Guest Post: What Next For Europe?

This is a response that Alex Sabell sent me to the last post. Since Alex genuinely knows this policy area very well, I thought it would be well worth sharing with you all. It has some worrying implications to say the least. Enjoy.

You speak of the current austerity conditions being imposed by the European elites and that they need to realise that this isn't going to wash with the electorate. The only problem is that I don't see the other solutions being any good either.

The likes of Greece, Spain etc... in general got quite a lot richer over the life of the Euro, and we can see now that this was mainly down to cheap credit being available under the assumption that Northern Europe (aka Germany) would pick up the tab if something went wrong. The Germans explicitly always said that they wouldn’t; so really nobody should have been lending on the assumption that Germany would actually stand behind the entire Euro venture.

The knock-on effect is that the banks of Europe do indeed need to take a hit on this (which they haven’t so far). But incidentally I think it would be a mistake to assume that pummelling ‘the banks’ and letting them take a hit, just affects rich people. ‘The banks’ essentially are all of our pension savings etc... or our ability to get a loan to start a business. They affect everyone. I don’t think the current Euro austerity ‘solution’ is just to benefit rich creditors.

Anyway I digress, my main point is that in hindsight its a bit mad that Greece, for instance, was able to borrow at the same interest rates as Germany. There were always some quite fundamental differences between the two countries, and I’m not just talking kebabs vs sausages. During this time wages and buying power went up a lot in most Mediterranean countries but stayed about the same in Germany, who were quietly becoming more efficient. (Germans exports were of course also benefiting from what was essentially, for Germans, an under-valued currency). Yet the stuff being produced in Mediterranean countries wasn't being made any more efficiently during this time of increasing wages. Those higher wages were effectively coming at the price of competitiveness. And cheap credit was papering over these widening cracks. Unit cost and various productivity/efficiency analyses seem to back this up. These countries were essentially living beyond their means – funded by credit.

So its not just the elites who would like to stay in the Euro now. Many people realise that going back to the old currencies would leave them quite a lot poorer. In effect it actually would mean going back to a relative level of income of the era before the Euro... Now, I realise that those politically connected, ‘the elites’, the financiers, the bankers, in these countries would have done best out of the Euro (and have all by now bought houses in London) and that those who suffer most are ‘the rest’, but the figures on wages and productivity do seem to suggest that most of the Mediterranean populations were considerably better off during the happy Euro years. People were paid more, they could buy more as their Euro currency was considered as good as anyone else’s, companies could borrow at more competitive rates and grow quicker than before etc... etc...

Sadly it was all a bit of an illusion.

The future for many Euro countries is a Euroland of either massive inter-country redistribution and losing control of your finances, in the style of a true political union, (which essentially means being told by Berlin and Frankfurt to be sensible or else) or falling out of the Euro, incurring a massive loss of wealth as your currency reverts to a more ‘natural’ level – a level of national wealth more like where you were before the Euro came along.

To me this implies that its not just a case of the elites imposing the wrong austerity solutions. They are rather stuck trying to manage a slightly unrealistic and ageing continent that’s got rather used to being comfortable and protected. The elites are effectively playing scrabble with a hand full of Zs, Xs and Js. And the rest of the letters are consonants. And they are nowhere near a triple word score.

I think its more a case of everyone in the Euro, the elites and ‘the rest’ alike, being trapped in a poorly designed (mainly when viewed in hindsight) currency union in which no future option looks particularly inviting. Somebody is going to have to pick up the tab for the Euro binge, probably the Germans, and they will forthwith ban all future parties. Or alternatively peripheral countries become poorer quite quickly, either through austerity or through falling out of the Euro. I can’t see a magic alternative policy that the elites can choose.

In effect, where I do agree with blaming the elites is that it was they who allowed their currency union to be designed by committee (apparently using sticky tape and party straws), but then European integration is a rather lovely idea – in principle – and I can see why lots of us went for it, elite or not.

