Monday, April 30, 2012

A Spring contrast

In Tallinn Spring is slowly advancing into Summer. The Sun begins to offer some warmth and the days are growing long.

In London the weather is less good. The rain and storms, that seem inevitable once a drought is declared, are clearly depressing the national mood. In the year of the Diamond Jubilee and the London Olympic games, the national mood still remains rather bleak.

Although the local elections will probably be a nasty mid term shock to the coalition government, the elections that really matter to Britain are happening elsewhere. The likely change of government in Paris may see significant changes in French policy- and the demise of the Sarkozy part of the "Merkozy" partnership may simply be the prelude to a change in government in Berlin next year.

Europeans have grown weary and disillusioned with the austerity program that has been imposed at the behest of the right wing-led government in Germany. The meltdown in Spain and the continuing crises in Greece and Portugal leaves few in the Eurozone immune. If Germany will not agree to fiscal transfers, which it unilaterally deems unconstitutional, then since no other transfers have democratic legitimacy, the result will be the evisceration of the banks in Germany and France (and the UK) that retain their exposure to the southern Eurozone.

There are no good choices for dealing with the crisis, and still the UK remains in the firing line, despite its independent currency. Indeed the slowdown of the UK economy is coming partly as the result of the steady appreciation of Sterling against the Euro over the last year.

As Mervyn King told David Hale during the 2010 general election campaign, those who won that election have taken on a poisoned chalice- and many will view the UK local elections as a striking testimony to that possibility.

Yet it may not be so.

The UK has begun to restructure- and the political pain is still being  inflicted, yet as the British debt levels begin to level off, there is already some benefit. Confidence in Sterling is strong, despite economic numbers that are comparable with the weaker Eurozone members. The coalition remains stable and its application of policy-  whether you believe in the policy or not- is consistent. It may even be that the UK, far from undergoing a double dip recession, is actually growing faster than recorded, and growth may be more robust still.

So as the storms envelop the country in gloom, it is worth considering that the crisis, as with the weather, may yet improve. 

Meanwhile in Estonia, the sun begins to shine more brightly and the better weather leaves us- to coin a phrase- with a spring in our step.   

Sunday, April 29, 2012

Why you should vote Liberal Democrat

The tone of political debate in the UK over the past twenty years or so has grown ever more shrill and rancorous. This bitterness is partly, I believe, the result of the growing recognition that far from being all powerful, our political leaders have in fact ever less control over "events".

Political leaders, especially on the left, still put forward the view that they alone can provide detailed policy solutions to the economic and social problems of the day.

The Liberal Democrats have been no less guilty of this hubris than any other party.

However, there are two critical differences between the Liberal Democrats and the other political parties.

The first is that the Liberal Democrats recognized a long time ago that the problem of British politics is not in the party- or parties- of government, but in the system of government. We argue for major reforms of the constitution in order to create a political system that is more accountable to the voters and more flexible in the way that the voters can change the polices of different levels of public administration. We therefore want more local control of more local services than the other parties want, but we also want to change radically the Whitehall/Westminster oligarchy that controls the whole country. 

We would create a more open electoral system without the need for repeated changes to constituency boundaries, we believe that this would make MPs more directly accountable to their voters. The recent Parliamentary scandals have allowed MPs from safe seats to avoid much sanction, because the voters can not throw them out without also voting against the political party that they support. We do not beleive that people should have to vote tactically- perhaps ironically since, as a party, we have clearly benefited from tactical voting in the past. Our view was, and remains, that electoral and constitutional reform is necessary and important, and that it should be carried out as soon as possible.

The reason that we believe this is that we can only address solutions for the social and economic problems of the day if we have a political system that is capable of finding those solutions. 

The second difference between the Liberal Democrats and the other parties is integrity.

