The Euro is Deepening the Depression in Southern Europe

Currency union used to be very fashionable. There was a time when the Euro was the future – it led to increased growth, lower unemployment, and greater prosperity. Opposing it – and opposing the Exchange Rate Mechanism that was intended as its precursor – could only derive from some atavistic nationalism. How times have changed.

The ERM crashed the British Economy in 1992 and the Eurozone is not prospering today, instead it is going through a deep economic depression. This can be seen most clearly in Southern Europe – by which I mean Greece, Spain, Portugal, and Italy – where youth unemployment ranges from 25 to 50%, economic growth is either near non-existent or negative and political instability is growing. The Euro did not merely fail to prevent this crisis: it actively helped to cause it, and it is making it worse.

While times were good, participation in the Euro allowed nations with weaker economies – like those of Southern Europe – to borrow at low interest rates that reflected trust in the ECB, not in the national governments it represented. This allowed them to pursue wasteful policies, to cripplingly restrict their labour markets and make themselves less competitive, all without having to borrow at higher rates like other countries would.

On top of this the EU did not enforce the laws intended to keep Eurozone countries solvent, enabling economic mismanagement. The international bond markets did not punish economic mismanagement as they would with normal countries – these nations were allowed to become more and more uncompetitive until the financial crisis brought the house of cards crashing down.

All of that cannot be undone, only recovered from, but the Euro makes such recovery far harder. As the Euro is a very strong currency – thanks in the main to the economic success of Germany – it crushes the export markets of weaker economies, while the benefits to imports that a strong currency brings aren’t much use to countries in economic free-fall. The USA began its recovery when Roosevelt devalued the dollar. Argentina dug its way out of its depression in the 90s by unpegging from the dollar and allowing its currency to devalue. Greece, Portugal, Spain, Italy and France cannot devalue their currencies because they are in the monetary straitjacket of the Euro.

Any reasonable attempt to help those economies would have at least allowed them to unpeg from the euro until they returned to economic health, as even Wolfgang Schäuble once suggested. That though, would be a blow to federalism, which ensures that the dogmatically federalist EU will not be reasonable.

This is not to say that structural reforms aren’t needed. They are, and they are being slowly made, but without devaluation to kick-start a recovery it could be decades before Southern Europe returns to economic health. That time will see millions of vibrant young people across Southern Europe unemployed and becoming unemployable, birthing a veritable lost generation.  It will mean more bailout dramas, brinkmanship and radicalism. It will mean poverty, desperation and resentment. Southern Europe is on its knees, and the Euro is throttling it.

The only hope for a more pragmatic policy in Brussels is the foreclosure of the federalist dream. We in Britain have a chance to bring about just that. We have a chance to make Brussels rethink its dogmatic federalism – to be reasonable and to give South Europe the monetary flexibility it desperately needs. That chance comes on June 23rd.

EMPLOYEE GRIEVANCE PROCEDURE: NEEDS TO BE LEGALLY BINDING?

There has been a huge commotion in parliament over the last few days. Particularly involving
certain MPs and their overzealous acts of sexual conduct towards women, some of those
working in parliament themselves. This then calls for some sort of solution to fix the issue (or
at least reduce the risk). Theresa May as the PM comes under intense scrutiny for the need
to address the issue. To which she proposed that the code of conduct in parliament should
have some “legal standing” and a contractually binding grievance procedure for all MPs set in
place.

There were allegations made regarding the Tory party, including some senior ministers who Mrs. May
was working closely with in parliament. There were also allegations made towards MPs
from the Labour party. Did May know what was happening? If she did that’s a worrying concern
for the young female professionals, who have been reported to have been victims of these
alleged groping and propositioning incidents. But even then, many leaders lose sight of the
issues on their own team as I’m sure they would expect their team players to uphold the same
values as they do. Well, that clearly wasn’t the case and May is in a huge frenzy to have a
reshuffle of her cabinet.

