Thursday, 12 February 2009

Credit where credit's due

Can any of my wonderful 6 readers ask their undoubtedly highly intelligent friends if they know why it is that we are all getting so fixated on trying to get the banks to do their job, rather than feather their beds in a recession. Why doesn't the government cut them out of the equation and extend credit directly to citizens and businesses. If banks can't, or won't lend, then I think the time for gentle or not so gentle pursuasion is over. Bankers have brought us to this point, and their obstinance is seemingly perpetuating the woes of ordinary people and small businesses, who through no fault of their own, face ruin. The time for action has surely arrived. Either we must nationalise the banks, or the Government must, through some ingenious ruse (which I cannot describe as I know nothing, along with most economists, about these things), extend credit to those who need it. Money is all notional, after all. If you doubt me, just look at how a boom was generated which apparently made us all so much better off. It was a chimera. A house of cards. The money didn't really exist.

Which leads me to another thought. If the recession gets as bad as even Cabinet Ministers are now predicting, then we are looking at damage being done to the economy on an almost biblical scale. Let's imagine for a minute that a terrorist group, or a mafia organisation were able to have "taken out" several City banks, and caused even a tiny fraction, say one per cent, of the damage already done to the "real" economy in this recession. The Government would have passed emergency legislation, police and army units would have flooded the streets of central London. The nation would be up in arms at the audacity of such an attack and would be reeling due to the jobs (let alone lives) lost.

So now consider what has happened in the last two years. Yes, we're all culpable to some extent, through our collective myopia and greedy wishful thinking that such a boom and credit-based consumerist economic growth could continue ad infinitum. But the "Masters of the Universe" in high finance who wrought this economic destruction on us through their greed and recklessness were more to blame. It seems that the recession will wipe out four per cent of UK economic growth in just one year. How much will the recession take in total? Ten per cent? Fifteen. Twenty? Can you imagine if a terrorist organisation had managed to cause such a calamity? There would be mass outrage.

And I suspect that unless the political masters of the market systems of the West show, very rapidly, that they are able to bend this system back towards the interests of ordinary people, these very same people might start to express similar levels of outrage.

Ed Balls and any student of history knows that there are always political and social repercussions from economic calamities. Given that every prediction since summer 2007 has turned out to be far, far too optimistic, the time to get a grip on this crisis is suerly upon us now.

Tuesday, 10 February 2009

The President's coattails

The election of Barack Obama was a transformative event of profound significance for the world. Another revelation has been the actions that the new President has taken since 20 January. Simply put, President Obama has been radical and he has been bold. With the swipe of the Presidential pen, he consigned Guantanamo and torture to the dustcan of history. He has pushed through an unprecedented economic rescue package. He has capped the pay of senior executives at rescued financial institutions. He has "pressed the reset button" on relations with Russia. He has talked openly about reducing the number of nuclear weapons in the world. He has extended the hand of friendship to the Muslim world. He has done more good in six weeks than George W Bush managed in eight years.

This is all well and good for the US and for the wider world. It is interesting, however, to consider how the actions of this visionary, radical but pragmatic President will impact on the Labour Party here in the UK. It strikes me that each and every dynamic act shows that our Labour Government can act with greater boldness and radicalism. The President is an inspiration to left of centre politicians and should be a jolt to the system of many Governments, such as our own, which have too long sought out the safety not of the middle ground per se, but of governing in a an overly technocratic way.

What President Obama is showing is that morally courageous political leaders can win popular support. Obama has entered office to shake up the establishment which has so clearly failed ordinary people. There is a danger that our Government, no matter how honourable its intentions, and notwithstanding its many achievements for the disadvantaged, has become part of the establishment. This is perhaps an occupational hazard. The Government too often is at its boldest when pushing through establishment measures like replacing Trident, or a new runway for Heathrow, rather than pushing through some radical policies designed to tackle the important issues facing Britain. In an age when the establishment has obviously failed in its collective responsibility to monitor and control the excesses of the financial markets, this is a tendency we must guard against.

In contrast, and perhaps imbued with the good fortune of not having been in power while the seeds of the present malaise were being sewn during the boom years, the President is showing that it is not only possible, but sometimes necessary to criticise the establishment. He is breaking barriers down if they impede the path towards taking the steps necessary to make the changes we are all crying out for. He is being proactive and strategic.

Despite some notable successes in being one of the first countries to recapitalise banks, our Government still gives the impression of being reactive. There is a danger that only when an issue becomes of such public concern that outrage flares up (as with foreign workers two weeks ago, or immigration more generally) does the Government act. A case in point is that they must have known there would be outrage about the paying of bonuses to near-nationalised banks, and yet only now, in the face of widespread public opposition to they act - or should I say, commission another report.

The President shows that it is possible to talk about nuclear disarmament without sounding weak. He is breaking New Labour taboos with almost every breath. What next?....criticism of the excesses of the financial elite...already done (in the inuagural address). What about the environment? The Americans are actually going to do something to generate jobs in the green sector. Despite recent positive steps, Britain still lags behind countries such as Germany when it comes to generating green jobs or investing in green technology.

