Friday, September 30, 2011

J'accuse... pt 1

The crisis of the Euro is not a Greek crisis... it is a German one.

We are told, incessantly, that the crisis is a question of German tolerance for the lazy, un-German economies like Ireland, Spain and Greece. But actually, the issue is the fact that German (and French) banks funded borrowing in those countries in a way that they would not have done at home.

So as Estonia, in common with the rest of the Euro-zone, signs off on a deal that doubles the national debt of the country, we should recognize that this is not a deal to rescue Greece: it is a deal to rescue the German banks.

Estonia, with a GDP per capita less than one third of Germany is handing over 10% of its GDP to rescue the imprudent lending of German financial institutions.

That is wrong.

If the Germans don't want to be rescued by their poorer neighbours, now, would be the perfect time to say so.

In my view the membership of the the Eurozone is already too expensive for the country I came to in order to escape the crushing national debt of the UK. Sure, if the Estonian Kroon had continued as a free currency it would now be trading at a big premium to the Euro, however there is still something morally wrong to see the huge transfer of wealth from  Estonia to Germany.

Thursday, September 29, 2011

Miliband: a symptom, not the cause of Labour's problems

The Labour conference in Liverpool has rather descended into a comedy of errors. The Leader's speech was badly delivered and only patchily coherent. The policies- such as they are- that have emerged from the conference have mostly inspired indifference, but in one or two cases actual hostility. Even the comedy turn of the teenage speaker which seems to infect party conferences from time to time ended up being rather less than it appeared. All in all this conference seems set to cement Ed Miliband's image as a bit of a loser, and to inspire no one with the image of Labour as the party of the future.

Doubtless -as is the way of the media narrative- we will soon have growing stories of plots against the leadership and a lot of "Labour in crisis" headlines. After all electoral defeats after a long period in government tend to underline problems in the party: just ask the Tories what it was like ten years ago. Yet even if Ed Miliband is replaced, it is hard to see which of the other potential leaders could actually deliver a recovery. Labour optimists must surely believe that sooner or later, perhaps after a leader or even two, the political pendulum will start to swing and Labour get another chance as ennui with the Tories kicks in.

But why should the inexorable pendulum of politics be so unerring, and why should a new Labour leader make any difference?

After all, in Scotland, Labour faces a growing crisis.There is a general sense that it is Labour, not the coalition, that is largely responsible for the economic crisis in the UK. There is a general contempt- even among Labour members- for the personality of Tony Blair. So in addition to the normal pendulum there is something more than the usual organisational reaction to a charismatic and successful leader- after Margaret Thatcher, the Conservatives may still struggle to reconcile themselves to her legacy, yet they would not jeer their former leader.

The problem- it seems to me- is that Ed Miliband is not the cause of Labour weakness: he is the symptom, and it would probably be no different if any other candidate had won. 

Labour was, under Harold Wilson, as much as Tony Blair, a pragmatic party, seeking largely to impose its will without too much of an ideological underpinning. In the end, though, the New Labour project was one of the most brazen cynicism, and the policies that the Blair-Brown government enacted have been little short of disastrous. Labour fell under the control of the SpAds and the generally unelected political engineers, such as Peter Mandelson. Yet Mandelson, like Blair himself, has conducted himself, since leaving office, extremely badly. Personal greed has revealed these individuals in the harshest light- no wonder Blair is being booed by his own side. Miliband, like Balls and all the other current potential leadership contenders, grew up within the ideological dead zone of Blairism and under spell of power for its own sake. 

Even as the generation of Labour politicians that grew up under Blair mouths its slogans of compassion or toughness or fairness, the public remembers the self-serving, back biting and most of all the dishonesty of the last Labour government. The Blair generation does not even see how they are seen by the public at large: their experience of politics has been very largely the backroom and the cabinet room and they know no other way. There are like fish out of water as they try to articulate a vision. Yet their focus group intermediated "vision" is itself an artificial construct.

The problem is that the professional political class has lost the strength of authenticity- and Labour as the dominant force during the rise of the political class, is the most tainted. The problems that the country faces require a greater depth of knowledge and expertise than most British politicians possess, but Labour is still trying to fight the lost battles of the past; still seeks to justify its mistakes; still hopes to rewrite the history.

