Friday, November 25, 2011

Now is the winter of Russian discontent

As regular readers know, I am very sceptical about the stability of the Russian government. The supposedly large poll leads that Vladimir Putin's United Russia has held always seemed to me to be suspect, given the political history of the country. Although dissent was not open, it was always there.

I pointed out that the decision of Vladimir Putin to return to the Presidency was a critical mistake that would not strengthen, but weaken the regime. So it is proving to be. Inside Russia, the "September 24th coup" is now seen as such a blatant disregard of democracy, that even those who previously supported Putin have begun to disassociate themselves from his government. The fact is that the Putinistas by ignoring the voters completely, were placing themselves above the constitution. The result is a chorus of contempt that is going to derail Mr. Putin's plans to remain in power for a further two Presidential terms, and may even stop Mr. Putin from returning to power at all in the Presidential elections, just announced for 4th March 2012.

The turning point was reached a few days ago when Mr. Putin was booed at a marshal arts event. Though not quite the fall of Ceausescu, the fact is that at various other sporting events even mention of Putin or United Russia has led to a repeat of boos and catcalls against the regime. It is clear, that even with the substantial vote rigging that is likely to take place in favour of United Russia at the Parliamentary elections, the collapse in support for the ruling party can not be hidden.

Authoritarian government in Russia has always failed. Those who insist that "Russians are children" who "like an authoritarian leader" ignore the fact that the alternative has not been tried. Russia has not yet entered the post Communist world. The Siloviki - the sinister security people who control United Russia- are all linked to the organs of repression of Communism.

Despite the brutality of the regime, it can not disguise its essential weakness. The economic and political challenges: industrial restructuring, North Caucasian terrorism, the threat of secession of non Russian regions, the challenge of China, would be daunting enough even if Putin enjoyed unquestioned legitimacy. The growing public derision for United Russia shows that he no longer has such legitimacy.

The huge miscalculation of September 24th grows more obvious by the day, and it grows ever more likely that the changes that Russians demand of their government are not longer simply cosmetic ones. 

The conditions for a Russian Spring may not yet be in place, but Mr. Putin's government can no longer dismiss such a possibility.

Russians too, like Arabs, are seeking an end to authoritarian government.

Thursday, November 24, 2011

The Credit Crunch Part II

The failure of the German Bund auction yesterday is being written off as being of relatively minor significance. It is not- it is critical. If the Federal German government is unable to attract bids for nearly half of the Bunds that they offer, it tells you that the rest of the credit market is also closed. Banks are unable to access even the interbank market, and we are seeing the system come under renewed strain.

Already we have seen the collapse of the Lithuanian bank, Bankas Snoras, which has also been dismissed as being of little significance. However, the fact is that there is now a serious liquidity drought across central and eastern Europe, and this is spreading. There are strong rumours of a major liquidity crisis in the Russian banking system- and again the failure and subsequent recapitalization of Bank of Moscow is being dismissed as being of minor significance, simply the result of the political fall of Yuri Luzhkov. In fact it may well be that the fall of Luzhkov was the result of the bank failure, not the cause.There is plenty of anecdotal evidence that Russian capital markets are under severe strain.

There is a cumulative body of evidence that suggests that liquidity in the European credit market as a whole is draining away and that the crisis is now testing bank balance sheets- even those with state guarantees- once again.

The fact is that despite the persistent pressure of policy makers to keep interest rates low, the markets are no longer prepared to put capital at risk when returns are being kept artificially low. In other words, there is likely to a significant rise in rates. In fact for the general customer this has already happened, but not yet for banks, which have been trying to take the opportunity to recapitalize themselves with higher margins. Now the regulatory need to bolster bank balance sheets is colliding head on with the renewed tightening of the market. If Germany itself is suffering a buyers strike, then it is clear that the Euro banking system is under severe pressure.

The pressure on sovereigns has eased a little with the advent of new governments in Rome, Athens and Madrid, but that has merely refocused attention to the banks themselves. The Eurozone banking system could be poised to break down without further emergency measures.

With German Bunds now trading around the level of Gilts, the crisis takes yet another lurch downward.

Wednesday, November 23, 2011

The UK EHRC does not know the meaning of human rights

A report has been published this morning concerning the quality of personal care for the elderly in England and Wales. It sets out findings that suggest that about 50% of those it quizzed are receiving a quality of care that is unacceptable. That, of course, is extremely unfortunate. However there are several features of this report which render its findings questionable at best and useless at worst.

The first is the author of the report is the Equality and Human Rights Commission. This is a statutory body that "promote[s] and monitor[s] human rights and.. protect[s] enforce[s] and promote[s] equality across the nine "protected" grounds- age, disability, gender, race, religion and belief, pregnancy and maternity, marriage and civil partnership, sexual orientation and gender reassignment.". The leader of this body is Trevor Phillips OBE, who has had a controversial record. Indeed six members of the commission have left after a series of disputes with the now part time chairman of the commission. Others are said to be considering their position.