Despite the extraordinary amount of hatred that has been poured on the Liberal Democrats and the party leader, Nick Clegg, the Liberal Democrats have done what they said that they would do in entering into a coalition with the Conservatives. No one party won the 2010 general election. Nick Clegg said all along that if the result was inconclusive- which it turned out to be- then he would talk with the leaders of the largest party first. The invective from the left- which has at times been outrageous, even unforgivable- should not distract either from this truth, nor from the truth that Labour rejected any serious discussion in the aftermath of their defeat. 

Although the Lib Dems promised too much at the outset of government, particularly in the face of the greatest economic crisis of our lifetimes, nevertheless they have served diligently in a coalition which we too find painful at times. That pain, we believe, is justified by the national interest. We knew that we would be vilified for entering into a coalition, even if the level of hatred that this provoked has at times been completely shocking. We knew that we would have to pay a price- and we have willingly done so, in the knowledge that we were serving the national interest.

Yet Liberal Democrat integrity also rests in the way that we have conducted ourselves both in opposition and in government. The Leveson inquiry has reawakened the contempt for politicians as a class: even Michael White of  The Guardian, who should know better, suggested that the Murdoch testimony was damaging to all parties. We hear on the door steps the mantra "you're all the same", "in it for yourselves" and so on.

Yet, as White and others well know,the Liberal Democrats are not the same. We have never asked for or taken the support of the corrupting influence of Rupert Murdoch's media empire. On the contrary, we have consistently and often bravely opposed him at every turn. Despite the blackmail and pressure that Murdoch has applied to British politics, in fact because of that pressure, the Liberal Democrats- on principle- have opposed the concentration of wealth and power in the hands of  an organisation that we feared, with good reason, was little more than a criminal racket.

So Rupert Murdoch, friend and ally of Tony Blair, David Cameron and Alex Salmond was, and remains an enemy of all of the Liberal Democrats. If David Cameron had listened to Vince Cable on the subject he would not now be facing the imminent loss of another one of his senior ministers.

So the Liberal Democrats have faced a difficult time in the coalition, but where we have made mistakes it is because we underestimated the difficulties of what is, after all, a new way of conducting politics. Our biggest mistake is occasionally forgetting that vision in the daily hurly-burly of government. Yet at least we still understand that we need a new way of doing politics. 

We need a new political system. Although the coalition is only a baby step in the direction of new politics, it is at least a step. The other parties, including the SNP, sold out to Murdoch a long time ago. 

I believe that The Liberal Democrats have the right vision for the future. I believe that the lessons of the Murdoch scandal demonstrate that the party continues to stand for integrity and justice in public life.  Nothing is perfect, least of all a political party, but the Liberal Democrats have not lost sight of their unique vision and that is why they continue to deserve your support.

This Thursday will probably see many setbacks and many bitter losses. We have been here before. The electoral cycle being what it is, we may perhaps begin to see a recovery before too long: indeed several  of the polls already show some progress, albeit not enough to avoid defeat on this occasion, but even if recovery remains elusive, we have chosen the right course. 

We will continue to speak out for the Liberal vision at all levels of government. Eventually we are likely to be as feted as we are now vilified. In the end though, politics is not only about what is popular, but what is right. 

Vision and integrity can be the bedrock for our recovery. Indeed without them, politics in Britain is as pointless, unprincipled and corrupt as Rupert Murdoch believes clearly it to be. 

Wednesday, April 25, 2012

James Murdoch: Suicide Bomber

James Murdoch is already under criminal investigation in the United States. His testimony to the Leveson enquiry yesterday suggests that he should face a series of trails in the UK too.

That is not particularly surprising. What is surprising is the manner in which he has decided to face his fate. Essentially he has clearly decided to "take as many of the bastards with him" as he can, starting with Jeremy Hunt- who, Murdoch suggested, had stepped well outside the line of good standards and even the law in his relationship with News International.

Perhaps Mr. Murdoch thinks that his display of revenge will cow others, probably equally implicated in the growing outrage against the Murdoch empire.

