Cicero's Songs

Could France vote for Marine Le Pen?

2012-01-22T09:03:00.000Z

France remains one of the cornerstones of the European Union. A founding member of the organisation, it has been French philosophy that has shaped the ideology of the bloc and French systems and vocabulary of administration- "conseil", "stage"- that dictate the implementation of policy. The EU, primarily conceived as a way of eroding the hostility of enemies, in practice has become a way for France to project its power and influence over the whole bloc.

The latest alliance- of President Nicolas Sarkozy and German Chancellor, Angela Merkel at first sight looks like only the latest in a long series of Paris-Berlin (or Bonn) arrangements that have come to constitute the "Franco-German motor" of the EU.

Yet the signs are there, for all who can read them, that all is not well.

The attempts to rationalise and reform the European Union that have been underway for over a decade culminated in the EU Constitution: a document primarily crafted be a former French President- Valery Giscard d'Estaing- and full of the phraseology that L'Academie Francaise could approve- or even understand. Yet as we know, the French rejected the document in a decisive referendum. Although another founding member- the Netherlands- also rejected the document a few days later, it was the French rejection that was fatal to the project.

Yet France has long possessed significant anti-federalist, even Euro sceptic, political forces. These have tended to group into the anti-capitalist parties of the extreme left and the ultra-Gaullist believers in the French nation state who shade into the Pujardist and ultra nationalist Front National. As the left continues its slow decay, it has become the Front National that has been the primary standard bearer of Euro Scepticism, based upon a certain idea of French identity and nationalism.

Yet the leadership of the Front National, under the ex-soldier, Jean Marie Le Pen has not made the political breakthrough that they hoped. In 2002, despite the strong hostility of the media, Le Pen was able to knock out the Socialist candidate for President, Lionel Jospin and enter the run-off against the incumbent President Jacques Chirac. - yet Le Pen was crushed in the second round as voters decided that even the compromised and corrupt Chirac was a better choice that the bluntly racist Le Pen. Alarmed by the rise of the Front National, the politicians of the Gaullist right adopted several key policies of the FN, and for a while the threat seems to have receded- certainly the FN did not perform well in the 2011 regional elections.

Yet in recent weeks, the opinion polls are showing an increasing momentum behind Le Pen's youngest daughter, Marine, in her campaign for the Presidency in 2012. At the moment the Socialist candidate, Francois Hollande is ahead, even though he is usually described as a lacklustre or wooden figure, often outshone by his glamorous former partner, Segolene Royal.

Nicolas Sarkozy has proven himself to be a tough fighter- but he remains unpopular and is struggling in the polls- as Marine Le Pen continues to close the gap. The point is that Marine Le Pen does not have the blunt-to-the-point-of-brutal manner of her father. She is riding the wave of the the unpopularity of the Euro and the wider European Union project.

At the moment the conventional wisdom is that Hollande and Sarkozy will face each other in the run-off. However, if Sarkozy were to lose to Le Pen in the first round, then the second round could be a rather different affair than in 2002. Chirac was able to appeal across the political spectrum- yet Hollande is too much a man of the left to be able to do that- at best, Marine Le Pen would score a higher result than her father did a decade ago.

What about at worst?

Though the chances may be small, I do not think we can rule out entirely a Le Pen victory. The concerns of Euro sceptics have only grown over the past five years- and I for one have heard forthright support for Le Pen from very surprising quarters. Of course such a result would be a political earthquake- but as the No vote in 2005 showed, the French are not afraid of political earthquakes- indeed they seem to enjoy rocking the establishment boat.

It may be a small chance today- but Le Pen has momentum and the French voters are in an angry mood- so even such a radical an idea as victory for Marine Le Pen can not be entirely dismissed.

Why Labour could still be doomed

2012-01-18T13:37:00.001Z

Too often we forget that the British Labour movement is built upon a Socialist foundation. Although Blair and Brown sought to create a new, pragmatic version of Socialism, as Harold Wilson tried to do before them, the reality remains that the deepest instincts of the Labour Party remain collectivist and tribal.

Since the fall of the Brown government in 2010, the party has struggled to address the root causes of the financial crisis- which are as much about the follies of the state as about the follies of the bankers. Until this week, the leadership of Labour rejected the idea that the only way to recovery was through austerity, preferring instead to assert that a return to growth required continuing high levels of government expenditure. Even now the slight shift in the Labour attack on the coalition still leaves Labour on the side of fiscal incontinence.

Yet even this pretty minor shift has been greeted with rage by the Unions, which remain the core of the Labour Movement and the primary backers of the party. Eds Balls and Miliband are still trying to have it all ways. Yet this intellectual dishonesty is now coupled with a sense that the Labour leadership is losing the plot- it is not just the personal attacks on Ed Miliband, which themselves reflect unhappiness with the direction of his leadership, as much as his personal qualities.

The problem is that Labour policy is based on the deepest instincts of the Labour movement- which are at heart anti capitalist. Len McCluskey's comments reflect a deep ambivalence about the entire capitalist economic system- yet offers no answers about what any viable alternatives might be. We have to get capitalism working again -even if we can include a broader range of ownership- such as mutuals- because there is no other system realistically on offer.

It is this intellectual failure by Socialists that undermines Labour as a viable alternative government. The failure of the New Labour project now leaves the party with nothing but the threadbare nostrums of a hundred years ago. The party is out of ideas and increasingly out of energy.

There has been much gloating over the supposed demise of the Liberal Democrats since they took the difficult and dangerous decision to join the coalition. The latest polls certainly make grim reading. Yet at least the party retains its intellectual vigour- and increasingly, whatever the problems for Nick Clegg, Ed Miliband's problems seem worse. A recovery in the Liberal Democrat's fortunes can not be ruled out.

Neither can a further decline in Labour fortunes. The strange nature of electoral outcomes in a three party system may yet condemn Labour to further defeat. They certainly deserve it.

Remaking British politics

2012-01-17T08:36:00.002Z

Many of my Scottish nationalist friends attack the so-called "Unionist" opposition to separatism because it seems so negative. "Overcome your fears" they say "and embrace a positive and constructive agenda for a separate Scotland". Yet for me, it is separatism that is negative and narrow. The SNP thesis is that the Union has failed and can not be repaired. In my view there is very much a positive message in the idea of preserving the common state.

The political union that was created in 1707 was a platform that not only created the worlds most successful global economy for a period of two centuries, it also created a political and cultural powerhouse that spread the our ideas of a liberal parliamentary system across the planet and disseminated our language even in places that did not come under the influence of the Crown.

It was an expansive and dynamic time, and the Scots took full measure in it. Indeed part of the problems of the common state, as some in the SNP would see it, is that with the Empire now long gone, the common state is too small to give Scots the global opportunities that they crave. Taking that logic, the break up of the United Kingdom should be seen as the logical consequence of the break up of the Empire- "lost an Empire, never found a role, and ultimately broke up".

Yet I believe that Britain can rediscover a sense of national mission, and that the opportunities on offer to Scots are all the greater as part of this wider national project.

What Alex Salmond and his cohorts have been doing has been to recreate all the faults of Whitehall- a centralized bureaucracy, inflexible thinking and old fashioned ways of government. The purpose of centralising all power in Edinburgh is to provide a critical mass of power to oppose London. Yet this centralization also opposes alternative power centres- both geographical, by taking powers away from local centres and political, by ignoring citizens initiatives that Holyrood can not control. While proclaiming the virtues of diversity, the SNP is actually undermining it. To my mind a new political agenda can be set more freely when cities like Aberdeen share ideas with cities like Plymouth, which have similar problems of over reliance on a single employer, relatively poor transport links and larger geographical distances. The SNP bitterly rejects this kind of collaboration, since it undermines their case that Scotland is unique and should be separate. Despite this, however, in the private sector, such links are routine, even universal. Only in the SNP dominated state sector is such work dismissed.

The decline of the Tories in Scotland led the SNP to discover the virtues of business ethics, however as Labour too sinks into decline in its former Scottish heartland as it has in the rest of the UK, the SNP is tacking back to the left- yet the state dominated thinking of the left is failing Labour electorally because it is intellectually bankrupt. The cost of the banking crisis has been to severely limit the ability of the state to deliver the unsustainable finances that the left demands. The SNP have fallen into a left wing managerialism that is only interesting because it demands a new stage for the same old play.

I believe that the Common state can create a new agenda- not precisely the "big society" of David Cameron, but certainly a more individual based community- an new format and at odds with the old fashioned leftism of the SNP. Radical Liberalism remains a powerful intellectual force and I believe that it can deliver- provided the politicians have the couragee to stop pretending that they can deliver to every interest group.

I am not one who contends that separation would be an economic disaster for Scotland- although it is fair to say that the outlook of a highly indebted, largely state sector economic would be problematic even with every penny of oil revenue- and no penny of bank debt- allocated to Edinburgh. It would be a gamble- of the kind that appeals to Alex Salmond who is well known as a betting man. I think it is irresponsible to place such a bet- especially since it is a one way ticket to a highly uncertain destination.

So before Scotland embarks on its gamble, I think we should work towards a new politics within the United Kingdom- I think it possible and I think it right: and it does not involve kidding on the Scottish people that they do not have to sign any checks for the RBS or the Bank of Scotland disasters- when they clearly do.

The Tories have done enough damage to the UK: time they shut up

2012-01-10T08:22:00.000Z

Alex Salmond may be a very successful politician. He may be an astute leader. He is also, however, wrong. Despite the recent failures of administration by London, Salmond's vision of Scotland is one that reduces Scotland's vision and diminishes its opportunities.

The policy of the Scottish National Party is to separate Scotland from the rest of the United Kingdom. In this way, the SNP contends, the Scottish people can achieve more prosperity and have a louder global voice than Scotland has as a full part of the United Kingdom. It is a view routed in the world that has emerged over the past twenty years- a world of fragmenting states and diminished great power rivalries. Put in that context, the SNP suggests that the break-up of the British Empire should now be followed by the break up of the British State.

This thesis is based on the false idea that Scotland was an unwilling junior partner in an essentially imperialist enterprise. The implication is that Scotland was, like other parts of the former Empire in some way occupied. Yet, as the long list of Scottish Prime Ministers and business and cultural leaders in Britain shows, Scotland was not the junior partner in anything. The ability of Scots to make their way in the wider state may have reduced the pull of Edinburgh, or Glasgow as political centres but it massively increased the opportunities available to Scottish individuals, who have taken those opportunities with both hands. From politicians to comedians, artists to inventors, the Scottish people gain hugely from the possibilities that the much larger British state has offered to them. Salmond's vision of a Scotland separate from the rest of the UK offers diminished opportunities to the Scottish people away from Scotland and condemns the Scottish economy to a limited market and limited growth.

The basis of the renewal of Scottish Nationalism has been that Scotland can function just as well within the European Union as in can within the British Union. Superficially it is an attractive prospect- the EU is a market of over 300 million. However, as the experience of the other smaller countries shows, there are significant limits to the influence of 5 million voters, against the determination of the Franco-German motor. Although Scots have been frustrated by the election of Conservative governments in London, they should note that virtually all the governments of the EU are out of the same mould. Furthermore, the resurgence of the right wing Front National could easily see far more conservative governments dictating terms to a government in Edinburgh.

The loathing of England and the English in large parts of Scotland is a bitter and unfortunate legacy of Margaret Thatcher's hectoring and suburban style of leadership. She impose the poll tax on an unwilling Scotland and when the experiment failed, refused to listen. Although the poll tax was the ultimate occasion of the end of her leadership, the sense that Scotland was unimportant and disqualified by the Conservatives led to a rebellion that continues to this day.

For that reason, the emergence of another voice which is equally suburban and hectoring, in the shape of George Osborne could hardly be designed to irritate Scots more. His accent grates, his attitude grates and his determination to force Scotland into an early referendum could hardly have more than one outcome: the break up of the very Union that Mr. Osborne purports to defend.

The Conservatives, having failed in their unyielding defence of the unitary United Kingdom, seem to have defected en bloc to the separatist camp. Yet as Germany, Spain, France and several other countries have shown, there is another alternative, in the shape of a federal or confederal Britain. That maintains the benefits of the common state- including the sharing of armed forces which is of such benefit to NATO and the wider security architecture of Europe- while allowing Scottish affairs to be controlled at home.

For the regions of Scotland, the emergence of centralized power in Edinburgh is possibly even worse than centralized power in more distant London. The SNP is so determined to create a rival power centre to Westminster that it has sucked the life blood out of Scottish provincial cities- and that will be damage that will continue even if the referendum to separate is defeated.

The SNP is dangerous, but they continue to benefit from the tin ear that Conservatives still have for Scottish politics. Osborne should butt out and shut up. If the common state falls I for one would be quite happy to put Osborne's head on a spike.

Estonian "orientation"

2012-01-09T09:23:00.001Z

Edward Lucas has highlighted an interesting article on the ERR website by a former RFE correspondent, Ahto Lobjakas. The basic thesis is that Estonia has, as it did in the 1930s reoriented its foreign policy away from Britain and towards Germany. Then, as now, such a reorientation is a function of new trade and economic patterns. In the 1930s, Germany overtook the UK as Estonia's biggest trading partner, and over the past few years, the creation of the Euro as increased the significance of Germany to Estonia equally dramatically.