It is not a body that has specific skills that could allow it to undertake a specialist investigation of the realities  of care for the elderly. Indeed it even undermines the quality of its own conclusions by suggesting that the problems that they identify could be much worse, because some might be "too frightened to complain". The alternative, that those who are complaining the loudest may be exaggerating the position is not considered. So the only valid conclusion of this extremely expensive report is that there may be problems in the provision of personal care services to the elderly, but that the scale of this problem is not quantified.

What bothers me the most is not that problems have been identified- I doubt that there is any aspect of the provision of public care- or private, for that matter- that could be above criticism. No, my beef is that the EHRC suggests that this problem is a human rights problem, and that the solution is- surprise surprise- to bring the provision of personal care under the control of human rights legislation. So a "human rights" quango wants to expand its remit, well pardon my cynicism, but "they would, wouldn't they?".

Personally I feel that this report like so much of the "human rights" industry of special pleading in the UK actually degrades the idea of the fundamental nature of human rights. The fundamental rights enshrined under the universal declaration of human rights have been ignored by the UK, but not in the way that the country provides care to its elderly citizens. The use of torture and violence by British forces in Iraq, for example, is well documented- and it is to our thorough discredit. To try to put the patterns of behaviour which the commission says it identifies in certain aspects of treatment of the elderly on the same level as torture is totally inappropriate.

There may be a problem with personal care with the elderly being inadequate. It would not be a good thing if this was so. The remedy is to improve management and reporting and probably funding in the areas where a need for such change is found. The remedy is not to submit to the special pleading of a self appointed human rights industry that can not tell the difference between real human rights abuse and the poor delivery of services.

Since the EHRC can not tell the difference, it is hard to understand why the UK government should continue to fund such a patently useless organisation.

Tuesday, November 22, 2011

Excessive Executive pay is theft from the shareholders & it can be stopped

The dramatic increase in the gap between the highest paid employees and the average pay grade is not just bad economics and worse politics. It reflects a major break down in corporate governance.

The fact is that not only are most fund managers lousy investors- they rarely beat their benchmark, and the majority in recent years have actually lost money for their investors- they are truly appalling stewards of the investments that they make.

Fund managers have been content to allow through any pay request made by the management of the companies that they invest in. These requests come, of course, through the remuneration committees of company boards, which are largely staffed by... ex-executives. Instead of querying the increasingly large sums going to senior management, the fund managers, if they dislike their investment, will simply sell it.

The result is that executives have had little or no scrutiny of their remuneration- it is simply rubber stamped by a bunch of compliant place men. 

Fund managers fail in the fiduciary duty to their investors if they permit management to over pay themselves to this extent. If the government wishes to make a point, they could remind fund managers that they have this fiduciary duty. Meanwhile, individual investors in funds could threaten to sue fund managers that continue to vote for excessive pay packages for senior company employees.

The solution to the robbery of the shareholders by senior management is to force the agents of the investors, i.e. the fund managers, to take the issue seriously. We have the means to impose greater discipline over managements, but the cozy cabal of the City has not been forced to take action. 

Time to do so. Which individuals will lead a class action against the UK fund management industry for permitting this theft to take place?

Monday, November 21, 2011

Housing crisis.. government prepares to act (OH NO!)

The stupidest feature of the Blair-Brown government was they way that they responded to every situation with a detailed policy outline or eye-catching "initiative". No aspect of economic or political life could remain undisturbed for long. More criminal justice bills, for example, were passed in their period of office than in the previous ten governments put together. From bulldozers to benefits, more and more of our lives became subject to government intervention and regulation.

It was a disaster. The OCD Brown, both as PM and under Blair undermined our competitiveness, created a class of benefits dependents, demoralized teachers, health care professionals and the police- among others-  by repeatedly second guessing and overruling their experience and advice.

It was a breath of air to have the coalition put a pause on legislation and to seek to repeal some of the more crass mistakes of this Labour mismanagement. 

So it was with a feeling of groundhog day like despair that I read this morning that the government has decided to ACT on the housing crisis in the UK. Of course there is not a housing crisis in the UK yet, but on current trends there will be a problem soon, unless there is more construction of new housing permitted across the country. In the past the state has managed the process directly, by building social housing- council housing, we used to call it- but now the proposal is to provide government guarantees to banks to support mortgages to first time buyers.

Doubtless the ministers and the Prime Minister who is making the announcement this morning will congratulate themselves on an exciting and original idea to stimulate the housing market into growth once more.

Except it is not an original idea- FDR thought of it in 1930s America and created the federal mortgage protection agency that became known under the friendly acronym Fannie Mae. Yes, you have heard of it, because it is the essential bankruptcy of Fannie Mae that has been one of the major problems that the US government has had to deal with.

So, I have started my day shaking my head in much the same way as I used to when Labour were in power: muttering through gritted teeth "surely they can not be so self deluded as to not understand the consequences of this foolish action"

But of course, they are and they don't.     

Saturday, November 19, 2011

Testing China to destruction

A major characteristic of the Great Recession is the way that chronic and long-term problems finally lead to an acute crisis. The public sector profligacy in Greece or the high debt position of Italy are the consequence of decades of policy mismanagement. The US deficit is the result of long term political deadlock, while in the UK and Ireland the roots of the crisis lie in an obsession with property, rather than production, as the key to wealth. Policy mistakes, misallocation of capital, unfunded pensions, poor productivity have been festering for decades. It is only now that the pressure that these put on economies finally leads to crisis.