President Obama's audacious gambits on the domestic and international fronts must be an inspiration to left of centre political parties the world over - including our own Labour Party. We are still not presenting a coherent vision for the future. Nor are we showing, as does the President, an understanding that ordinary people want a Government resolutely on their side at this time of crisis. There can be no equivocation. All the years spent appeasing the interests of the City have led us to where we are now. Whether or not the fault lies ultimately with the American banking system, or with bankers the world over, the boom has turned to bust. The onus is on Government to build a firmer foundation for the recovery and they will hopefully follow in the President's coattails. Mirroring the pragmatic idealism of this US President is surely the kind of behaviour which most British voters would support.

Thursday, 5 February 2009

The BBC's Peston hits the target

If you want to know why bankers should NOT be paid bonuses, you need look no further than this blog by the BBC's ubiquitous Business Editor - http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/02/should_bankers_repay_bonuses.html.

We see from accross the pond that politicans of the centre-left can be dynamic and radical. In limiting the pay of banks which are taking the Federal bail-out dollar, President Obama is showing real political and moral leadership. If only our own Government would show such courage. It might even find that to stand up to the financial elites which have caused this catastrophe is popular with the voters. Heaven forbid we actually start to do things which are popular....Far better to remain entranced by the financiers and businessmen... This on the day when newspapers are reporting that the Government is debating whether or not to allow Royal Bank of Scotland to pay out bonuses to its staff. This is a bank which would have collapsed but for the Government bail-out which has resulted in the taxpayer owning 70 per cent of RBS.

I don't remember "ordinary" workers who do really valuable work like being teachers, or nurses, being paid bonuses. Those in the private sector used to claim that bonuses were reward for success. All too often we discover that people are rewarded for success AND for failure.

Wednesday, 4 February 2009

Seeing things from your opponents' perspective

On those rare occasions where politicians advance the cause of peace and reconciliation, it is always partly the result of their having swallowed their pride and admitted that it is possible to see the "truth" about the situation from their opponents' or enemies' perspective. This is not about pacifism, it is about being realistic. Examples are abundant: the Great Powers decided not to repeat the punitive reparations of Versailles following the Second World War because they realised that from the German perspective, such measures were humiliating and led indirectly to Nazism; the ANC showed immense maturity and dignity by choosing the route of forgiveness and reconciliation, realising that to punish the white rulers would be counterproductive; the British Government accepted that it must actually negotiate with the IRA in order to bring about peace, and the IRA came to the same conclusion. None of this was easy for the warring parties. In each case leaders exercised moral strength, not weakness. They stood up to the hawks in their respective regimes, they showed vision and magnanimity.

All this is in stark contrast to the knee-jerk reaction of our leaders to Iran's launching yesterday of its first satellite. We hear that Western leaders are deeply concerned, and we read apocalyptic newspaper articles showing how Iran's new satellite capability must mean that we are now more at risk of being attacked by an Iranian long-range missile armed with a nuclear warhead.

And now for the difficult part. Let us imagine for a moment what Iranians reading our newspapers might legitimately feel. Their scientists have performed a feat which is clearly impressive, without outside help. They are now capable of launching communications satellites. Iranians might be rather outraged that we in the West should view this with such alarm. The subtext to Western responses is that Iran ought not be allowed to have this technology, that the world would be safer if Iran remained technologically backward, as it was in the past. If I were an Iranian, I might find this insulting, and it might make me more likely to view the West with suspicion and hostility. It is even more likely that I would respect my own leaders more, for having succeeded in the face of Western disdain.

The Ahmadinejad regime is clearly unattractive, and its abuse of the human rights of its citizens is well known, as is its malevolent interference in its neighbours such as Iraq. However, I merely suggest that our leaders and commentators might for once take a step back before issuing terrible proclamations about the "threat from Iran". If you remember, the knee-jerk reaction of the Western powers to the Russian / Georgian conflict of last year has been shown to have been misguided in that Russian guilt has by no means been established for that murky war.

Tuesday, 3 February 2009

Letter to The Times (unpublished)

The Editor
The Times

Sir,

If during the last 30 years, socialist economic policies had been enacted by socialist governments across the advanced world, resulting in an economic calamity as devastating for ordinary people as is the present crisis, right wing parties would not merely be advocating a policy revolution, but coup d'etats. Right-wing policies of free market economics, light-touch regulation of high finance and credit-fuelled consumerism have brought us to this point, yet elicit from our 'Labour' Government no stinging rebuke for the elite which caused this catastrophe. Rather, Government is recruiting an ever expanding cabal of bankers to advise on how best to direct the bailouts. When bankers and financiers are virtually indistinguishable from the Government, the result is the notion that saving the people depends on saving the banks. People are searching for a more coherent vision of the future. Unlike in the United States, they are not getting one from our leading politicians.

Yours faithfully,

John Slinger