Malcolm Blair-Robinson's Blog, page 106

Boris Backfires: But Is He Right?

In a word, yes. Very many Brits are deeply uncomfortable with the somewhat slavish attitude to the Saudi State of the Establishment, which goes to great lengths to keep within pages of the Saudi good books. There is an economic advantage of doing so. Saudi Arabia is a major customer for British goods and services and especially armaments, for which they are our biggest customer. Many thousands of jobs would be at risk if they took offence, then took their business elsewhere.

On the other hand there are serious questions about human rights and gender equality which trouble almost everybody. Then there are these wars across the middle east, in which we are embroiled (but should not be) which go on seemingly without end. There is talk of war crimes, but in truth the whole thing is a crime and we are to some extent a part of it. The world is now tired of these quarrels, based on differing interpretations of the same faith. Christians have had their fair share of this over the centuries and know that resolution is easier said than done. Nevertheless it is time to do something. So said Boris. The balloon went up in Downing Street.

But Boris need not worry. The old style of murmuring behind closed doors over issues which impinge upon the lives of millions under the general veil of good diplomacy, is maybe past its sell by date. The incoming president of the United States conducts diplomacy via Twitter. This is a racy new way of talking directly to the people.. The Prime Minister In Waiting in the UK (Boris’s ambitions are not dimmed, simply postponed) knows that very well. That is what all these so called gaffes are about. Because everybody agrees that while this is not quite the right way to express these things, they are the right things and something should be done about them. And, as always, they agree with Boris. May knows that. Her life is now driven by two Bs. Brexit and Boris. She can manage the first but not it appears, the second.

The EU: What Is Happening?

It has been said, especially by this Blog, that the Euro cannot survive and that the EU itself is going to unravel. Neither is correct yet both are true within the definition of what was supposed to be. What is happening is that Europe is morphing into what it was set up to prevent. At some level this is good news, but there will be a lot of change. What will be avoided is a catastrophic collapse. Let me explain.

The pointers lie in the markets shrugging off both the No in Italy, once more without a government, and the potential threat to the Eurozone of Italian financial instability and the tottering nature of its banking system. The market has worked out that Italy no longer counts, because Europe has become part of a German economic empire. The euro is plainly not actually a shared currency; it is the German currency shared. This is not the fault of the Germans.

They have suffered and worked to build an industrial superpower, which joins fiscal discipline, economic management, technology, R&D, unity between management, workforce and stockholders, democratic government decentralized but with a strong centre, and a living standard which no other major country in the EU can match. They have accepted a million refugees but they have space and resources in the east which will be mobilized to provide jobs for the newcomers which will increase German GDP still further. In other words the Germans have been very successful, they will not compromise and threaten their own prosperity and neither of the other two major industrial powers in Europe, France and Italy, can keep up. And they do not want to, because they are culturally different in outlook, attitude and application. Above all they do not want to become like Germans.

The masses in both France and Italy have had enough. Their politicians are impotent to help them, their living standards are flat-lining, unemployment is terrible and among young people, exotic. At the very least both will have to leave the euro, because both must have a currency which reflects the facts of their own social and industrial landscape. In other words they both have to devalue. Others like Greece and Portugal may follow, or they may decide to struggle on through monastic austerity to meet German standards. They know Germany will not bend and it will depend upon the tolerance of their voters. After initial volatility, which is always near the surface as globalization adjusts, the markets will like all this because the mayhem will provide exceptional opportunities for profit in the revival which will follow.

It will fundamentally change the nature of the European Union. It will most likely be either smaller with France and Italy, perhaps Spain too, out, or more loosely joined, with a soft outer ring but a hard German core, including smaller mainly norther states willing to use German euros and thus be governed by German economic sovereignty. And then it gets really interesting. France and Italy will be headed for a significant industrial revival producing cars, fridges and even ships at lower cost than the Germans, which will restore their self esteem and standard of living. The euro will rise because it is no longer dragged back by the two weaker economies, and German competitiveness will be eroded. German growth will slow. German power will be curbed, but by the opposite strategy to the one designed for the purpose.

As for the UK? Already there is a serious question mark over the integrity of a referendum which offered a smooth and cost free Brexit, which we discover to be impossible. There is now the prospect of negotiations to establish a future relationship with an entity no longer there. All the more reason to look, not for the first time, to the New World, rather than the Old.

Richmond Bombshell: Is It Big?