We’ve been told government officials keep a “black book” of allegations against MPs hidden
away. So that leaves us to question, how long does the list track back from? And why has it
taken this long for these allegations to come into the public consciousness?

What was of shock to me regarding the scandal is that there is a “WhatsApp sex pest group”
that women who include parliamentary researchers, secretaries and aides are all a part of.
Who claim that politicians on both sides of the house have pestered them and given them
lewd nicknames. The code names for some of these MPs in parliament who committed the
acts were described as “Lift Lunger”, “Happy hands” and “Taxi Tickler”. All involved in groping
women in enclosed environments and even in public, which reveals the lack of awareness or
care these perpetrators had for the actions they were partaking in.

The recent allegations have come into fruition in the light of the recent global social media
campaign called #MeToo launched by Alyssa Milano, an American actress at the forefront of
it, who too was a victim of sexual assault. The campaign encourages all women to confront
the men they know, whether their brothers, friends or work colleagues about their attitudes
and behaviours. Thousands of women have come forward sharing their stories since the social
media hashtag was created. No doubt this had huge influence regarding the women in the
political sector to share their own stories, despite huge risk to their careers within parliament.
I say that as MPs hold immense power and as the young employee with a lack of voice
compared to their older counterparts, particularly when female, societies attitudes can be off
putting in believing their reports.

Alyssa Milano, the actress who started the #Metoo
campaign on Twitter

Echoing what Theresa May has proposed in her comments concerning the MPs in the scandal.
The current grievance procedures in government we have regarding employees and their
employer are not legally binding. It’s expected that the employer follows the necessary
guidelines to tackle the problems that may arise through complaints from the employee in the
work environment. But we know this is not always the case and it’s pretty difficult as a young
professional who are the most vulnerable in the workplace, due to their lesser status and lack
of experience. Combining that with being a female in the workplace, it’s an even tougher task
to share your grievances towards your employer, especially one who holds immense powers
in parliament. For a lot of women, they do not bother reporting incidents or if they do, it is not
taken as seriously.

Theresa May’s views on the grievance procedures should be the agenda needed to create
some legalities around the topic. Implementing some sort of policy around the instances of
sexual conduct towards employees and making it legally binding needs to be a course of
action in parliament. It’s a sad shame knowing what it is morally right and wrong cannot be
the indication we need to take complaints of sexual conduct in the workplace more seriously.
It seems when employers are threatened by legal action, they may tend to take matters as an
urgent need for attention rather than sweeping cases under the rug like many in parliament
have been doing to protect the most powerful and senior members of staff. Well this needs a
complete reform and female employees in this case need to know that their issues will be dealt
with accordingly and the relevant persons will not go unpunished. I think it will also be a wakeup
call for those who commit these revolting acts, that there will be repercussions for their
actions. Hopefully, it will also allow them to get the help they need for their habits.

Campaigns such as #Metoo are giving women and (men) the opportunity to voice their stories
more bravely than in the past and help others in the process to share theirs. Building a
community of victims to overpower the perpetrators who inflicted any sort of harassment or
assault towards them. Theresa May, now needs to enforce laws that are contractually binding,
that involve the issue of grievance in parliament and the workplace. That may be just one way
of tackling this ever troubling problem.

A Libertarian Approach to Student Debt

Both the Tories and Labour Party have attacked the current higher education funding system for leaving thousands of students in debt that they can never repay. While Corbyn admitted he could not promise to wipe debt, Theresa May has launched a review into student debt and tuition fees. At the moment, fees are capped at £9,250, but come with a punishingly high interest rate of 3%above RPI. This interest begins to accrue from the day that students start university. How can we ensure equality of opportunity for young people of all backgrounds without leaving the next generation of workers in enormous debt?

Reducing Interest Rates

The simple fact is that the loans offered to students are too expensive, with three quarters expected to never repay the full amount. The burden of paying back this debt therefore falls onto the taxpayer, so that those who never went to university are paying for those who did. A true libertarian approach would cut interest rates to be in line with market values.

