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Sunday, 24 September 2017

China's Opportunity to Defuse Trump

China - the political masters of that country, to be precise - well understands that the North Koreans' unexpectedly rapid development of nuclear weapons capability is largely their fault; or, at the very least, their default.

The 'received wisdom' in foreign ministries around the world is that China is now locked in to a crisis that it has allowed to happen. China has limited [and 'interpreted'] UN sanctions in a way that has allowed the Kim regime to survive; most notably by allowing petroleum products to enter the country. This is said to be due to China's terror at what would happen if the regime collapsed. Starvation and anarchy would be very quick results of the collapse. There is said to be a fear that in such circumstances South Korea would step in to supply the people of the north, and thus be on the way to 'reunifying' the country on a capitalist basis: which would be anathema to China, and a great shame for the president who has begun to permit the media to liken him to the [still-sacrosanct] Chairman Mao.

More likely is the scenario that the regime would be able to tighten its grip even as the cessation of food and energy supplies [in a savage winter] picked off millions of already undernourished people. In such circumstances the rhetoric against the USA, as the perceived authors of the country's misfortunes [due to sanctions], would increase: and with it the prospect of nuclear adventurism from the Kim regime. The naive narcissist in the White House has recently had his image toned down by the largely-military cohort who now surround him. With the strong assistance of the Secretary of State, he can often appear reasonable; and this makes it unlikely that in the near future he could be declared unfit to continue in office. Thus the risk of a first strike by the US increases. The recent threat by the North Koreans to detonate a hydrogen bomb 'over the Pacific' has increased the probability of disaster greatly.

Were the US to deploy nuclear weapons against North Korea [and so far they are the only power to have done this in a real war] the fallout would certainly reach China, Russia and South Korea. This prospect is imminent.

There is an obvious solution. China has facilitated the North Korean weapons programme, and done nothing effective to tame the regime: or even its rhetoric. President Xi can stand tall as a statesman comparable with [and morally much superior to] Mao, by taking drastic, swift action. China should first seal the frontier with North Korea: then send in overwhelming forces to occupy the country. As it does so, it should call on the United Nations to send in a control team to supervise the neutralisation of the nuclear weapons and ballistic missiles.

As soon as those conditions are met, a joint command formed by - and led by - China, comprising the permanent members of the Security Council with the other 'brics' [India, Brazil and - perhaps - South Korea] should establish the preconditions for a reformation of the North Korean state. A safe haven could be offered to the dictator, perhaps in Switzerland which he knows from his schooldays: there is no reason to believe that he is mad, and assurances of personal security might be acceptable. Of course, for as long as lives, wherever he lives, victims of his regime and their children will [understandably] wish him harm: so he will never live in secure comfort.

Such a resolution would completely overcome Trump's posturing and rhetoric. It is arguably President Xi's duty to resolve the drastic dilemma that his country's hesitancy has fostered: and it can be the basis for real greatness.

Saturday, 23 September 2017

How to Turn Things Round: By Jingo

The term 'jingoism' has fallen out of use in the British Isles. Its origin comes from a song that was popular in a different social, economic and political environment from that that under which the UK is now groaning [and today being downgraded by yet another credit-rating agency, Moody's]: the song goes:
We don't want to fight
  But by Jingo if we do,
  We've got the ships, we've got the men,
  And we've got the money, too!

Very quickly after his seizure of power in 1933, Hitler got the German economy on the move by re-armament and by building up the supporting infrastructure: re-equipping steelworks and arms factories, and building the Autobahns. This created employment, which in turn generated demand for radio sets, new clothes and better food. Britain's turnaround after the Depression of the early 'thirties was also helped by a massive increase in armaments including - as mentioned in the last couple of blogs - the construction of dozens of airfields, which dispersed the RAF's growing but limited resources and made it vastly harder for the German airforce to attempt to destroy our 'planes; and a massive house building effort.

The British economy could massively be boosted right now by re-running what we did in the 'thirties. We could order the twenty frigate-type ships the navy needs, and equip them both for missile weapons, and for rescue missions [such as the one in which we have so visibly been inadequate in the West Indies in the past few weeks]. The order for ships could only be fulfilled by sub-contracting the building of sections of the hulls to small shipyards around the country and boosting the capacity of Rolls Royce and other firms to produce the engines and equipment. That would involve thousands of sub-contractors, who would all be able to invest in improved machinery and better work practices, to apply both in their defence contracts and their increasingly-competitive civilian work. The future of Short-Brothers [aka Bombardier] in Ulster and of Westland would be boosted by having aviation capability on the new ships and on Britain's long-neglected island bases around the world. Instead of being reduced, the number or Royal Marines and soldiers should be expanded: all of this putting wages into peoples' pockets and 'real' business into the shops those people use.

