Murdoch serpent has been only partially de-fanged.

For me, however, it is not enough: it merely restates that breaking the law is a bad idea, it does not take sufficient sanction against the criminals responsible in the first place. The judicial inquiry and the police investigation must be backed to the hilt until full completion.

Never again should the press or the police, still less politicians, believe themselves to be above the law.

Wednesday, July 13, 2011

The Coming Debt Meltdown.

The Sovereign debt crisis is finally exploding. As usual the Anti-Euro nutters are out in force- I see someone has let Ambrose Evans Pritchard out again- but just they always do, they totally miss the point.

Of course the Euro is in crisis, but it is not the Euro that caused the crisis- it is a level of government debt in Europe and the US and Japan which is simply not sustainable. It may well be that the Euro is damaged or even destroyed- through that causes more problems than it solves- but the crisis is: that Western governments have been living beyond their means for decades.

The bill is coming due- and this is a bill that embraces all the major currencies: the US Dollar, the Yen and the Pound as well as the Euro.

No where is safe: the US Federal government is poised on the brink of shut-down as the political deadlock in Washington deepens. The Japanese government is essentially leaderless and directionless, and the governments of Italy, Greece and Spain are under critical strain.

But the UK is hardly immune: total debt has more than doubled in less than two years- it now stands at a total of £2 trillion- nearly twice the GDP of the country. This is despite the coalition commitment to cut debt. Who knows what see of red ink we would have been looking at if Labour had remained in office?

The disastrous decisions to fund social welfare, pensions and health care from current revenue, rather than building up an endowment has crippled the economies of the West. Unfunded cross generational IOUs are scattered around like confetti. Few- if any- of these promises can be honoured. What seems inconceivable now is about to become a reality: the welfare state is going to collapse under the weight of debt. Pensions will never be funded, welfare payments will dwindle to worthlessness.

That is the reality.

And it is a reality that will soon be revealed in stark colours as the heavily indebted states, from Italy to the US start to default on their obligations to the markets. This is not a Euro crisis, it is a debt default on a global scale.

The consequences will be with us for decades. Yet, still, the political class in the West do not understand the iceberg that they are looking at. The attack on Italy is not coming because it is a member of the Euro, it is coming because the Italians can not sustain their levels of debt.

Neither can the UK.

The fact is that unless British debt levels are reduce now, they will be reduced for us, because the markets will no longer buy some sovereign debt at any price. If that happens to the UK- as it may happen even sooner in Italy and has already happened in Greece- then the choices for politicians will be devastating. It is now not a question of what can be saved- very little can or will be. It is a question of an entirely new system to finance our social contracts, and -whatever happens- that system will see a massively reduced role for government.

The second stage of the Credit Crunch crisis- analogous to the 1931 bank collapse, as opposed to the 1929 Wall St crash, in the Great Depression- looks now to be upon us.

August is a dangerous month for the markets, but then so is October...

Tuesday, July 12, 2011

Murdoch: it is still getting worse

The revelations for the beleaguered Murdoch Empire just keep coming.

The exquisitely timed released of information that the medical records of Gordon Brown's children had been stolen by NI hacks. The growing realization that the Sunday Times, The Times and the Sun are also to a greater or lesser degree involved not only in phone hacking, but also in computer hacking and the theft of personal information on an industrial scale. That payments to the Police were routine.

What does Murdoch do next?

Despite the referral to the Competition Commission, the bid for BSkyB remains on the table, but short of actually closing his whole newspaper business in the UK, with a loss of jobs that would itself be highly unpopular (not least in the wider media), it is hard to see how the bid could now be allowed in the teeth of overwhelming public opposition. The point is that even if Murdoch did sell or even close News International in its entirety- as some are suggesting that he might- the legal fall out, and criminal prosecutions could still go on for many years.

James Murdoch himself face gaol if the allegations of breaches of the US Foreign Corrupt Practices Act are substantiated. A criminal is not- in any way- a fit and proper person to stand as a company director, still less in a business that has the power to set the political agenda in the way that Murdoch has been doing for years.