Senior economic advisor at PwC, Andrew Sentance, argues that 2018 could see interest rates triple, due to high inflation and global economic growth. To charge students an extra 3% above inflation is creating unnecessary debt. This is caused by state intervention rather than the invisible hand of the market.

Diversifying the Market

The UK has one of the highest tuition costs in the world, largely due to an unfree market. Almost half of school leavers now go to university, even if it isn’t the right option. For a genuinely free market to keep costs down, there needs to be a wider range of options.

This can be achieved through the use of apprenticeships or work placements for those who thrive in a vocational sector. Not everyone is suited for university, but many see it as the only option. Furthermore, many courses are charging the same amount despite varying in costs. Different courses should set different prices according to market forces.

Encourage Private Sponsorship

The most effective way to lower costs and the debt burden on students is for the state to be rolled back. Instead, private companies should provide sponsorship and bursaries where they see potential in students. More debt reduction and consolidation companies may enter the market in order to further ease the burden without the need for state intervention.

Successive governments have done a great disservice to our young people in the way they fund tertiary education. Interest rates should come in line with the market and private companies should be given greater freedom to sponsor students. By diversifying the education market for over 18s, overall costs and therefore debt can come down.

Taking a glimpse at the Rothschild Bank

Emmanuel Macron is the youngest President France has ever seen, stamping his name into the fabric of political history. Although he is considered by many in France as the best of a bad bunch, his victory at the mere age of 39 is undeniably impressive. As a British bystander, taking a loose and yet concentrated interest in Macron’s campaign, I couldn’t help but notice the constant repetition of that same description: “former Rothschild investment banker”. It was as if his association with the Rothschilds was more significant than his time working in a senior position in Mr. Hollande’s staff, or, as Minister for Economy under Manuel Valls.

Having heard some rather far fetched conspiracy theories concerning the Rothschilds’ ability to manipulate global affairs, I thought it would be interesting to have a closer look at the bank’s history and how they operate. For lack of wanting to entertain internet conspiracy – as some would now considering we have a former Rothschild banker as French President – I have steered clear of any David Icke type sources. Lizard shape shifters aside, the Rothschild story remains an interesting one.

Mayer Rothschild

Originating from Germany, the Rothschilds became a prominent family, establishing banking and finance houses in 18th Century Europe. Mayer Rothschild (1744 – 1812) sent his five sons to live in various capital cities across the continent. When in Frankfurt, Naples, Vienna, Paris, and London they set up individual banking establishments under the Rothschild name. Effectively, the Rothschild bank was the first of its kind to work across international borders. By lending to governments helping to finance war operations the family was able to accumulate bonds and support additional wealth from a vast array of different industries.

In true aristocratic fashion Mayer Rothschild wanted to keep his empire very much within the family. This required a certain amount of inbreeding between cousins. It has been reported that four of Mayer’s granddaughters married grandsons, and one poor girl married her uncle.

Of Mayer’s four sons, Nathan Rothschild (1777-1838) was the biggest success. Based in London, Nathan was the pioneer of international finance. Soon establishing himself as the central bank for Europe. He monopolised Europe’s financial systems brokering for kings, bailing out national banks, and funding the development of infrastructure that sparked the beginning of the industrial revolution. In this time he established the bank we know today as N M Rothschild & Sons Ltd. England’s seventh oldest bank in continuous operation.

Nathan’s major benefactor came when he took an enormous gamble during the period of the Napoleonic Wars. In 1811 N M Rothschild & Sons managed various subsidies that the British government sent to their allies and loaned them the funds they needed to pay their army. Effectively Nathan was single handily financing the British war effort. At the same time, however, unbeknownst to the British, he was also funding Napoleon Bonaparte behind their back.