At the same time, a state-funded scheme of construction of 'affordable' homes should begin: that too would create jobs in the sector; and break the near-oligopoly of the existing developers [who are deliberately concentrating on an inadequate supply of higher-cost housing]. It would add to demand for businesses all down the supply chain and thus increase demand in the whole system; and the houses would start to produce a flow of rental income within a year, which could then fund  the scheme in future years [preferably boosted by the income from selling some of the houses as the supply became less stretched].

And how would this all be paid for? As the austerity addicts would plaintively claim.

By borrowing. By offering National Recovery Bonds at a rate of interest [capped at 6%] that would be at least 1% higher then the Retail Prices Index - something close to 4% as things stand just now. There are millions of people who have been starved of sensible vehicles for their savings, all through the era of low interest rates that followed from the crisis of 2007-9. As the economic growth provided by those two stimuli [defence and housing] all other sectors would face higher demand: led by innovative young companies. Thus the cost to the government would be only the interest that had to be paid [plus administrative costs]: and that would easily be met by the growth in the national income that would have been stimulated.

It has been done before: it can be done again. The only things needed are credible leadership in both politics and economic life. The bus-pass holders have the money!

Friday, 22 September 2017

Merkel and May: Common Origins, Shared Failures and Different Prospects

Angela Merkel and Theresa May are both the daughters of clergymen, so they grew up in the psychologically comfortable environment of a clergy house with attentive members of the local community willing to support them even though the majority of the outside population was post-Christian. May's route into politics was typical of an Oxford graduate who had always been a young Conservative. The much rougher road that Merkel followed depended on the collapse of East Germany, on Helmuth Kohl's determination quickly and fully to integrate the east and the west, and on the ruthlessness that she had learned under Communism to move in at an opportune moment and slip herself into Kohl's place. By contrast. Mrs May's accession to the party leadership was by default of David Cameron, whose panic flight from the tragic situation that had been created by his daft, imprecise referendum question was one of the most shameful incidents in British history.

Mrs May's great 'weakness' as Home Secretary was the abject failure of her department to come anywhere near meeting the policy requirement to reduce net immigration to the UK to fewer than 100,000 non-students a year. In one sense, the target was unattainable under EU Freedom of Movement rules; Mrs May should have said that clearly: she had no way of limiting EU immigrants. She would then have had to establish and enforce a quota of non-EU immigrants; and that would have to be a tight one. That would be impossible to enforce, too, because almost every MP is constantly battered with demands and petitions from their Asian constituents to support the immigration of family members, and to support cousin-to-cousin mail-order marriages; many urban constituencies could be swung if the whole south-Asian population united to support one party [Labour, if the Tories in government had imposed a real cap on immigration]. George Osborne was apparently scathing about this'failure' in and out of Cabinet meetings: so she had to dismiss him on taking up office as Prime Minister; and superficially journalism's loss is her political gain in not having his constant carping at her elbow. He will, however, be a powerful enemy outside the Westminster hothouse, and he will surely dissect her ongoing failure to address Brexit adequately.

Mrs Merkel's massive mistake was to allow around half a million chancers from the Muslim world to claim to be asylum-seekers when she opened Germany to Syrians who were genuinely in flight from the appalling chaos of their home country. Many of these men - Afghans, Eritreans, Pakistanis etc - claimed to be juveniles, despite their appearance being clearly that of adults. She and her ministers appealed to Germany's Christian tradition as a major ground for welcoming the homeless: a sound point, in principle, which was instantly vitiated by the recognition that the chancers must include some jihadis and some potential recruits to jihad. Other EU countries have refused to take the quotas of these thugs that Germany has persuaded to EU to thrust upon them, and that will continue to be a source of discord within EU institutions for years to come.

Even if May is able to achieve a half-sensible Brexit, with the help of Merkel [which is by no means guaranteed], there is no reason to think that this will make May's position in the UK more secure: it could create the situation in which the Tory party can ditch her. May has, however, one cunning ploy that she has used already and will doubtless play heavily in her Florence speech today: that the UK can contribute materially to 'security' in the EU on an ongoing basis, after Brexit. That could well have a positive resonance, [particularly with Merkel and with the central Europeans who are resisting the quotas of chancers and thugs whom Merkel is foisting on them]. But everything is 'up for grabs' in a quickly-changing world and European context; with Trump and Putin spoiling on the sidelines.

Thursday, 21 September 2017

Countdown to Humiliation?