Yet politics must be written in the future, and while the playground politics of New Labour are good entertainment value- especially Alistair Darling's memoirs-  they are very much in the past.

Of course the discrediting of the political class affects the coalition too, but for the time being, the less rancorously personal and more professional relationship between the Conservatives and the Liberal Democrats is more attractive to the voters than the venom of Labour.

In the end though, this is not meant to be a partisan post: in my view the very nature of politics is overdue a radical change. The bland bromides of every conference wash over the electorate without engaging them. Democracy can not be the preserve of the political class, but must be integrated into the whole of wider society. As single issue groups have become more influential - and gained more members than the inevitable compromise of parties, it is clear that our society is changing beyond the massed politics of the 19th and 20th century. Labour, as a nominally socialist party rooted in the tradition of the massed ranks of trade unions, may have been forced to abandon its  ideology in favour of pragmatic managerialism sooner than the others, and as a result is now the most vulnerable to the dislike of the voters, yet the form of both Conservatives or Liberals also seems unlikely to last another generation.

Although Labour seems totally oblivious to it, the fact is that Politics 2.0 is being constructed as we speak and new and more fundamentally radical ideas are being discussed outside the party political forum than within the stale walls of the party conference season. . 

Wednesday, September 28, 2011

Parkinson's Law strikes again

C. Northcote Parkinson died in 1993, but almost every day we see examples of his famous Law in action. Put simply he said "Work expands to fill the time available for its completion". From this fundamental insight, in various semi-humorous books, he laid out different aspects of how human nature conspires to undermine the efficiency of organisations.

You may want to read his original and brilliant essay here.

Nowhere is Parkinson's Law more clearly obeyed that in government bureaucracy.

I recently saw a good example.  A well known international financial agency has approached the governments of the Baltic countries to create a fund of funds that invest in the region. Leaving aside whether or not this project is a good idea in principal, and whether or not it might "crowd out"  the private sector or not, the slightest glance at how bureaucracy and government works should tell you what a wrong headed project it is.

Since the agency is asking for government money, it is clear that each of the three governments will have to go through an evaluation process and will need to depute resources to scrutinize the idea and to monitor expenditure once the funds are ear-marked. That is only right and proper, given that tax payer's money is involved. So the man-hours required simply to make a decision on the project will be significant. Once the idea is evaluated and presumably approved, a responsible official will need to be appointed within the relevant ministries, these officials will also need cover, for when they may be away, they will need office support. Meanwhile they will need to liaise with the existing investment agencies, both internal, and since the fund is intended to be international, external too, this means that both these agencies will need to appoint representatives to cover the project.

Before a single penny is invested, there are already at least ten people in each country that will be working on the project, so across the three countries that is at least thirty. All of this for a minimally sized investment fund. 

Even if we accept that creating such a fund is a good idea in principal, it is quite clear that the practical mechanics leave a lot to be desired. Yet the politicians will probably approve the project, since the headline message is positive- never mind that the cost to each country is likely to be higher than the benefits that the taxpayer may expect to receive, even if the funds perform well, which- of course- they may not.

This is happening across the European architecture at the moment, with grandiose projects taking on a life of their own, whether or not they provide any net benefit, or indeed even when they can only deliver the precise opposite of what was intended. From centralizing the fire services in Scotland, to investments in the Baltic countries, the government bureaucrats create more and more make-work projects and ever less efficiency.

At a time when the financial roots of the European project are being torn up, it strikes me that we will simply have to restrict the remit of government for the future. Big is not beautiful, it is mostly bad. A big state is unsustainable, and the network of patronage that nurtures it ultimately ends up becoming corrupt.

The agency should go back to the drawing board and the local governments should reject the idea at the outset.

Tuesday, September 27, 2011

So how much does Tony Blair think he is worth?

OK, so Tony Blair was a steaming pile of hypocrisy in office. So he was also pretty incompetent, leaving us with a constitutional settlement that could destroy the country and economic policies that brought us to the brink of national insolvency. 

OK, so he left us with the inept and unworthy Gordon Brown as his hand picked successor.

So he created a coterie of dishonest unelected "special advisors" - the so-called "sofa cabinet" and undermined the civil service, personalizing his regime in a way that was also essentially against our constitution.

So he was a war monger.