His gamble came when the war was coming to its crescendo in 1815 with the battle of Waterloo. Nathan’s network of couriers reported the grave losses being faced by Napoleon to the British government. As the information did not come from their own scout the British were sceptical of this report and rejected it as mere fallacy. Instead they were convinced the British were on track to lose the war. Seeing an opportunity, Nathan Rothschild enhanced these rumours and sold all his bonds on the English market in light of the Brits’ apparently grave future. After such a loss British bonds would be plummet in worth. His influence surged a panic in financial England with a mass selling of bonds that quickly resulted in the collapse of the London stock exchange.

Knowing that the British were actually on course to win the war, the Rothschild network began to start buying back British bonds at record-low prices. Two days later Wellington received the news that Napoleon had in fact suffered a crushing defeat. British bonds went back up in price and the Rothschild bank was in complete control of the London stock exchange.

Nathan’s cunning manipulation of two warring factions and the British financial elite paid off in almost immeasurable amounts. As of 2015, the British government was still paying back the money owed to the Rothschild family from the Napoleonic period. That is a lot of debt.

Today, the Rothschild bank is one of the world’s largest independent financial advisory groups specialising in private wealth, asset management, and merchant banking. The family, like many who maintain such a high level of wealth, are involved in charitable pursuits across the globe. Their main office aside from London is based in in Switzerland; the Edmund de Rothschild Group.

There are those that claim the Rothschilds still maintain a monopoly over Western financial markets through their control and ownership of the world’s central banks. These are denounced by any officially trusted financial source with such claims usually being attributed to the anti-Semitic nature of the discussion. For example, Rothschild & Sons reported a net revenue of 423.8 million GBP in 2015 when Morgan Stanley racked up a huge 37.95 billion USD revenue in 2016. The difference here is significant.

The Rothschilds remain an extremely tight knit and yet influential player in the financial game. With only around 2,800 employees their affairs are handled by very few. With such responsibility so thinly spread it is not surprising their work is handled with a serious amount of discretion.

Considering the way they revolutionised international finance the Rothschild family history is remarkably interesting – the even after only having scratched the surface here. Will Macron bring this Rothschild investment style to the French economy with the same success? Only time will tell.

Meddling Regulator Plays Havoc With BT Shares

OPENREACH CHIEF EXECUTIVE STEVE ROBERTSON, LAUNCHES THE NEW LOGO, AT THE BT HQ IN ST PAULS LONDON. PICTURE MURRAY SANDERS

BT shareholders have had a bit of a rollercoaster ride recently thanks to the actions of national telecoms regulator Ofcom.

The company’s share price has been in an erratic downward slide over recent weeks thanks to the regulator’s protracted review into the future of Openreach, BT’s broadband service arm.

This morning, Ofcom announced that the feared breakup of BT and Openreach would not occur, causing BT’s share price to once again rally.  However the regulator is still insisting that the Openreach business become more independent within BT.

There are a lot of problems with this kind of regulatory meddling. The consumer focus of Ofcom’s intervention is misguided, for a start. Their chief executive has established their motive as being “to make sure the market is delivering the best possible services for people and business across the UK”.

That sounds noble enough, but in many respects, a company’s first responsibility is to their shareholders, not their customers. The idea that the customer comes first is simply good business practice, not a moral principle. If a company doesn’t value its customers it will have a harder time achieving good returns for its shareholders.

Shareholders are the people who have invested directly in the company, giving it the capital it needs to operate. When the regulator intervenes and sends the share price tumbling, they’re effectively taking money out of the pockets of the people who make the business possible in the first place.

There’s a deeper problem with the mentality of Ofcom’s position though. Good broadband provision is not a right. In a free market, providers will come where there is sufficient demand to warrant investment in such a service. It is not a bad thing that some areas will end up with weaker service. Some areas have poor road provision too. Nobody expects motorways to be built to remote villages in Mid Wales.

This idea that BT, a private company, has a responsibility to provide high quality broadband infrastructure has been pervasive in government for some time. This stems largely from the fact that BT has ownership and control of the vast majority of the infrastructure that provides these services to homes across the country.