Gordon Brown's statement that it was Rebekah Brooks herself who told him that she already knew about his children's serious medical problems is surely now fatal for her position. She had- after all- already moved onto the Sun by the time of that conversation.

Last night I met a number of senior British politicians at a cocktail party. Several of them had been the subject of extraordinary intrusion. One described how they received a call from a journalist on a number so private that only nine people were permitted to know it. Another described how a journalist from the NoTW had called within an hour or two to ask about a fracas that had taken place outside their house: quite clearly information that had been released by the Police.

So the scandal of Police involvement remains unresolved. The issue of BSkyB remains unresolved, though it seems that Murdoch at this point is simply preparing to bluff it out. Of course it seems pretty clear that newspapers in other groups may have carried out similar crimes, though possibly not on the same scale. Murdoch's bet is probably that as those scandals come out, they will eclipse his own, and that the BSkyB deal gets back on track.

However, there is also the real chance that the scale of the crisis leads to a criminal investigation of the whole Murdoch business in the UK. It already seems clear that a wave of arrests is likely, and that the Police will -under intense public scrutiny- be forced to follow up every lead to its final conclusion- and that the other papers will not be a focus at this point, whatever may come later. Meanwhile any attempted investigation by Murdoch's journalists into his rivals could get them into even more trouble than they are already.

It is not the report of the Competition Commission that Murdoch must fear most, but the report to the Director of Public Prosecutions.

Meanwhile what of Cameron?

His error of judgement in hiring Andy Coulson has already cost him dearly. The recovery of Ed Miliband that this has allowed is clearly dangerous for him. However this may be the point where the Lib Dems, having been human shields, may end up as a weapon against Labour, whose kow-towing to Murdoch in the years they were in office dwarfs the problems of the Tories. The Lib Dems of course are known as long-term enemies of Murdoch- as Vince Cable's indiscreet comments earlier in the year showed all too well. The Lib Dem commitment to the coalition remains strong enough and it is clear that several Lib Dem figures are prepared to use their essentially uncompromised position in order to protect the coalition's flank.

Watch this space- the Liberal Democrats may be getting their mojo back.

Monday, July 11, 2011

London Calling

Another week and another shuttle trip to London. My purpose is to support the fundraising for a new investment vehicle for Central and Eastern Europe, and although slow, there is steady progress towards raising a fairly modest €100 million.

Yet London is not what it was as far as investment in CEE is concerned. The City is ruled by fashion as much as anywhere, and in the emerging markets world what's hot and what's not can change in a very quick order. Despite the generally impressive performance of the region over the past two decades, for all practical purposes CEE ceased to be of general interest after the August 1998 default of Russia. ironically it is now only Russia that seems to capture the imagination of those who are not specialists. Yet Russia remains incredibly challenging both as a market and as a place. Never mind that Poland or Estonia have turned in economic numbers that put Russia in the shade, the fashionable investors will track Moscow but not Warsaw. In fact the world of fashion, sorry I mean investment, finds more opportunity in Africa, and that is now where London emerging markets investors want to make their mark.

Partly, I suppose, there is some kind of folk memory of a time when British investors like Cecil Rhodes made their mark and their fortunes in the dark Continent and partly, I suppose there is no longer the resentment that one of another of Africa's "big man" leaders had towards the West. After the fall of the USSR, there is only the Chinese left to meddle and their attitude is -if anything- even more exploitative towards African resources than the West.

So as I- rather wearily- put myself onto yet another flight to visit investors, I reflect that the people I am talking to are generally expert specialists- it reduces the number of people I can talk to, but at least the conversations don't start with geographical explanations. On the other hand, the real money for the region has long since left the UK. The regional specialist development bank, the EBRD, retains its headquarters in the City, but private sector money returned to Germany or the Nordic states, or even settled in the region- especially Warsaw- a decade ago.

The caprices of fashion have not yet returned the City's gaze back onto Central Europe, and with so many rival centres, I wonder if it ever will.