Yes.  In spite of what the opinions polls say (they do not have the methodology to deal with counter-intuitive cross party political trends) if there were a general election now, May would probably lose. This is not going to happen because, under the 2011 Act which provides for fixed term parliaments, there would have to be a two thirds majority in favour of dissolution; it is no longer in the hands of the prime minister. If May were somehow defeated on a vote of confidence, (some imbroglio over the Supreme Court?) the Queen would have to send for Corbyn and only when he was defeated, which might be easy, could parliament be dissolved. So when you hear commentators talk about a ‘snap election’ they are talking about something from the past. It is not possible now.

However if it were possible or somehow happened, a May loss would not mean a Corbyn win. It could mean a hung parliament with the Lib Dems back to about fifty seats, possibly up to a hundred, and UKIP with about a dozen. There would be no party with a majority, nor one able to form a majority on an agreed programme for government. But there would be two cross party majorities. The first would be either for a very soft Brexit or even to call the whole thing off. The second would be for an end to austerity. That rules the Tories out from even making the tea in any coalition even with UKIP support, so it would be likely to compose Labour, Lib Dems and Scot Nats.

The thinking behind this analysis goes like this. There have been two by-elections since Brexit (not including the constituency of the murdered Jo Cox). The Lib Dems came from the nadir of their 2015 massacre, to a close second in the first and they won the second. And the centre-piece of their political platform is that they are against Brexit and would try to reverse it. They would vote against Article 50 and demand a referendum on the final terms.  Leave won the referendum because Leavers had passion. Well now the passion is with Remain.

There is driving this revival of Remain energy a new factor, which never came up in the referendum. Everybody knows what the terms for remaining in the EU are, and being there is part of our lives and in many cases our jobs and our savings. But nobody is even vaguely able to articulate what Brexit means, the effect it will have, what the legal implications are and what the outcome will be. There is no agreement on what opportunities it actually brings, or what costs it entails.

It appears there will have to be compromise on either immigration or contributions or both, to stay in the single market. One part of Brexit cannot live with the first of those and the other part cannot live with the second.  There is no majority in parliament or in the country for hard Brexit. About a third of voters and the same proportion of Tory party would go for hard, but the remaining two thirds would not, whether it is a general election or another referendum. So the way forward is far from clear. Depending on the deal on offer it might even be blocked.

It is all made worse by chaos in the Cabinet, leaks to the media, asides from ministers conveying opposite Brexit positions and the emergence of a bossy side of May which is beginning to irritate. The complete failure of Hammond to seize the economic initiative and offer real prospects  for economic revival will prove a long term political disaster. The mounting financial crisis in public services, damaging the prisons, social care, mental health, the NHS, Child Protection and the railways (why does the government not end that Southern franchise and rescue the commuters whose lives are being made a misery?), is approaching a point that must surely lead public patience to snap. Perhaps the lesson of Richmond Park is that already has.

Next week all eyes will be on the Supreme Court.

CIA Warning To Trump

One of the problems this blog is going to have with the Trump presidency is that I agree with him on some things but not on others. I support him on the trade, but not the tax, aspect of his economic policy and I applaud his fresh approach to the current train wreck of America’s foreign policy. But I disagree with his assertions on Iran. So I think the outgoing director of the CIA was right to warn Trump about tearing up the Iran nuclear treaty, but talking nonsense when he blamed Russia for everything in Syria, during a recent interview with the BBC.

Foreign policy is not a competitive sport, like football or swimming, where you support your team whatever they do. It is a political discipline which, if it goes wrong, leads to the death of millions, as history shows us. In a nuclear world it could bring human life to an end, so it is important to think it through. Each point of tension has to be dissected, analysed and tested to find where the tension is building, through what historical decisions, what the dangers are and what path will lead to the best, but usually far from ideal, outcome at the least cost overall, and especially in innocent lives. Force should be off the list, but if there is no other way, it must be a decisive knockout blow. It must not be used in restricted environments where it has enough punch to cause terrible suffering but not enough to deliver a decisive outcome. That is the military equivalent of slow torture. The brain dead souls who inhabit the present US State Department are about to be woken up by the hot blast of new thinking from the Trump administration. The same cannot be said for the UK foreign office, not least because the entire cabinet appears in a stupor brought on by a binge on Brexit.