So he was a brazen liar.

So how come JP Morgan appear to have paid him a lot more than the declared £2 million?

Surely the experience he picked up in office belongs to the country, not to him, and he should, as his predecessors did, have used that experience to benefit this country, particularly since he did so much damage to it while in office.

But, if the rumours speak true, perhaps he was just lost in love's young blush. 

So Blair, it seems, falls into the same category of "corrupt former leader" as Schroder, Chirac and- we can only hope- Berlusconi.

It seems to me that these allegations should be investigated, and if sufficient evidence is found, that Tony Blair should face a trial.  This is Britain, after all and it is time that all of her citizens realized that no one is above the law- not even Mr. Blair or, dare one say it, "Lord" Mandelson.

Monday, September 26, 2011

Lib Dem disappointment

Now I have had time to consider the Liberal Democrat conference as a whole I must confess to feeling rather... underwhelmed.

The fact is that the party is falling into the same old habits as the other two. The characteristically over the top treatment of the Leader- fireworks, marching bands and all that is expected at the time of his speech, seems now to become an all purpose creep-fest for the entire conference all the time. Far from a genuinely interesting program of debates- with all the disagreements of the old Liberal Assemblies, we now have a uniform blandness and a display of unrelenting toadyism.

It is not particularly Liberal and it is not particularly convincing.

The manufactured unity of the conference does reflect a lot of like mindedness among the party membership, but frankly it also reflects the fact that the party seems to have forgotten its purpose as the focus for new thinking about politics. Our country IS in a crisis and yet there is not only unanimity among ourselves, but beyond the superficial posturing of Tim Farron, pretty much equal unanimity with our coalition partners. The party that demanded reform of our constitution to create greater democracy seems set to hand over more power to our own un-elected SPADs and party bureaucrats. I notice that the Daily Telegraph Top Fifty most powerful Liberal Democrats includes  12 such figures, and even the leader's wife, famously rather detached from British politics is said to be more influential than most of the party's MPs. 

Where is the debate? Where is the determination to avoid conformity that is supposed to lie at the heart of our political agenda? Where is the diversity of ideas? Where, in short, is the Liberalism?

It is quite clear that we need a lot of new thinking about the nature of capitalism, the power of the state, and its long term role. What we got was a boast about hiring 2000 new tax inspectors- a boast that for sheer fatuousness is hard to beat. We don't need new tax inspectors, we need a root and branch revolution to simplify and slim our tax code. We don't need empty threats to prevent reform of the NHS: we need actual reform of the NHS, before it goes broke. We don't need the puerile slogans of pavement politics, we need a genuine attempt to reconnect the British people to their political system and a national debate about where we can go from here.

The failure of Liberal Democrat ambition is what disappoints me the most. 

We need to work towards a new politics, which is not the use of new media to sell our existing, rather discredited message, but to create a whole new politics: Politics 2.0. 

Sure, our political rivals are not thinking too much about this. Labour are -judging from from the unhappy opening of their own conference- in particular trouble, but as political membership continues to fall, it is even more incumbent upon the Liberal Democrats to explore and develop new ideas.

The 2011 Federal conference looked like a great time to meet old friends and cheer on the party- it did not look like a group of people who were genuinely considering ideas, still less ideology. It was stale and rather boring.

That is not good enough any more. Politics is becoming not just irrelevant, but actively malign as poor decisions undermine our economic strength and social cohesiveness. If the Liberal Democrats choose to become simply an adjunct of the political class then they will be punished and rightly so.

Non-Conformist, Radical, Reforming, Liberal. 

We need to remember what these concepts really mean and forget the idea of conference as a lick-spittle creep-fest.    

Putin, Autocracy and Assassination

Vladimir Vladimirovitch Putin has not been a notably successful leader of Russia. He made a significant strategic mistake in making the production of oil and gas the priority for his country. The result was a higher Rouble, which squeezed Russian industry and finance, and undermined the rest of the real economy: the economy where most Russians have jobs.