Personally, I think Murdoch fils should now be prosecuted to the full limits of the law, and if the evidence supports it, so should everyone else in the Murdoch organisations.

Murdoch may be trying for some kind of mutual assured destruction: but our Parliament and our laws must make sure that Murdoch and his twisted journalism are indeed expunged completely. 

Tuesday, April 24, 2012

Euro crisis moves into a new phase

The likely change of President in Paris is now coupled with severe tension in the government in the Netherlands. As in 2005, these two founder members are questioning the long standing consensus in the European Union.

Usually, when asked about the future of the Euro, the response from officials and from many national governments is that the solution is "more Europe". This is short hand for creating the common institutions, such as a treasury and a system of fiscal transfers, that were not created when the single currency was first established.

The problem about creating such powerful new institutions is that they lack democratic political legitimacy. They may be the most obvious and practical solutions to the crisis, but they are not sufficiently supported in most countries to allow them to happen. The political problems in France and the Netherlands only underlines the difficulties in gaining democratic support for the necessary policies to allow the Euro to survive.

The probable election of Francois Hollande as President of the French Republic will not only bring to an end the remarkable cooperation between Nicolas Sarkozy and German Chancellor, Angela Merkel, it will also mark a huge change in French attitudes and expectations with regard to the policies to address the crisis. In short, the process of short term coordination and longer term integration will, as a minimum, slow down. This parting of the ways between Paris and Berlin will not reassure those in Germany who have been seeking to resist integration. Either Germany may reduce its commitment to the Euro, potentially leading to a German exit, or the pressure on France grows to danger levels and thus support for Greece, Italy, Portugal and Spain can not be maintained.

Clearly President Ilves believes that the probability of an exit from the Euro zone of one or more countries has grown to the level where Estonia should be making contingency plans

Actually I think it could be a more complete breakdown than simply one or two countries leaving the single currency. If the "Franco-German motor" starts to splutter, then I think that the currency bloc as a whole would break up.

Yet that is not to say that all countries will simply revert to their previous currency arrangements. The clear signal from both Helsinki and Tallinn is that the currency union between Finland and Estonia will be maintained, and as far as possible, both countries will align their policies as closely as possible with Germany. The question in the aftermath of the deluge though, will be whether Berlin would wish to maintain a currency union with any other state, with the possible exceptions of Austria, Slovenia, Slovakia, Luxembourg and the Netherlands. If they do not, then these smaller economies may try to work together: certainly from the point of view of Bratislava and Vienna, two cities less than 40 minutes drive from each other, recreating currency barriers would be at least as inconvenient as recreating separate currencies for Finland and Estonia.

So, as the Euro crisis bursts into flame once more, it is increasingly clear that far from there being "no plan B", in fact the chancelleries of Europe are actually actively considering several plans. Although it may be several months before the reality of these plans is tested, the fact is that as the growth/debt/stability conundrum of the Euro continues to remain intractable, the attractions of ending the single currency experiment will grow- in Berlin and Paris as much as in Madrid or Athens.

The question then, will not be "more Europe", but whether "any kind of Europe" can long survive the wreckage of policies that were so incomplete as to be completely ill conceived, and which were maintained for so long in the face of overwhelming evidence of all the problems and dangers, and at a cost in human misery that has become truly shocking.

I do not think that Mrs. Merkel would long survive the demise of her partner in crime, Nicolas Sarkozy. 

Monday, April 23, 2012

As French Front National gets a record vote: you heard it here first

The French Presidential election has thrown up something of a conundrum. Nicolas Sarkozy did not lead in the first round, as he was expected to, and that is supposed to send a bad signal to his campaign. On the other hand, as I predicted here in January, The Front National made advances even from the record result they gained under Marine Le Pen's father, Jean Marie. That 19% of the vote is now up for grabs, and the gap between the President and his Socialist challenger is wafer thin.