As far as Syria was concerned, it was a perfectly stable country which had played a measured and sometimes positive role in the endless Israeli quarrel with its Arab neighbours, led by an anglophile married to an English born Syrian, in a family ruling dynasty which was politically intolerant and bolstered by a torture driven state security system, but in which all minorities lived and worshiped according to their own traditions in a secular state. They enjoyed life in a prosperous economy with excellent public education and healthcare.

Along came the Arab Spring, not a good name perhaps, and the Sunni minority, denied power in Syria always, and denied it in Iraq since it was invaded by the Anglo-Americans hell bent on creating a’ beacon of democracy'(!!), decided to rise up in revolution. The West backed them with silly rhetoric, a bit of cash, a few weapons of water pistol potency and goaded them on. Russia urged caution. Putin and Lavrov warned that a civil war in Syria would be disaster. The West dismissed them as ogres and declared  Assad would be gone by Christmas. How may years ago was that ?

You know the rest. So does Donald Trump.

Brexit: Now Another Legal Challenge

The beleaguered May now faces another legal challenge to her stubborn insistence that she govern the Brexit process by Royal Prerogative. It appears that there is a strong legal opinion suggesting that leaving the EU will not automatically take GB out of the Europeans Economic Area, which is actually the free market extended to the likes of Norway. To exit that requires  triggering, so this opinion asserts, a certain Article 127 of a different treaty setting up the EEA.

Without wishing at this point to explore the merit of this interpretation, it casts yet another spanner into the works of a project at present going nowhere. This is because a Judicial Review is threatened causing more delay, which may end up with Parliament having a vote both on Article 50 and also on Article 127. Whilst most MPs have pledged to let Article 50 through once they have reviewed the terms, there would be no such assured majority for A127. Indeed many would argue that while the majority in the country voted for Brexit from the EU, they did not vote to leave  the EEA. Indeed recent opinion polls show a huge majority (90%) wanting to remain in the single market.

We now have a legal spider’s web, cabinet discord, no plan, the political weather changing in Europe and an increasingly restive population who feel they have voted for something which is not being delivered. This could turn nasty quite quickly. It is certainly the biggest UK political cock up for very many decades. Perhaps the biggest ever.

Castro : Passing Of An Icon

He was arguably the world’s best known politician. Cuba was a tiny island of little consequence but Castro put it in the forefront of the politics and tensions of the cold war. He ousted by armed force a cruel and despotic dictatorship which made most Cuban’s lives a misery (which was inexplicably backed by the US and allowed organized crime to more or less run the country). He transformed the lives of his people for the better, but he was a cruel dictator who tolerated no opposition, which he executed in large numbers. He soon fell out with the Americans and became friends with the Russians. The Cuban Missile Crisis gave him a star on the sidewalk of history.

The Americans hated the notion of a communist regime on their doorstep and did everything possible to oust him, including a blockade which has lasted fifty years, but he survived everything and became a hero to half the world. The other half reviled him as a wicked tyrant. He was a bit of both but in absolute terms neither and there will never be agreement about his life or his legacy. His elderly brother, more of a reformer but still a communist dictator, soldiers on, but the time surely approaches for America to end this pointless blockade which did no more that hurt the innocent Cuban people and cement the Castros in power. Without that childish blockade the Castro reign would have ended decades ago.

Europe Threatened: But Not By Russia.

This blog, as regular readers know, is constantly critical of the attitudes of the EU and NATO to Russia. Post Soviet Russia should have been brought into both the EU and NATO. The failure to do so made Russia feel threatened, especially after the eastward expansion of the union and the alliance. The ridiculous support and encouragement for largely far right anti-Russian elements in the Ukraine, encouraging mob rule which overthrew the legitimate, democratically elected government, forced the return of the 90% Russian Crimea back into the Russian Federation. The eastern half of the Ukraine remains in rebel hands and guarded by Russia. The EU shrieks aggression by Moscow, but good strategists can identify defence in the face of an actual threat.

Such is the detachment of the EU political class from all manner of realities about economic management and international relations, that it has allowed a combination of circumstances which do actually threaten its own survival.  The strategic threat comes not from Moscow, but from Berlin. Of course Berlin is not an aggressor nor does it mean the EU ill. At the heart of the issue is this question, posed by Helmut Kohl shortly after the reunification of the two halves of Germany.  Does Germany become part of Europe, or does Europe become part of Germany?