Italians Possibly Not Irrational

I have a personal theory, which often upsets committed political activists, namely that electorates tend to choose the least bad option presented to them at an election. This is not to claim that voters are individually rational people, because they are not. People vote according to their own whims, a lack of information or a lack of comprehension, raw prejudice, family tradition or indeed any combination of thousands of other motivations. I am saying that in aggregate, if you ask enough people the same multiple choice question, they will generally choose the option which causes the least distress to the greatest number of them.

With this theory in mind, consider the result of the Italian elections. On the face of it, the Italians have chosen a government, or more accurately not chosen a government, which will result in legislative paralysis and economic chaos. One in four of them voted for a comedian (an actual comedian, this is not a metaphor) called Beppe Grillo, whose policies include the abolition of the tax collecting department. They have also granted control of one of the legislative houses to Silvio “Bunga Bunga” Berlusconi, a man who defies all attempts at satire, while the other is dominated by his left wing opponent Pier Luigi Bersani. This is a recipe for gridlock, and almost manages to make the US look like its government is functioning well (but not quite). My theory about the rationality of electorates is starting to look a bit shaky.

Now imagine that you are an Italian voter. The last few years have not been kind to you. The unemployment rate is over 11% and rising. It is over 36% for the under 25s. Savage austerity measures have significantly reduced your standard of living. All this has been deliberately imposed on you by a technocratic government installed by the EU in order to keep the country in the Eurozone. You were told that if you took this harsh medicine, economic growth would return. It hasn’t. If Italy carries on down the present policy course, all you have to look forward to is years of economic depression. Now, your job, your retirement and your children’s future may all be in doubt but, and this is the beauty of democracy, you have one thing left. You have a vote, and you use it to vote against the misery which has been imposed upon you. The Italian electorate voted against candidates backing austerity by a factor of three to two. Notice how Mario Monti, the technocratic leader who has imposed austerity on behalf of the EU, was sent packing at the polls? That was no accident.

There is nothing irrational about the Italians voting in this way, although it could have far reaching consequences. This vote is effectively a rejection of the failed EU wide policy of economic austerity without any concurrent growth plan, which has been the continental response to the Eurozone debt crisis. It cruelly exposes the fatal flaw in that plan-the political elite can impose years of depression on millions of people, but they cannot make those millions of people gladly accept it. Already, analysts are saying that this election heralds the return of the Euro crisis. What has really happened is that the total inadequacy of the previous “solution” has been exposed. Just think, if the Italians won’t put up with it, why would anybody else? The Eurozone looks pretty exposed right now, and deservedly so. Its leaders brought this on themselves.          

Kremlinology

I’ll make this quick, because it’s pure speculation. A misconception many people have about the British system of cabinet government is that the Prime Minister holds all the power. In reality the only power that comes with the office is the power of patronage-it is the Prime Minister who makes all the ministerial appointments. MP’s and ministers are loyal to a Prime Minister because his favour is the only way they can secure political advancement, or because the Prime Minister can sack them if they prove disloyal.

This produces an interesting dynamic, because the power of the Prime Minister to command loyalty from his MP’s and ministers is diminished if those MP’s and ministers think that said Prime Minister will not be in charge for much longer. If, for example, it looks like the governing party is going to lose an upcoming general election, then the Prime Minister no longer credibly holds the fate of his underling’s political careers in his hands. Those underlings will be looking to gain position in or under the next leadership of the party. I am well aware that this assumes that many politicians are ruthless careerists. History would indicate that there is some truth to this.

With this in mind there was a fascinating snippet in the Independent on Sunday this week. Back in 2010, when the coalition was freshly elected and the Prime Minister had five years worth of appointments to make, Michael Gove was prevented from having his choice of special advisor (SpAd), namely Dominic Cummings, because Mr Cummings was felt to be something of a loose cannon by the leadership. Later on in the Parliament Mr Gove had no problem employing Mr Cummings, despite the fact that if the present briefing is to be believed, the leadership still hold a dim view of this SpAd. Why does Mr Gove feel able to act against the wishes of the leadership (not for the first time) now? One possible answer is that Mr Gove is no longer in awe of the Prime Minister because it looks increasingly likely that the Conservatives will not win the next election outright, and that if a new coalition is formed it will be between the Lib Dems and Labour*. If this is the case then Mr Gove’s next career move will not depend on the favour of David Cameron. Indeed, it could be to replace him.