We have, up until now, mainly seen the crisis hit the Western world. The United States still faces a political struggle to control its deficit as the parties refuse to compromise and, as with much else in the political discourse of the USA enters instead into an arid discussion on matters of the constitution. Yet Business America has coped better than elsewhere, and while the state sector continues to drag the country down, the USA is increasingly well placed to recover.

The European Union and especially the Eurozone faces a far more grim prospect. Without major structural changes, the single currency can not survive, yet those necessary changes are still resisted and the process of reform is very slow. Eventually- for such is the way of the European Union- there will be a compromise that creates a new stability, but until that compromise is achieved, the outlook is dangerous and uncertain.

The conventional wisdom is that Europe and America- and probably Japan- are declining powers in the face of the new powerhouse of Asia, China. That may be so in the longer term, however it is not certain, and the crisis has only just started to lap against the shores of the Middle Kingdom. If the roots of the crisis in the West lie in a property bubble, China has a huge property bubble, which is about to burst. If the roots of the crisis in the West lie in too much state intervention, then nominally Communist China has plenty of misallocation of resources and inefficient capital. If the roots of the crisis in the West lie in policy mistakes of politicians, then how many more mistakes have been made in a system where the power of politicians is untrammeled? 

Now that the overheated Chinese property market is slowing sharply, it is clear that China too is joining the crisis- it is not the safe haven that some were suggesting. Indeed long term China bears, like Hugh Hendry, are dramatically outperforming. In fact, the crisis coming to China will begin to test the major Chinese weak spot: its political system. Ever since 1989, and repression of the Tiananmen Square protest, there have been questions about the long term political stability of the Chinese Peoples Republic. With an upsurge in protest in Chinese society, it may well be that the impact of the bursting of the property bubble could lead to major political instability.

The impact of the repeated policy interventions of the Greenspan years at the Fed did not smooth the cycle: it lengthened it. All the problems of the boom were stored up, until even the shock and awe of the Fed could not stave off the required re-balancing. After the longest boom in history, we seem to be set for a prolonged period of retrenchment and austerity. As that happens, many of the ideas of the boom: that debt and deficits don't matter, that inflation is banished, that you can have too much cash, that governments can not go broke- all are being tested. 

Yet the critical thing that underlined the prosperity of the boom was the huge shift in production to the seemingly limitless labour market of China. Now, we can see that this labour market is not limitless, that inflation in China is reducing their productivity and competitiveness, that there are financial and political risks in China (just as there is a risk to your intellectual property). The result will be that China comes under much greater scrutiny as a place to base manufacturing- and already, several American companies are repatriating production of some high-end goods.

As with so much else in the Millennium Depression, our most basic assumptions about the world order are being challenged- and China will not be immune from that either.    

Friday, November 18, 2011

Estonian Egalitarianism (= success)

One of the most attractive features of Estonian society is the complete lack of anything that could be described as social hierarchy. Even in countries smaller than Estonia a great deal of pomp is given to the political leaders- large numbers of bodyguards, police outriders on motorcades, government jets and all the toys of the powerful. In Estonia the ministers fly commercial and the level of security is minimally discreet.

Talking last night to a friend who is the head of one of the largest local banks, he remarked on the fact that Estonians do not feel constrained by different levels of wealth- money is not a social barrier. There are creative people who have very little money, but they may still socialize with business leaders, indeed artists or writers have their own clubs, and an invitation to visit is quite prized- and is not a function of price in the slightest.

I suppose this egalitarianism is a function of the long periods when Estonians were an undifferentiated mass of peasantry, and even when some were able to become freeholders or even move into the professional classes in the 19th century, they kept their roots in the land. Of course the occupation too undermined the political power of the wealthy, mostly by stealing most things of value. 

Even still, the open access that Estonians have to their political and economic leaders is appealing. I saw the Prime Minister out practicing his skiing before the snows come- though I was not aware he injured himself. 

This egalitarianism is a very stubborn root, and clearly is a part of Estonian political culture that nurtures the highest democratic values. Whether it comes from Lutheranism, from education or indeed from "peasant values", it is one reason why corruption is generally held in check. The kind of blatant theft that is obvious in Russia could not be tolerated in Estonia. Though, doubtless there are plenty of self-serving and venial politicians in the Estonian political class- the vast majority are not. Where a political figure comes under question, there is a clear question of disgrace and shame: not, most assuredly the case in many other countries.

So Estonians are educated, open minded and egalitarian. It certainly helps explain the radicalism of Estonian Liberalism- and its electoral success.

After I penned this article I noticed the latest piece from the excellent Eastern Approaches blog from The Economist. 