Neville Chamberlain was apparent a man of almost-infinite vanity, who believed of himself the quotations [from Shakespeare's Hotspur, and others] that he used to extol his success at the time of national humiliation in the days of the 1938 Munich Agreement. Perversely, public anger then and at the outset of war was directed to his predecessor as prime minister, Stanley Baldwin, who had in fact had a much clearer view of Hitler and initiated the process of rearmament and [in particular] the expansion of the RAF and the widespread development of airfields that were to save the country in 1940. Chamberlain handed over to Churchill only when his illness made continuance in office impossible, and his death was buried in the fraught news of the nation's survival and eventual victory.

Mrs May may be equally delusional with Chamberlain, but I do not believe that she is. She is, however, mortally wounded [in political terms] by her failed general election: since which, she has seemed like a doped rabbit in the headlights, buoyed-up by a remarkable self-belief that she is unable to communicate to the nation that she very rarely troubles to talk to. Even during the election, that she called herself, she did not face up to confrontation, but took a tedious road-show around the country making absurd claims about her own strength and stability and risking losing the oldie vote by a totally silly launch of a plan to pay for home care with a 'death tax'. That might be a sensible basis for consideration: but it would have to be pondered deeply and planned carefully, not drawn up on a fag packet and launched during an election campaign that was already failing to match that of the antediluvian Marxist who had repackaged himself to capture the inexperience of younger voters.

Now Mrs May is gearing up to make only her second major speech this year in the Brexit issue: the one matter that will determine her reputation and the durability of her tenure of office. Early in the year, at Lancaster House, she vaguely talked about the sort of outcome that she hoped for from the negotiations with the EU on how Britain would stand after March, 2019. Many months later, she is to go to Florence tomorrow to make a speech whose content and tone - so it is rumoured - will be determined in the Cabinet Room in Downing Street today. Given Mrs May's propensity to take up pusillanimous positions with the advice of a kitchen cabinet of close advisers, there is a possibility that what is decided in Cabinet may be transmogrified en route to Florence: but the probability of Cabinet resignations may rule that out. However, some Cabinet members in the past have brought down prime ministers and government by resigning; and at least one egotist might be tempted to go - in the hope of future glory - if he is dissatisfied by her remarks.

Rumours about the content of her draft speech are scarce; but they include the suggestion that she will offer a [low] sum of money to the EU as a divorce settlement, spread over a couple of years after March 2019, if the EU will agree to a transitional phase that could well end in British membership of a redefined European Economic Area.

It still appears to be the case that a small number of Conservative buffoons in the Commons actually believe that Britain can walk out of the political AND economic aspects of the EU and survive economically from April 2019. If they were to have their way, supported as they are by a larger number of other MPs who would be prepared to risk a 'hard Brexit' with crossed fingers and justifiable doubts, they would be open to the same treatment as the Rumanian dictator got from the people after his

Wednesday, 20 September 2017

The Present State of Economy and Society

Official statistics are compiled by honest professional people, and tell the 'truth' in simple numerical terms. But much can be done to interpret them, either favourably or unfavourably, according to the wish of the interpreter. Hence, although the United Kingdom now has the highest proportion of its available adult citizens in employment since 1975 [one of the three years during which the mixed economy was tested most severely] it is sobering to note that in almost every way the present pattern of employment is massively more fragile than was that which NeoKeynesian inflation undermined. The effect of the inflation of prices, especially after the oil price hike of 1973, was that production was interrupted by strikes when the authorities took action to suppress wage rises in their clumsy attempts to cap the wage-price spiral. In each period of pay 'restraint' government costs rose while government revenues declined, and the balance of payments with the rest of the world became strongly negative. In those circumstances, the Labour government [which relied on minority parties to retain control of the House of Commons] sought a loan from the International Monetary Fund; and the conditions applied to that loan [in retrospect] can be seen as a demand for the state to bring in Monetarist policies to replace they failed pseudo Keynesianism that the Economic establishment had applied.

The Labour Party was torn apart by the consequent dissent from the new policy, with the trade unions - the traditional paymasters of the party - doggedly opposed to the government. Consequently the Conservatives won the 1989 general election. The new Tory leader, the largely-unknown and completely untested Margaret Thatcher, embraced monetarism enthusiastically; and she deplored the less-than-half-hearted attitude towards her radical policies from most of the Tory establishment [including most of her cabinet]. They had been broadly content with the mixed economy and were scared by the new radicalism. Mrs Thatcher and her close cohort dismissed the majority as 'wets', and became more intent on radical change in the economy. As to the social consequences of disruptive economic policies, Mrs Thatcher was simply to say 'There is no such thing as Society'.