That in turn is a direct result of the fact BT used to be state-owned. It was a mistake of the government in 1984 to privatise the company as one whole, rather than splitting it into separate operations that could compete at that stage, as was done in a wide range of other privatisations.

As a result the situation where BT has a monopoly on this infrastructure is now one that must be worked with. Rather than intervening in an established business that plays a major role in the country’s overall economy, the best thing government could do would be to level the playing field and encourage other providers to install competing infrastructure.

The idea that telecoms, like transportation, utilities or postal services, has to be a natural monopoly is outdated. Technology is advancing to a point where physical infrastructure to homes is unlikely to even be necessary in the future. Even if it is, there’s nothing preventing multiple providers running separate networks in an unregulated market.

Ideally the government should not use taxpayer’s money to invest in a non-essential service in the first place, but if it must, that would be best done by putting that funding into research and development of disruptive technologies and potential competitors, not re-enforcing the existing monopoly. But even that kind of intervention disrupts the market’s natural ability to produce the most efficient outcome based on consumer demand.

Fundamentally, it is not the role of government to ‘make sure’ the market delivers the best services for consumers. The market will do that for itself if left free to do so. The problem in this situation is a legacy of nationalisation, and a return to that would only serve to replace a private monopoly with an even less accountable public one.

In short, Openreach and BT, such as they are, shouldn’t really exist, but the fact is that they do. They are the product of an outdated mindset and continuing to apply that mindset will not serve to improve the situation for either consumers or the market. It’s time that regulators stepped back and let the industry innovate and compete in response to demand, not in response to government policy.

The Price of Brexit: The Martyrdom of Business?

With Brexit now only a matter of months away, and nothing agreed, either with the EU or within the British cabinet, the martyrdom of our business to the cause of an ideologically driven Brexit appears as real a possibility as ever. It seems that there are some in Government, and millions across the country hell-bent on Brexit at any cost; a cost which I fear they can neither fathom nor understand. Recent studies which showed most Brexit voters would rather a hard-border in Ireland than remaining in the customs union are the epitome of the Brexit farce, and the inability of so many to realise the effects of such actions. They would have us create the biggest security hole anywhere in the world at a time when international terrorism is highly dangerous: and if ever radicals in Ireland needed fuel for action then this would be it…

But as the title suggests, the sinking of our economy seems to be the last concern to most in Government, with no positive noises and even less progressive action. Lets just take a second to review what business has been saying in the past week.

Jaguar Land Rover, which employs near 40’000 people in the UK as of yesterday questions the logic of a hard Brexit, calculating that it would lose in the region of £1.2bn per year to trade tariffs; the inevitable result of a destructive Brexit. The company even questioned whether remaining in the UK would be profitable should this eventuality occur? Similarly, Airbus which employs around 11’000 people in the UK has raised concerns about Brexit and the risk it may be forced to withdraw funding should a poor or no deal be the result of thus far fruitless negotiations. In this instance however, Jeremy Hunt, who clearly knows a lot about running a large organisation, which must be why the NHS is doing so well at the moment (in his mind at least, if not to the rest of the population), declared Airbus’s concerns “completely inappropriate”… as if he expects everyone to just say nothing and wait for the end. Funny really, it was okay for businesses who backed Brexit to speak, and its okay for those still brave or stupid enough to invest in Britain to do likewise, but anyone who fears the real and present dangers of this calamity must be silent: how’s that for democracy?!

And lets not forget the comments recently from the Society of Motor Manufacturers and Traders (SMMT). They have warned that the current Brexit process is “death by a thousand cuts” for an industry which relies on frictionless trade. Recent figures show that investment from companies represented within the SMMT has been halved from the first half of 2017.

The director of the CBI summed up the current situation best, when she said “facts ignored today mean jobs lost tomorrow”. Worryingly, we live in a world where facts are just what politicians say they are, when the people chose to believe them. No longer are experts, business and those with years of experience listened to, but cast off as “traitors” to the cause. What we need, as Stephen Martin argued, is “less antagonism and more pragmatism”: we should be so lucky. As long as it suits individuals like Boris to sabotage the governments position on Brexit, we will continue down the slippery slope to disaster.