Sunday, July 10, 2011

End of the line for Rupert Murdoch

Rupert Murdoch is not a figure who inspires affection. He is now, as he has always been, a ruthlessly efficient businessman. He promotes the interests of himself and his family above all else, and when those interests are threatened, he acts without compunction.

However he is now 80.

The fact is that, no matter what, his day is passing. For those who value freedom that is a happy thought.

Murdoch has been a pernicious enemy of a free democratic process, calling politicians to heel through threats or through promises of support. Although his newspapers are a relatively small part of his empire- so much so that he has been able to close a centuries old newspaper without a second thought- the control he has exerted has made even Prime Ministers quake.

That is not a power that an Australian, naturalized American should have in Britain. Though he exercises his power through an international business: through News Corporation into News International, nevertheless it is a very personal power. He and his family are by far the largest shareholders in these businesses.

The phone hacking scandal, the corruption of the police investigation and the emerging story of cover-up and conspiracy make it absolutely clear that this power may well have been abused in a way that would make Rupert Murdoch and his family the criminal enemies of British democracy.

Now it is up to those that we have elected to remove the threat to our freedom, both in practice- if the law concludes so- but also in theory.

This means, not only that the bid for 100% control of BSkyB should be disallowed; it means that if guilty, then Murdoch should be expelled from British politics for ever. It means in any event that News International in the UK must be broken up. It means that Murdoch must not be permitted to have such control in our country as he already has. If the emerging scandal proves beyond all reasonable doubt that Rupert Murdoch and News Corp are not fit and proper to have such power in the British political process, then the only real remedy is the nuclear option: forced sale of all News Corp assets in the United Kingdom.

I should make it clear that of course I have never supported Murdoch's power in Britain: he has consistently been the most powerful enemy of Liberalism and the Liberal Democrats, however I also believe in capitalist property rights and do not believe in principle in government intervention in private businesses. Murdoch, however, is different. His business may well have become, under his ownership and influence, a criminal business. It would be critical if so that his criminal activities are stopped. If James Murdoch- Rupert's designated successor, let us not forget- is indicted and convicted under the US foreign corrupt practices act, then Vince Cable and Jeremy Hunt must act immediately.

A judicial inquiry is not the end of the affair. The overwhelming majority of people in the UK expressing an opinion already have serious concerns about Murdoch's influence. BSkyB must not be allowed to proceed without divestment of other Murdoch assets in any event- even if cleared of wrongdoing (however unlikely that may seem, we should allow for the possibility) the scandal has demonstrated clearly that there is a threat to British democracy- even if it is only a theoretical one in the eyes of the law at present.

However, if that threat becomes manifest, then Murdoch must face the full penalty of the law. A malign and criminal influence should face annihilation. A ruthless enemy must be dealt with ruthlessly.

A criminal business must face criminal sanctions.

Saturday, July 09, 2011

Why I live in Estonia...

The XI Young Song festival, held last weekend. A choir of 30,000 schoolkids and students watched by over 120,000 of the rest of the country. Magnificent and of course not one instance of bad behaviour recorded in the whole three day event.

What land is this? No mountains vastly tower

Just woodlands without end and mires in throngs

but the people here are filled with wonderous power

and strange the tales in their songs...

What land is this? At times the day is eaten

At times it lasts so long, it swallows the night

The two pass us by regardless of season

When outsiders rest, the local has to fight

What land is this? Is here a Man's stature

fit only for when a slave he became?

All this hurt, who would gather

so that love would come and bring an end to pain

What land is this, where mercy is defenseless

(what land is this) where freedom's buried deep underground

Where's the justice, where's the justness

where is justice for the jaded when they're bound?

What land is this? Compassion here's corroded

Corroded is the heartless breast with shame.

I could run away from here overloaded

Still I'm held back by something just the same

What land is this, that takes such hold of me

and how it does it I've not known for long

It doesn't cover me, it doesn't feed me

yet somehow still it carries me along

What land is this? Could I it conceive?

What land is this? Could I be without its caress?