Europe saw the former was best, especially France, which in order to create a Europe into which Germany would be absorbed, proposed the single currency and led the complex negotiations which created the European Constitution, which France, perversely voted down in a referendum, killing it. This left the euro project in the air. Then came the deeply flawed decision to press ahead with it, while having no common government and no common economic policy. This meant that in effect the Euro became a de-valued Deutschmark, notionally controlled by the European Central Bank. However the ECB was headquartered in Frankfurt not far from the Bundesbank, which was heavily represented on its governing board.  Either consciously or subconsciously Europe has been managed in Germany’s interests, especially the euro.

The new currency was generally at a much lower level than the d-mark would have been, making German goods relatively cheaper, but higher than the lire or franc, making Italian and French goods more expensive. Meanwhile because the currency was backed by Germany, the likes of Ireland, Greece and Portugal were able to borrow and spend at cheap rates on a binge that lasted until they all went bust. However Germany would not agree to default or serious haircuts (grade one) so these economies tottered forward in an austerity programme of monastic severity.

This blog has said on countless occasions  that the euro cannot succeed, because it has no government. But it carries on against the odds because actually it does have one; in Berlin. Germany decides and, because the world knows that Germany decides, it is happy to use and trade euros. But it is also true that you cannot have a sovereign government without a currency, since without control of your own currency, you are unable to control the economic fundamentals, which would enable your policies on all the critical social issues, to take effect. In other words whoever is master of the currency has sovereignty. Thus Germany has sovereignty over the Eurozone and with it de-facto the EU. This is the opposite of what was intended. Because of Germany’s success, Europe has become part of Germany.

In the old world this might have passed unnoticed. It is easy to forget that in Europe, before the world wars, democracy was in meagre supply and that the EU represents the first democratic unification of a continent which has spent most of its post Roman history at war. But in democracy you have power vested with the people. So although the political class is comfortable with German leadership, there is increasing evidence that the populations at least of France and Italy, are not. If the far right win the Austrian presidency in ten days time, which is possible, there may be an Auxit referendum. Certainly if Le Pen wins in France there will be one for Frexit.

This is all because Brexit changed everything. It showed that the political class, the bankers and the rich could be defied and the aspirations of ordinary people had to be brought back centre stage. It is likely that without Brexit, there would have been no Trump. In ordinary EU homesteads as opposed to EU political offices, Brussels is seen as a burden not a blessing and far too many have suffered either stagnation or a fall in their standard of living. But not in Germany. Suddenly it is beginning to dawn that there is a way out. If France and Austria were to exit, Italy would follow. The EU would become fundamentally different. It would be likely to regroup on a less prescriptive model, providing a looser more relaxed confederation with which GB could build fair trade. The alternative is a federal government democratically elected controlling the euro and running an economic policy which works across the union. But it is probably too late for that because there is no longer a reliable majority to see the project through.

Whatever happens Berlin will be blamed. Berlin will blame London. That might be right, because history will judge that it was from the island capital that the fatal blow, Brexit, was struck. Moscow never came into it. On the other hand, the Green candidate may secure the Austrian presidency, Le Penn may be defeated in France, Merkel and Renzi may be returned to power, Germany may ease its economic policy to accept that if the EU is to survive intact, account must be taken of the needs and aspirations of all the countries in the EU, so that restive populations fall into line and settle down. The only thing which is certain is that there are now, so to speak, so many balls in the European air, anything can happen.

Including, even, No Brexit.

Perhaps we could call it Noxit?

Hammond: A Failure

This blog tended to predict that Hammond would come forward with something bold and inspiring which would kick start a period of sustained growth independent of Brexit, driven by massive house building of affordable rental homes, modernization of hard infrastructure like roads, railways and hospitals and soft infrastructure as in broadband, 5 G, universal mobile cover everywhere and a skills upgrade across the piece. This would drive up economic activity so as to increase revenue and create enough income to fully fund public services, made even better if supported by taxation reform such as a turnover tax. He has failed to do this.

He needed to come up with a plan which would pump up to £500 billion into the economy over the next seven years, part borrowing, part DQE and part private. This would have sent a signal to the world and moreover to the British people, that GB was going to motor, whatever the direction, length or outcome of Brexit negotiations, to  become the number one global choice to build a business. If soon matched by a similar reflation programme in Trump’s US, the global economic drive would pass back from China and a stagnating EU to the old Anglo-American couple who led the industrial revolution. At its heart it is a vision thing. Trump has it (rather surprisingly to many) but May hasn’t. She fusses and fiddles and soothes with platitudes.