Thursday, November 17, 2011

Euro breakdown is bringing us to closer to catastophe

The economic crisis that began in 2007, became a banking crisis in 2008, a sovereign debt crisis in 2009, a Euro crisis in 2010 has now become a political crisis in 2011. All of the deficit countries in the Eurozone, the so-called PIIGS: Portugal, Ireland, Italy, Greece and Spain have now seen their governments replaced (in Spain, that will actually take place after the election this weekend, though the result is not in doubt). Germany seems to have won the argument that harsh economic discipline is the only solution to the protracted restructuring that seems to be required.

The stereotypes that have been flying around: that Greek dishonesty or Italian indiscipline are the root of the crisis may appeal to a certain kind of headline writer, but in fact the crisis has been caused as least as much by German indiscipline and banking incompetence. Of course Chancellor Merkel has much to gain by being portrayed as an inflexible, "iron" Chancellor, but the reality is that unless Germany can find some flexibility to allow the ECB to become a true lender of last resort to the Eurozone banking system, then the single currency in its current form is doomed.

While technocratic, un-elected, governments take office in Athens and Rome, in countries which have a very recent history of fallen democracy, we can see a short-to-medium term strategy taking shape. The weakest economies will get a does of German discipline, while Germany considers the prospect of full fiscal union if those economies can be stabilized.

A two-speed Europe is already decreed.

However the two speeds may be a standstill- at best- in the core Eurozone and a major reverse in the periphery. 

The failure of the capital markets has already caused an investment drought, for those countries inside the EU, but outside of the Euro. In Central and Eastern Europe, it is already clear that the Eurozone banks that have been most active in the region are looking to make an exit, in order to retrench their home operations. UniCredit has already put several of its operations up for sale, intending to maintain their operations only in Poland. Commerzbank is set to do the same. Yet these countries are already suffering from a serious capital shortage. In the UK, the lack of investment is already causing a significant increase in unemployment. In Spain the already horrendous unemployment numbers are getting worse.

The consequence of the kind of restructuring that Germany is asking for, will be a huge increase in the numbers out of work. The next year will see levels of unemployment not seen since the hungry thirties. The implications for the kind of restructuring that is under discussion are unemployment rates that in some countries will top 50%.

With democratic governments already suspended in Athens and Rome, the European political elite may believe that it can ram through their policies without consent "in order to save the Euro". However, the price is simply not worth paying. Far better to restore the shock absorber of independent currencies and attempt to ease the pain of the inevitable restructuring under the control of governments that have the consent of the governed than to maintain this suicidal policy mixture.

The "Merkozy" Paris-Berlin axis is said to be under strain. To my mind, the polices that are being followed can not but lead to massive unemployment and a major political breakdown unless Germany simply opens its moneybags- which they are understandably reluctant to do.  Yet without major flexibility and compromise from Berlin, the economy of all of Europe is headed for meltdown.

Relying on German flexibility to save the currency strikes me as dangerous as relying on Greek probity. This is the moment of truth for the Euro. Without German shock and awe in the financial markets, the economic outlook is for a major contraction in Europe, accompanied by huge unemployment and significant political instability. 

We are back to the 1930s in Europe. 


Wednesday, November 16, 2011

Syria follows Libya...

Restored Libyan Flag

Soon to be Syrian flag again

The Libyan revolution saw the restoration of the pre-Gadaffi flag . Today in yet another tumultuous demonstration in Syria, I saw that the crowds had swapped the Assad-era flag of Red-White-Black with two green stars on the white stripe, for the flag above.

As the news comes in of a major attack against the feared Air Force intelligence by the Free Syrian Army, it is increasingly clear that Bashar Al-Assad is losing his grip on power. An ambush earlier this week, again said to have been carried out by the FSA, left 34 government soldiers dead. 

France has recalled its ambassador, and the country now faces increasing isolation and probable sanctions if the situation continues to get worse. It is really only a question of time before the regime must fall, and if Assad wants to avoid the fate of Gadaffi, then he should open negotiations as soon as he can. Yet, he remains his bloodthirsty fathers trusted son and anointed successor. The brutality he has already shown has lost him the chance of any congenial exile in London- his wife's birthplace, and with the Arab League now imposing sanctions, the list of places of sanctuary grows short indeed: Iran is his only ally, and that country is also increasingly unstable.

So there is still every chance that the cornered Assad will chose to fight to the death. He may well succeed in dying, but he will do a lot of damage in his ruin.

Of course I welcome another step in the liberation of the Arab world- whatever the future may bring, the regimes that are tottering or which have fallen already can hardly be mourned. Sometimes the West has seemed rather conflicted- wanting to see the fall of tyrants, yet concerned about stability and energy security in the region. It is the same hypocrisy that saw Western governments become increasingly equivocal with the liberation movements in the Soviet Union or East Germany- preferring the certainty of stasis to the uncertainty of the fall of Gorbachev.

On the other hand, as the "Occupy..." movements show, there is increasing anger being directed towards our own political class. The cadre of professional politicians that dominates European Union governments may not be tyrannical, but is is proving ever more incompetent.

Revolution is sweeping away the certainties of the post colonial world in the Arab world. It seems to me that the political, economic and social failure of Europe will see a new reality emerge here too- it may not be revolutionary in the strictest sense, but it is certainly going to be radical. 