What land is this? How could it leave

all its children motherless...

What land is this? No mountains vastly tower

Just woodlands without end and mires in throngs

but the people here are filled with wonderous power

and strange the tales in their songs...

Friday, July 08, 2011

News International faces Nemesis

James Murdoch has not cooled public anger with his closure of the News of the World. In fact the large number of sackings that this tactical move involves makes his own position, not just that of the indefensible Rebekah Brooks, increasingly precarious. He may also- simply as collateral damage- have wrecked industrial relations in the rest of Wapping. Certainly there are rumours of sympathy strikes at The Sun. More importantly though, the radical move has been greeted with a mixture of cynicism and cold fury in the wider world. Cynicism, because creating a seven day Sun has clearly been a Murdoch goal for some time and cold fury, because the 400 or so NoTW workers lose their jobs while Brooks- for the moment- still keeps hers. The rest of the media are uniting to give the entire Murdoch business the biggest kicking that they can muster.

James Murdoch's strategy: sacrifice NoTW now, Brooks later, looks pretty threadbare, indeed is so transparently an attempt to save his own skin, that it may fall to pieces pretty quickly. In the US culture of "the Buck stops here", Murdoch Junior would already be packing his bags. That, of course, raises questions about the judgement- and nepotism- of Murdoch senior too. Those judgments will be more exposed than ever at the next News Corp AGM.

Now, despite the tactical sacrifice of the NoTW title, it is clear that further revelations are coming- and that they will not simply involve the NoTW. James Murdoch, of course, will be setting the dogs on the competition- and the other red-tops are being studiously quiet on the scandal. However, even if -say- The Times happens upon some juice at the Express, Mirror or Mail its publication would be seen not as a "fearless expose", but as desperate mud slinging. Murdoch Junior is backing himself into a corner if he thinks that by raising the ante to the competition he can get to safety. The fact is that it is going to be next to impossible to completely isolate the Sun -and perhaps not even The Times and the Sunday Times- from the scandal

Meanwhile the second and third stage of the scandal are about to break. The arrest of Andy Coulson, which is much touted for today, brings the problem into the heart of the Prime Minister's office. The political dimension will only grow as it becomes ever clear just how far Rupert Murdoch's writ has been running in British politics. As a minimum, there is going to be a backlash against those political figures involved- and Cameron can not escape undamaged. It will also become politically impossible to permit the takeover of BSkyB for the foreseeable future- and a less determined man than Rupert Murdoch would make a tactical withdrawal now until the scandal cools. For as long as the bid remains on the table, the issue of News International business ethics will provoke stronger public anger- and in the end may lead to a forced divestiture of either the Newspapers of of BSkyB. Of course if NI now fails the fit an proper test, then it might even be both.

For the fact is that the relationship- the corrupt relationship- of NI with the Police is only now coming into focus. The scale of payments to officers, payments which are illegal, is more substantial than has so far been disclosed. The relationship was founded on money inducements, but there is also some evidence that Murdoch employees may have routinely blackmailed both police and political figures. It is also clear that surveillance of different targets went way beyond simple phone hacking. In many cases a full scale surveillance operation was mounted. The size of these operations- with the co-operation of Police figures, let us not forget- would not have disgraced the KGB.

In fact, of course, there is the suggestion that foreign intelligence agencies were also penetrating the Murdoch newsroom. The idea that Russians or Chinese- or even the French or Americans- were listening into George Osborne's hacked phone is one that will give our own MI5 the screaming heeby-geebies.

The sacrifice of NotW does not end the scandal- in fact it reminds us what an astonishing situation is emerging. The tentacles of implication run across British politics, and sooner or later the bombs that they are leaving will explode. Murdoch Junior- I predict- will not survive either.

Thursday, July 07, 2011

Has Murdoch junior closed the NoTW too soon?

Well, the Murdoch scandal is becoming the gift that just keeps giving.