So the nation is now engulfed in gloomy forecasts (why does anybody listen to this stuff and how on earth were we so stupid as to set these wild guesses onto a statutory basis?) and a little bit of this and that. £20 billion into infrastructure, a few houses, innovation and skills over five years. In an economy with a GDP of about £1.8 trillion annually and over five years £9 trillion, the effect at best can only be marginal, if visible at all. There was a tax tweak here and there; easing off the austerity package a little, but keeping it in force and bearing down on those with the least.

What this tells you is that, not only does this government have no clear idea about what it wants Brexit to look like, but neither has it a clue how to either safeguard the country from any economic shock, or worse, how to prepare it for a great leap forward. No wonder national productivity is so poor. Just look at the meagre output of the government.

May, Trumzp And Farage

Reports multiply of angry ministers complaining that Downing Street has made a horlicks of the incoming Trump transition and allowed Nigel Farage to steal the show. Certainly Don and Nige are big mates, see eye to eye on a good deal and Don wants Nige to be the Brit Ambassador to Washington. May has become all prim, like the bossy headmistress of an independent school, who nevertheless gets little actually done.

Boris has been left to offer support for our actual man already there, whom nobody has ever heard of. At the heart of all this is the chaotic state of the internal Brexit debate in the cabinet, leaving no spare time to focus on the epoch making change which has occurred to the American body politic. Gone are the niceties of diplomacy, the rituals, customs and protocols at which GB is gold star brilliant. Instead here is a non-politician billionaire incoming president, propelled to office by a revolution few saw coming or if they did shut their eyes, who communicates via Twitter and announces policy on YouTube. The biggest trade deals in history, one with the pacific Rim and one with the EU, have been killed off over night.

Meanwhile GB is struggling with Brexit, or at least political GB is, popular GB seems to have shrugged it off,  its greatest upheaval since the end of WWII. The new president is an Anglophile and wants to help. That’s good news missed by May who is so busy-busy that she doesn’t open her post, so she missed it. Sorry open her Twitter feed. Perhaps she should refer to Churchill.  Struggling Prime Ministers often do. He built up a very close relationship with Harry Hopkins, a confidante of FDR, during the dark days of 1940/41. Hopkins reported directly to the President of his conversations, by-passing both country’s respective ambassadors. He gave Churchill direct influence over the thinking in the White House.

Maybe something like that in reverse involving Farage would be a shrewd move now. Trouble is this blog fears May used up all her shrewd plotting for the leadership of the Tory party. There has been little sign of it since.

May, Trump And Farage

Reports multiply of angry ministers complaining that Downing Street has made a horlicks of the incoming Trump transition and allowed Nigel Farage to steal the show. Certainly Don and Nige are big mates, see eye to eye on a good deal and Don wants Nige to be the Brit Ambassador to Washington. May has become all prim, like the bossy headmistress of an independent school she is becoming, who nevertheless gets little actually done.

Boris has been left to offer support for our actual man already there, whom nobody has ever heard of. At the heart of all this is the chaotic state of the internal Brexit debate in the cabinet, leaving no spare time to focus on the epoch making change which has occurred to the American body politic. Gone are the niceties of diplomacy, the rituals, customs and protocols at which GB is gold star brilliant. Instead here is a non-politician billionaire incoming president, propelled to office by a revolution few saw coming or if they did shut their eyes, who communicates via Twitter and announces policy on YouTube. The biggest trade deals in history, one with the pacific Rim and one with the EU, have been killed off over night.

Meanwhile GB is struggling with Brexit, or at least political GB is, popular GB seems to have shrugged it off,  its greatest upheaval since the end of WWII. The new president is an Anglophile and wants to help. That’s good news missed by May who is so busy-busy that she doesn’t open her post, so she missed it. Sorry open her Twitter feed. Perhaps she should refer to Churchill.  Struggling Prime Ministers often do. He built up a very close relationship with Harry Hopkins, a confidante of FDR, during the dark days of 1940/41. Hopkins reported directly to the President of his conversations, by-passing both country’s respective ambassadors. He agave Churchill direct influence over the thinking in the White House.

Maybe something like that in reverse involving Farage would be a shrewd move now. Trouble is this blog fears May used up all her shrewd plotting for the leadership of the Tory party. There has been little sign of it since.