To my mind, though there is more to it than a shuffling of priorities in Estonia's government district, Toompea. Estonia has spent most of the time since independence was restored seeking to comply with the complicated rule book that sets out the terms of membership of both the EU and NATO. Once those goals were achieved, the next task was to comply with membership of the Euro. Once that was achieved, membership of the OECD and so on. Yet the fact is that Estonia has run out of clubs to join. The country has achieved as full a place in the international system as it can. This has left the political class somewhat adrift. In each political party there are signs of ennui, as though they are exhausted by the struggles of the past two decades.

The uneasy federation of nationalist Conservatives and Liberals in the IRL party has more or less fractured, with the ideological nationalists being squeezed out my more slippery technocrats. The result has been a series of increasingly serious corruption scandals- the latest concerning large payments being made by Russians in order to gain Estonian residency permits. Decisions being made by some IRL ministers seem based entirely on party political calculations- and this is causing significant damage both to Estonia's reputation for probity and competence. I have written about the increasingly mishandled privatisation of Tallinn Water in the past, but as both sides now settle in for a long legal battle, I can only view the miscommunication between the company, the economics ministry and the competition commission with something approaching despair.

The Centre Party too remains under a cloud of suspicion as investigations continue into suspect donations from overseas (=Russian) sources. The controversial leader of the Centre Party, Edgar Savisaar has faced such allegations before, but the finger of suspicion is now being pointed in the direction of other parties. The Centre Party vote continues to languish, while former Centre politicians are trying to create a new political force that can appeal to both Estonian and Russian voters: the Social Democrats. Certainly the Sotsid have the wind in their sails, yet this reflects the tired nature of Estonian politics: the Prime Minister is now the second longest serving leader in the EU, and people are increasingly bored with the stale sloganeering that has replaced the vigorous intellectual debate that was the joy of Estonian politics over the past two decades.

Huge decisions are going through Estonia's Parliament, the Riigikogu, with barely a debate. The decision to double Estonian national debt in order to support the Euro, was taken with barely a dissenting voice. This does not reflect unanimity- it reflects exhaustion. The parties are tires, and as allegations of corruption mount, it is clear that a political renewal is needed in the country. Yet here too there is a sense of ennui: the entry of the new Respublica Party a decade or so ago was supposed to sweep aside the old guard in Estonian politics- but ultimately it has failed. There is an urgent, growing need for a radical and uncorrupted voice in Estonian politics, but such a voice is not coming- at least not quickly. The growth of support for the Sotsid, reflects the hope for a new direction, yet the leadership of that party seem to be more interested in creating a new Centre Party- shorne of its controversial leader. Yet the policies of the Sotsid are the kind of tepid socialism that Radicals must have hoped would be long gone by now.

So, Estonian politics is mired in political exhaustion. It may be some time before a new energy can be found- because although the older guard in Estonian politics is moving on, the new guard of smooth, hard faced and questionable professional political figures does not give much hope that things will change positively for the good in the near future.

Josef Skvorecky

2012-01-06T15:40:00.002Z

It is with a heavy heart that for the second time in three weeks I have to report the death of a giant of Czech literature. Although less well known than his contemporaries, Milan Kundera and Vaclav Havel, Josef Skvorecky was as good a writer as Kundera- and in a broader idiom- and as humane a political figure as Havel.

Forced to defect to Canada after the Soviet invasion to crush the Prague Spring, Skvorecky became a publisher who popularized his fellow Czechs in the West, while still writing warm and wise novels of his own.

His semi-autobiographical novels, the Cowards, the Tank Batallion and the Engineer of Human Souls are often laugh out loud funny, in the tradition of Jaroslav Hasek's Good Solider Svejk, while at the same time carrying serious and wise points. The last is certainly the equal of Kundera's The Unbearable Lightness of Being.

It is hard to select a favourite, but for me, Skvorecky's obsessive interest in the genre of detective stories created a subversive version of Chandler, where his hero, Lt Boruvka, gradually gets more depressed as the solution to the crime hoves into view. He systematically tries to break the rules of the detective story- and the result is extremely readable.

Skvorecky was a humorous and warm writer- and his death, coming after the recent passing of Vaclav Havel should remind us of what heights Czech literature was hitting in the last decades of the twentieth century.

Some more self indulgence

2012-01-06T10:52:00.000Z

At the risk of being accused of self indulgence, here is another attempt at saying something in a more compressed kind of way, normal service will be resumed shortly:

Coming backto bed

I understoodin my confusion that I want and I don’t want.

I see, Ithought (but I didn’t see).

You told meonce, before you left, that I was… you paused… clumsy

I wonderedif it was true and what you meant.

The full moonshines through the window,

A dusty ballof dirt, inert- yet it glows with a memory of you

It does notshow hope or fear, or love, or distraction, though I think it does

The banalface of a rock I nightly screened my grief upon

So clumsy amI.

Yet I would havesoared with the Apollo craft.

Made a smallstep upon the face of Tranquility

Our world ofwonder, joyful under the jewel of Earth

Oh no, thatcould never be (you said), too… clumsy.

So I ammarooned on the lunar surface of my pillow.

There is nomovement on the lunar surface now

Your hair wasscattered like a crater shadow across the bed.

Now longgone, and your soft breathing is on another pillow far away,

Only thecold moon shining

On the arid,empty landscape.

Were youever here?

For longerthan the moon has smiled,

It seems adream I had but minutes since.

Yourcomfort, your presence, your cyan-blue eyes

But I waswoken by a harder voice…”clumsy”

My dreams,of late, are silent as a vacuum

I no longersee your face, or hear your voice.

The smiling Moonis silent too, complicit.

So, I sit. Iturn over and lie down. I see, as my eyes close (but I don’t see).

Downie covered,I remember, I remember.

I forget.

March 2011:

The Saxon Shore

2012-01-05T14:28:00.000Z

The Saxon Shore

The Saxon shore: theshingle clad beach shouts the sounds of the Sea.

Here Cedd the sinner,storm tossed, lost, came to build on the stones of Othona.

The Light lasting asKings and Caearls made Saxon swirls

To break Romanrigidity in a fresh imagination.

So Cedd brought thespark to shelter in St. Peter’s name here, on the sibilant shore.

The word, illuminatedin vellum volumes

Preached to the marshdwellers by the Blackwater where the curlew calls.

Cuthbert, Cedd, Chadchanting the rituals of the hours and the days.

English then beingborn in the dark age, flaming into light

The vibrant vitalityof intertwined imagery: riotous and rich.

As Barbarians slowlylearning a language for the light,

So we struggle tofind a name for our days and ways.

As the Saints we seekbut do not find, the certainties we can save

Our age is uncertainty,yet still we fill the gaps with fantastical monsters

Dancing in the spaceswhere the truth is not written.

Then who could speakto us from the rising waves in the darkening storm of night?

Not Bryhtnoth, thecourageous politician, cursing the Danegeldand lost beneath the waves upriver;

Nor yet those whowould have compromised and paid for comfort with another’s gold.

Not the priestlyhypocrites, also fat on other men’s toil.

Surely we must judgeourselves- perhaps most harshly- if ever we might find a haven.

Sent by Aidan fromthe shore of Lindisfarne, we might follow Cedd’s long pilgrimage.

In ignorance or infaith he worked within the world, though hoped beyond it.

Can we too find suchgrace, peace, serenity, in the face of the storm’s strong surge?

Yet shoreward,eventually, we must come; the sun setting crimson beyond the evening mist

But will we knowwhere our life’s journey brought us?

The bewilderingbabble of our millennium hides the truth in so much data,

Where once the Saints–who had so little- sought to find any truth at all.

If we could know allwe might know, would we have a greater truth than theirs?

Or would our understandingfail us, drowning in a complex sea?

Then the silence ofthis Chapel might speak loud at last.

October 2010

Closing the straits of Hormuz

2012-01-03T23:47:00.002Z

In the Cold War, there were a series of existential nightmares that kept policy planners awake at nights. One of them was the cutting of the vital oil supply lines from the Persian Gulf to the West. Today, the Iranian regime has threatened to cut the straits of Hormuz, if the United States tries to returns its carrier to its base in Bahrain. Iran has also tested a missile that could sink a carrier in the precise same place.

Iran has also, rather mysteriously, shot down a US unmanned drone. The best technology to do that is in Russia. Russia, the logical conclusion must be, has supplied technology to Iran in order to do this. Closing the Hormuz straits would certainly increase the price of oil- which might save the increasingly unstable Putin regime. When one therefore thinks "cui bono?", the answer must be that Moscow and Tehran have several things in common.

"Some damn thing in the Balkans" was the policy nightmare a hundred years ago. Now, it is the cutting of oil supply to the West by an Iran supported by the criminal regime in Moscow. The fact that China also took a look at the drone cannot have gone down well in the US.

This is spectacularly dangerous.

If Iran tries to close the straits, the response will be overwhelming force.

The slightest miscalculation will start the Third World War.

Casting the Runes

2012-01-01T11:34:00.003Z

Predicting the future is not something Human beings can do with any great accuracy, so the acres of newsprint devoted to imagining the year ahead before it happens are largely wasted effort. I do not intend to make any predictions, but I can see a few interesting "what-ifs" on the horizon.

There are some definite dates that we can play with: we know that France and Russia will face elections. At this point, the French candidates include the incumbent Nicholas Sarkozy, his great right wing rival, Dominique de Villepin, the Socialist Francois Hollande, and Marine Le Pen of the Ultra-right Front National. While many are prepared to make a bet as to whether or not M. Sarkozy can make it back, I think the story of the election may end up being the showing of the Ultra-rightist Le Pen. Polls are showing that her support exceeds that of her father at a similar stage before he humiliated the Socialist Lionel Jospin and forced a run-off with the now convicted fraudster Jacques Chirac. The impact of a strong showing for the anti-Euro Le Pen could not only turn French politics upside down, but up-end a larger number of basic assumptions about the entire European system.

In Russia, the conventional wisdom was already being challenged in 2011. As I have argued many times, the corrupt and mendacious regime of Vladimir Putin rests on shallow and unstable foundations. As the momentum of protest grows, the Putinistas will struggle to maintain control, and ultimately, if the Russian people insist on it, some real change can finally come to a country that has totally lost its way under the current government. A change in Moscow may not be proceeded by change in Belarus, but Minsk too may end up becoming a cockpit of protest too.

In Britain, the mechanics of the coalition have worked surprisingly well, but the Liberal Democrats have paid a heavy electoral price- that seems set to continue, and the party is braced for substantial losses at the May local elections. The decision of the Essex Police to send a report to the Director of Public Prosecutions concerning the alleged behaviour of Chris Huhne could lead to his departure- and the first significant reconstruction of the joint ministerial team. Look to the cadre of junior ministers, such as Ed Davey and Jeremy Browne to be promoted early in that event.

The Scottish elections will be examined particularly closely for evidence of the growing likelihood of Scottish separation: a defeat of Scottish Labour in their erstwhile stronghold of the City of Glasgow will provide all the evidence that is needed that the UK is headed into very dangerous waters. The breakdown of Labour hegemony in Scotland would undermine any momentum the party would hope for in their attacks against the coalition- and may also provide a first glimmer of hope that the Liberal Democrats could ultimately recover.

As in 2011, the performance of the global economy seems set to maintain its stranglehold over the headline writers' imagination. Yet, the scale of the economic imbalances that were built up over the first decade of the millennium precludes any quick fix, although there is growing evidence that it will be the United States that will benefit first from the recovery. The radical restructuring that America has undergone has left its private sector in a strong position, and that is a big plus at a time when China will be slowing, and growing more introverted ahead of the up-coming change in the leadership of the Chinese Communist Party. China retains its capacity to surprise, and it is increasingly difficult to forecast the direction of a country that has been undergoing wrenching economic change.

If the zeitgeist of the past generation has been the creation of a culture of excess, it is becoming clear that recent years has begun to see a significant change in cultural norms. The age of austerity has yet to shape a more thoughtful culture, but I suspect that the coming year may see some interesting experiments. The technology that has helped to shape political currents in the Arab world could yet see a wider revolution in the ways that we see ourselves.

As for this blog, it faces a rather uncertain future- my ambition was to make the blog something like an op-ed column in a newspaper. It may not always be achieved, except in respect of the negative aspects of a columnist- possibly too repetitious and too strident- but it is increasingly clear to me that the coming year will need to see significant changes in how and what this blog seeks to do. I will consider how to proceed over the course of the next couple of months.

However, I still look forward to the coming year and wish my readers a Happy New Year!

Downtime- Happy New Year

2011-12-29T11:28:00.002Z

The period between Christmas and New Year always seems rather slow. The year is not yet finished, but I always feel rather reluctant to start something new, when I know it will be interrupted by yet another holiday- and also in my case, my return home to Tallinn.

It has already been the longest trip to the UK this year, albeit that I have been here only 9 days. I find that I do not feel particularly alien- why would I? Yet I can not say that I am still in touch with the zeitgeist in Britain now. There is a comfortable familiarity in returning to old haunts and seeing friends and family. Yet I am more convinced than ever that Britain as we have known it is fading away. The country I grew up in - still reflexively thinking in post-Imperial ways- has given way to a shrill, sharper and more fearful place. Whereas the price of decline in the seventies was the final loss of empire, now it seems to be the loss of ourselves. The alienation of Scotland and England seems increasingly irrevocable.

I was thinking about how the subjects of His Imperial and Royal Majesty Franz Josef might have viewed their future in 1911. At that time, Vienna was a prosperous, intellectually vibrant capital, and Budapest was a boom town, rather like Dubai today. I cannot believe that many would have thought that Serbia would be the cause of the dissolution of 700 years of Habsburg dominion. Yet within four years, Franz Josef was dead, and two years after that, so was his Empire.