For me, much of the government’s position can be summed up in one short phrase: “F*** business” in the words of our eloquent Boris… which is ironically what he and the government will end up doing if they don’t get their act together pretty damn quick! The complacency is galling, as is the complete disregard ministers seem to have for the thousands of workers and their families whose futures are threatened by their ideological squabbles.

So many in this country are so eager to sacrifice their children’s futures, the economy and business to the blood stained alter of Moloch. It genuinely terrifies me. But then, every country ends up with the government it deserves, and I truly believe that we have just that, populated by pompous self-opinionated toffs who think they know more about business that business.

What Now for Bitcoin?

Over recent years Bitcoin has had a habit of defying expectations. Since its dramatic 2013 price rise it has held level in spite of the constant predictions of naysayers that it’s just a fad, that regulation will catch up and that it will ultimately fail.

Yet today, bitcoin is used seriously in a wide range of roles, including everyday transactions, venture capitalism, currency exchange, charity and even dedicated bitcoin gambling.

The future of bitcoin is now the subject of intensive debate. Will this success continue, or will it soon be a thing of the past?

The block-chain technology underpinning it is undeniably revolutionary, but some have suggested the success of the technology may overtake Bitcoin itself.

But while some of the advantages of the decentralised system may be adapted by the mainstream in the future, a lot of Bitcoin’s success lies in its role as an outsider to the conventional financial system.

Indeed much of its criticism also stems from this point. Some countries and territories have banned its use, while others have been quick to point out that payment and consumer protection rights don’t apply.

Likewise its potential for anonymity makes it attractive to black marketeers and those wishing to hide their online purchases. That in turn makes it a target for regulators and opens it to calls for clampdowns on its free use. However the anonymous nature of Bitcoin is itself a subject of debate.

Another threat to Bitcoin is also one of its most exciting aspects. There is an increasing threat of conventional currencies moving to a cashless system, removing the facility for individuals to store their own money away from the threat of negative interest rates and transact without fear of monitoring.

Bitcoin presents one possible escape from that, in being a currency not beholden to the will of any central authority and, at least for the moment, largely anonymous. If the prospect of a cashless economy does come on line in the future, that could well be good news for Bitcoin and other crypto-currencies.

on the other hand, its unregulated nature and the speculation over its future does leave it open to wild price fluctuations. That volatility may settle as it becomes more established and if it becomes widely accepted as a mainstream means of transaction, but until then having money in Bitcoin has the potential to lose, or make, the holder a lot of money, depending on how well it fares in the future.

Ultimately Bitcoin’s future is at the mercy of a lot of external factors, particularly government regulation and economic policy, as well as the development of the system and potential competitors. However currently Bitcoin is an unchallenged force in this space, and in a time where the use of money is rapidly changing, that status gives it the potential to grow massively.

Already it is being taken increasingly seriously, with Bitcoin ATMs in operation, major retailers accepting it and blockchain technology being seriously pursued by mainstream institutions. There is still a great deal of growth ahead if it is to become a permanent, established medium of exchange, but some recent news has been very encouraging.

Ultimately, whichever way it goes, it’s exciting to watch and be involved with something with so much potential to radically alter the way we do business. Bitcoin is one great example of how technology has radically altered economics in the internet age, and whether or not it ultimately succeeds, it and the technology it has brought into widespread use will undoubtedly continue to disrupt and reshape the world.

That alone seems reason enough to be optimistic.

The return of mercantilism? Libertarians and Trump’s trade war

It is a generally uncontroversial tenant of economic liberalism that free trade is a ‘good thing’. This
idea can be traced back to one of liberalism’s founding thinkers, 18 th century economist Adam Smith,
whose famous The Wealth of Nations was written to make the case for free trade and against the
then common mercantilist practice of states imposing tariffs to lower imports and stimulate exports.
With President Donald Trump turning on free trade and embracing the mercantilist outlook that
Smith opposed, the obvious conclusion is that liberals and libertarians should be in uproar.