Faced with a large number isolated of one company towns, instead of promoting entrepreneurship and trying to diversify their industrial base, he has simply subsidized the zombie company- it saved jobs in the short term, at the expense of undermining Russian competitiveness. Instead of trying to relieve isolation by investing in infrastructure, the Russian infrastructure has largely been left to rot. Dangerous nuclear stations, such as Sosnovij Bor on the Gulf of Finland, continue in operation, despite the very real threat it poses to the very existence of the City of St. Petersburg.  Roads and rail receive inadequate attention; aviation in Russia continues to have a lamentable safety record- with the tragic deaths of the Lokomotiv Yaroslavl Hockey team only the latest in a series of horrific accidents.

His economic record as President or Prime Minister is at best so-so. His political record is unrelentingly bleak. Since assuming power, he has ruthlessly eliminated his political enemies. He has shut out all but his own hand picked cadre of like minded autocrats. A monstrously corrupt group of former security service officers dominates decision making. Freedom of assembly has been severely curtailed, so that no one may create a political force that can challenge the dominant elite.  There is overwhelming evidence that he has manipulated violence in the North Caucasus for his own political advantage- leading to deaths of thousands of Russian servicemen and many more Chechens. He has picked a war with Georgia in order to try to dismember that country. There is significant evidence that Russia has bribed major Western politicians and sought to subvert democracy in several other countries.

Any objective observer would agree that Mr. Putin has a controversial record - it is a record that deserves significant scrutiny and challenge. Yet this scrutiny and challenge is precisely what the Russian people will not be allowed to undertake. The selection of Mr. Putin as a candidate for the Presidency condemns Russia to perhaps another two Presidential terms of corruption, incompetence, brutality and increasing stagnation. He has obeyed the letter of the constitution while totally subverting its original democratic intentions. By returning directly to the Presidency after only one term, he has indicated that he will never leave office willingly. His idea of a "United Russia"  is one which ignores pluralism, reviles diversity, crushes dissent. Yet he is creating a pressure cooker that could lead to a profoundly unstable country. 

Mr. Putin is said to have expressed the wish to restore Russia to the glory of the Tsarist times, but as I have mentioned before, a good definition of Tsarism was "Autocracy- mitigated by assassination".

The return of Putin to the Presidency sets the seal on the end of Russian democracy, yet it  may also mark the eventual end of Mr. Putin.

Tuesday, September 20, 2011

Can we take Murdo Fraser at his word?

The political scene is Scotland seems as close to a dead end as can be found. The corpse of Socialist cronyism still retains some vestigial loyalty in the West of Scotland, but the populist behemoth of Separatism now strides across the political landscape in the shape of our pudgy "Father of the Nation" Alex Salmond.

Meanwhile the crisis that faces Scotland is not just an economic or even a political one: it is a moral one. The creation of a class of dependents has elevated political patronage to the primary source of economic activity north of the border. Far from dispersing this centralized state, the SNP seeks to extend it. Instead of the different parts of Scotland deciding things locally, Salmond prefers to create bigger bureaucracies in Edinburgh.

Yet the wealth creating part of Scotland's economy continues to diminish. Oil support suffers from a chronic lack of investment in infrastructure- it is still not possible to fly from Aberdeen to Houston, and now barely to Baku. The road system remains congested and the rail system is Victorian. The financial sector has collapsed and the outlook for recovery is bleak indeed. The Scottish engineering and manufacturing base has shrunk dramatically, and the quality of education to provide the innovators of the future has fallen dramatically in the international league tables. A shiftless, unemployable underclass haunts the grim suburbs of Aberdeen, Dundee, Edinburgh and Glasgow. Drugs and alcohol play their part in Scotland's deteriorating health.

Socialism is dead, Separatism is a dead end.

Yet neither the Scottish Liberal Democrats nor the Scottish Conservatives have engaged the Scottish people. The crushing defeat of the Scottish Liberal Democrats in the May elections is still a sore point, yet the existential crisis gripping the Scottish Conservatives is no less serious.

The front runner in the leadership contest for the Scottish Tories, Murdo Fraser, is an old University colleague and his proposal to dissolve the Scottish Tories and start again reflects the political realities of the the new Scotland. Yet simply reforming the Conservatives as Progressives would not convince many that they were not the "same old Tories".

A more fundamental political realignment is needed in my view, if Scotland can avoid a return to the corruption of Labour, while rejecting the folly of separatism. I suspect that Murdo carries a large part of his party with him, yet there remain sufficient die-hards that could make his task, even if he wins, impossible.