Francois Hollande has to favourite- he has less hair than Sarkozy (which has often been a signifier in the past- the exact opposite of the US elections), and of course he is leading in the first round.

On the other hand the markets have taken it badly- and even the French might yet balk at the end of the Franco-German motor, which the early exit of Sarkozy might bring in its wake. 

Press Matters

Spring has come to Estonia, and it is like the lights have been switched on after the long (overlong) winter. As always, your heart leaps as the huge chains of migrating geese take to the skies, and here and there a newly arrived solitary stork wanders along the field gullies looking for frogs. The grass visibly greens from day to day, and the floors of the budding forest are bright with snow drops and the primrose-like blue flowers, known rather prosaically in Estonian as "blue flowers". Soon the swallows too will be here and the white nights of June will echo to the Estonians enjoying the brief pleasures of the glorious northern summer.

Yet work must continue, and I head to Parnu, the summer capital of Estonia, amidst April showers, to take part in a conference to discuss the future options in Estonian finance. For me, Estonian finance, as so much of Estonian society, stands at something of a cross roads. In many ways the last twenty years have been a series of exams for the Estonian state- and by complying with the rules and entering NATO, the European Union, OECD and so on, the country has at last graduated. The questions now are less external and more subtle. Having successfully rebuilt the Estonia ravaged by the brutality of Soviet occupation, while there is still much work to do, it seems appropriate to consider the wider horizons. 

The keynote session of the conference is a debate between Estonian President Tomas Hendrik Ilves and the former world chess champion and leading spokesman for innovation (and therefore dissent) in Russia, Garry Kasparov. As the two figures interact, I find myself more and more engaged in the implications of what the two leaders were saying. A half Azerbaijani Russian Jew speaking with a Swedish born, American educated, Estonian in English carries its own message, but the questions that are being asked carry profound implications for the most fundamental bases of western society: our capitalist economic arrangement and our democratic political arrangement. The crisis we face is testing the very roots of the Liberal state.

Yet Estonia is so much better prepared than most other states. The impact of the first decades of radical reform has allowed the country to be more open and more flexible than most other members of the EU, and as a result the country has come through the crisis more quickly. Yet the pressure on the Estonian model from some other states in the EU risks putting all that has been achieved at risk. Estonia is being asked to make sacrifices and contributions to countries that are still a lot richer than it is in the name of some nebulous "European solidarity"- but increasingly Estonia is not benefiting from the bargain. I have no answers, but in my own address to the conference the next day - partly inspired by the debate between President and Grand Master- I decide to ask the questions.

I ask why we are still wedded to the demonstrably false dogmas of modern finance- the determination to predict the future in the face of overwhelming evidence that it is not possibly to do it in the way that the finance system believes it can. I ask why European banks are being consolidated when they need to be broken up: "too big to fail", means "too big", as I have argued here before. I ask what the long term price of the Euro is, and whether this is not too high.

Bringing the theme to Estonia itself, I challenge some of the lazy assumptions that are made about the country: Estonian taxes are not particularly low, even though they are efficiently designed and efficiently collected (which is a gigantic plus compared to the more or less catastrophic inefficiency of the UK tax system). This in itself comes as a slight surprise to the audience, although it is demonstrably true, especially when considering social taxes and income taxes combined. The concern I have is that some Estonian politicians on the left believe that making the tax system more complicated will make it fairer: that is probably untrue. If one wants a more progressive taxation system, the best way is to tax the poor less -  which is to say to increase the tax thresholds. In general, by taking the lower earners out tax altogether you are, by definition, making the tax system more progressive. A super tax rate, by contrast increases the costs of collection while not relieving the poorest one jot.

