Friday, 30 November 2012

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Wednesday, 28 November 2012

The Significance of UKIP

Is it time to start taking UKIP seriously? This should be a classic ‘question to which the answer is no’, and yet this week, in the wake of the ridiculous Rotherham foster parent case, we find that they are at their highest ever level of popularity. Furthermore, serious Conservative politicians are arguing that some kind of electoral pact is necessary between the two parties if the right is to secure the next election.

There are a number of things going on here, and most of them concern internal Conservative Party matters, rather than a principled stand regarding Britain’s membership of the EU. UKIP’s entry into the mainstream of political debate tells us a great deal about the challenges facing David Cameron in the near future, but to understand them you have to look at the recent past.

Europe is the issue which has torn the Conservative Party apart since the late 1980’s. It was Europe which caused them to depose Margret Thatcher. It was Europe which caused backbenchers to cripple John Major’s government. It was hysterically fanatical anti-European sentiment which was a huge contributing factor in the un-electability of the party under Hague, Duncan-Smith and Howard. During the opposition years, the party gave voice to the obsessions of retired army officers in golf club bars in Southern England, namely the evils of Europe, the terror of political correctness and the perils of immigration or as we now call these things, the UKIP policy napkin. The Conservatives were in danger of fading in to irrelevance*.

David Cameron’s great achievement was to drag his sometimes unwilling party back to the centre ground of politics, and make them sound relevant to the concerns of the electorate. In his first conference speech as leader, he exhorted his party to “stop banging on about Europe”, and start talking about what voters care about. As an electoral strategy, this sort of worked. The Conservatives now lead the government (albeit with a Lib Dem fly in the ointment). However, it had two major flaws. The first is that there is still a hard-line Europhobic element in the Conservative Party. The second is that Europe actually exists, and even if you don’t want to talk about it, you have to have a policy towards it, so the party hardliners will still cause chaos.  

When you see right wing commentators arguing that the Conservatives must accommodate UKIP policies in order to prevent their core vote deserting them for Nigel Farage, what they are really trying to do is to undo David Cameron’s modernisation project, and take the Conservatives rightwards. UKIP is a convenient way for them to argue this. If it didn’t exist, they’d just find another reason. Cameron is resisting this because he (rightly) believes this will make the Conservatives unelectable again. The strain is showing. Cameron has been defeated by his own backbenchers in Parliament. There is now a real risk that the UKIP tendency in the Conservative party has a stranglehold over European policy. The risk of being dragged ever rightwards by his own party will haunt Cameron. If it happens, he will share the fate of John Major, and go down in history as being “in office, but not in power”. As for the rest of us, the idea that the single most important element of our foreign policy is being decided by a few euro-sceptic oddballs should be cause for grave concern.

*Cute fact; the hardliners at this time used to call themselves the “rockers”, and they did political battle with the “mods” who wished to reach out to centrist voters. See the excellent “Tory Wars” for details.   

Update (30/11/2012): If you think I'm wrong about the Tory UKIP tendency, have a read of this.

Tuesday, 20 November 2012

Energy Independence for the USA?

Take a good look around the room you’re sitting in. Anything which is made of plastic is an oil based product. Anything which you did not personally dig out of the ground was transported to you using oil. Like it or not, the global economy is utterly dependent on this resource. A great deal of fuss has been made of the recent International Energy Authority report which argued that by 2020 the USA will be the world’s biggest oil producer, and will be more than self sufficient by 2030. This fuss is justified, but perhaps not quite in the way that people think.

The key thing to understand about oil as a resource is that the oil market is integrated on a global level. This means that instead of thinking about where each individual country gets its supplies from, we need to think about a single global level of supply, and how it matches a single global level of demand. Once we understand this, we can understand the real significance of the US increase in oil production.