In my view the Scottish Liberal Democrats should consider how best they may help to reshape Scotland's politics for the better. Scottish Liberal Democrats, though firmly radical in tradition have always understood the power of real economics, and been fully opposed to the Socialist make-work schemes that created the Labour client state in the first place. In that sense there is at least a piece of common ground we have with the party of the right. We need to think about what else we might have in common.

In the face of a choice between Socialism and Separatism, it is time that we offered a third choice: Sense. 

In order to do that, we may need to consider whether or not it might be wise to take Murdo Fraser at his word and to reshape Scottish politics through conciliation and cooperation with those who have long been our competitors.  

Outside the conference hall...

The media narrative of the Liberal Democrats at conference setting themselves up against the "evil" Tories is not one that I find particularly inspiring, even if it makes for tub thumping speeches and generates a bit more coverage for the party. 

In fact it is a distraction.

Vince Cable is wasted as the anti Tory shibboleth, when it is his economics prowess that is now most needed in order to analyse the growth implosion outside the conference hall. Yesterday's downgrade of Italy looks to me like the beginning of the end of the financial system as we have known it for some twenty or thirty years. The political paralysis across the European Union is now not only threatening the existence of the Euro, but of the European Union itself.
The breakdown of the EU would be an economic and political catastrophe for the UK.

While infantile Conservatives rub their hands with glee, they fail to see the unfolding disaster in Britain. Our markets, our trade, our very livelihood depends on Europe, and a catastrophic meltdown of currency and the wider system, far from being the "liberation" that the more right wing Tories believe, has the potential to become a bigger economic shock than the great depression- with incalculable and permanent impact on the UK- even leading to the break up of our country.

Vince Cable is one of the commentators who got the crisis right, and his solutions are among the most nuanced and thoughtful. Although he is right to trumpet his victory over Tories in the Murdoch affair, it is his economic analysis that we could most do with right now.

I do not buy the idea that splitting "good", that is high street, banks from "bad", that is "casino" banks is on its own sufficient safeguard- the fact is that the crisis has its root in bad lending- basic mortgage lending- that was only made worse by the bundling of such dross into more complicated securities. The original failure was a basic bank failure and not an investment bank failure, albeit that investment banks made a poor situation into a critical one.

While I welcome the current ideas on bank reform, the fact is that the UK faces the immediate crisis with a far bigger structural deficit than we knew, and it faces the potential for a critical breakdown in trade and finance flows.

We need to be addressing this crisis with far more urgency: the fact is that much that is going on inside the conference hall in Birmingham will be irrelevant, pretty soon, unless we can understand and get to grips with the economic crisis.

Vince Cable has been a good lookout, but the country is still headed towards the iceberg- as Italy pays the price for its failures of political and economic leadership, we must make sure that the UK does not go the same way.

How we address that is what I want to hear from the party leadership: it could hardly be more topical or relevant.

Monday, September 19, 2011

Conference and Conference Calls

Alas I am not able to get to Birmingham for the Liberal Democrat conference this year. I suspect that the party will rally round, but I notice the venom of the Mail and the Telegraph is already rising- the slightest thing that they consider likely to make the Lib Dems unpopular, from set decoration to tattoos is highlighted, while the body of good policy making and good speakers will- of course- be ignored. The vituperation coming from the right wing press is almost an affirmation: it underlines the new power that the party now has. Nevertheless, there are many things that, if they are not addressed at this conference, will need to be addressed soon. Tavish Scott's comments on Nick Clegg, while reflective of a certain personal bitterness are not completely wide of the mark. The leadership can, and will, get away without much criticism at this conference, but it does not mean that such criticism is unmerited. 

While Tim Farron made a good speech, there are many points that he made that I- for one- profoundly disagree with. I do not, and never have, accept the left/right labeling of Liberalism. In my view we must do more to convey the clarity of our ideology, because by accepting the paradigm of left/right without also explaining our anti authoritarianism, then the hostile press can continue to portray the party as merely a chameleon- not matter that we are far more wedded to our ideology than our political rivals are to theirs. I also believe that the political tactics behind supporting a 50% income tax rate may become a similar problem to the failures over tuition fees. I would far rather support a land tax than a higher rate income tax, and if it becomes- as it may- a choice between them, then this could end up as "a humiliating climb down". That aside, I expect my many friends in the conference hall will enjoy themselves.