London in 2011 is looking forward to Queen Elizabeth II's diamond jubilee, and also, of course hosting the XXX modern Olympic Games. 2012, despite fears of austerity, seems set to be quite a party- and of course the SNP will not make their move on the referendum, until the party is safely over, and something of a hangover has set in. By 2014, which will be the 700th anniversary of the Battle of Bannockburn, the Separatists will be preparing to bring down the curtain on over 400 years of Great Britain. As the Habsburgs have proven, longevity and success are not guarantees of survival. I will continue to advocate maintaining the common state, yet in 2012, I will also turn my attention to my country of residence.

Estonia has had a good two decades of renewed freedom. Economically, despite the impact of the global recession, the country remains economically dynamic, flexible and increasingly prosperous. Yet still, there remains the fear that judgement on the country has not been made, but only reserved. The fear of a repeat of the invasion of 1940 remains strong. Yet, over the course of the next few years, I hope that Estonians can begin to relax a little. The growing protests in Russia against the venal, incompetent and increasingly brutal regime of the Putinistas, shows that there is hope that Russia can build a civic society and a democratic government. A liberated Russia would be a happier partner for Estonia- and indeed the whole world- but the release of Russian economic dynamism that would come from the fall of a deeply hidebound and corrupt regime could transform the economic face, not just of Russia, but Europe as a whole.

So as I look back on 2011 with generally positive feelings, I also look forward to 2012 with more hope than fear. The year of Arab liberation in 2011 may be followed by greater strides towards liberalism and further moves towards democracy across the whole planet. After years in the doldrums, I begin to think that the markets may stabilise in 2012: I certainly think there is more risk now on the upside than on the down side.

So, I look forward to seeing more friends and more places in 2012.

Happy New Year
bliadhna mhath ur
Head Uut aastat
laimingų Naujųjų Metų
Bonne année
Szczęśliwego nowego roku
sretna nova godina
З новым годам
laimīgu Jauno gadu
srečno novo leto

la mulţi ani

šťastný nový rok
С Новым Годом
ath bhliain faoi mhaise
Щасливого Нового Року

New steps

2011-12-24T22:20:00.001Z

So thousands on the streets in Moscow... of course the health of a ninety year old Danish-Greek Prince may have drowned that out in the news in ~~Austria-Hungary~~ the UK.

I have nothing against the ~~Emperor~~ Queen. However, the tide is changing. Nothing will happen while they still live.

I wish all of us a merry Christmas, and I think 2012 may be a far better year, economically and politically than we fear now, yet I also believe that that we all need to think about what happens next.

For that we need to think... but I see little evidence that we are.

Disunited Kingdom

2011-12-23T11:18:00.000Z

As London journalists contemplate the year ahead, a great number of them have finally begun to understand the high probability that now exists that the United Kingdom will not long survive.

Few commentators, on either side of the border, seem prepared to make a principled case for continuing the common British state. Many, are increasingly inclined to welcome the idea that Scotland and the rest of the UK should part company.

However, even if you accepted the inevitability of the break up, there is little thought being given to what happens afterwards. From the Scottish perspective, the advent of independence is currently being seen as a relatively small step. However, it would not be. The economic adjustment that wold be required to stabilize the economy of newly independent Scotland would be of the same kind of order as the adjustment that was forced on the post-Communist economies of Eastern and Central Europe. The banking sector alone would need significant changes, and will be a major sticking point in the negotiations- even without taking on the full liabilities of the bankrupt Scottish banks, the Scottish government would still need to run significant deficits for at least the first decade of independence. Yet in order to maintain a currency union with the Euro, which as a new member of the EU, Scotland would be pledged to join, then deficits would need to be strictly limited. The cost would be drastic austerity. Even the alternative of maintaining a currency union with Sterling would still require significant fiscal discipline, since the Bank of England would insist that the new state would not undermine its own monetary policies. The third alternative- a fully independent Scottish Pound - implies, at least in the short term, a significant devaluation. All options are unattractive. All carry real risks for the prosperity of Scotland and the rest of the UK

If Scotland faces significant economic adjustments, the rest of the former Kingdom would face major political challenges as well. The relationship of the three remaining participants would need to be completely recast. Though people casually argue that Northern Ireland could join with the Republic, that is to ignore the bitter bloodshed that has been taking place over the past 40 years to prevent exactly such a thing from happening. The integration of Wales into the UK is closer than Scotland, but the initial break-up would probably lead to the independence of Wales too. The result would be the end of nearly 1000 years of the gathering of the nations of Britain- the end of the British State. Internationally that removes a country that is a major support of NATO. Though people seem calm about the prospect of such a diminution of global power and influence at the moment, they may become much less so, when the reality of the end of the state leads to ends that they did not foresee and find hard to accept. The British state is woven into the ways we do things at a fundamental everyday level. Things we take for granted, the BBC, the armed forces, even the flag- all will be totally recast.

The break up of Britain will be a wrenching and often bad tempered affair, and the price will be very real. Some in Scotland argue the case that independence will genuinely liberate the country, and unlock stifled creativity. I can see no reason why it would- Scottish health will remain worse than south of the new border posts, the impact of poor diet and exercise regimes are not wished away so easily, as the spreading waistline of Alex Salmond eloquently testifies. The temptation to cock a snook at the former partners in the Kingdom will not be resisted either- and that could quickly undermine the initial goodwill.

So, Scottish Liberal Democrats should continue to make the case that the common state serves all of the peoples of the Kingdom better than a break up would. We should not be afraid to point out the reckless and unnecessary economic damage that we could do to ourselves. We should work to create a federal Kingdom that we can all respect and trust.

The coming years are going to be difficult, because selling independence is a much easier prospect that the complications of the common state. Yet even with the portly first minister at his triumphant- rather smug- best, the majority of Scots do not want to forget the opportunities that the common state offers us. There are millions of people who are waiting to be reminded that our multi-national state remains a tolerant, open minded and - yes- even prosperous place. Though we are no longer the most powerful military, political and economic force in the world, yet our example delivers an enviable society. We are not perfect, and we should redouble our efforts to recast our society in a better and fairer way, but what we lose if the kingdom is lost is precious- it would be a profound tragedy if we have to wait until it is irrevocably gone for us to understand that.

Ed Balls remembered

2011-12-22T09:43:00.000Z

The Shadow Chancellor of the Exchequer, the Rt Hon. Edward "Ed" Balls is a strange man. He, it is said, cries during Antiques Roadshow. Perhaps he should be more upset when he contemplates the political and economic legacy that Labour has bequeathed to the nation. Despite this slightly bizarre tendency towards the lachrymose, his reputation is uncompromising, even brutal.

Not just his reputation.

His latest journey into folie de grandeur is his invitation to Liberal Democrats- without, of course, their leader, Nick Clegg- to leave the coalition and join with Labour.

This would be the same Ed Balls who dismissed the Liberal Democrat negotiation team in 2010 with words of one syllable.

I think the response of the Liberal Democrats to his- hardly self-interested- invitation will be more or less the same words that he gave to David Laws in May 2010.

Just so all Labourites know, it was Ed Balls who told the Liberal Democrats that they should support a coalition with the Conservatives. It was Ed Balls who told us that there was no way that Labour would or could work with the Liberal Democrats in the national interest. It was Ed Balls who ensured that Labour would go into opposition.

As far as the Liberal Democrats are concerned, Ed Balls should stay in opposition indefinitely.

Piers "Morgan" Moron

2011-12-22T07:42:00.000Z

Private Eye is well known as a satirical magazine, equally well known is their detestation of the pudgy former editor of the Daily Mirror, Piers Morgan. Morgan, for all his later appearances on television, is a pretty discount celebrity. He was, after all, heavily implicated in the "City Slickers" scandal at the Mirror. Although he was able to escape gaol at that time, he was not able to prevent his reputation being permanently tarnished. As a result- and rightly- ever since, he has been a figure of ridicule and contempt, at least on the pages of Private Eye.

His turn as a judge on "talent" contest has been followed by another as an interviewer for CNN. always though, the results of his highly questionable activity as a British newspaper editor have been out there, waiting to trip him up.

His testimony to the Leveson inquiry was as mendacious and partial as we have come to expect from this pustulous figure. Essentially he gave evasive half truths ( =whole lies, c. My Grandmother) and flim-flam answers to the commission. Exactly what you would expect, if you were a liar and a cheat.

This man has delighted us long enough. When, as seems inevitable, he is proven to have lied, he should face the full consequences.

Send Morgan to gaol: he should have been there years ago.

Vaclav Havel: Pravda Vitezi

2011-12-19T12:59:00.000Z

The motto of the Czechs- the truth shall prevail- has been used since the time of Jan Hus.

Yet for much of that time, the ancient lands of Bohemia, Moravia and Silesia have been subjugated to other Crowns. The Czech sensibility- cynical, non conformist and intellectual- is well captured in the English word "Bohemian" and is shaped by resistance to authority.

Since the fall of the Winter King after the battle of the White Mountain in 1620, Czech leaders have often combined these rebellious qualities. Hus himself had previously embodied some of them, and so did the nineteenth century Czech nationalist, Frantisek Palacky. The writer, Jaroslav Hasek, completely captures the Czech sensibility in his immortal character, the Good Soldier Svejk.

All of which is a very roundabout way of saying that most international mourners of Vaclav Havel have not mentioned just how Czech he was. From his gruff, slightly woodwind voice with its strong Prague accent, to his complete determination to use peaceful means to speak to his enemies, Vaclav Havel was in the rich tradition of his Czech predecessors, and especially Tomas Masaryk, the beloved founder of Czechoslovakia.

As a teenager, at the bitter height of the cold war, I read his essays and letters that were smuggled past the Czechoslovak secret police- the StB- with a growing personal awareness that the Communist system was a totalitarian obscenity, if it denied such humane and wise voices. The Power of the Powerless remains a powerful testament to the moral force of the individual, both in totalitarian and democratic systems. Not for the last time, it pointed out the failings of his fellow citizens, as they mouthed the empty ritual of Communist propaganda. For Havel, feted as he later became, was not a comfortable hero. His vision of "the truth shall prevail" was rooted in an uncompromising political morality.

As the Czechs and Slovaks bent the knee to the system, in the terrible years of "normalisation", after the crushing of the reformer Alexander Dubcek's attempts to lead the country into a more open direction during the Prague Spring, those who chose to dissent from the totalitarian norms- including Dubcek himself- were severely punished. After 1977, those who signed the Charter 77 dissident manifesto, were subjected to the full panoply of informers, harassment, imprisonment and torture. Havel, for all his international fame, was no exception. Only a few hundred signed the document, and dissidents were small in number and isolated by the full weight of Communist oppression. Havel and his friends got to know the inside of Czech prisons all too well. His letters from prison to his first wife Olga, published as Letters to Olga, are a testament to the strength of an extraordinary man- and an extraordinary woman. During his increasingly long and harsh stays in prison, he was regularly beaten, and developed TB, which was untreated for some time- a source of much of the lung problems that beset his later life, of course not mitigated by his Bohemian smoking habit. Others, with whom he was in contact, such as the journalist Ervin Motl, were treated even more harshly, and their lives were shortened even more by the torture they endured..

Even at the beginning of 1989, Vasek remained in gaol, and Olga was under the close surveillance of the StB. Yet the miracle of 1989 saw the revolution, which although nicknamed "velvet" was no less complete for all that. I had stayed in touch with support groups for Charter 77, and it still seemed, that for all the gathering tumult in Hungary and Poland that Czechoslovakia would still remain firmly under the control of the apparat. The reality, as we now know, was far sweeter.

As the demonstrations in East Germany, moved from wir sind das volk -we are the people- to wir sind EIN volk -we are ONE people- the missteps of the StB began to undermine the hated regime of Gustav Husak. The Charter 77 dissidents transmuted themselves into the Civic Forum- an echo, perhaps, of the East German New Forum- and set themselves up in the Laterna Magika theatre, a stone's throw from Vaclavske namesti- Wenceslas Square. In the course of an astonishing couple weeks, Dubcek and Havel appeared on a balcony in the square, the crowds grew beyond the capacity of the square to hold them, and finally the Communist government collapsed. Through it all came the call "Havel na Hrad"- Havel to the castle- a call for him to assume power in Prague Castle as the free leader of a free people.

It was at this time that many chose to view Havel as a kind of secular saint- an attitude which irritated him. At that time, in the inevitable cloud of tobacco smoke, he still preferred to seek out the company of those he knew he could trust, and that remained a fairly small number of people. I met him at the house of one of the Chartists in 1990, where we celebrated in beer and songs- and the inevitable cigarettes- a party that was truly Bohemian. Marta Kubisova, a singer who had been banned under normalisation, sang the song she was best known for in 1968- the prayer for Marta- with its quote from the Czech philosopher Komensky. Havel's eyes were as bright as mine as the timeless words of Czech national yearning held us spellbound in the small room.

Olga Havlova became an unconventional first lady, her office full of her throaty laughter, and she and Vasek sought to place the rapidly changing politics of Czechoslovakia within a broader moral context- not always successfully. Neither could Havel or Dubcek resist the growing divorce between the political lives of Czechs and Slovaks within the increasingly fractious Czecho-Slovak Federation. The illness and death of Olga isolated him, and though he had never wanted for female company, the Czechs were mildly shocked when he remarried relatively soon after Olga's death- and Dagmar, the actress who become his second wife, was forced to endure considerable misunderstanding and even abuse. Despite the break up of the Federation, Havel was offered and accepted the Presidency of the Czech Republic, yet to many Czechs by then his virtues were more symbolic than practically political. His own health, from this time was never sure- cancer of the lung was diagnosed, and he was forced into unpleasant and radical surgery.