Tuesday, November 15, 2011

Small is still beautiful

In the 1970s came a school of economic thought popularized by the German-born British economist, E.F. Schumacher called "Small is Beautiful".  This itself was the product of much work done by Leopold Kohr, Schumacher's teacher, and the author of the seminal work "The Breakdown of Nations". 

The simplest level of the ideas of the small is beautiful movement is that "when something is wrong, something is too big". The implications of this are profound. Innovation, for example, usually flows from small companies, not from large ones. Mergers of large companies almost never deliver the returns that they promise, In the realm of ideology, the creation of massed -isms is a reflection of a social unit that is unable to create bridges across different aspects of the human condition. In short, the alleged benefits of economies of scale are largely fictitious.

The current debate about the future is being made in increasingly apocalyptic terms. The crisis is creating a feedback loop of loss of confidence, "Chicken Licken" really seems to be in charge.   Yet that is not to say that we can just continue as we have been. Neither can we continue to destroy nonrenewable resources- the resource capital of the planet- as though it was simply a contributor to growth, with no other cost. Sustainability has become a cliche, but the depletion that it represents is still a critical issue for the future of our planet and ourselves.

In the current crisis it is already clear that banks that were too big to fail, were in fact simply too big. Yet the manner of their rescue- consolidation and nationalization did not end the problem- it simply bankrupted the countries instead. Now the impact of that financial catastrophe is undermining the European single currency- which is clearly too large for the resources available. 

The response at each point has not been to begin deconstruction, but to rope more and more power and resources under one roof. The concentration of power into the hands of the key leaders of the European Union has come at the expense of the indebted periphery- since the crisis began, the leaders of all of the PIIGS states have fallen, - with only Spain surviving, and their election in five days seems set to remove Mr. Zapatero too, a clean sweep.

However, the fact is that the Merkel-Sarkozy (the so-called "Merkozy") axis, which has presumed to fill the "leadership vacuum" in the EU is just as impotent as those they have outlived (or in the case of Greece and Italy, actually brought down). In due turn, it seems increasingly likely that Sarkozy will lose to Hollande in May 2012, leaving Merkel to survive  as a lonely and haunted figure, until her own political demise not later September 2013, and quite possibly before then.

The conclusion is that we can already see that the policy direction undertaken by the Merkozy axis will fail.

The problem is that this will now require a fundamental reassessment of the structure and workings of the European Union. After the failures of the constitution and the Lisbon treaty, the fact is that it will be impossible to conclude a satisfactory treaty acceptable to all 27 member states. Even if the "peripheral" states, i.e. those not in the Eurozone, are prepared to accept a two speed Europe, with a closer core and a loser periphery, it is hard to see how that could be delivered politically within the Eurozone. The crisis, after all, is not between Germany and Britain or Sweden, both non members of the Euro, but rather Germany and the PIIGS- which are all inside the zone.

So, in fact David Cameron, by encouraging a closer core Europe, provided the UK is allowed to stay out, is actually arguing for something that is incredibly difficult, if not actually impossible, to deliver. Meanwhile the Liberal Democrats are still speaking up for a European model that now obviously need radical reform as though it is still a blue-print for the future.

If it is a map for the future, then we appear to be lost.

The fact is that we should now be revisiting the ideas of Schumacher and Kohr, particularly with regard to sustainability and appropriate technology and applying both to the political mess that we now find ourselves in. Liberal Democrats have long supported the idea that the powers of government should be given to those most closely affected, what is called in the jargon, "subsidiarity". The problem with being a European Federalist, is that despite the powers nominally granted to the European institutions, and despite the departure of national governments that oppose these, the fact is that these European institutions do not have democratic legitimacy, and are unlikely to acquire it in any acceptable time frame.

If the idea of Europe is going to have any political meaning in the future, we must consider not the overarching institutions, but the ideas of small is beautiful. To my mind it is the only way that the European Union can avoid being washed away entirely as the new political generation is forced to address the crisis in the light of the gridlock and failure of the polices of the Merkozy axis. There have been huge benefits in European co-operation, that seem in danger of being destroyed by the gigantism of the European Union as it is currently constructed.

The Liberal watchwords of Peace, Retrenchment and Reform are now critical. They are the only way we can ultimately tackle the economic crisis after the banking collapse, they are also the only way we can tackle the political crisis at the heart of Europe.

Monday, November 14, 2011

IS Football as fixed as cricket?

I watched the football match between the Republic of Ireland and Estonia last Friday. 

As the Hungarian referee made decision after decision that favoured the Irish visitors, it was firstly frustrating, then infuriating, then contemptible.

I am not the only one who believes that the match we saw last Friday was not fairly refereed.

There is then the question of why Estonia faced this biased match? Personally I do not think that UEFA or FIFA would have decided that Ireland deserved a measure of recompense for the Hand of Gaul, although Armenia have formally complained that they suffered similar bias when they played Ireland.

I do think it is possible that Football may be suffering from the same kind of problem as Cricket.

Ireland is a betting mad nation, and huge wagers are staked whenever the Republic plays.