It will not mean that the US is insulated from the economic effects of an oil price shock. If, for example, OPEC were to repeat what happened in 1973 and constrict oil production then the US would suffer a dramatic recession, despite theoretically being able to supply itself. In reality the US would be contributing to a global ‘bathtub’ of oil production, which without the OPEC contribution would have shrunk yet would still be expected to meet the same level of global demand. The oil price would rise sharply, causing said global economic crisis.

It follows from this that the USA, and indeed everybody else, will still have an interest in maintaining global supplies. Wars in oil rich Middle Eastern states will still be likely, although the participants may change. In a world where geopolitical power is not just concentrated in the USA (hello China), more countries can be expected to have an interest in a global resource such as oil, and be more willing to act to secure it rather than free riding on the back of US actions as happens now.

So far, the increase in US production looks pretty irrelevant. This would be a foolish view to take. If, as the report predicts, the US is exporting oil by 2030, then that’s a huge source of revenue. A quick glance at the architecture in Qatar is testament to the enormous wealth that oil generates. That won’t go amiss in the USA. The diversification away from the Middle East should also make the global oil market more stable, so OPEC’s influence will be diminished, even if it is not removed. It should be noted that the increase in US supply is a result of shale oil, which is extracted by “fracking”, a process with grave environmental consequences. These, and the climate change which comes with a hydrocarbon economy, will need to be dealt with.

The overall point here is that the USA becoming an oil exporter will be an important geopolitical trend in the coming decades, but to understand its significance we have to break away from the false idea of ‘energy independence’ that has obsessed US leaders since the 1970’s. Oil doesn’t work like that.  

Thursday, 15 November 2012

The Next Big Government Disaster

The idea behind the Universal Credit is beguilingly simple. Beginning next year all tax credits, housing benefits, jobseekers allowance and income support will be abolished and replaced with a single scheme, which will act as a top up to what low income people already earn, effectively bringing everybody up to a guaranteed minimum income. It will also reduce the amount of benefit which people lose by taking work, theoretically increasing the incentives to take low paid work. Sounds great, right? It’s got ‘Whitehall debacle’ written all over it.

There are two major reasons for this. Firstly, it depends on a very large and very complicated IT system, and the civil service record of delivering these projects is appalling, as the failed £12.7 billion NHS computer system attests. The IT requirements for the Universal Credit are even more ambitious. It will require real time, monthly data from every single one of the country’s 1.3 million employers, many of whom are not even aware of the scheme. So far, only 1,400 employers have been signed up, and this is supposed to go live within a year. Already the IT firms involved have indicated that they think the timescale is unrealistic, and senior civil servants associated with the project are being removed.

Secondly, any changes to benefits inevitably produce winners and losers, and a scheme of this scale will produce a great many losers. 17% of working households are currently in receipt of tax credits of some form. That’s 3.3 million working households, the kind of people that ministers insist they want to help. I suspect that it won’t take a great deal of investigative journalism to find examples of people who do the right things having their benefit cut by bureaucratic fiat. More to the point this will be happening to people we know, which makes it politically toxic. It’s exactly the sort of bread and butter issue which cuts through to the public, and could damn the government in the way that the 10p tax fiasco damned Gordon Brown.

You could argue that so far all I’ve done is point out that this is a very ambitious scheme being implemented by people with a poor track record, and that with good leadership and management it could work out fine. This scheme is being led by Iain Duncan Smith. I shall leave you with an assessment of his leadership capabilities which was given by an anonymous former colleague of his to Prof Tim Bale, and published in his authoritative history of the modern Conservative Party:

“I can’t think of a good thing to say about Iain. I mean I really can’t. He’s not a bad bloke. He’s not stupid but he couldn’t be a Cabinet minister. He’d be a liability because he’s got these instincts which drag him off without really thinking about things. He’s not very bright. He’s not very loyal either”.

Feeling confident about this yet? 

Monday, 12 November 2012

What The Godfather Can Teach Politicians

Never hate your enemies, it affects your judgement. (Michael Corleone, The Godfather pt 2)

Michael Corleone had a talent which set him apart from every other character in the Godfather films. Unlike his hot-headed brothers and rivals, he had an empathetic understanding of his opponents. This was the gift which let him to rise to the top of his fictional mafia empire, because it allowed him to understand exactly how others thought and reacted to certain situations. It is a gift which is lacking in a great many people who are interested, or indeed active, in politics today.