A connoisseur of "Absurdistan", Havel's humour was part of his qualities of endurance and as a writer he appreciated the absurd situations that his position and sudden fame had catapulted him into. He continued to write, and his memoirs - To the Castle and Back- contain many dryly humourous vignettes. For some years, he traveled between his homes in Bohemia and Portugal, and his large and airy flat in Prague,though this year he was clearly increasingly unwell.

In office he revelled in taking dignitaries to the various Czech pivnice which he liked in Prague- and the sense of puckish rebellion which that implied, was not the least of his Bohemian qualities. He appointed Frank Zappa as a cultural ambassador, and continued to be scornful of those who were conformist and narrow minded. For Vaclav Havel, bourgeois appearance was not necessarily the truth, and he had no need for pretence or pretension.

For, whether punished as a dissident or feted as a President, he remained entirely a writer and thinker committed to living in truth- for him, as the quintessential Czech, that ultimately the truth would indeed prevail was not a matter for debate: it was simply a question of what kind of truth it would be.

'Bye Hitch

2011-12-16T06:48:00.001Z

Christopher Hitchens has died.

A brilliant polemicist, an extraordinary speaker, a thoughtful and determined contrarian. I did not agree with all he said, but the fact of his saying it was always interesting, challenging and valuable.

He stoical attitude to the approach of painful illness and death marked him out as uncompromising and even- though he would have hated the word- courageous.

He was a sparkling mind and a superb conversationalist and a determined seeker after truth, no matter what the implications of that truth.

It seems pointless to say anything further to such a determined atheist, but his idiosyncratic views will be much missed, and perhaps that is praise and recognition enough.

Sarkozy: the bunny boiler

2011-12-16T00:17:00.002Z

Well, of course the British press will respond to the gale of nonsense being pushed around by the Sarkozyites. The noise of discredited British "journalists", however, is nothing serious.

What this drivel from Paris means though, is that France under Sarkozy has indeed decided that the French national interest is best served by there being not a rival to France for the affections of Berlin. The problem is that the obviously conflicted nature of the British relationship with Europe is more attractive to Berlin than Sarkozy's obsessive lurve-fest for Germany.

Germany does not want a Federal Europe.

Germany has therefore not delivered what Paris wanted, but instead of hating the thing which you love, the French have decided that "if only Britain was not around, then Germany would love us and deliver a Federal Europe": hence this absurd "declaration of dislike" against the UK. Of course the UK is financially weak, and almost all the French say is true but... the UK doesn't have to function within the dysfunctional and unfunded Eurozone and France does. So, as France faces the loss of its AAA and the UK does not, there is an inevitable annoyance. Germany needs to stand up to the plate for France but won't, but meanwhile the UK can survive without German help, at least for a while.

I think the response from everyone across the Channel is... Tough.

Sarkozy will lose power in six months. His behaviour towards the UK has been outrageous, but never mind. France usually takes a while to recognise the value of a relationship across the Channel. So does Germany.

Anyhow the back pedaling on all sides after the inept British veto is already sidestepping the tantrum of the priapic and foolish French President. After his seeming triumph, he is discovering that every playground fight diminishes BOTH partners. So if the UK is weakened, which it is, then so is Sarkozy.

I am sure the French voters may have noticed.

Adieu Nicolas!

What Britain could start to do next

2011-12-15T07:44:00.002Z

The problem with British government policy is that the civil servants are still working to the New Labour Playbook. "Eye-catching" announcements are made, usually with recycled, rather than new money which are supposed to give the impression that the government is purposefully shaping the agenda rather than simply waiting on events. Almost always these announcements involve spending, and whenever any idea of restructuring is mentioned, the necessary retrenchment is typically ignored.

Except, of course, that Britain needs retrenchment.

The reason why so many voters now believe the welfare system needs reducing, is because they have seen that it doesn't work. Often it has created a skivers charter, and placed innumerable bureaucratic obstacles in the way of those who actually wish to get work. Huge amounts of money have been wasted.

The core of British bureaucracy, ironically enough, lies not with the spending departments but with the Treasury. As I have noted before, the over 11,000 pages of the British tax code is five times larger than the German code. It is also a make work project for tax inspectors and accountants- with billions now at stake in vested interests. Yet the cost of tax collection is nearly as bloated as the tax code itself. Over £18 billion is spent on simply collecting tax. That represents about 8% of revenue, and does not account for the roughly the same amount spent on benefits and tax credits. Essentially 15% of our taxes are squandered on the spectacularly inefficient way we collect and distribute them. This cost does not count the cost of compliance for individual tax payers and companies and the army of accountants that they need to hire.

Meanwhile the regulatory burden on small businesses is decimating our spirit of entrepreneurship. People who can not find work find it even more difficult to set up on their own.

This has got to stop.

If the coalition does one thing, it must break out of the New Labour mindset so beloved of civil servants. The tax code must be radically reformed: tax simplification would be a start, but if the UK is genuinely going to restore its competitiveness, it should seek a tax code that can be understood and complied with by simple individuals. Supply side reform is now a critical part of stimulating recovery.

In my view, the British people are increasingly cynical of government programmes that do more for the civil servants administering them than for the supposed targets of those programmes.

A radical tax overhaul will show people that they can take back control in their lives.

That is the message that Liberal Democrats should be putting across in coalition and in public.

Football needs a longer spoon for these particular devils

2011-12-14T07:48:00.001Z

Alisher Usmanov is a pretty "controversial figure". In fact the Russo-Uzbek tycoon initially made his money through acquiring control of large parts of the Russian metal industry at a time when that industry was one of the most murderous in the gangster world of 1990s Russia. He has gone on to acquire a very diverse set of holdings in Russia and increasingly outside Russia. In the UK he recently acquired Sutton Place, the former home of JP Getty. He has also acquired a large stake in Arsenal football club.

Usmanov has been extremely close to the regime of Vladimir Putin, and although his Kommersant newspaper has not been entirely slavish to that regime, it has -in general- fully served the interests of both Putin and United Russia. Indeed earlier this week, Kommersant fired two editorial staff who has allowed the publication of stories that were highly critical towards the conduct of the disputed elections and the statements of the regime. Usmanov is and remains a loyal ally of the Kleptocracy.

Usmanov, like other Russians, has sought to use the positive publicity of being involved in football in the Premiership, or the Scottish Premier league in order to provide a certain amount of international influence and potential protection.

The fact that the British authorities still see fit to deem these individuals "fit and proper" is increasingly controversial. Mr. Usmanov's clear alliance with Putin marks him out as being no friend of Britain. In fact it also marks him out as being no friend of Russia either.

I don't often agree with George Monbiot, but...

2011-12-13T13:17:00.001Z

The press reaction to the events of the past few days has been to smear, to misrepresent and to outright lie. As George Monbiot points out in The Guardian today, journalists are now a lickspittle bunch of toadies for their society friends. The circle of journalists is so narrow that any independent thought is being crushed by an isolationist, very right wing groupthink.

As the Daily Mail comes out with some variation on Lib Dems support for Europe taxing your granny to give you cancer shock horror and the Daily Express continue to find some spurious excuse to print a picture of Diana, it is hard not to feel a burning anger at the injustice that allows these poltroons to get away with their schtick.

Of course the Lib Dems are right to feel that Cameron played to his Eurosceptic gallery rather than the national interest when he wielded a veto that could be ignored. However we also know, as does David Cameron, that if the UK is going to recover, then the Eurozone must recover- and restructure- too. How it does this is of critical importance to Britain, and refusing to even participate in the process is an abdication of responsibility that is not only unworthy, it is positively dangerous to the UK national interest.

However that does not leave "Merkozy" in the right. The fact is that Sarkozy may have overplayed his hand too, and yet he still has no guarantees that the Germans will yet do what is now necessary to free up the ECB to act directly and to provide funding for the EFSF. Germany may have claimed European oversight over member country's finances, but it is by no means clear that they are yet ready to sanction the release of liquidity that would persuade the market that the Euro can recover. So although the Brussels summit veto has served notice of the parting of the ways, in fact there remain many potential outcomes still in play.

The fact that Nick Clegg absented himself from the yah-boo fest of the House of Commons was probably wise, and the relatively measured way that David Cameron made his statement, "more in sorrow than in anger" has clearly helped to cool tempers. His insistence on continued European Union membership will have reassured the Liberal Democats, after the more rabid Europhobes launched their maximalist- and totally irresponsible- demands for withdrawal.

In Germany, the press too has wondered aloud whether the UK should not just leave the EU, but in today''s press there is a far more measured tone, and many German politicians are growing irritated with the grandstanding of "Merkozy"- especially the Sarkozy part- and reminding themselves that a German-British alliance would be more congenial in many ways.

So we are not where we were a week ago, but Nick Clegg has made his point- albeit to the universal derision of the gutter press. They may remain loud, but David Cameron has been forced to take more notice of his coalition partner than a bunch of Yah-Hoos in the press... even if they did go to the same schools as many of his friends.

Getting what you want in a negotiation

2011-12-12T09:14:00.001Z

Interesting to note that David Cameron went to Brussels and has returned with no agreement and the dangerous fiasco of his ineptly wielded veto. Chris Huhne went to Durban and despite long odds, has returned with an unexpectedly strong agreement on climate change.

I suppose the message is that if you want an agreement, eventually you can find one.

Nick Clegg steadies the ship

2011-12-11T11:42:00.001Z

David Cameron went to Brussels but his use of the veto, which could have been justified in certain circumstances was bad from the point of view of strategy and pretty appalling from the point of view of tactics.

His position was so last minute that he had not briefed even a single potential ally. The result was that we had no allies.

Sarkozy laid an ambush which the UK walked straight into. The result was a catastrophic defeat for British diplomacy, which puts at risk not only our wider diplomatic reach, but undermines respect in Washington and Beijing. Neither has the veto stopped anything the EU26 now wish to agree among themselves without reference to the UK, so the defeat is total.

In the UK the Europhobes' references to the Second World War have come thicker and faster than ever. Complete withdrawal is now seen as possible, even likely.

So what Nick Clegg has started to do today is sensible. He has understood the fury amongst the Liberal Democrats at a defeat which is on the same scale as the AV humiliation that the Tories inflicted on us.

He learned a lot from that.

I suspect that the Brussels veto is not the last word on this matter, and that from now on, the Europhobic attack dogs will get far less of what they want than their gleeful triumphalism will have them believe today.

I judge that the mood among Lib Dems is now grimly determined.

We have been successful in putting forward the liberal agenda in government. The price of the Brussels debacle will be that the Lib Dems will start to dig in their heels a lot more- and that includes starting to reach out to our EU allies and rebuilding the relationship that has been so badly damaged by Tory scorn and ineptitude.

My father has one line that he uses from time to time: "Never ever trust the ******* Tories", he should know, he once was one. Liberal Democrats must trust less and verify more: this coalition is a business relationship, not a marriage. It is time we got more from this, including real constitutional reform. That must now be the determined goal for Mr. Clegg. and all the Lib Dems.

Should the Liberal Democrats now leave the coalition?

2011-12-10T16:33:00.001Z

As the scale of the disaster of the Brussels summit for Britain becomes clear, it is now an open question as to whether the Liberal Democrats should continue to be members of a government that has so spectacularly undermined the British interest.

We have been openly derided, not just from the left, notably and effectively by John Kampfner, but also mocked by the Europhobic Conservatives in a more infantile and insulting way.

We serve two purposes in coalition: firstly to put forward and enact as much of the Liberal agenda as possible and secondly to save the Conservative Party from itself.

The failure in Brussels shows that we can not prevent the Conservatives acting on their basest anti-European instincts. The damage that this will do to our country is severe and permanent.

I understand that if we go to the country in a general election now, our party will be severely damaged. However I would far rather go now on a point of principle that is central to the Liberal Democrat cause, than linger on, derided and ineffectual to the same result- but greater damage to our country- in three years time.

David Cameron must be put on notice that the Liberal Democrats will not see the interests of our country undermined by his party political sectionalism. We do not and must not claim ownership of this fiasco. Cameron's bet on the failure of the Euro is a bad mistake, and we should say so, out loud, now.

I do not expect the coalition to fall, but unless Nick Clegg can recover the situation over the next two quarters, I -for one- will be advocating a further vote by the party on the coalition at the Autumn conference in Brighton next year.

Cameron's veto: what next?

2011-12-10T08:41:00.001Z

The thunder of the Brussels Summit is only just fading, and it is still by no means clear what happens now. In many ways the summit has created more questions than it has answered.

However, there is no doubt that the relationship of Britain with the rest of the European Union has reached a point of fracture that places the UK outside the core of the organisation. David Cameron has, as he threatened, wielded the British veto, but the consequences were not what he intended. Instead of forcing the other 26 states to address British concerns, they have instead created a separate agreement without the participation of the UK. Although the British have- rather childishly- insisted that this group of 26 not use the facilities, even the offices of the European Union, the fact is that the Franco-German entente has de facto expelled the United Kingdom from the new direction of the European Union.

The miscalculation that David Cameron has made was not to think beyond the veto. The UK did not have any alternative plan. Neither had the British engaged with anyone else to put forward any other solutions. Intransigently, the British position was simply that the role of the City of London had to be taken separately from the rest of the financial crisis. This was not a position that could be taken seriously by any of the other member states, most of which believe quite strongly that "financial speculation" has been a major cause of the crisis in the first place.