I am no expert, but to my eye, the quality of refereeing was so poor that it is hard to admit of an excuse that does not involve skulduggery. We already know that the international football administration shows signs of profound corruption. Is it too much of a stretch to suggest that if a fish rots from the head, might the very game of football too be facing a genuine crisis?

The problem is with Sepp Blatter in charge, who is widely believed to have fostered a culture of corruption across FIFA, it is hard to believe that any clean investigation could be launched. The cynicism in the round ball game remains hard faced and the morals of the game have been reduced to a matter of gamesmanship and money.

The team that beat Serbia 3-0 away could certainly have lost to Ireland 4-0 at home, but the two red cards and the exclusion of three key Estonian players for the return match tomorrow certainly made the process of Irish qualification a whole lot easier.

Suspiciously so, you might say.

UPDATE: After seeing such a different match in Dublin, which ended in a 1-1 draw, I am now pretty firmly convinced that the match in Tallinn was fixed. Unless football can clean its Augean stables, I don't think I will be following it any further. 

Friday, November 11, 2011


The eleventh hour of the eleventh day of the eleventh month of 1918. 

It is where we get the expression "at the eleventh hour" from.

It was the end of the most disastrous war in British history- a war that destroyed the flower of a generation, so that when the war was resumed only twenty years later, there were very few men in their forties left to lead. A war that destroyed centuries of careful husbandry, so that when the war was resumed, only twenty years later, the financial reserves were utterly exhausted, and the national reserve had became the national debt. A war that led to the break-up of the Kingdom of Great Britain and Ireland, so that London presided over a larger loss of the territory of the homeland and people, than Berlin did.

When they sang "I vow to thee my country", which was created in 1921 by matching the words written in 1908 with the beautiful music of Holst, the words:

The love that asks no question, the love that stands the test,
That lays upon the altar the dearest and the best;
The love that never falters, the love that pays the price,
The love that makes undaunted the final sacrifice.

Were truly heartfelt- so many families had lost the next generation entirely.

At war memorials across Britain and the world, at 11.00 today there will be a silence. It seems the only appropriate response to such a catastrophe.

Monday, November 07, 2011

Tory Troubles may undermine conventional wisdom

Although the opinion polls say different, there is an emerging consensus among the chattering class that the Conservatives are likely to achieve an outright majority at the 2015 election. Yet, our old friend "events" could well conspire to frustrate this, and after my recent visit to Westminster, I am beginning to wonder if the old Greek adage, "whom the Gods would destroy they first make mad" might not apply to the Tories.

The obsessive hostility to the EU which comes not simply from the old guard of Euro-sceptics, but also from many of the new intake elected in 2010 comes badly. The fact is that despite the serious crisis at the heart of the Euro-zone, British withdrawal from the European Union is an extremely radical and uncertain step. The British Conservative Party does not advocate withdrawal - that policy is supported only by UKIP- yet many of the new MPs particularly are loud in their determination that Britain should indeed leave. For them, it is self evident that the both the Euro and the EU has failed.

The fact is that despite the Euro crisis, the single currency has actually appreciated against most of its peers- including the US Dollar and indeed Sterling. Furthermore, although the spread of interest rates between Germany and the PIIGS states has been rising, the rates are still dramatically lower than those countries would have to pay, were they outside the Eurozone. The crisis is real, but it is not a currency crisis. The issue is the overall level of debt- and there the UK faces a crisis no less severe than any of the countries inside the Euro bloc. 

The fact is that the inchoate rage of the Conservatives can not address the crisis- it only serves to remind the voters that the Tories are horribly divided on the entire issue of Europe. A huge amount of heat and light is being put into an issue which - for the time being at least- the antis can not make much progress with, unless they go to the maximalist position of complete withdrawal- and that is unlikely to be supported at a referendum, given the considerable economic uncertainty and potential dislocation that leaving the EU would most likely cause.

Meanwhile, north of the border, the Scottish Tories have chosen a 32 year old, deeply inexperienced leader, who has at best luke-warm support among her own MSPs. Any recovery in Scotland now seems very unlikely.

So the conventional wisdom of a Tory victory in 2015 may yet end up being upset. The conventional wisdom has been that the Liberal Democrats are human shields for the Tories, but as the debate among Tories grows more rancorous, many Tories are noting the quietly professional way that Lib Dem ministers are getting on with their briefs. Indeed, despite several setbacks: in constitutional reform and in the killer of tuition fees, it is fair to say that the coalition has enacted a substantial body of Lib Dem policy. It is also interesting to note that, as so often in the past, the support for the Lib Dems has dipped mid term- perhaps it may yet recover before the next election.

So, the conventional wisdom could be wrong on both fronts: the Tories may be the party that pays the price for the coalition, while the Lib Dems may recover to get back in contention. After all, even in Scotland, where the outlook has been extremely bleak for the Scottish Lib Dems, the party has been able to return to winning ways- taking a seat in Inverness from Labour, in the face of very determined SNP competition.

With three and a half years left of the coalition, the conventional wisdom may be increasingly challenged- there is nothing yet settled and many "events" still to come.