This analysis comes with plenty of health warnings. Michael Gove has gone on record as saying he is unfit to be Prime Minister. All of the briefing I referred to could have come from Department of Education officials who are in the middle of an acrimonious dispute with Mr Gove and his SpAds. Still, these rumours are cropping up in quite a few places. This might be a story to watch.

Can you tell I’ve been watching House of Cards this week?

*I personally am not yet convinced Labour can pull this off, but it looks more likely than it did this time last year, so who knows?     

Academy Schools

We often hear talk about the need for public sector reform, and indeed most governments pledge to deliver this in some form or another. I want to use this post to give you a real life example of the process in action, and to show you that even if there is a pressing need for it, successful change can take decades to come to fruition, and will be opposed at every step of the way. The case study I’m going to use is the British state secondary education system, which covers pupils ages 11-16. To explain the reforms, I have to explain the process which made them necessary in the first place, so I’m afraid this begins with a brief a history lesson.   

By the mid 1980’s it was clear that something had gone very wrong with the British comprehensive education system. Originally set up in the 1960’s, the idea behind it had been very noble. Up until 1965, children had been separated at the age of eleven into the one third who passed an exam and were sent to ‘grammar schools’, very high quality schools which prepared pupils for university and a life in the professions, and the rest, who were sent to ‘secondary moderns’, which essentially warehoused children until they were old enough to be sent off into low skilled jobs requiring few if any qualifications*. This system had the effect that most people’s life chances were decided at the age of eleven, and it failed to properly educate two thirds of the population. As a result the different types of school were merged, creating the new comprehensives which took pupils of all abilities from their local area.

The problem was that a very large number of the new comprehensive schools failed, becoming dire ‘sink schools’, which were effectively the same as the secondary moderns that had preceded them, only with no route of escape for bright children from modest backgrounds. Because wealthy parents could send their children to private schools, which actually became even better during this period because many of the old grammar schools went private rather than becoming comprehensives, the British state education system effectively became the teeth of the British class system. Social mobility froze up, because a high quality education was only available to the rich.

Faced with this problem, the politics of the period produced a dead end. The right favoured using state funds to pay for a small number of bright children to attend private schools, doing nothing for those left behind, while the left blocked any reform which they thought would lead to a return of a two tier system. Neither came up with an answer to the key question of how you could improve the quality of all state schools.

At this point, consider what it is that makes a good school. It is emphatically not the socio-economic background of the pupils. Rich kids can be deeply stupid (think Made in Chelsea), and if this is true then so to must be the reverse: poor kids are not necessarily thick. The good schools are the ones which insist on high standards of behaviour and achievement, and do not tolerate slippage in these areas. These standards are set and maintained by good quality leadership within the schools, which requires an excellent management team who have the power to implement their vision of a good school.

This high quality leadership was exactly what was missing in the sink comprehensives. Responsibility was split between the head teacher, the board of governors and the local education authority (LEA), which is a part of the permanent bureaucracy of the local council. These LEA’s were particularly woeful, and often members did not even bother visiting the schools they were responsible for, let alone provide decent leadership for them. They tended to be very protective of their schools and were very resistant to closing them, even if these schools were failing the pupils who had no alternative but to attend them. The split responsibilities were a recipe for passing the buck between different layers of management, and when no-one took responsibility for a school, it sank.

Gradually, beginning with Kenneth Baker’s ‘City Technology Academies’ in 1988 and followed by New Labour’s ‘Academy Schools’, a new model of state secondary school began to emerge, which tackled the problem of failing LEA schools head on. These new schools had a private sponsor, often a successful local business person, who hired a management team which they knew would be effective. They received their funding directly from central government, bypassing the LEA’s altogether. Although they had to maintain high standards and pass OFSTED inspections, the new managers were free to run the school as they saw fit, without interference from the local council.