Yet beyond the conference hall, the storm in the financial markets is on the brink of becoming a hurricane. 

The conference call this morning of the Greek government with the Eurozone main leaders is being marketed as a critical point. In fact the point of no return is already upon us. The failure of leadership in Germany is palpable, and the electorate are minded to punish the governing coalition: the meltdown of the FDP in Berlin is a horrible warning. The fact is that the political leadership in Europe still does not have an answer to the crisis.

This could be the week where the crisis provides its own answers- and they may not be ones that politicians can control. The market capitulation seems to be a matter of a few trading days away.

Friday, September 16, 2011

What is to be done?

My latest trip to the UK made me very sad and somewhat angry.

Even on the Katia washed streets of Edinburgh there were young men begging for change. In Estonia the beggars are old and genuinely in need, in Edinburgh they were young and genuinely unemployable. The beggars are a symbol of something worse- the palpable sense that most people no longer feel in control of their destiny. So many have withdrawn into a squalid fantasy world of drugs, alcohol or video games. The misery is obvious and the determination to escape equally so- drunkenness is everywhere. The pallid obesity which is the general lot on the streets is a great shock, after you have  become used to the good health and good looks of the Estonians.

It is therefore not enough to say that there is a political crisis, or even an economic crisis: what I see is a moral crisis. Too many Scots were abdicating their own personal responsibility: "this is the fault of the English, independence will fix this". Too many elsewhere were arguing "it is the economic crisis that did this to us".  The fact is that the fault is not in others, but in ourselves, that we lack the awareness and the energy to define the problem and fix it.

Britain remains a rich country, but the population are failing to take responsibility, let alone take control in their own lives. It is irresponsible to smoke, to drink too much, to fail to take any exercise, to fail to study properly, to spend more than you earn. The consequences of such irresponsibility include poor health, poor wealth and a poor understanding of the world.

I think that politicians are expected to provide leadership and yet, how can they? A politician can determine how much is spent on anti smoking campaigns, but can not determine whether or not people smoke. Yet the politicians are attacked when the health service can not cope with the health consequences to those who choose to smoke, who choose to drink to excess, who can not control their diet and exercise regime.

So in the words of the Russians of the 19th century faced with the political paralysis of Czarism: "What is to be done?"

The Liberal solution has been to place political control with those most affected by political decisions. If people take control, they end up becoming more engaged and making better decisions.

The problem now is the apathy in British society. The failure of the AV referendum reflects a primary failure of those who believe in such political and constitutional change to explain the critical significance of this to the voters, however, it also reflects a deep political inertia.

Yet I have come to the conclusion that though the Liberal Democrats must continue to make the case in government for major reform, the fact is that we need to recover more of ourselves as a party of ideas, rather than as a mere "party of the court". We need to consider the entire issue of social and political engagement. We know that societies where the citizen is politically active- like Switzerland or the town meetings of the United States- create happier and more engaged citizens which in turn create greater social cohesion and greater wealth.

We also know that social alienation is immensely destructive and can lead to a vicious circle of disillusion and failure. The fact is, across British Society, from the riots of the summer, to the rantings of the Daily Mail, apathy, and disillusion are combining to create exactly such a vicious circle. 

I suppose the first thing that we can do is to make people- including ourselves- believe that things can change. If we can cross that bridge of self belief, then we may consider how best to proceed, but the most critical thing right now is to rediscover optimism. 

If we are to address our moral crisis, we need first to repair our morale.

It is in pretty short supply on the streets of Edinburgh right now.  

Monday, September 12, 2011

Its worse than you think...

Travelling to Edinburgh in a nearly gale- NOT assuredly a hurricane- reveals Britain at almost its worst. I travel in a diesel train, but we are forced to adhere to a 50 MPH restriction imposed on electric trains, even though the train is already 15 minutes late, so there are no electric trains immediately ahead of us- it is just "the restriction- for your safety". No, it is a restriction for insurance or for operational reasons or for signalling reasons. It is not for the passengers, it is for the company. Yet, despite the large number of passengers missing connections, we are supposed to believe the health and safety spiel- no matter that it is not the truth.