The announcement by James Murdoch that the News of the World will close after Sunday's edition was one of several ideas that have been running round the blogosphere- after all the idea of separate Sunday titles has been unpopular with newspaper managements for some time. At one extreme is the steady death of the Observer as a separate title, at the other the increasingly full integration of the two Independent titles. So the closure of the NoTW has probably been discussed by News International in various contexts long before now. However it was probably not discussed in the context of the kind of scandal explosion that has now taken place.

However, while it may be good business for Murdoch to take the opportunity to do what he may have wanted to do anyway, it may not- yet- get News International off the hook. By taking such a drastic step at what is still a relatively early stage in the crisis, it may refocus public anger away from the NoTW and onto the wider Murdoch business. There has already been some criticism of the rather hypocritical editorials in the Times, while it may yet be the case that the phone hacking also embraced journalists on The Sun as well as the NoTW.

Has James Murdoch acted too soon? Public anger is still building, and by offering up a sacrificial lamb Mr. Murdoch may find that he is fanning the flames rather than quenching them. One of the key points of this scandal is that The Sun and the NoTW, while nominally functionally independent, were in fact integrated-at least to a degree. It is certainly the case that The Sun printed stories that involved phone hacking- and we do not yet know what degree of culpability the Sun may or may not have had. If it turns out that The Sun is implicated, will James Murdoch close that Paper too?

It seems hardly likely.

On the other hand the closure of the News of the World seemed hardly likely even as early as this morning.

NOTW scandal: everyone is running for cover

As I suggested a couple of days ago, the News International phone hacking scandal is emerging as a humdinger - very much the British Watergate. The Management of NI is implicated, and there is now an increasing focus on the relationship between the Police and NI which links corrupt payments made for information directly to the initial cover-up of the extent and scope of the phone hacking.

As advertisers now run for cover, as those whose phones were or may have been hacked express increasing outrage, life at the top of News International seems set to become very lonely. Jeremy Hunt's rightful decision to delay his decision on integrating BSKYB with the rest of the News International organisation may the first of many blows to hit the Dirty Digger.

The fact is that the scandal is gaining stronger momentum as the politicians realize that they are finally free of the pressure from Murdoch. All of the dirt on all of the politicians in the world will now avail News International nothing: there is a universal determination to cut NI down to size. For years I have argued that NI would eventually face a moment of truth as its arrogance and ambition overshot their judgement. By allowing routine criminality, albeit with the connivance of the Police, that point was reached many years ago- the difference is that now we know.

We know that NI routinely broke the law. We know that when this scandal first broke, the Police did not investigate these crimes efficiently, and there appears to a deliberate cover-up. We know that political and possibly Royal figures- indeed anyone in the public eye- faced the threat of blackmail implicitly, and it now appears sometimes explicit threats were made too. We know that these practices were known about at or very close to the top of the News International Organisation.

We also know that the public disgust at these revelations is likely to destroy the News of the World, and even has the potential to take down News International itself. However much the Times- another Murdoch title- may shed crocodile tears for the ethics of "journalism", in fact the crime is a bit more specific and a lot closer to home than that. It is Murdoch journalism that must be condemned and it is Murdoch journalism that must take the consequences of their crimes.

As David Cameron rues the day he hired Andy Coulson- as I said he would- Labour, despite their fierce attack on the hated Murdoch will not be able to hide from their own collusion either. Peter Mandelson is as implicated in this as any politician could be. This scandal is not only going to be about phone hacking and a Police cover-up, it will also be about the long term relationship between politics and the press, particularly the Murdoch press. Only the Lib Dems are likely to emerge unscathed- since Murdoch's loathing and contempt for the Liberal Democrats was well documented, but there will be many political figures in both Labour and the Tories who are running for cover and hoping like hell that the rest of the press have short memories.

This will be a tipping point for the relationship between the old media and their readers/viewers. In the week that the Huffington Post opens its UK website, it is perhaps significant that the world of the print media seems set to be turned upside down. The Murdoch titles certainly the News of the World and The Sun, and possibly The Times and the Sunday Times as well could face a boycott. Certainly the fact that advertisers are dropping the NoTW and the Royal British Legion will no longer work with that title must be creating some worry in Wapping. It is hardly surprising that the value of the parent company has been slashed in trading around the world.