Thursday, November 03, 2011

The end of the Scottish Conservatives opens up a new opportunity for Scotland- and for the Scottish Liberal Democrats

The election of a new Scottish Conservative leader is not usually an occasion of great moment in British politics. From being the preeminent force in Scotland in the 1950s the party now has only the rather gauche and lumpen David Mundell to represent them at Westminster, and even that is by the thinnest of margins.

Yet the choice that the Scottish Conservatives will reveal tomorrow will mark a significant change. Either they will choose the uncertain risk of Murdo Fraser, who has said openly that he intends to remake and even rename the Scottish Conservative and Unionist Party or they will vote for an apparently safer choice in Ruth Davidson,who is said to be the choice of the London party leadership, but who is otherwise both rather inexperienced and a rather unconvincing proponent of the discredited status quo in the party.

In my view, whether Murdo Fraser wins or not, he has already opened up an intriguing possibility for Scottish political realignment.

The Socialist hegemony in Scotland has been a disaster- by every conceivable measure the health and wealth of Scotland has been undermined by the creation of a corrupt network of political patronage orchestrated by a political machine that for sheer malignity equals the very worst that Tammany Hall could offer. The public sector, by almost every measure, has grown to top 60% of the economic activity of Scotland. Labour became the party of the Scottish establishment over the course of the past three decades, and over that time the Scottish economy has grown ever less competitive and ever less efficient. After the Labour lock in Scottish politics was broken by the creation of the Scottish Parliament elected under a proportional system, the power of the party has undergone a dramatic decline. Socialism is increasingly dead in Scotland.

Yet the chief beneficiaries of the decline of Socialism have been the Separatist SNP. Paradoxically this is has been because they have absorbed many of the most radical Conservatives. Their solution to Socialism is to to adopt a shock therapy in Scotland similar to that of the ex-Communist countries, and the only way to do that is to break up the Common Kingdom and impose these dramatic policies by going it alone. 

However the already severe economic dislocation that such a shock therapy would impose on the Scottish economy would be compounded by the massive restructuring of the Scottish financial system that independence would force. The asset base of the RBS group alone is a multiple of the size of Scotland's economy. There is simply no way that an independent Scotland can support such a behemoth bank, particularly since at the outset an independent Scotland would have a massive deficit- which the Bank of England would force them to address, if they wanted to continue to use Sterling. An independent currency would immediately devalue against Sterling, leaving Scotland poorer, even before the impact of the shock therapy and the bank restructuring had its first impact. The Naval and RAF bases would close, yet the new state would need to take on huge new expenses, from a separate diplomatic corps to a new customs agency- even if there was no border at Bewick.

If Socialism is dead, Separatism is a dead end, with a horrible economic sting in the tail if it ever happens.

The fact is that unless we want to see the wealth of Scotland decline by 40%-50%, with all the social woes that would cause, we should address the appalling economic and social legacy of Socialism by taking decisions within the framework of the Common Kingdom. By all means let Scotland take as many of those decisions in Scotland as it can- not just in a centralized government in Edinburgh, as the SNP insists, but at the local level too- but it would be raving madness for us to lose the option of the help and assistance that can come from the rest of the UK as the country seeks a more business minded, entrepreneurial and freer future.

The Scottish Liberal Democrats are not "Socialism Lite", and never have been, even if many Socialists were prepared to lend us their votes. We are a radical free market party, that nonetheless believes in corporate social responsibility. There are many economic positions that the Liberal Democrats share with many Conservatives. Where we parted company from the Tories was in our profound belief in Home Rule. The Scottish Parliament was an achievement that was the crowning glory of such great home rulers as Rae Michie, Russell Johnston,  and dare I say it, Ross Finnie,  David Steel, Malcolm Bruce, and Jim Wallace.

The adamant "Unionism" of the Tories was in our view just as much of a catastrophe as Socialism or Separatism. Now, Murdo Fraser is putting forward an imaginative policy that is very similar to our own.

Whether Murdo Fraser achieves the leadership of the Tories tomorrow or not, in a way he has already scored a victory: he is putting forward the possibility of a positive Scottish Federalism- and that is something that the Scottish Liberal Democrats can only view with satisfaction: Murdo, it may have taken a long time, but at last you are with us. 

A Federalist bloc of Liberals and those Reformers who want to jump the walls of the Unionist Tory prison may yet be able to lead Scotland away from both dead Socialism and dead-end Separatism and create a better nation: both for Scotland and for Britain.

In my view, that is not only the best future for Scotland, it is what the people of Scotland want. 

The SNP may decline just as quickly as they surged if a positive, hopeful message is offered to the Scottish people by a Federalist bloc that rejects equally the economic catastrophe of  Socialism and the economic catastrophe of Separatism. .   

Tuesday, November 01, 2011

Greek gamble pulls Euro to the brink

The decision by the Greek Prime Minister, George Papandreou, to submit the Greek austerity measures to referendum could be seen as a reassertion of democratic control over the relationship between Greece and the rest of the Eurozone. In a way it is a laudable expression of the democratic rights of the Hellenic Republic.