This is where I find myself losing my temper.

Across almost all aspects of British life, we are not given the true information, but merely bluffed with customer service bullshit. It is as though the people here could not handle the truth, that everything must be sugar coated. I can see a gale outside, but it is not that serious: trees are not uprooted, rivers are not much flooding. We are, in short, making a crisis out of a drama.

It is self indulgent. It is infantile. It is destructive. It is pathetic.

Whatever happened to the stiff upper lip?

As for what I find in my old home of Edinburgh- this must await another, later blog, I am too sad, too angry, too sick to describe my immediate impressions. This is a third class, third rate, third world capital charging first world prices and then some. In my hotel I am paying not only more than I paid in London, but more than I paid for a much better hotel in Zurich a few months ago.

It smells of stale fish and is none too clean.


Beggars accost me on many corners. A parade of the obese, obviously sick already, lurk outside doorways, lighting cigarettes.

I am utterly shocked by the state of this place- I need to get my head around this. It is literally disgusting.

Friday, September 09, 2011

The Financial become Economic Crisis now turns into a Leadership crisis

The fact is that the financial crisis was rooted in a failure of politics in the first place.  The changes to mortgage regulation under President Clinton forced US banks to enter the "sub-Prime" Market in the first place. The Banks, attempting to improve- as they hoped- the riskiness of these loans, bundled them with safer loans in order to try to insure themselves.

Meanwhile, the monetary management by the global central banks was very loose: interest rates were historically low for a prolonged period. The implication was that there had, under the influence of new technology, been a significant improvement in capacity. In fact as we now know, both low rates and nominally higher growth were being maintained by a dramatic expansion of bank balance sheets. The innovation was simply in finding ways to expand global liquidity. Finally the banking system imploded. The next- disastrous- decision was political: to take the banks into public ownership. This transferred a private sector crisis into a sovereign debt crisis.

Now the markets are on the edge of another nervous breakdown: there is not enough growth to finance the debts. Either the taxpayer has to take the whole hit, or banks have to write down their sovereign liabilities- requiring another painful recapitalization of the banking system. The Governments have reached the end of the borrowing road- and yet, the process of de-leveraging- unmitigated- will plunge nations into a long and deep depression that will take at least a decade to work through.

The political choices are all toxic. Reducing sovereign debt is a must, but if there is no growth, then the need to continue to take money out of the economy in order to reduce debt means painful real spending cuts and risks destroying any signs of recovery. A vicious circle of of debt payments reducing growth, requiring bigger debt repayments, reducing growth faster then ensues.

The problem is that the political leadership across the world remains paralysed. The failure of leadership is terrifying the markets. The politically dysfunctional United States remains locked in a deadlock ahead of the next stage in the electoral cycle. The Germans make occasional radical gestures without adequate thought as to the consequences- and yet at other times, are dangerously inert. The Japanese are in a perma-crisis, France in elections, Italy has no credibility. All of this leadership vacuum adds to uncertainty in the global financial markets.

Yet, although the markets are jittery, the crisis has also exposed their limitations: The once all powerful bond market no longer sets the weather in quite the same way as once it did. After all the market was not so efficient: it permitted the unsustainable explosion of credit in the first place- without questioning whether the quantum of debt was repayable or not. Ironically, for the first time since the Bretton Woods agreement, policy makers have a free reign to reshape the global economy. Yet the failure of leadership is so total that no coherence - indeed few actual decisions at all- are emerging as the basis for a new consensus.

A new financial architecture is now needed- a new Bretton Woods.

Yet our leaders can not understand the new situation- and unless the Western leaders rediscover their mojo pretty soon, then the new financial architecture will be dictated by Beijing- to the permanent discomfort of the West.

It is not that China is such a giant- their economy is still much smaller that the US or the EU- but the are used to creating plans and sticking to them, and this is giving them an edge in the current turmoil. They can provide leadership by default. Yet it is time for leadership in the West- who can provide it?

Monday, September 05, 2011

Scottish, British (?), and European

The majority of people in Scotland would subscribe to an idea of multiple identity. Being Scottish and British and European is something that a large number- probably the majority- of the people of Scotland accept as their identity.