The people who could be identified as the 'enemies' of the new Monetarist policies began with the Economists, 364 of whom signed a letter to the TIMES condemning her policies from a standpoint of NeoKeynesianism [and who succumbed thereafter, with amazing speed, so that those who remained in their 'profession' become locked in to the new Econocracy by the millennium]. Next among the 'enemies' were the trade unions, that had frustrated the attempts by the Labour government of 1974-79 to control the wage-price spiral. Here the Thatcher gang decided on a radical solution: if you close the coal mines and a large section of the iron and steel industry [including shipbuilding] you take the cash and the members away from the unions, leaving them as shell organisations with no real power. These radical solutions were adopted; and the majority of the electorate was unmoved by the pleas of miners and steel workers whose communities were largely isolated geographically and socially from the cities where banking, finance and smart retailing were providing more nice, clean jobs for the middle classes. While the traditionally unionised areas continued to return Labour MPs from constituencies with very high percentages of the industrial and ex-industrial population, other urban centres and the less-densely-populated majority of constituencies were content to return Tory [or, in some cases, irrelevant Liberal] MPs; and thus the wrecking job was done.

It is now more than thirty years since the steelworks of Sheffield, the pit sites across the country with their unmistakable winding-gear, the massive cranes on the dockyards to the Tyne and the Tees and the Upper Clyde, and other symbols of the most basic and essential industries were first left derelict; then cleared away. It is hard to believe that Meadowhall in Sheffield was once the world's leading steel and engineering centre, or that the placid banks of the Upper Clyde were once the proudest shipyards in the world.

No thanks to successive governments, pharmaceutical and biological companies have developed lucrative new products; creative industries [including computer games] have developed magnificently and - despite the idiocies that created the financial crisis of 2007-9 - the financial services based in London lead the world in expertise and innovation. So Britain has high spots, and remains uniquely innovative; but fools in government have congratulated themselves on 'attracting inward investment' as one after another the innovative firms [along with the intellectual capital] are snapped up by aliens. This almost-constant alienation of the most valuable assets that the British continue to create means that the balance-of-payments becomes increasingly adverse, as British consumers have to pay foreign firms to access British inventions, even if they are manufactured here.

The final knell of heavy industry has been sounded today, with the news that Tata is selling its steelworks in the UK to Thyssen-Krupp: whatever promises are made [and especially if we really do leave the European Economic Area] Port Talbot will go; and with it the last evidence of heavy industry will be consigned to the film archives and to history books.

Tuesday, 19 September 2017

The Glory of a Mixed Economy

Between 1950 and 1972, Britain boasted of its Mixed Economy. Then, in the 'seventies, the misapplication of Keynes's principles by the self-styled NeoKeynesians combined with the OPEC cartel to create an inflationary spiral that threatened to destroy the economy. That situation, in turn, made the opportunity for Thatcherite Monetarism and the 'free markets' dogma to be installed: with apparent temporary success and long-term ruinous outcomes. I have issued sufficient jeremiads about the latter state to give it a rest for the moment, and to pick out instead the features of the economic policy [broadly pursued by both Labour and Conservative governments] that prevailed beneficially under the generic description of the Mixed Economy.

During World War II the coalition government published the Beveridge Report, which promised a universal, compulsory social insurance scheme that would provide healthcare, unemployment insurance and old-age pensions for all contributors and their dependents. Both the major parties in the coalition were committed to implementing the scheme, and though the costs - especially of the national health system - always exceeded the income of the national insurance fund it was hoped that a time would come when those books would balance and a subsidy from general taxation would not be necessary. The National Health Service, in particular, was immensely popular and it delivered massive benefits to the entire nation.

Labour won the 1945 election, with a clear mandate to nationalise core infrastructure services and the 'commanding heights' of the industrial system. Under the infrastructure policy, the clapped-out railways, the partially-derelict canals, the major bus companies and the biggest road haulage companies [with their depots and other support facilities] were nationalised. The railways already owned some ports, and major hotels near stations, and these were taken into state ownership as well. For the first decade of nationalisation there was an attempt to support all of these facilities; but with the rapidly rising popularity of private cars and the consequential demand for the state to provide an appropriate road network the aggregate costs became too great. The slow death of the canals continued, and the subsidy of railways became excessively burdensome until a Tory government appointed a 'technocrat', Dr Beeching, to manage the railways. He just adopted a slash-and-burn approach, reducing the system too much in an orgy of destruction that is pretty universally regarded with hindsight to have been absurdly excessive. But the core railways system was preserved, to become a success eventually: and the motorways were built.