Yet the future for economic growth in Estonia rests on access to capital, which has been a perennial problem for such a small country. The stock exchange lacks both activity and enough attractive and interesting stocks- so it has not been able to provide more capital to the Estonian entrepreneurs. I suggest at least the partial listing of such state corporations as Eesti Energia and the Port of Tallinn might help. Rather than compelling Estonian pension funds to invest in Estonian Equities though, which is frankly rather risky in such a small market, I suggest that they might invest in infrastructure bonds, in order to kick start new roads, the proposed Rail Baltica and the increasingly needed upgrade of the IT backbone of the country. This gets a few nods.

In my peroration I ask several questions of the audience: what is this new Estonia for? It is not merely a reservation for the Estonian language, laudable as that aim may be: it is surely to improve the national welfare and indeed wealth as far as possible. This country which inspired and continues to inspire with its dignity and sense of hard work also has a moral right to speak up for those causes it identifies with. This, I suggest, is not just on a European stage, but a global one too. There are economic and political opportunities and Estonia, a country where salt water often seems to be in the veins of the people should rediscover its global identity, not merely its European one: to misquote Noor Eesti, "More culture, more global culture, let us become Estonian and at the same time become global citizens". Internet technology has already helped Estonia into a leading position in this- I conclude by saying that there is still a greater opportunity to seize.

The reaction has been mostly positive, the speech was widely reported in the press and, as always, it is in the comments in the e-pages of Postimees, Paevaleht, Delfi, Aripaev and so on that one can see the strength of the democratic debate in Estonia. Some miss the point of course, or try to make anti-government comments. These are, however not relevant to what I said: I continue to be  politically very much a Liberal, and although there are liberals in all of Estonia's political parties, it is clear where my support lies, even if I reserve the right to disagree with some aspects of policy. Mostly though, the comments are positive and, I think, helpful in framing a wider debate.

It occurs to me that rather than being a one off, the positive reaction means that I should probably try to engage more with the national debate, I will think about how I can help that process over the next few days, but would appreciate comments from Estonians about what I should do or how I might be able to contribute. 

Friday, April 13, 2012

More bullying bluster from Alex Salmond

The Economist is a serious magazine, but it is also known for a sense of humour.

The latest edition carries a pretty well balanced article on the costs of a separate Scotland.

There are obvious pros and cons about the idea of independence. I myself, on balance, am against a totally separate Scottish state, but I will admit that there are some positive aspects. It is just that on balance I don't think the potential benefits of independence stack up against the potential costs. 

Many of my SNP friends obviously think differently- and we have many good natured debates about it.

Alex Salmond, on the other hand, thinks that any one who does not support his version of the Scottish separatist agenda is solely motivated by the basest motives and is probably either a traitor (if Scottish) or an Imperialist (if from elsewhere in the UK).

His typically bombastic attack on the Economist "they will rue the day they thought they would have a joke at Scotland's  expense"  is a typically humourless piece of victimhood.

The fact is that while many Nats are prepared to have a real debate on the pros and cons of independence, Salmond himself is not. His view is that since all would be rosy in the "free world", we do not even need to consider what the downsides might be.

It is totally dishonest- any fool can see that a fair debate needs to recognize the pros and cons- and The Economist article does precisely that- and even under some cases it recognizes that independence is not only justified but necessary. Yet it is also a serious examination about what the costs are- and that is what Alex Salmond cannot stand.

He is not being straight with the Scottish people- and as a result loses his rag when someone challenges his cloud cuckoo land political and economic assumptions.

Humourless and arrogant- Salmond has already poisoned the Scottish national debate- but sooner or later the Scottish people will be asked to judge on these issues- and they will remember that Salmond put up a barrage of bullying bombast when he should have engaged with his critics.

Wednesday, April 11, 2012

Time to reset the coalition

My recent trip to the UK reminded me just how difficult the economic situation remains for a large number of people. The simultaneous increase in taxes and cuts in services is coming at a time when it is clear that many, if not most, pension schemes need dramatic increases in savings in order to provide a financially secure retirement.