However the rise of the SNP has brought the central pillar of this identity- Britishness- sharply into focus. A significant number of people reject their British identity. Campaigning  at the last general election in the North East of Scotland, I found plenty of doors that said "I never vote for London based parties". Even when I pointed out that the Scottish Liberal Democrats were based in Edinburgh, it was plain enough what the message was: "independence-nothing less".

Now, the SNP is rising in the polls for Westminster seats, while the Scottish Conservatives are actively deciding if they even have a future in their current form. Meanwhile, Alistair Darling's memoirs explains just how dysfunctional the Scottish Labour Party had become, that they not merely tolerated the monstrous behaviour of Gordon Brown, but actively elevated him to the leadership of the national party. The neo-Stalinist cronyism of the Central belt of Scotland Labour Party was written up to a catastrophic national government level.

The position of Scotland within the Union is under question as never before.

Yet as I find myself contemplating the tapestry of Scottish history I ask myself a big question. What did Scotland as a separate state ever accomplish that was better than what was accomplished as a partner in the British state?

Apart from the mud-clad fantasy of Braveheart, it is absurd to consider the years of a separate state as much of a success. Robert the Bruce, the quintessential Scottish hero- and an ancestor of mine- died of leprosy, the quintessential disease of squalor and filth. Yet fast forward the Scottish story, and the achievements of the Edinburgh enlightenment or Clyde engineering were precisely because Scotland was part of a larger economy and society. British Scotland was far more successful than anything Separate Scotland ever offered its people.

I have always believed- and still do- in Scottish Home Rule. I believe in a Federal Britain. Yet, more an more I see the complete rejection of British identity by many in Scotland. Yet, I think that this is a fantasy too.  A separate Scottish state could barely have a border with the rest of the former UK, and if it did it would have major economic challenges, yet the SNP proposes policies that make it increasingly likely that  borders would go up at Berwick. The SNP proposes joining Schengen- yet unless the rest of the former UK joined at the same time, then border posts there would certainly be. Many in the SNP actively want such and outcome, of course.

However, even if physical barriers can be avoided, there would be more and more economic barriers. The Scottish banking sector would need to be shrunk dramatically, since the smaller state would not have the resources to back RBS or HBOS. How many thousands of high paying jobs would need to go in Edinburgh to make that happen?

As Scotland drifts towards outright separation and the UK loses its identity, I wonder if I may end my days holding a passport with a shield of three lions, not England of course, Estonia.

Friday, September 02, 2011

Planning with no Plan

The British economy faces some serious questions about how it can grow in a sustainable way, but one thing has become clear: the planning laws are now so restrictive that they are not sustainable. The problem is that NIMBY-ism has mutated into BANANA-ism (Build absolutely nothing anywhere near anywhere). The consequences are villages that no longer have populations that can support a pub, let alone a school, shops or anything that makes a community- as a result the countryside is losing population fast.

It is in a word “unsustainable”.

Meanwhile the less than 7% of the land area that is actually built up has to take ever more of the population- and the costs of housing now put it out of reach of the majority of the young generation. Our “property-owning democracy” isn’t one.

The self appointed “defenders of the countryside” (funny how so many “Greens” turn out to be large landowners) continue to avoid tax by putting their land into trusts, so that for a large part of the land area of the country, we neither know the real ownership, nor do we receive a penny in tax: indeed the subsidies we give to the agro-business sector could pay for a whole new rail and road network.

The UK infrastructure is a joke- we can not continue to make do on the 19th century rail and mid 20th century road system.

The UK planning regime is draconian, arbitrary and restrictive and unless a more flexible and intelligent one is put in its place, the UK faces drastically higher costs and much lower living standards- that is the flip side of opinions these self-appointed “defenders of the countryside”. They are not evidence based, they are visceral and they will end up undermining our whole economic- and with it environmental- future.

BANANA-ism is anti-social special pleading, and it is time we had a far more realistic debate on the wider issues.

The Town and country planning act was routed in the neo-Marxist ideas of the time and has failed in every purpose it set itself: it does not protect sensitive sites and does not allow sufficient flexibility to allow growth where it is needed.

A full review of the planning regime in the UK is not "concreting over the country". Already more people are living in squalid and overcrowded conditions- as housing becomes unaffordable for more and more people, then a return to large scale programme of council housing will creep ever higher up the political agenda.