To understand what I mean, think about the process which causes some on the left to claim that child sex abuse is the result of “a small minority of rich white men”, or some on the right to claim that Obama’s election victory means “bye bye western civilisation”. The root cause of these obviously ridiculous claims is that the people who make them see the world as being divided up in to the good, who agree with them, and the evil, who don’t. I use the terms good and evil deliberately, because those who hold this dualistic world view choose not to engage with their opponent’s arguments, but instead with their motivations. This effect is amplified by groupthink, where many people coalesce around a particular viewpoint, reinforcing each other’s belief in their own virtue and demonising their opponents.

This effect is not confined to the extremist fringes; actually it infects more or less every level of public debate. If a right leaning government decides to cut tax on high earners, a left leaning opposition will cry that they are doing it for the benefit of their wealthy friends. The debate is never conducted in terms of what level of taxation best balances economic growth with state revenue, because the left leaning opposition can never accept that the right leaning government has the national interest at heart, and assumes a sinister motivation instead.

In a similar way, if a left leaning government increases the size of the welfare state, a right leaning opposition will claim that they are trying to create a client state of ‘takers’ who will always vote left to keep their benefits, at the expense of the ‘makers’. It is assumed by the right that those on the left must have a sinister ulterior motive for their actions, and the idea that they simply want to improve the lives of the poor is discounted.   

Michael Corleone would not make this mistake, because he would realise that in the end misunderstanding your opponents in this way is a form of self delusion which can be highly self destructive. Just because you sincerely believe yourself to be right, and your enemies to be evil, does not make it true. If you base your actions on this false premise, the chances are that you will find yourself isolated from more rational people, who can see things more objectively. This is what has happened to the US Republican Party in recent years. So convinced were they of their own essential rightness, contrasted with Obama’s inherent evil, they failed to spot that most people didn’t see things this way. Lest we get too smug, it is also a pretty good explanation of the irrelevance of the British Labour Party during the 1980’s, or indeed the British Conservative Party during the Blair years. It is the curious fate of political movements in these situations that they cast round for some kind of ideologically pure saint to save them, when they would in fact be better off looking for Michael Corleone. In the words of Don Vito himself; “there was no greater natural advantage in life than having an enemy overestimate your faults, unless it was to have a friend underestimate your virtues”.

Wednesday, 7 November 2012

The US Election: The Aftermath

I switched on the news this morning to be greeted by something which resembled the closing sequence from Return of the Jedi. Supposedly impartial journalists beamed from ear to ear as they stood, surrounded by cheering Obama supporters, to tell us that Europe’s favourite US President has won his second term. Guess what, it made me happy too. If I were a US citizen I’d be a registered Democrat, and I’d be even more delighted to hear that rape apologists had been voted out, and that LGBT candidates were now electable. Good times.

The problem is that I fear people of my political persuasion are getting carried away. Having President Obama is far better than having President Romney, of whom it could be said that nothing became his political life as much as the manner in which he left it, but the United States’ political problems remain much the same as they did yesterday, and could possibly get worse before they get better.

Europeans never seem to grasp that the US system is based on the separation of powers between the executive (the President) and the legislature (the House and the Senate). The result of last night’s election is to have a Democratic President and Senate, and a Republican House. Historically this has not been a problem, because agreement was reached across party lines to pass legislation. In recent years, as the US has become more politically polarised, or more accurately as the Republican Party has become more extreme, this has not been possible. Unless a single party controls all three branches of government, getting legislation passed becomes more or less impossible. That is the situation Barack Obama now faces; responsibility without power.