Those on the left argue that this policy of austerity is counter-productive and that- if anything- government expenditure should be increased through the downturn. Yet the reality is that the global investment markets will not provide capital to fund this spending splurge: austerity is not optional, it is compulsory.

And the worst is yet to come, the impact of the spending reductions will take time to come through the system, and although emergency action is saving many pension - including public sector pension schemes- from total bankruptcy the huge number of interest-only mortgages that have been created during the crisis provides a long term threat to people's retirement security, and potential short term problems to the housing market, if mortgage interest rates continue to rise.

So, the despite the slight improvement in general economic sentiment, the British economy is going to continue in a long and painfully slow restructuring which will maintain the pressure on average incomes for the foreseeable future.

This rather gloomy economic environment has a political impact.

Firstly, politics as a whole has become the focus of general public anger and contempt. It is not just the coalition that seems bogged down in trivia like the pasty tax, but as the success of the odious George Galloway shows all too well, the left is included in the general opprobrium towards politicians.

The most vituperation, however, is still reserved for the Liberal Democrats. Some of this is not really their fault- the decision to form a coalition with the Conservatives was not a matter of choice but of necessity, given the inconclusive result and the impossibility of forming a government with Labour alone. However there is also no doubt that the mistakes that the party has made have cost it dearly. The most important mistake of all was our own failure to understand that policy making for the sake of simply popularity, rather than principle- which is where the origin of the tuition fees debacle lies- would have even more severe consequences when its abandonment was almost the first decision that the Liberal Democrats made.

The fact is that the Liberal Democrats have been outmanoeuvred at several critical junctures: not just on tuition fees, but on electoral reform too. The Party was put in a position where it was the sole proponent of an electoral system- AV - which it did not even support. The defeat in the referendum was a disaster that has likely delayed electoral and possibly even constitutional reform by years, even decades. As Nick Clegg gets himself into more difficulty over the House of Lords reform and the proposed snoopers charter, many Liberals have been asking what is actually so Liberal about the Liberal Democrats?

It is a critical position- yet as the prospect of Labour defeat in the City of Glasgow and the London mayoral elections looms, and as nearly 20% say they will not vote for any of the big three parties, it is clear that the Liberal Democrats are only receiving a more extreme version of the same punishment being visited upon all the Westminster parties.

So, what is to be done?

From the point of view of the Liberal Democrats, we should remind ourselves that we are in it for the long game. The short media and even electoral cycles should not distract us from the core long term Liberal agenda: radical and comprehensive reform of our constitutional and political system. Paradoxically, despite the fall in support for the Liberal Democrats, our ideas are now seen as more relevant and important than ever. Yet the great failure of our leadership has been the failure to identify these radical reforms as a core part of the Liberal political brand. Still, too few identify what the Liberal Democrats core agenda is, and have tended to project their own wishes for protest onto the party- no wonder so many of our voters now feel betrayed.

Political reform. Civil Liberties. Radical tax reform.

These should be the core values that we project - and if we did so, then David Cameron could not try to railroad through his illiberal proposals for Internet controls which conflict with a central part of this core agenda. The party should burnish its Libertarian credentials- making common cause with those on the Tory radical right who share these values to a surprising degree. It also, helpfully, differentiates the radicalism of the Liberal Democrats from the tender-hearted but wrong headed policies put forward by Edward Miliband.

The coming local elections may well mark something of a nadir for Liberal Democrat electoral fortunes. Painful losses can be expected. Yet the party as a result may receive back some of the excellent activists it lost to local government- who can revitalise both policy formation and campaigning. Even the most bitter defeats may have some silver linings- if we learn the right lessons.

The next year will require the party to hold its nerve- but insist that the leadership rediscovers a focus based on principled Liberal positions. The next party conference should become a platform to reorganise, retrench and recover. I -for one- intend to be there and to make a contribution to the process of the reformation of the party in order to reflect the rapidly changing realities that the continuing economic crisis is likely to force upon the whole of the United Kingdom.