If Mr. Cameron's strategy was flawed, he was also outplayed tactically by the Franco-German entente. They were fully prepared for the British veto and had made contingency plans accordingly. The result was the effective reconstruction of the European Union without British participation.

However the result of the Brussels summit is still set to be tested. The Germans may have achieved their goal of deeper fiscal integration, but it remains to be seen whether the agreement delivers the "big bazooka" that can soothe the fretful markets. The fact is that only now does Berlin recognise the twin nature of the threat they face. The first is the obvious sovereign debt crisis which can only be solved by major macro-economic reconstruction. The second is the deep crisis in the European banking market. Over the course of the past three weeks, several of the largest banks in Europe have come close to collapse, and they are still on life support. Without further emergency capital, we will still see a major European bank failure within coming weeks or even days, unless immediate remedial action is taken.

The determination of the new EU-26 will be tested to the utmost in the next few weeks. The liquidity- never mind the solvency- position remains dependent on significant policy changes by both the ECB and the EFSF- and that the EU-26 governments all fully support these with their own full faith and credit. It is in order to attract German support that the summit sought the binding commitments that David Cameron vetoed. If that German support remains partial or grudging, then the outlook for the Euro will still be in the emergency room. However, if the EU-26 follows through on the declarations that they have made, and they acquire greater market credibility, then there is a breathing space for the new macro-economic restructuring to begin.

As for the UK, David Cameron has essentially made a bet that the Euro will not survive as a single currency. Certainly, from the perspective of the British political discourse, that is a reasonable position to take. However, by walking away from the crisis, he has earned the contempt of the rest of the EU. If the UK was not willing to help in the depths of the crisis, then it will be excluded from the share of the recovery.

Britain is not a member of the Schengen zone, not a member of the Eurozone, it opts out of large parts of the European treaties, it has vetoed greater defence cooperation. For a long time other members have regarded the UK as a semi-detached member of the bloc. Now that status is institutionalised not just by British opt-outs but by exclusion. For the first time Britain has been told that it may not participate in a significant areas of EU debate. Unfortunately for Britain, that now means that critical areas of economic and financial policy will no longer have input from London.

That is a major change. It is also likely to be a permanent change. It is also a huge diplomatic defeat for London. After years proclaiming that they would not accept a two-speed Europe, after supporting enlargement in order to weaken the centralising policies of France and Germany and staying at the "heart of Europe", Britain has ended up in a minority of one. The stunned faces of the British delegation said it all- decades of work and engagement with the European project have ended in the worst possible result: a Europe united against us.

The Eurosceptics have had their victory. Perhaps, they may yet still seek a formal withdrawal from the EU, after all most of them would be quite happy to end all the EU arrangements, no matter how beneficial they may be to us as individuals. For those of us who have supported the benefits of closer Union, this has been a profoundly disappointing time, and it is something that many Liberals will not forgive, that the Liberal Democrats in the coalition could not construct a more practical alternative to the ineptly wielded Cameron veto. Yet perhaps it is too soon to consider the political consequences, while the economic consequences remain unresolved.

When 26 countries are prepared to make an agreement and one is not, then that is a problem. Many Eurosceptic bloggers this week have linked to the David Low cartoon of Dunkirk, "Very Well, Alone", as usual, they draw on the well of imagery of the Second Word War- one Tory MP told Cameron on Wednesday that a bring back "piece of paper" would be simple appeasement. This is not 1938, and Brussels was not Munich, and our failure to move out from the past is what lies at the root of our dysfunctional relationship with the EU.

I don't know if the Brussels agreement will stick, still less whether it can begin to solve the crisis. My hunch is that it will take many summits, many meetings, and much more anguish to solve. However, that process will be long and involved, new alliances will emerge, new ideas will be developed. Meanwhile Britain will not be part of any of it,

The arrogant isolationism of the Eurosceptics, with their dogmatic bravado and insulting contempt for people who support the European ideal has now made a lasting impact on the relationship between Britain and the rest of Europe. Yet we have been here before. Britain barely participated in the Messina conference and we did not sign the treaty of Rome in 1957. In the end, we recognised, too late, that we needed to be part of the emerging EU.

It is quite possible that the Euro survives intact and ultimately begins to prosper. But then it will be too late for the UK to join: we would not be permitted to do so by the other EU members, who will long remember our failure to acknowledge what we had to do in order to solve the financial crisis. "Saving the Pound" might be the last thing we want to do in twenty years, but of course it is possible that by that time the UK itself, in its current form may not exist. It is not just the EU that faces an existential risk. The difference is that 26 governments decided to confront that risk head-on and one did not.

Why the UK has lost the Euro argument

2011-12-09T13:17:00.001Z

The Euro debate in Britain takes place in a vacuum. The Euro-sceptics are not challenged, even when they start to resort to absurd national stereotypes and mentioning the war ("I think I mentioned it 73 times, but may have got away with it") in the most inappropriate contexts.

The fact is that the image of Britain is so rooted in the Second World War, that we have become imprisoned in a national myth which insists on our unique righteousness and moral certainty. No one is allowed to mention the equivocation that created a culture of appeasement, the rise of the Blackshirts, or the real possibility that instead of "fighting alone" in 1940, a Britain under Halifax would have probably come to terms.

The problem is that the generation that actually took part in the war has more or less passed, and it is the post-war generation that mostly were not even alive at the end of the war that has created this pristine national myth. In the face of inexorable national decline, the country clings ever more tightly to "the finest hour", but it has little to do with the historical right and wrongs of the 1930s and 1940s, and even less to do with the present day.

The problem is that the latest generation now still thinks in terms of the stereotypes shaped by this national fetish. The French are cowardly "surrender monkeys", the Italians even more cowardly and probably mafiosi, and the Germans?

Well the Germans are literally unspeakable. Sinister, brutal, efficient. Still planning global domination and undermining democracy everywhere. Yet its shows how little people in Britain actually know of Germany that this stereotype has grown and morphed into a profound but irrational fear and hatred of our Teutonic cousins.

Few people speak German, fewer still have ever visited Germany. The gap in comprehension is yawning. Britain has learnt to hate Germany without ever understanding what Germany is. Whereas many Germans speak English and visit Britain, British lack of interest amounts to a kind of contempt. Even when our former allies ("the plucky Poles") engage with Germany, they are treated as though this is the blackest ingratitude.

The problem is that this fear and hatred of Germany has become bound up into British ambiguities about the entire European project. Whereas Germany and France reached out to each other in the post war generation, with Mitterrand and Kohl hand in hand making their peace with the past, Britain remains unreconciled to the idea of our diminished place in the world and bitter and envious about the growth of Germany, which was the evil protagonist of the Second World War, versus her own eclipse, when Britain was the noble victor of the great crusade. We can not get over ourselves nearly three quarters of a century after 1945.

Yet it is a view that carries little weight- in Eastern Europe the Second World War brought the further catastrophe of Stalinist Communism- a system which was Britain's ally and which only ended in 1989/91. Even if the result of the war was an unalloyed good- which is itself debatable- it was not brought about largely by Britain. If D-day was not, as claimed by the French, "a primarily Franco-American affair", then neither was the Second World War largely won by the British. It was won by American generals and Soviet troops, and after 1942, Britain was clearly the junior partner.

In fact it is the Cold War where Britain fought for an unalloyed moral good, but of course that carries less resonance, it involved making alliances and partnerships, which is somewhat at variance with the myth of "standing alone".

The bitter irony is that the generation that fought the Second World War wanted to build and be part of the European project. They understood the ambiguities and did not swallow the myth of British purity. Indeed it is the patron saint of the myth of the Second World War, Winston Churchill himself, who first argued, not for a community or a Union, but a full "United States of Europe".

I don't like the sceptics, I freely admit that. I see Dan Hannam as a puffed up pustule of ego, and seriously doubt Bill Cash's sanity. Yet I must concede that they have won the argument for now: not because they are right, but because they have persuaded the British people that they might be. But the consequences of their victory is that Britain has been pushed into deep isolation through its own myth making and intransigence.

So invincible in the certainty they are right, the Euro sceptics are making Britain into a lesser country -and a weaker one.

Mr. Cameron goes to Brussels

2011-12-08T07:25:00.001Z

The weekly Parliamentary riot that is the British Prime Minister's Question time must have reminded Mr. Cameron how fractious his own party is, when it comes to the European Union. The problem is that the freedom of action that the government has on the issue is pretty limited. The Franco-German diktat, organised my "Merkozy" is pretty much the only game in town, since any proposal has to have the support of the German treasury. From the point of view of the UK, we have been outplayed and outgunned by the slippery French President.

That is... for now.

Britain has been isolated for two reasons, one real, one a matter of perception. The first is that the UK did not an will join the Eurozone. The second is that British comments, however well intended usually sound like existential criticism of the Eurozone itself.

However ignoring and isolating Britain on such subjects as the financial transactions tax may let backfire on "Merkozy", because they are not just ignoring a British position, they are failing to understand the likely market reactions to their own policies. The Germans have made a critical mistake in trying to tackle the sovereign crisis in isolation. The near collapse of international funding for Eurozone banks has been the result. The crisis has two aspects: the risk of Sovereign default and the risk of banking collapse, and "Merkozy's" ideas were only looking at the problem of sovereign default. The transaction tax proposal is lunacy in the context of European banks that are on the brink of collapse because they can not access market funding- one can only think that it is being put forward simply to be a "concession to the UK", when it withdrawn.

In fact David Cameron, to the chagrin of his backbenchers, is going to Brussels in a fairly pragmatic and open minded mood. However, he should not underestimate the cards he has in his hand, even if he is greeted with a certain froideur or even contempt by "Merkozy".

Firstly, the Nordic bloc of solvent states remain closer in thinking to London than to Berlin/Paris- and although Spain and Portugal are supplicants to "Merkozy", there is a certain resentment as to the way the Franco-German motor has become a Franco-German directory. The UK is not as isolated as Merkozy would like. This means that simply not imposing a transaction tax will not be sufficient bone to offer David Cameron.

It means that Mr. Cameron can impose conditions on a treaty of 17 as well as on a treaty of 27. The provisions of the single market must not be weakened, and if they are and what "Merkozy" means by a 2-speed Europe is an inclusive and exclusive market, then Cameron must veto.

In fact Mr. Cameron now has the opportunity to remind the other 26 states that the UK is not to be treated like Spain, Italy or Greece, the actions of the coalition government are bringing our financial house into order: it is not the British AAA that is under threat. The issue is how to present this declaration of British power. So far Britain has appeared arrogant and patronising. Now Mr. Cameron should put on a new attitude.

Merkozy has been preceding on the basis of Caligula's motto:

Oderint dum metuant: Let them hate me, as long as they fear me.

It is time to put Merkozy in their place: the undermining of democracy and the outrageous contempt displayed to the other sovereign states must stop. David Cameron has some sharp teeth: he should not be afraid to show them to the French and Germans who have brought the European financial system to the brink of collapse. By being determined and forceful, Mr. Cameron could return from Brussels not just with a few token concessions to sell to his backbenchers, but with a whole new working relationship.

More on the Russian "election"

2011-12-08T07:13:00.001Z

The background noise of protest in Moscow and St. Petersburg has continued, despite the severe clampdown. Over 1000 people have been arrested, which implies that the size of the protests is much larger than the few thousand that has been admitted by the regime. Significant figures amongst the opposition, such as the blogger Andrei Navalny, remain under arrest.

The problem for the regime is that evidence is growing that the declared results are so far out of line with the real tallies as to be utterly at variance. This is not just a matter of the vote stuffing in Chechnya helping United Russia over the line- it seems that even the results in the major cities, which were thought to be more accurate because they showed such a large fall in the United Russia vote- are false too. In some areas it is clear that United Russia was well behind Yabloko, the Liberal party that the official tally says polled so few votes that they did not qualify for the Duma.

While the state run television continues to ignore the protest on the utterly spurious grounds that "a protest of 10,000 is nothing in a population of 142 million", the chat rooms in Russia are extremely excitable. There is a groundswell of protest online and in the press, which is not under such strict control.

Obviously the Kleptocrats have all the guns and it is difficult to see how the protesters can force an early change, but it is now very clear that the Putin regime has lost its legitimacy, and that the "Prime Minister" will face increasing difficulties over the coming weeks.

Russia starts to reap the whirlwind

2011-12-07T08:47:00.001Z

The blunt political reality is that Vladimir Putin needed to cheat, even just to get the "sharply reduced majority" that is the official result of the Russian Parliamentary election. When we blow away the fog of the 99.9% results in some parts of the country, it is quite clear that United Russia lost the election.

The problem now is, what comes next?

There have been the largest street protests for many years in Moscow and St. Petersburg, and - as usual, these have been broken up by the thuggish internal security service. The future of Russia is not likely, in the short term, to be determined on the snowy streets of Moscow. However, there is no doubt that the weakness of United Russia opens up some serious future problems for Vladimir Putin' s bid for the Presidency.

In classic authoritarian style, Putin is likely to try to prevent any credible opposition leader from standing against him, yet the weakness of United Russia may entice a few of the opposition leaders to stand regardless. In which case, Putin will seek to divide the opposition by encouraging many more candidates. Yet Putin may be losing his sure political touch. His tin ear on the job swap between President and Prime Minister is a significant part of what has got him into serious trouble in the first place. His instincts remain firmly authoritarian, at a point in his regime where he needs to be more flexible in order to avoid real political challenges.