You only have to recall the way that the USA, the richest nation on earth, managed to lose its top credit rating last year, when legislation to raise the legal debt ceiling was held up in a row between the different government branches, to understand the damage this situation can do. It rules out the sort of serious strategic planning, involving both tax rises and spending cuts, which the US needs to implement in order to sort out its long term finances. This has been identified as one of the most serious threats that the US faces, and the result of this election is to postpone any possible solution a little longer.

The other effect of this election is that it is likely to make the Republican Party even more extreme and uncooperative. Mitt Romney, for all his faults, was the best and most moderate candidate in the Republican primaries. Remember Rick Perry? How about Herman Cain? The point is that Romney was selected because it was thought that his moderation was the best way to win the presidency (this is true incidentally, but he wasn’t moderate enough).

The call from the ‘movement conservative’ hardliners will now be that moderation failed, and a clear Republican message is needed. This is already happening. This debate will take place on Fox News and talk radio, and moderate voices will be drowned out. I cannot see any countervailing force, although I’m happy to be corrected on this. Hard-line, ‘tea party’ inspired resistance to everything President Obama does is likely in the near future, especially in the House of Representatives. Just imagine what the negotiations surrounding the so called ‘fiscal cliff’ are going to be like.     

I realise that this has come across as a very pessimistic viewpoint and it’s true, I have serious concerns about Obama’s second term. I don’t want that to overshadow the achievement of him winning it, nor write off a country that I sometimes admire more than my own. But I do think that those of us of a liberal left persuasion should be more focused on facts on the ground rather than the seductions of symbolic victories. Politics is about steering nations, not winning elections.  

Saturday, 3 November 2012

Money Can't Buy You Love...

...but it can buy you influence. I shall begin with an admission which in certain circles is quite controversial. I like capitalism. I like the high standards of living which come with it. I don’t accept that it is oppressive. However, I am not uncritical. I think that we should always be on the lookout for the abuses of the power which are associated with wealth. It is my view that the market functions best when it is regulated by an independent state. The state should be controlled by the voting public alone. We should be very suspicious of market actors exerting or attempting to exert influence over the state.

After the last expenses scandal (which frankly hasn’t been resolved), David Cameron said that corporate lobbying, the practice of companies influencing governments, was “the next big scandal waiting to happen”. Sadly, apart from a couple of minor incidents, he was wrong. Corporate lobbying is hard-wired in to our political system, allowing established firms beneficial access to policy makers, at the expense of both consumers and other firms. This should offend people on both the left and the right of the political spectrum, because it is detrimental to both the public at large, and also to the proper functioning of the market. Funny then, how nobody seems to care about it.

Let me give you some publicly available, and I should stress perfectly legal, examples.

Ed Balls is the Shadow Chancellor. That means that if Labour wins the next election, as the opinion polls currently indicate that they will, he is the man that will be in charge of the nation’s economic policy, including all tax law. According to the Register of Members Interests, the huge accountancy firm Pricewaterhouse Coopers supplied him, for free, with “the services of a research assistant/analyst...for 4 days a week on a 22 week secondment from 4 January 2012 to 1 June 2012, value £72,576”.

Why would they do a thing like that? What possible interest could an accountancy firm have in the politician who could end up writing tax law?

Let’s take a different example. William Hague is the Foreign Secretary. He is in charge of Britain’s network of embassies across the globe. He received a political donation of “£6,545.90, for reception” from a company called Project Associates UK Ltd. A glance at this company’s website tells us that they are a PR firm which governments across the world can hire to help them communicate with the press and NGOs.

Do companies just give out four figure donations without expecting anything in return? Because if so, I’d like some of that. What was being brought here? Why would a company specialising in international governmental PR make a personal donation to the Foreign Secretary?

The idea of a company making a political donation is ridiculous. A person can have political beliefs, and they can choose to donate to a politician if they agree with them. Companies are not sentient beings. They cannot believe in things. A company director cannot just spend company money on whatever they want; the spending legally has to be in the interests of the company. But if a donation is in the interest of the company, then the company is buying influence over the state. As I've tried to show you, that’s not OK, regardless of your politics.