The results have been quite frankly stunning. Not only have standards within the schools which converted to academies risen, but academy schools have raised standards across the education system as a whole, because previously coasting LEA schools have to compete with them for pupils, and so they raise their game. To see how effective academies can be, take a single example. Hackney Downs was one of the worst of the LEA sink schools, in one of the most deprived areas of the country. It was so bad that it was closed by ministerial order in 1995. The attitude of the time was that “schools cannot compensate for the problems of society” (translation: poor kids are thick).  In 2004 it was re-opened as Mossbourne Academy. In 2009, the first year that it had 6^th form graduates, NINE of them gained a place at Cambridge. Who on earth could argue with results like this? Sadly, lots of people found a way.

The academy program generated a huge amount of resistance, both from the LEA bureaucracies themselves, and from the wider left, notably from within the Labour Party, who mistakenly thought it was introducing a two tier education system. I want to stress mistakenly here, because academy schools are bound by exactly the same selection rules as LEA schools**. It is just not true that they select their pupils. If they are good then parents will try very hard to get their children into them, but that was true of good LEA schools as well. Look at the high house prices around an LEA school with a good reputation and you will see selection in action, but it is selection by parental income rather than student ability. Academies took over the worst of the LEA schools and turned them into desirable establishments. They made the comprehensive dream of good schools available to all a reality. They should be New Labour’s proudest achievement, yet due to internal party resistance only 203 of these new schools were open by the time Labour left office in 2010.

The incoming Coalition government was not so inhibited. Education Secretary Michael Gove, knowing a good thing when he saw it, put rocket boosters under the program. There are now well over 2000 of these schools in Britain. That is over half of the total number of schools, and there are more to come. Gove is something of a hate figure on the left, so it is perhaps amusing to note that his most successful policy is simply to do what his Labour predecessors did but to do it more quickly. Those Labour predecessors were in turn building on the work which began under the Thatcher government, although they tend to keep that a bit quiet. That isn’t really the point though. Gove is simply continuing a much needed process of reform which began way back in the 1980’s. If real change is to happen, this is how long it takes. It is sometimes worth taking a step back from Westminster politics to think about that.   

 *The old selective system is maintained in a small number of counties, including Kent.

**UPDATE 14/02/2013: Please see comment one.

What's The Beef?

This weekend Britain is in the grip of a full on food scare. Horse meat has been discovered in several processed beef products, including Tesco burgers and Findus lasagne. We have no way of telling how wide the contagion is at this moment in time, and there are fears that it could be present in school dinners and hospital meals.

Horse meat is not dangerous to eat in and of itself, although it is not yet known if the meat used in the contaminated products contained the horse drug phenylbutazone, which can cause serious blood disorders in humans. The issue here is that we basically have no idea what is in the food that we eat, and therefore cannot be sure if it is safe or not. Although most people are actually OK with eating horse (sales of genuine horse meat have doubled since this scandal broke) imagine what would happen if something else was discovered in our food. Cat for example. I doubt people would be so sanguine then. As with all food scares, uncertainty about which products are trustworthy risks undermining confidence in the whole supply chain.

Faced with this situation Environment Secretary Owen Paterson has given us a master-class in how not to be a Minister. The scandal has been brewing for a couple of weeks now, during which time Mr Paterson was pretty much anonymous. Yesterday, as it became clear that the contagion was much wider than originally thought, questions were asked about the whereabouts of the Minister, and David Cameron expressed his “full confidence” in Mr Paterson, which could be interpreted as a less than gentle reminder that he was expected to deal with this. Whatever the intention, it certainly got the Ministers attention, and he immediately returned to the department, gave a series of TV interviews, and announced his plan of action. Fans of ‘In The Thick Of It’ will probably be able to anticipate the result of this form of crisis management.