Those of us "Naive" enough to criticize Murdoch's journalistic ethics were always told that in the end it was a matter of economics. After the value of NI shares have been hammered over the past few days, it seems that the damage to the News International brand is not merely cosmetic. Likewise the value of BSkyB has also fallen. It is clear that investors are no longer comfortable with the Murdoch family's trusteeship of their money. That is a situation that is unlikely to be turned around anytime soon. In the end Ethics and Economics have turned out to be surprisingly allied. That is a point that should not be lost on those political figures most compromised by this exploding scandal.

Making the Best Better

Estonia is a model for many economic policies. A pioneer in simple taxation and the open economy, there is much for other countries to admire and to emulate. Yet there remain several issues in the micro economy that hurt Estonian competitiveness.

The relative isolation and northern geographical location of the country is something that will always place limits on the Estonian economy, but there are clearly things that can be done to improve the transport links. However one of these is not a high-speed rail line. Even if the billions could be found to fund a high speed line to Warsaw, it would still be a journey of three-four hours. This is never going to be competitive with flying. While freight rail links could be improved, the fact is that the existing line to Riga makes a giant dog-leg via Tartu and Valga and thus passenger traffic will tend to prefer the direct route by bus, which at present takes three hours to get to Riga. It would be quicker, of course if the road were upgraded, and it is quite clear that the vision of the via Baltica as a multi-lane highway should now be realized. The highway to Narva is already being upgraded, and Tallinn Tartu should also be a priority, but for the competitiveness of the country, the international road links should clearly receive priority in future transport planning.

Then there are various tax issues. The fact is that the burden of taxation is falling disproportionately on the poor- the tax threshold needs to be raised in order to reduce the burden on the poor. Furthermore the burden of social taxes- at 30%, a significant cost to entrepreneurs- needs to be reduced. The combination of 21% flat income tax and 30% social tax, makes Estonia a relatively highly taxed nation. The original plan to cut income taxes to 18% should now be progressively reintroduced too.

The great advantage of Estonia, despite being a relatively expensive place for entrepreneurs, is that the process of taxation calculation and collection is pretty simple, but there are clear exceptions. Taxing hotel stays and other travel expenses above a very low cost threshold is not only expensive in terms of the cost of taxation, but also in terms of administration. Either a much higher threshold should be introduced, or better, these legitimate business costs should be made fully deductible.

Since Estonia joined the EU, the administrative burdens on companies have increased: this year new statistics collection has added further work for companies to report new information. There is a growing attitude that the state has a right to impose these burdens, but if Estonia does so, without significant reform elsewhere, it will quickly lose its competitive edge.

As the country comes up to the twentieth anniversary of the restoration of independence, it is clear that politicians on all sides should not be resting on their laurels: Estonia still has much to do if it is to be able to achieve its declared goal of one of the highest living standards in the EU. Increasingly tired and jaded, the politicians are losing their focus on reform, and some political figures are more interested in their own personal political point scoring than in advancing the cause of the country. Estonia should not have time for that kind of political immaturity. The task remains immense and even these relatively small changes will take significant political will. It will be the acid test for the government and the wider political process to ensure that the country continues to move forward.

Tuesday, July 05, 2011

The British Watergate Scandal finally breaks

It has been common knowledge for some time that News International routinely hacked mobile phones. Many of the great stories of the past 15 or 20 years have probably been the result of this illegal activity. Even the "Squidgy-gate" story of 1990 now appears to have been the direct result of illegal journalistic snooping. The Milly Dowler phone hacking was a new low, but in precisely the same tradition of illegal and immoral activity.

News International has a clear case to answer, but they are not the only ones.

Why did the initial Police investigation into phone hacking conclude that only a few "bad apples" were responsible, when that was quite clearly not the case?

The evidence is strong that politicians and the police were placed under intense pressure by the News International organisation to curtail the investigation. In other words there has been a deliberate cover up. The question is now: who is complicit in this extraordinary scandal?