In practice, the two or three months of uncertainty that will result, before any referendum can take place, look like being a Greek revenge upon the rest of the Eurozone. The fact is that the markets will most likely deliver a verdict long before the Greek people are able to. It is an astonishingly high stakes gamble for the Greek government, and it is a gamble that could drag other countries beyond the point of no return, and they too fight to restore liquidity and in some cases, solvency.

It may well be that Mr. Papandreou can win a referendum, but he may also face the collapse of his PSOK party, as certain defections today seem to hint. The breakdown of the Greek government at this critical time would render the terms of the rescue plan currently under discussion rather academic, and even as it stands, the terms are not as stiff as the markets would like.

The problem now is time. The Spanish government is facing a comprehensive defeat in the general election scheduled for 20th November, so new ministers will be coming into office in Madrid. The Italian government is on the brink of a major change, as Silvio Berlusconi finally runs out of road in his legal and political battles. In France, President Sarkozy faces an uphill battle to gain re-election in May 2012. Even the German government is facing a trouncing in a run of local elections, that will limit their options even before the Federal election in 2013. The fact is that the window of opportunity for a deal to be agreed and to stick is going to be be lost as the political calender increases uncertainty.

The risk is now that Greece becomes a side show as the crisis spreads to Portugal, Spain and Italy. The markets certainly see the risk, and the next few days will see both the EU finance ministers and the ECB attempting to bolster the markets as far as they can. In fact they will be trying to make the best of a very bad job.

The Euro which only yesterday seemed to be on the brink of muddling through, is now facing a further cycle of uncertainty and pressure. The risk of a chaotic end-game has increased. The telephone wires across the continent are going to be hot tonight as very worried European leaders seek to consult.

If Mr. Papandreou loses his gamble, Greece will leave the Eurozone- and they may not be the last country to do so.   

How the Liberal Democrats are recovering

I often find that returning to the UK for a rare visit is a rather sobering experience. The difficulties the government faces seem exposed in sharp relief when you have been away for a while.

This trip was a little different.

Yes, it is all to obvious that the physical infrastructure needs investment: but despite potential future problems, Crossrail is being built- and the tunnel portal, close to Paddington station is well underway. Above the ground, Heathrow's new terminal is also now taking shape, and flying over London, the Olympic stadium gleams above the winding river Lea. The giant Shard office building too is nearing completion. The pace of development is visibly quicker than last year, so for the time being at least, London is moving forward. The sense of depression that seemed all pervasive in the summer is also a little lighter.

For the first time in a while, I went to visit a friend who is a Member of Parliament. Indeed, he has become a Liberal Democrat minister in the coalition government. Before I meet him, I talk things over with my Uncle who is a very long serving Lib Dem MP. He reflects that the situation for the party is not beyond recovery, and that behind the scenes, some extraordinary progress is being made. I am sceptical, but I resolve to quiz my friend, who has emerged as one of the key ministers, when we meet later.

It was the day after the Conservatives had split dramatically over the perennial issue of "Europe". The atmosphere in the evening fug of the bars and tea rooms remains excited and it is clearly the leading topic of conversation. The kind of people who call the European Union the "EUSSR"- which as a resident of a country formerly occupied by the USSR, I find incredibly insulting and puerile- are much in evidence. Yet as my friend points out, the "antis" lost, and more to the point, the Prime Minister has even more reasons to be grateful to the Lib Dems and irritated with his Tory colleagues.

It is, he points out, something of a distraction anyway: there is a crisis in the Euro, but there is nothing positively specific that the "antis" can put forward: it is still a visceral and rather inchoate rage. Meanwhile, the Minister makes a key point: 

"This is the first time since the 1920's that Liberal ministers can put their policies into action. We may not get a second chance, indeed the polls tell us that we won't. While the Tories are content to wait until the next election, since they believe that will get a majority, we have no time to waste. The result is that we are enacting far more of our program than they are."

He added:

"We can now point to a solid block of genuinely Liberal achievements, particularly increasing the tax free allowance to £10,000, and while we have made mistakes- and how could we not have done, under such difficult circumstances?- we have genuinely worked for the national interest, even when it looks like our party interest will be overwhelmed"

So, far from the Lib Dem ministers being cowed by the dire polls, in fact they seem to have a real fire in their bellies. While it is clear that the local elections in May will probably continue to see a negative trend for the party, at least in Scotland, it strikes me that the Liberal element in the government may yet prove, by working for the country in a fairly selfless way,  that they can restore trust in the party.

Certainly, despite the discomfort that Labour caused the Tories in the Euro vote, there is no evidence that Labour themselves believe or even hope that they can break through in 2015, whatever the polls say today.

So, the Liberal Democrats, dismissed as irrelevant or worse, are actually achieving far more than the media is giving them credit for. Despite the problems of the country, I find myself heartened by the political courage of the party's ministers. Morale in the Parliamentary party is good, and as the polls show a slight improvement in the still dire standing of the Liberal Democrats, I find myself wondering whether the party, far from being punished in 2015, might not actually end up being rewarded for at least trying to do the right thing, in the face of near-Universal derision and contempt.