Paterson has today held an emergency summit with food retailers and suppliers, and demanded that all processed meat products are tested and the results made available by next Friday. Given that the results of tests on school and hospital foods will not be available until the 8^th of April, this timetable looks optimistic to say the least. The Food Standards Agency does not actually have the legal power to force companies to do this, and even if it did experts say that there is not enough laboratory capacity to perform all these tests in one week. It will be very interesting to see what happens if they fail to meet the Ministers demands. My best guess is that by announcing what look like panic measures which are probably impossible to enact, Owen Paterson has just given the story more legs. He may come to regret that.   

Mid Staffs

Some things matter more than party politics and today’s report into the horrific events at Stafford Hospital is one of them. Between 400 and 1200 people died unnecessarily, and many hundreds more received treatment so appalling that it will haunt them for the rest of their lives. The managers in charge of the hospital did not address the failings, but instead attempted to cover up them up, showing a shocking lack of human empathy for the people in their care.

Between 2005 and 2009 patients in the hospital were left literally starving, unwashed for up to a month and reduced to drinking water from flower vases, because staff members were unable or unwilling to care for them. Patients were assessed by receptionists, and many people were killed after receiving either the wrong medication or none at all.

Disturbingly, none of this was picked up by NHS quality control procedures, and only came to light when the daughter of an elderly patient who had died after being refused life saving medicine, having suffered terribly for weeks, wrote to the local paper and asked if anyone else had had a similar experience. It is perhaps instructive to note that this bereaved whistleblower received hate mail for her troubles.

The picture that has emerged from multiple enquires into the hospital is deeply disturbing. What appears to have happened is that the hospital managers, the Mid Staffordshire NHS Trust, cut staffing levels in an already understaffed hospital in order to meet government targets which would allow them to gain the coveted “Foundation Trust” status. The Trust's focus was entirely on bureaucratic targets and not on patient care, which seems to have been forgotten altogether. When concerns were raised about the hospitals high death rate in 2008 the Trust did not act on them, but instead dismissed them as “coding errors”. Remember that at this point in time, people were needlessly suffering and dying on a shocking scale. Statistics mattered, people did not.

This is not a story about cuts or austerity. This happened at a time when the NHS was better funded than at any point in its history. It is a story about the total failure of NHS management procedures and indeed the whole culture of the NHS to ensure that users of the service received even a basic standard of care, dignity or empathy. The management structure and culture that failed so disastrously at Stafford Hospital is the same management structure and culture which governs the rest of the NHS. If it has been shown to fail this badly then it must be reformed. That is beyond question. However devoted you are to “defending our NHS”, it must be clear that this is not what Nye Bevan had in mind when he set it up. Make no mistake, this is a dark day for the health service.

Gay Marriage

As I write this the Commons is debating legalising gay marriage, and it will vote on the subject at around seven o’clock tonight. There is absolutely no question that the measure will pass, however large the Conservative backbench opposition to it eventually turns out to be, for the simple reason that the vast majority (although not all) of Labour MP’s are voting in favour. I’m guessing that none of you will be surprised to find out that I think this is fantastic news, and I would add that frankly I find the arguments against the measure so feeble, not to mention bigoted, that I’m not even going to dignify them with a response.

I would make the observation that the fact that this is happening today is a testament to how quickly social attitudes towards homosexuality have changed in recent years. While I was at school I remember seeing the front page of The Sun newspaper screaming “Is Britain run by a gay mafia?”, then ‘outing’ several gay men in the British government, as if their sexuality had some bearing on their ability to govern. That was only fifteen years ago, yet in that time such naked bigotry has become a total anachronism. The fact that as a society we have moved on from that and are now legislating to ensure that there are no areas of British life that gay people are excluded from is something we can be justifiably proud of.

Since all that is so predictably socially liberal of me, I’d like to make one final point. All the opposition on the Conservative backbenches is obscuring the fact that this legislation has been put forward by the Conservative leadership. This highly commendable policy is going to be a part of David Cameron’s political legacy, and I think it is something that he will look back on with pride. It is also notable that several Conservatives who have never previously shown modernising tendencies, including Chris Grayling and Bernard Jenkin, have come out in favour of this Bill. These people deserve credit for doing this, and it would be churlish not to give it. This is going to be remembered as one of Parliaments better days.