Putin can now expect little from the West. His failure to engage with the US after they publicly sought to "reset" relations with Moscow now means that he is internationally isolated. He has lost such Western leaders as Berlusconi, Chirac or Schroder from the previous generation who were prepared to intercede in his interest. Although Russia has often voted with China on such subjects as support for the Libyan or Syrian uprisings (against both), all he ended up doing was making an ineffectual protest and being ignored.

The global economic and financial crisis has hurt Russia too, and although it has become customary to talk of BRIC states as the rising future, Russia has been losing political influence and economic cohesion over the past few years. Adding political instability into the mix makes the Putin regime a pretty unappealing partner- and the Chinese already barely bother to hide their lack of respect for Moscow.

In the short run it seems that Putin can hold power, at least until he is formally returned to the Presidency. Then, however, his problems may seriously begin. Another obviously fraudulent election will severely weaken his political legitimacy, and although history shows authoritarianism can survive on force alone for some time, the examples of the Arab rebellions are being widely discussed in Russian chat rooms. Putin and Mubarak, and their countries, have much in common, and continuing to impose his rule without consent could easily lead to the violent collapse that Russians most fear.

The bigger problem for Putin is that he rides a tiger already, in the shape of the various contending "bizness" groups which comprise his regime. Without the legitimacy of a popular mandate, he will find it far more difficult to control disputes as they arise. The implication is that the foundations of the regime, resting on the criminal theft of billions of state assets could be undermined from within as well as by popular pressure.

From the point of view of the West, there is ever less point in engaging with Moscow, and while tens or even hundreds of thousands of the Russian middle class now prepare to leave, we can not avoid the increasingly high probability that Putin's shelf life could be down to far less than the period of his next Presidential term. A backlash is already brewing. The crushing corruption, brutality and criminality that have become the hallmarks of the Putin era may now, finally be sowing the seeds of popular rebellion.

The problem is that the future may be even less stable, and could be far more difficult to cope with than the cantankerous Putinistas.

A word to Tim Farron's therapist

2011-12-07T08:21:00.001Z

As a life-long Liberal I can not say that I share Tim Farron's professed need for therapy about the coalition. I am not a Conservative, I have never been a Conservative and I am not going to become a Conservative because of the coalition. Yet it is precisely because I am not a Conservative that I don't need therapy.

For the first time in my life time, and indeed my parents lifetimes, Liberalism has a leading place in government. We have senior Liberal Democrat ministers who are leading the debate in this country, and more to the point are enacting Liberal policies.

Our ministers, with no little political courage, are enacting policies, such as the steady increase in the tax threshold to £10,000 which would not be enacted at all without our leadership.

Sure government is not easy, and we have on occasion been outmanoeuvred - particularly in the early days, and notably on tuition fees, which cost us dearly. However, I see several announcements every week that show, while the Tories worry about the future of the EU, over which they currently have little or no control, our ministers are making changes now that are having a practical and positive impact to everyone's daily lives.

At least half, and arguably a greater majority, of the policies that the Liberal Democrats are backing in the coalition are Liberal Democrat policies.

If I was Tim Farron's therapist, I would tell him, in his own interest, to pull his socks up, straighten his tie and go back out to proclaim the success of the Liberal Democrats in government.

Comparing this coalition with the supposed virtues of a single party government- say, under Gordon Brown- and I will take the harmonious policy splits, the lack of personal rancour and the discipline shown by the MPs of both parties every day of the week.

There is no point in being half-hearted: the coalition government under truly appalling economic circumstances is making progress, and we should be certainly not be ashamed of the Liberal Democrat ministers who are making this happen.

We don't know if the electorate will recognize this work in 2015, but there is still a chance that they may.

If, of course Mr. Farron was just seeking to put a marker down for a leadership bid in the event of defeat, I guarantee that these kind of comments will not endear him to his Parliamentary colleagues or even more than a small group of the membership.

Red Alert from the Bank of England

2011-12-06T13:33:00.001Z

The Bank of England made the following statement this morning:

In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility.

This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral.

Obviously this follows on from the coordinated action last week, but it underlines that the liquidity crunch that nearly took place carries risks for all non-US$ holders.

The rumour that suggests that we came within a few hours of the total collapse of the short term funding market can only be reinforced by today's statement.

Very Scary Indeed.

What nearly happened in the markets last week makes my blood run cold

2011-12-06T06:52:00.001Z

In the middle of last week, exceptional measures were announced by a coordinated group of six central banks: the Fed, the ECB, the Bank of England, the Bank of Canada, the Bank of Japan and the Swiss National Bank. In effect they agreed to supply virtually unlimited Dollar liquidity to the market. The result has been a sustained market rally over the past few days. However it is only now beginning to sink in what lay behind the central banks' decision and how close the financial system just came to collapse.

It is now clear that the funding cycle, even for the best credits in Europe was getting dangerously short. Whereas a major industrial, like Unilever, could expect to fund US Dollar exposure for at least 30 days, by the beginning of last week, this was down to three days. If it was bad for industrials, it was becoming impossible for banks. US Dollar holders were not prepared to provide funds to several major Euro-zone banks at virtually any price.

They were simply unable to gain access to the US Dollar market.

Although this still has the status of market gossip, it seems all too likely that a significant number of the largest Eurozone banks would have collapsed last week unless the central banks had done what they did. Just to repeat, last week, the Eurozone came close to a multiple collapse of some of its largest brand name banks because they were not able to access funding in Dollars.

So clearly the action of the central banks was critical, but while necessary, it is not sufficient to address the crisis of funding. It is clear that several major houses do not have an independent future. A major banking restructuring is now very much on the cards.

The German government has refused to address the private sector until the Eurozone fiscal/sovereign crisis is stabilized. Last week's near disaster shows how short sighted that policy has been. The fact is that the debt crisis can only be solved by coordinating debt write-downs and restructuring across both public and private credits.

We had a very close shave last week, but while the liquidity issue is addressed, at least for the foreseeable future, the solvency issue is not. I do not think it is a coincidence that Commerzbank is being forced to take immediate remedial action to boost its capital ratios.

Others will follow very shortly. Further retrenchment will follow. So in addition to a major fiscal contraction, the Eurozone must now deal with a large-scale contraction in bank funding.

It is hardly a surprise that S&P has put all of the Eurozone countries on credit watch for immediate down grade.

In the face of the determination of Berlin to impose fiscal control without actually providing credit support, it is a moot point as to whether the price for the Euro is actually worth paying. Even if the Eurozone governments believe it is, the years of recession ahead, amounting, lets face it, to a second Great Depression may see the voters changing their minds rather quickly.

So far the politicians are betting that closer fiscal union will work in the medium term.

Given the odds, that is not a bet I would be taking.

The devil in the detail of the Russian election shows Putin LOST

2011-12-05T11:04:00.001Z

Now that we can see the final regional breakdown in the Russian election results, it is much worse for Putin that it initially seemed. The 49% vote for United Russia includes the tallies for non Russian republics, such as Chechnya, where the 99.9% support for United Russia is clearly false.

Given that several districts in Moscow and St. Petersburg returned tallies of less than 25% for United Russia, then it seems like a reasonable working assumption that the majority of Russians in European Russia voted substantially against Putin.

When we consider that the election was not certified free and fair, amid widespread intimidation and pressure on independent observers, it seems more likely than not that Putin actually lost this election.

This creates a crisis of legitimacy.

Far from serving another two terms as President, it could actually be that this clearly fraudulent and stolen election marks the beginning of the end of the Putin era, even if not for the Kleptocracy that he has created and presided over.

This is totally unexpected. The belief was that Putin has sufficient popularity that he would be able to hold power more or less legitimately. It now seems quite clear that he needed the fraudulent votes in order to maintain a majority: without them he would have lost the election.

The press reaction is that he has "suffered a setback": it is much worse than that: he actually lost the election.

Another crack in Putinism

2011-12-05T07:32:00.001Z

The election result in Russia is hardly unexpected: Putin won.

Except he didn't.. quite.

The political system for elections to the Duma does not permit liberal parties to participate. The choice is limited to the neo-fascist "Liberal Democrats", the rump Communist Party and a party "Fair Russia" which has been widely considered to be another bunch of Kremlin stooges. Under the circumstances you would expect the Putinista vehicle "United Russia" to walk every election.

Just in case, however, the only free election monitors- Glos- were harassed and more liberal media outlets had their websites hacked. United Russia was advertised at every sports event and public gathering- its opponents were not. United Russia had the full resources of the Russian state behind them- civil servants and other state employees are compelled to support the party. Significantly, the non Russian republics, such as Chechnya had a recorded vote of 99% for United Russia, while large areas in St Petersburg and Moscow gave less than 30% of the vote to the ruling party.

So far so unsurprising.

However, as I have suggested here for some time now, even with the full force of the oppressive Russian state behind him, Putin faces some increasing challenges to his untrammelled rule. the majority of Russians, in the Russian Federation did not vote for Putin, even as the non Russians "voted" 99% for him.

Even with every card in his hand, and a few stolen ones up his sleeve, the drastic fall in support for United Russia is all too obvious. It is an interesting legacy to leave for Medvedev, when he waltzes into the Prime Minister's office after Putins "re-election" as President. In fact it makes it all but certain that Medvedev will not complete his term as PM, even if Putin completes his term as President.

Of course that assumes that Putin is indeed returned to office in March. When even a manipulated choice between evils based in an biased media environment and harassed election monitoring can not hide Russian disenchantment with the kleptocracy that runs them, then it is fair to say that the stability of the regime can not be what it was.

While I think Putin may well re-enter the Presidential office on schedule, I am increasingly sure that his plans for two more Presidential terms will be disrupted. Having entered office promising stability, he has created stagnation and will leave in disorder.

Croatia makes it in!

2011-12-01T13:34:00.001Z

Amidst all the bad news on the EU it is good to able to report that Croatia has just received the formal approval of the European Parliament to join the European Union.

I have not blogged on the process for a long time, but the upheaval that has been involved for Croatia has been considerable. The country has taken the issues of corruption and good governance extremely seriously, and there has been a determined effort to ensure that all evidence of wrong doing is fully investigated- indeed even the former Prime Minister Ivo Sanader has been forced to face prosecution after being extradited from Austria.

The discipline that this process has involved is remarkable to those who knew the country through the course of the the war of the mid nineties. Then there were so many problems that Zagreb had to tackle, it was hard to believe that the political system could cope. Having won the war, politicians seemed to become torpid and greedy. The progress of the late 1990s evaporated, and many began to think that Croatia was in a spiral of Balkan decline.

As today's news shows, the country has taken a much better path. Croatia has much to contribute to the EU and I look forward to the dry Croatian sense of humour coupled with a passionate sense of right and wrong adding to the quality of European political discourse. Croatia now gives hope to the rest of the Western Balkans, especially Bosnia and Serbia, that they too can overcome their problems and follow Zagreb into the EU.

Dobrodošli u Europsku uniju, Hrvatska!

Euro storm hitting Russia harder

2011-12-01T12:19:00.001Z

The Economist blog, Free Exchange reports the growing evidence that the Eurozone crisis is sucking capital out of the peripheral European economies. Here in Estonia, we are inside the Eurozone, but there is certainly some increasing anecdotal evidence that suggest that Russia is being hit increasingly badly.

Colleagues who work with Russian investors suggest that there is a serious liquidity problem and that Russian banks are facing a funding strike. The impact of the de facto collapse of the Bank of Moscow in July has underlined concerns about a large number of smaller banks in Russia. In Lithuania, Bankas Snoras a bank that was owned by Russians, with a large client focus there has been declared bankrupt, and there are growing concerns about similar institutions in the Baltic region.

The Russian government, in principle, has a healthy funding balance, because the higher oil prices of recent years have allowed the country's reserves to grow substantially. However there is the unquantified impact of both corruption and mismanagement across the economy. There is considerable evidence of a huge capital flight, with large sums leaving the country through various off shore structures and being deposited in Switzerland and the UK, so that is hard to verify the precise state of financial health of many institutions.

The pressure that is on Western banks to control what they do even in Eastern European countries that are members of the EU has been substantial, with the Austrian monetary authorities demanding that their banks retrench their activities substantially. For Russia the situation is even bleaker. The impact of the political coup de theatre of the return of Vladimir Putin has eliminated any doubts about the undemocratic nature of the regime, and Western governments are in no hurry to support bank operations there.

If there has been a severe credit crunch inside the EU recently, it seems that what is happening in Russia is potentially much worse, and with the growing realization of a slow down in China and renewed recession in the West, the price of oil is looking a lot less perky. That in turn is putting pressure on the Russian budget, which had been scheduled to grow substantially, not least because of a sharp rise in defence spending. In short, there is some evidence that the Russian economy is a lot more stressed than its headline numbers would make you believe.

Taking on more debt does not solve the debt crisis

2011-12-01T10:13:00.001Z

The usual suspects have been out in force on the subject of the British Chancellor's Autumn statement. The mostly left-wing commentators have been imploring Mr. Osborne to switch to Plan B. "The cuts"- they say- "are too severe, and will damage growth".

I am almost tempted to say "what cuts?"

In fact, "If only..." because, although the government has talked big on the subject of government spending cuts, the fact is that the deficit remains close to its record high, and every month that passes adds yet further billions onto the national debt, which is already stretched way beyond the normal limits for a AAA credit risk. The coalition has established credibility with the financial markets, and retained its AAA- for the time being- but it is still a question of statements of intent rather than goals that are being achieved.