How did the Murdoch Organisation use the information they gathered, if they did not publish it?

Were ministers pressured? Were decisions taken as the result of this pressure?

Is it possible that John Major, when Prime Minister, was blackmailed by Murdoch over his affair with Edwina Currie? If so, what other Ministers or Prime Ministers faced the same pressure?

Were Police Officers were similarly blackmailed? If so who, and how?

It is clear that at the highest level, News International tolerated -indeed encouraged and paid for- crime. It is now all too clear why Andy Coulson had to resign, but this is one that goes all the way to the Murdoch family itself.

Obviously the News International organisation is in this up to their necks- it is quite clear that the decision to approve the full take over of Sky must be delayed while this investigation runs its course- any decision now taken to the benefit of Murdoch is going to be checked with a fine tooth comb, and Jeremy Hunt will lose his job sooner rather than later, unless he suspends his previous decision. Murdoch must be cut loose immediately.

The scandal is bad enough: the cover-up will be even more dangerous.

The fact is that the implications of this scandal and the cover-up will still embrace the police and politicians. The impact will be huge. By the end of it any connection with Murdoch- from writing for his papers or approving of his business or even appearing on Sky- will be toxic. This is why Cameron has quickly rushed to condemn NI over Milly Dowler: he knows that there is more beyond. The hiring of Andy Coulson was ill judged by the Tories, but the silence from Labour is even more telling. The relationship between Peter Mandelson and the Murdoch organisation is well documented, but the public story is not the whole story- as many people in politics know all too well.

The News International Scandal may have the same impact on London as Watergate did on Washington- and the fall of the Murdoch Empire might be just one of the lesser results.

The Archduke Otto

Upon his first official visit to Hungary in the 1970s, the Archduke Franz Josef Otto Robert Maria Anton Karl Max Heinrich Sixtus Xavier Felix Renatus Ludwig Gaetan Pius Ignatius, heir to the Imperial throne of Austria and the Apostolic Royal Throne of Hungary, the Royal Thrones of Bohemia, Dalmatia, Slavonia, Croatia, Lodemeria and Illyria. Heir to the titular kingdom of Jerusalem, the grand Duchies of Tuscany and Krakow, the Duchies of Lorraine, Salzburg, Styria, Carniola and Bukovina, the Grand Principality of Transylvania, the Margravate of Moravia and many dozens of other titles, was greeted with a rapturous reception.

Indeed he was asked to extend his stay and attend an international football match. He was told it was Austria-Hungary. Without missing a beat he asked "who are we playing?". The -by then- civilian "Archduke Otto" was more usually referred to simply as Dr. von Habsburg, yet he still carried some of the mystique of the lost Imperial era as well as a puckish sense of humour. Though born to the imperial purple, his family were to lose every throne that they had held during the course of his long life. Yet after the early death of his father, the last Habsburg Emperor, Karl, it was Otto who was to carry the burden and expectations of his family and of many millions in his lost realms.

His dignity and determination in the face of Hitlerian contempt for Austrian independence won him many friends, and his friendship with President Roosevelt secured Austria's status as a victim, rather than as a co-aggressor in the Second World War. He was to become a passionate supporter of European Co-operation and was, perhaps, the most distinguished member of the European Parliament for many years.

In 1989 it was a picnic on the Austrian-Hungarian border organised by the church and by Dr. Habsburg's own pan-European movement that was to be the occasion of the fall of the iron curtain: so even in our own day the Pope and the Emperor could face down the heirs of Stalin.

Although it was inevitable that he would always face controversy, his mistakes were few and as the years passed, the historical reassessment of the the legacy of the Empire grew more positive. In 2004, Dr. Habsburg's father, the Emperor Karl, was beatified, which was not only a vindication of the last Emperor's personal qualities, but something of a condemnation of those who persecuted him. It was certainly an especially moving day for the the last Crown Prince.

The death of the Archduke Otto at the age of 98 is truly the end of a long era. He will be much missed.