Coal and steel were among the 'commanding heights' of the economy which were nationalised, reorganised, and subject to massive investment and modernisation: which worked beneficially for a couple of decades. Electricity and gas services were nationalised, with massive investment in new power stations and the creation of the national grid for electricity and the beginning of a similar system for gas distribution. Telephones had been developed as a state monopoly, under the Post Office, and their availability increased immensely. Television had been suspended for the war, and it was reintroduced [BBC only, at first] to become massively popular.

The state managed all these things, while making good the massive destruction that had been effected by German bombing during the war and the massive wear-and-tear on all types of plant and equipment that had happened while concentration on war production had meant that maintenance and repairs had been minimal. Perhaps the greatest achievement was in housing. Private builders were enabled to develop private estates while the state sector built hundreds of thousands of houses. So great was the success of that programme, that under a Conservative housing minister in the later 'fifties 400,000 houses were completed in a single year. By contrast, the pathetic shower who govern us now cannot orchestrate the 'market economy' to provide so many as 100,000 homes in the face of desperate need.

Not all was perfect in those years; but things felt better than they do now because there was a feeling of common national purpose with significant objectives being achieved by the public and proivate sectors of the economy working in concert.

Monday, 18 September 2017

Brexit Britain Divided

The United Kingdom is more deeply riven by economic, political and social issues than it has ever been before. I say this with the benefit of a quarter of a century teaching Economics and economic History in a major university followed by a further quarter-century living in Tower Hamlets and active in the City of London. Thus I have half a century of reading, listening and probing; and, as a bonus, I have the luck to have a second home in the Peak District where I hear another spectrum of opinions and lore. Throughout history, most constituencies were controlled by a single party, after the dominant landowners surrendered control during the nineteenth century. Rural areas and affluent inner London were solidly Tory, some mixed-economy areas tended to return Liberal MPs, and the heavily industrial and mining areas were solid Labour. There were - and still are - anomalies: the constituency in which I first had a vote [Darwen, now Rossendale and Darwen] has improbably elected Tories all my life; but such exceptions are rare. However, in a rapidly-changing context, the old certainties have gone. The Brexit vote cut right across party traditions, and leaders' admonitions had minimal impact on voters' choice.

In the nineteen-nineties the Labour Party was split by the Blairites, who did not eradicate old-Labour in the new century but instead left stagnant pools of Marxist infantilism to fester while the legendary pragmatism of the big-union bosses became heavily diluted. The present mushroom growth of a new-left Labour is both an indication of voter dissatisfaction - especially [but not only] among the young - and of a search for ideals. The cupboard-love of the students and graduates who liked Corbyn's reckless 'pledge' about tuition fees during the recent election has dissipated, and the peak of the latest boom has probably passed.

The Conservative Party has never been in such disarray as it now displays: the old establishment of 'grandees' who could remove a leader with swift silence seem to have disappeared, and everything now hinges on a speech in Italy which has been heralded for weeks and will prove in the event [on Friday] to be a display of the Prime Minister's incomprehension, confusion and insecurity. Even if her cobbled-together second kitchen cabinet is able to deliver a more rational speech than I expect, the Tories will be left with the recollection that they set the referendum hare running - expecting a different result - and they have no idea what to make of the situation that they have created. Mrs May said "Brexit means Brexit", a supremely silly phrase which will haunt her even more than "strong and stable"; and she has given no indication of whether she thinks the vote was to leave the political institutions of the EU [only] - as would gain massive popular approval - or to cut adrift from the customs union and the common market, which would smash the economy and make the Irish situation irresolvable.

Tories and Labour are split on which sort of Brexit was intended by the voters, and by their opinions as to where to go now. The LibDems and ScotNats are determined remainers, and may well swing parliamentary votes: especially by the LibDems in the House of Lords.

Meanwhile, media commentators cannot agree whether or not the country has a wider gap between better-off and worse-off citizens; though the gap between the most highly remunerated and the lowest has not been greater than it is now, since the economy and society were put back to zero by the Second World War.

An early General Election would not resolve the situation. In England the LibDem vote might go up, which would mitigate Labour gains and produce the spectacle of Corbyn and Cable negotiating a coalition: that would then have to try to attract the ScotNats and some Irish contingent [most of whom hate Corbyn as an IRA supporter].

Most people know that they are getting worse off. Many worry about their borrowing. Many are extremely anxious about the homes they can barely afford to keep or those they cannot afford to rent or to buy.

Just as the majority of Russians are content to have Stalin rehabilitated, and his statues refurbished in some places, so there is a nostalgia in Britain for the mixed economy and the welfare state that the Thatcherites and the Blarites did so much to destroy.

To that I will return tomorrow; as my recent blogs have become overlong.