It is just as well that the UK government has gained a breathing space, because even compared to the peripheral Euro zone countries, the toxic legacy of Labour's debt binge has left the British economy in a very precarious position indeed. In fact, one could almost say that the scale of the problems in the Eurozone have distracted attention from the UK's own miserable debt plight.

The fact is that leverage in general is becoming ever more dangerous- which is why the UK private sector paid down over £ 9 billion of mortgage debt last quarter. Unfortunately, the British government has not been able to do the same thing- but that does not mean that it should stop trying.

The Labour government wasted billions on the public sector, and the bloat that remains is crippling the UK economy. Even now, and for several years to come according to the IFS, public sector jobs are set to pay better than the private sector. That is in addition to the fact that public sector workers are entitled to pension benefits that have had to be abandoned in the Private sector, because they were literally bankrupting the companies that were funding them. If the UK does not change the rules on public sector pensions now, then it will face a future where it will not be able to fund those pension liabilities at all. The strike in Britain yesterday, called to protest against those necessary changes, may or may not have been a damp squib- but the fact is that the government has no choice, and indeed arguably the changes may still not be sufficient to bring the pension funds back to any kind of solvency.

This week came close to seeing a meltdown in the global banking system. The interbank market froze- as it did at the time of the Lehman collapse in 2008. The central banks have been forced to flood the market with extra liquidity, but there is no doubt that there is the very real prospect of both a sovereign default and a banking collapse. The ability even of governments, to place more debt into the market is being severely limited.

That is what the left wing commentators don't get: unless the UK addresses its debt, it may not be able to access the debt markets at all. It is not a question of funding growth through added public spending, it is a question of national survival. The public spending that Labour funded was the creation of non jobs in regulation and control, restricting the ability of entrepreneurs to generate real wealth creation. the cost of that is crushing. Doing more of the same will not solve the crisis- it will inflame it.

So while this government considers how it can find money to invest in critical improvements in infrastructure, the burden of unproductive pensioners and excessive pay and benefits in the public sector must be reduced and this talent must be put to more productive use. It is not enough to create "make work" jobs, they must be jobs that add value and create wealth.

Tax inspectors don't do that.

Now is the winter of Russian discontent

2011-11-25T08:32:00.001Z

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.

The Credit Crunch Part II

2011-11-24T11:56:00.001Z

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.

The UK EHRC does not know the meaning of human rights

2011-11-23T11:50:00.001Z

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.

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

2011-11-22T13:40:00.001Z

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?

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

2011-11-21T07:28:00.001Z

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.

Testing China to destruction

2011-11-19T08:33:00.001Z

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.

Estonian Egalitarianism (= success)

2011-11-18T08:01:00.001Z

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.

Euro breakdown is bringing us to closer to catastophe

2011-11-17T07:45:00.001Z

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.

Syria follows Libya...

2011-11-16T15:20:00.001Z

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.

Small is still beautiful

2011-11-15T12:40:00.001Z

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.

IS Football as fixed as cricket?

2011-11-14T17:54:00.001Z

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.

Other too point out that Estonia should not have had to face two red cards and a penalty

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.

11.11.11.

2011-11-11T07:20:00.001Z

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.

Tory Troubles may undermine conventional wisdom

2011-11-07T08:56:00.000Z

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.

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

2011-11-03T21:10:00.002Z

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. .

Greek gamble pulls Euro to the brink

2011-11-01T17:46:00.000Z

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

2011-11-01T08:12:00.001Z

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.

Blaming the Germans

2011-10-26T14:29:00.000+01:00

In all financial transactions there are credits and debits. For the last few years there have been a lot of debits in Greece and the other, so-called, PIIG states. The converse has been that there have been a large number of credits in Germany.

Germany is not a paragon of fiscal rectitude- indeed it was Germany that first softened- by breaking altogether- the financial criteria by which the members of the Euro-zone are judged, but which they now insist must be applied strictly to other countries. Germany has amassed its credits by benefiting from a fixed exchange rate with the weaker economies of the south of Europe. The German economy has been out competing the rest of the Eurozone, which has been unable to balance their economies by either allowing their own currencies to depreciate, thus making their goods cheaper, or by allowing a German currency to appreciate, thus making German goods more expensive. This German free ride has caused considerable economic damage to those countries that are unwilling or unable to match the German policy of greater efficiency.

Now there is a bill to be paid: German industries benefited and provided capital to the German banking system, which in turn recycled capital into more loans to precisely those countries that were the debit to the German credit. Alas the capital can not now be repaid. The result is that the German banking system is now critically exposed to the southern tier of EU states.

Either the German banking system takes a major hit, and has to be recapitalized by the German state, or the debit states need to be rescued... by the German state.

The problem is that Germany refuses to do the one thing that would alleviate the crisis: backstop the rescue fund, the EFSF, with the full faith and credit of the ECB. This touches a serious nerve in Berlin, because such a policy carries with it a significant risk of inflation.

The problem, as always, is not that Germany wants to take over the EU, but that they definitely do not want to take over the EU.

Yet it is precisely the leadership vacuum that the Eurozone and the EU itself now faces that is creating an existential crisis. If Mrs. Merkel can not take decisive action, it will be taken by the markets. Then there will be debits amongst all the EU governments, and credits on a lot of trading desks,

Time to overthrow the (tax) system

2011-10-19T10:00:00.002+01:00

Yet another tax catastrophe is unveiled by the incompetents who control Her Majesty' Revenue and Customs service: over seven million people are paying the wrong level of tax. Though the story is reported as though it is a good thing that 4 million will get a repayment, the fact is the cost of fixing the problem will be in the millions.

The British taxation system is totally broken. As I have noted before, it is now 11,250 pages of mostly contradictory regulations. This is five times longer than the German tax code.

I is incredibly expensive to administer, and the costs of compliance- even a simple individual tax return often requires an accountant- are now running into tens of billions of Pounds, on top of an administration cost that is already around £ 20 billion every year.

This can not go on.

It is quite clear that simply tinkering with the system bequeathed by the OCD tinkerer, Gordon Brown will not get us anywhere. There most be a wholesale reform. Huge areas of tax must be eliminated, a simple, clear tax code is essential.

It shocks me that people in Britain are not out on the streets protesting at this shameful example of outrageous incompetence.

But them as yet another poll demonstrates how indifferent people are to the survival of the country in its current form, maybe that apathy applies across the board.

Asset shrinkage and the double dip

2011-10-18T07:13:00.000+01:00

The latest stage of the Millennium depression is seeing political and financial leaders making one of the most dramatic policy mistakes yet.

The Banking system is being forced to boost its capital ratios by a combination of international (Basel III) and individual government legislation. Nothing wrong with that, you may think: the crisis has already proven that bank capital was too small to fund the holes that resulted from the collapse of the property bubble.

The problem is that global liquidity is already exceptionally tight: governments are seeking to tap the markets in order- among other things- to fund the banks that they have nationalized or to fund the European bail out fund, the EFSF. Of course those in the capital market that have liquidity are now exceptionally loath to invest it, unless in some haven deemed extra safe.

Banks cannot be considered particularly safe in the light of the crisis. As a result, even the strongest banks are not getting the amounts that they seek or, if they are, the terms are radically different- and far more onerous.

The question has already arisen: what happens if banks can not get capital in the way they need? The answer is simple and brutal:if the banks can not improve their capital: balance sheet ratio by increasing capital, they must improve it by shrinking their balance sheets. In other words, banks are about to shut down lending again: a second credit crunch which may not be as severe as the first, but will be far more drawn out..

This is where the Millennium depression is about to get interesting. We have heard a great deal about the idea of a double dip recession based on a lack of liquidity: this is why central banks have been pouring liquidity into their currencies. However there is no escape from a double dip based on solvency. By adjusting the bank capital ratios at this critical point, the politicians and regulators have essentially guaranteed that the global economy will slow once more, and given the adjustments that banks are compelled to make, the second "dip" will be much longer and more prolonged that the first.

We have already seen increasing political protest. I think that another three years of gathering austerity will cause some major political breakdowns. The UK already looks like a very fragile political construct, as does Russia, and political pressure on China, though hidden is still significant.... but all of that is a subject for another day.

Adding Value

2011-10-16T15:09:00.000+01:00

The economic problem about jobs is a bit like a game of football. A football game needs a certain number of referees and linesmen to keep the game going. However the point of the game lies in the skills of the players, not of the officials. Small children do not generally have pictures of the officials on their walls, even when a poor decision by an official may have substantial impact on the result of a match.

The same issue arises with state sector jobs.

The fact is that poor regulation can kill an economy just as it would kill a football match.

To my disgust, my own party was proud to announce the hiring of 2000 new tax inspectors at the Lib Dem party conference. The fact that Britain now has more tax inspectors than soldiers is a matter of shame. The fact that we have the largest and most unworkable tax code in the developed world is a national scandal.

Imagine if FIFA, or some other criminal organisation, decided that there should now be 25 definitions of the offside rule and insisted that there be a single official for each interpretation, and that official must be paid more than any single player and you can begin to see the crisis that we have brought upon ourselves. There would be more officials than players, and the whole point of the game would be lost.

The Capitalist world is in grave danger of doing something similar. By failing to think about what kind of jobs are being created, political leaders have begun to believe that it doesn't matter. "A job is a job". Yet that isn't true. A tax inspector is ultimately a net economic cost to society, an entrepreneur is a net economic profit. One is an official, the other is a player, whose taxes pay for the officials.

Over complicated regulation is destroying the whole point of capitalism, which is that entrepreneurship can make money by adding value in services or products that can pay for benefits across society.

Watching the "Occupy" protests, I wearily understand the sense of injustice that these people feel. However it is not a question of more regulation of business, it is a question of sane regulation:

We say that as a general rule, the rich should pay more tax than the poor, yet we then over regulate so much that the precise opposite happens, and many of the richest end up paying no tax at all.

We say that we want to promote investment so that anyone who has the energy and the courage can become an entrepreneur. We then make it so fiendishly complicated to set up on your own that early-stage entrepreneurs spend more time complying with regulation than trying to build a business.

We say we want a more open society, and then put so many obstacles in peoples way (including public ridicule and contempt) that only the most hardened party political cynics are likely to make it into our Parliamentary systems.

Meanwhile the political-regulatory complex reinforces itself: The politicians boast of their disasters, and apart from the deification of Steve Jobs, entrepreneurs as a group remain reviled.

I can only assume that our political leaders were a lot of very strange kids who had Pierluigi Collina on their wall, instead of David Beckham.

Hunting the Fox

2011-10-12T17:34:00.001+01:00

In the current blitz of publicity I am not sure I should say that I have met Adam Werritty a few times, and the Defence Secretary a few less, usually on pleasantly social terms.

The stories that the press are running today bear no resemblance to anything that I could recognize.

They are certainly not gay- so far as I can tell- and I think the innuendo is childish and rather unpleasant.

Neither are they crooks. Adam Werritty is not some Svengali making millions out of his connections: far from it. It seems to me that out of principle, he refused to go on the government payroll as a special adviser, even though, for several years (as the world now knows) Adam was Liam Fox's SpAd. So, Defence contractors spoke to Adam Werrity? He is the Defence minister's closest adviser.

Is that what people hate? That Mr. Werritty would not sign up for the SpAd junketing?

I can see that they should have signed up for more government oversight, but this press witch hunt is just plain nasty.

At the risk of seeming naive, I do not understand this storm of vague innuendo and misrepresentation. In fact it shows the press in one of their worst moods. If I was Liam Fox I would demonstrate the Boris Johnson approach:

Show no fear, and tell them to go to hell.

Of course Boris is usually guilty. Ironically I don't think Liam Fox or Adam Werritty are actually guilty of anything at all.

As for the story planted by "friends of Dr. Fox" - namely the whips office- that Adam is a "Walter Mittty" character: that, truly, is beneath contempt.

The Real Tax Scandal

2011-10-12T07:55:00.001+01:00

The news that 98% of FTSE companies use tax avoidance is being reported in the usual "shock-horror" terms of corporate greed. However those protesting are aiming at very much the wrong target. When even the HMRC itself- never mind the corporate sector- uses tax avoidance structures, it is clear that something fundamental needs to change.

The UK tax code is the largest in the world. It currently stands at an astonishing 11.250 pages. This is five times longer than the German code. Many of the provisions of this code are contradictory. It is impossible for a single person to understand, still less comply, with all of the provisions. The creation of the Brown system of tax credits has also made it incredibly expensive to administer: an estimated 3% of revenue or an astonishing £18 billion. That, of course, does not include the costs to the tax payer in complying with the code, and even for an individual that can be several hundred pounds and for a company many thousands. We can see that the British taxation system is sucking tens of billions out of the productive economy. There is no added value in jobs enforcing tax compliance.

In Estonia, the simple tax code costs around 0.07% of revenue to collect and is so simple that 95% of people complete their tax return online. The burden on the economy is a fraction of that on UK.

There is a serious problem in the UK taxation system, but it is not that of corporate tax avoidance. The fact is that the current system has become so unwieldy as to be simply unenforceable.

Fair taxes must start from the effective abolition of the current code and a return to a system based on Adam Smith's four principles of taxation: Equity, Certainty, Convenience and Efficiency. As the great man himself put it:

I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

II. The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person.

III. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

IV. Every tax ought to be contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Tax reform in the UK is now long overdue.

The Quantum Revolution leading to Politics 2.0

2011-10-10T12:33:00.002+01:00

"The fault, dear Brutus, is not in our stars,
But in ourselves, that we are underlings"

Shakespeare, Julius Caesar

There come times when a strange conjunction appears in human affairs. Times when, in the words of WB Yeats:

"Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity."

The Millennium Depression, which has been with us now for nearly four years, is testing the apparatus of government to the utmost. The party conferences in Britain demonstrated a lack of vision that might have been predictable but was no less shocking for all that. It is quite clear that politicians across the world do not understand the scale of the convulsions that are gripping the global economy. In short the putative leaders of the world look powerless.

This happened before. Although Yeats wrote his poem in 1920 to describe Europe in the aftermath of the First World War, it gained an even wider currency during the period of the Great Depression and the rise of Fascism and Communism. The breakdown of the world economy after the Wall St. Crash of 1929 created a sense of disillusion and anger towards the institutions of democratic rule that then- as now- seemed powerless to cope.

That same sense of futility has already hollowed out much of the democratic debate in Europe.

Party politics have been largely abandoned to a coterie of cynics and idealists, who fail to convince even each other, let alone engage with the wider world.

Yet, paradoxically, there is even greater pressure on the non-democratic world. The fall of North African Arab tyrants is not automatically leading to worse regimes. More open government and with it greater freedom of ideas is making progress. Even in Russia, the "renewal" of Putin's Presidency is asking more questions than it answers. The Chinese leadership too is facing challenges from within that have been unimaginable since the Tian-an-Men massacre.

It is not a given that the economic crisis will lead to the return of fascism, or its twenty-first century analogue, though that threat exists.

The world wide web is creating a global and highly egalitarian forum for discussion. There is a greater global level of education than has ever been seen. That education is rooted in the scepticism of the scientific method, not the hierarchy of authoritarian diktat, whether Communist or Confucian. There are greater communications and more connections across more borders than have ever existed in the history of our species.

The emergence of the inchoate and ad hoc "Tea Party" or "Occupy Wall St" citizens action groups, to my mind is the shape of things to come.

The point is that if we want a more open, tolerant, humane and decent society then we have to take the responsibility ourselves. The Murdoch scandal demonstrated how opinion and politics have been manipulated in the past. Now we source our ideas from a widening circle of information- and there is a clamour of opinion that can not be silenced.

Humanity may not have a high percentage of original thinkers, but those that exist are now more likely to educated and more likely to be connected to the global Agora- as a result they are likely to have a greater chance to make a contribution that will make a difference.

As a result, I believe that we are on the brink of a quantum leap in the way that our species interacts and governs itself, and one that will eventually lead to a far more pluralist arrangement than the state-based government systems that we have largely inherited from the Enlightenment.

The emerging Politics 2.0 that I dimly discern is own rooted in individuality. The population of humans is set to peak in the the late twenty-first century and then decline thereafter, and it is another paradox that the weight of numbers undermines the ability of global rulers to enforce conformity. Indeed Politics 2.0 will involve far greater individual autonomy and responsibility, as it becomes clear that state based welfare systems can not be relied upon.

That recognition of the limited economic power of the state may force greater pluralism, and perhaps greater tolerance of difference, as we understand that solutions for our immediate problems can not be delivered by government, and may, indeed be bound up in areas far from our own doorsteps. This awareness of our own relative weakness- both as individuals and communities- will require greater global debate, since no state has the ability to fully impose their will on others for more than brief periods. Communities on the web are blind to passports in any event, and political debate will reflect a diversity that more accurately reflects our differences of view- for good and for bad.

Politics 2.0 will be non-hierarchical, even anarchic, but will be rooted in a social autonomy of citizenship that may be more genuinely free than any of the government systems we have tried so far. The claims advanced by the practitioners of religion have been tested to destruction in the scientific world we actually live in- and the role of those who claim divine mandates to control other humans is already declining rapidly. Religion, once a fundamental basis of ideology and community, will probably become an exclusively personal matter, since the power of coercion fails in the new world.

We live in a time of crisis. This is a crisis that will reform our political as well as our economic relationships. In the twentieth century such a crisis led to National Socialism and then to the Second World War and then cold war confrontation with Soviet Socialism. These confrontations rallied pluralists around the conventions of democratic politics.

Yet this crisis may not lead to the failures that Yeats writes about so eloquently. If we, as individuals make choices in favour of tolerance and pluralism, then we can not only avoid the abyss of global war, but also create a new forum for political discourse.

It may be idealistic, that does not mean it is impossible.

Something I thought I should add: Christopher Hitchens:

"There are no final solutions, there is no absolute truth, there is no supreme leader, there is no totalitarian solution",

So, what is the BBC actually for?

2011-10-07T07:41:00.001+01:00

The BBC in the late sixties created a second TV channel, BBC2 and it gave the responsibility for that channel to David Attenborough. Under his leadership the BBC created programmes like Civilisation, The Ascent of Man and Monty Python's Flying Circus. The channel did not broadcast all day, and when it did not, it showed the test card (see above). There were two TV channels and eventually four radio channels. Attenborough was not only a talented broadcaster himself, he was an inspiring leader in television innovation.

Now, decades later, the BBC has a huge number of TV channels and even more radio channels, plus a vast website and a plethora of broadcast formats, from HD to DAB.

Why is that?

Doubtless some BBC mogul would say that the Corporation was "responding to the needs of its customer base", "Reflecting the diversity of Modern Britain" or some other horseshit. Actually the Corporation has become a massive boondoggle at the expense of the British taxpayer and license payer. Every news story, from an earthquake, to the death of Steve Jobs (shock report: Steve Jobs still dead) to, God help us, the Oscars, requires tens or even hundreds of staff to travel round the world, premium class, to give the waiting world the details.

The latest nonsense of shifting large parts of the corporation to ~~Manchester~~, Salford and (despite denials for the past decade) to close the BBC TV Centre, reflects an organisation that long ago lost touch with what it was supposed to be doing.

This is a metastasized bureaucracy that can not deliver even what it was successfully doing forty years ago. Now we are supposed to feel a certain sympathy because the BBC needs to impose "cuts". Of course those cuts will not be to the bloated salaries and insane costs that the Corporation has racked up over the decades. In the same way that the Navy now has many more Admirals than it has ships, so the BBC no longer cares about programmes, and indeed these will be the first thing that get the chop.

The time has come to sell or close much of the BBC and to slim it and its cost base back to a sensible level. Indeed, given that the private sector is now eating the BBCs lunch in terms of quality of programmes, including news programmes, I am tempted to ask, whether we even need the Corporation at all.

Of course nostalgia for the time of David Attenborough, when the BBC genuinely created programmes that "Inform, educate and entertain" will keep the larded expenses of the bureaucrats in business for a while yet, but like footballers or bankers it is hard to care any more.

Putin jokes

2011-10-06T12:37:00.000+01:00

(Source: Getty Images)

It has already almost gone beyond parody: Vladimir Putin's spokesman actually said, when Putin was compared to Brezhnev, that is was GOOD! Brezhnev, far from being a brutal and doddery old autocrat, was actually a very positive leader in Russian History. Well compared to Putin, he certainly is: Brezhnev is now dead and can do no further harm.

No wonder that there are now quite a few Putin jokes doing the rounds, my favourite is:

The Federal Guard Service protecting ~~President~~ Prime Minister Vladimir Putin and ~~Prime Minister~~ President Dimitri Medvedev arrests an activist who is handing out leaflets on Red Square.

The man is taken by the ~~KGB~~ FSB to the Lubyanka for a search when they notice that the leaflets are blank.

"Why are they blank then?" The man is asked

"Why bother to print? Everything is clear anyway"

A Twit tweeting a Twitter

2011-10-05T11:56:00.002+01:00

OK. I said I was not going to join Twitter, because hey, who needs a thought that can only be developed in a few characters.

However after a few requests and the fact that of course those few characters can be a link to a blog post, I have decided to finally join the ranks of the twitterati, albeit with bad grace.

Thus you can now follow this blog @CiceroBlog, and you are quite free to tweet up up a storm should you so wish.

The buttons are now installed.

Putin's Soviet nostalgia

2011-10-05T09:06:00.002+01:00

Vladimir Putin has made a speech proposing a new ~~Soviet~~, Eurasian Union for the countries of the former USSR. He suggests that working together will enhance the prosperity of all the countries of the region. Perhaps it will but, as usual, Vlad the Bad gets important details really wrong.

The European Union was constructed by states that were previously bitter enemies. As a result it insists on strict adherence to democratic values and forms. The so-called Copenhagen criteria include a deep commitment to the rule of law and human rights.

The Eurasian Union would be constructed by countries with little or no adherence to the rule of law and little or no respect for human rights. With the sole exceptions of Ukraine, Moldova and Georgia all of the putative members of the Union are rated Not Free by Freedom House, and are some of the most brutal tyrannies on the planet,

The fact is that having undermined human rights and democracy in Russia, Mr. Putin seems to be seeking to impose his will on the rest of the former Soviet Empire. In fact, as we know from his previous speeches, Mr. Putin deeply laments the passing of the former Soviet Empire.

Yet Russia lacks the capacity to impose its will inside its own borders, still less in other states that have been getting used to making decisions without reference to Moscow. As the upheaval in the North Caucasus grows, the outlook is not that Russian power will straddle new borders, but that it will shrink even inside the current Russian borders.

The reason is not hard to find: you can see it in the London High Court this week, where two of the more egregious criminals among the Russian Oligarchs are fighting it out. The fact is that the Russian regime is based upon a network of patronage and almost complete disrespect for law. The government and the oligarchs are the same people, while the lack of an viable opposition renders the regime incompetent and increasingly unstable.

The Russian veto of sanctions against the murderous Syrian regime reminds me that we should judge a man by his friends, and Putinista allies tend to be precisely such illegitimate regimes as Bashir-al-Assad, or Muamar Gaddafi, Islam Karimov, Robert Mugabe or Hugo Chavez. In the end, like them, he is building the foundations of his regime on very sandy foundations.

We can not say that we have not been warned: Vlad is an enemy of everything that the democratic West stands for and those such as Gerhard Schroder, Jacques Chirac, or Silvio Berlusconi who have been so accommodating to Russia should be regarded with dark suspicions.

Scottish Tories show their Colours

2011-10-03T12:08:00.000+01:00

The election for the next leader of the Scottish Conservatives has become increasingly rancorous. Murdo Fraser, the current deputy leader has put forward an interesting and brave idea that the "Conservative" brand in Scotland is so toxic that it needs to be changed. The remaining four candidates reject his analysis and suggest that the way forward is simply to be more vehement about where they stand now.

The fact is though, that the Conservatives stand nowhere. They long ago lost the support of the urban proletariat, then the Kirk, then latterly even industry, and now farmers. Without renewal, they are condemned to die out- and the greatest part of this renewal is to stop reminding the Scottish people how much they opposed the new constitutional arrangements.

A huge number of erstwhile Conservative voters have defected to the SNP, and yet the message does not seem to have come home to the party as to what this means.

The backbiting, both in public and in private against Murdo Fraser's stand suggests that he is facing an uphill task to say the least. However, if he does not win, the outlook for the Scottish Tories is even more terminal than if he does. The backward looking nature of the whole debate shows how far some Tories still have to go in order to recognize that much of their predicament is down to their own political choices. As old dinosaurs such as Michael Forsyth or light-weights like David Mundell emerge to "defend the Union", it is hard to even recognize what kind of Union it is that they want to defend.

While the Scottish Liberal Democrats begin to lick their wounds, it is possible to see where and how they can address the incredibly strong hostility to the Lib Dem participation in the coalition- the Lib Dems are toxic by association, but the Tories are just toxic. It requires the kind of thinking that Murdo Fraser is putting forward for the party to even arrest its decline, never mind to make progress at the next Holyrood election or defeat the referendum on Separatism that Alex Salmond wants to time for maximum political advantage in a couple of years.

Yet the SNP- lead by "His High Excellency" (allegedly Salmond's preferred form of address after any independence was established)- are far from invulnerable, even if Labour may lack the ability or desire to land the killer blow. A rejuvenated Progressive Party (or whatever brand that the Conservatives choose) could reanimate a new Federal relationship with the rest of the UK, which is what opinion polls repeatedly tell us that the Scottish People would prefer instead of SNP-style separatism.

Of course if Murdo Fraser is defeated, the risk is that the Conservatives remain in the cold and can not participate in, let alone lead, a drive to overturn the dead-end socialism that has dominated and stagnated Scottish politics for half a century.

Murdo Fraser has demonstrated the kind of courage that is needed to lead his party out of the desert- the question is whether the Conservatives still choose to worship the dead idol of "Unionism" or to embrace the new political reality that can lead them back to the political heartland, and coincidentally rescue the common state from the risk of total dissolution.

J'accuse... pt 1

2011-09-30T20:33:00.002+01:00

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.

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

2011-09-29T08:09:00.002+01:00

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. .

Parkinson's Law strikes again

2011-09-28T08:20:00.001+01:00

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.

So how much does Tony Blair think he is worth?

2011-09-27T07:25:00.000+01:00

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.

Lib Dem disappointment

2011-09-26T11:22:00.003+01:00

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

2011-09-26T08:57:00.003+01:00

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.

Can we take Murdo Fraser at his word?

2011-09-20T08:41:00.000+01:00

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...

2011-09-20T07:03:00.001+01:00

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.

Conference and Conference Calls

2011-09-19T08:26:00.000+01:00

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.