 

Not quite.

The Trump administration’s recourse to tariffs imposed especially (but by no means exclusively) on
Chinese goods is certainly misguided, and must be called out as such by Smith’s successors. But it
has also opened the way towards a much needed discussion of the real mercantilist threat, namely
Chinese economic practices. For this, liberals can be grateful.

President Trump’s tariffs rest on the general premise that globalisation has hurt the US, and a more
particular one that the ‘unfair’ Chinese approach to trade has done this. The first is deeply mistaken,
and acting on it will only harm the economy. The second cannot be dismissed.

 

The modern form of globalisation resulted from capitalism winning the Cold War. As the economies
of communist states collapsed, and their ideology was discredited, the late 1980s and 1990s saw
free markets embraced from Eastern Europe to Asia. But as trade barriers lowered and work was
outsourced to new capitalist states, the US manufacturing industry declined and those it once
employed began to call for tariffs to turn back the clock and save their jobs. Cue President Trump.
The idea that globalisation harms the American economy and tariffs are the solution flies in the face
of everything liberals and libertarians believe. Not only did the benefits of outsourcing outweigh
their costs, but statist attempts to stimulate local manufacturing help no one and harm everyone.
Take the Trump administration’s imposition of aluminium and steel tariffs. In the short term, the
resulting rise in steel prices is will undoubtedly benefit US metal producers and their employees, but
in the long term automation means there will be fewer jobs available in such industries anyway.
Meanwhile, the gains from global supply chains that lowered prices for everyone will be undone. As
US companies reliant on these metals for their own products are forced to raise prices to
compensate for their own increased expenditure, it is the majority of consumers that will be hurt.
The administration’s tariffs, alongside retaliatory ones from US trading partners, already threaten to
increase the costs of products ranging from Coca Cola to washing machines to housing.

It is as though the Republican Party has forgotten one of its most cherished arguments against state
intervention: that, in the words of libertarian thinker Henry Hazlit, it is necessary to think about the
consequences of any given economic policy ‘not merely for one group, but for all groups’.

President Trump’s particular targeting of China as a threat to US employment, however, rests on
much more legitimate concerns and cannot be similarly dismissed. Among the states rejecting
communism in the 1980s was China. In China, however, it was the ruling Communist Party itself that
was responsible for the change, turning to a mercantilist state-led form of capitalism that threatens
more liberal economies. Under Communist Party rule, state-owned firms benefit from subsidies in
order to ensure particularly high production of products such as steel, while foreign firms are forced
to hand over their technological as a condition of trade with China. All of these policies serve the
traditional mercantilist aim of stimulating Chinese exports, in this case taken to the extreme with
hopes of Chinese global economic dominance under the ‘Made in China 2025’ plan.

So while his response remains an act of economic self-harm, free traders should not dismiss the
genuine concern that underpins President Trump’s tariff policy. It is the mercantilism in China, rather
than the more limited form in the US, that is at the heart of current threats to free trade. Liberals
must be prepared to engage in the debate on China that President Trump has opened if the
globalised capitalism they champion is to survive.

May’s Brexit Deal: The Pragmatic Approach

It’s becoming clear that May is playing a game with the future of the nation, our economy and business, and that is to hold the vote on her Brexit deal as late as possible. Downing Street confirmed a few days ago it would be after Christmas, likely in the New Year. What May is clearly hoping is that, by holding the vote as late as possible, she can essentially frighten MPs into backing it, many of whom are more opposed to no-deal than her agreement. Some MPs have accused May of self-interest, others of bungling. But what choice does she have? This is the only deal the EU will accept; that is clear enough. But MPs wont accept it. They are playing politics. They are the ones risking all our livelihoods. The game May is playing is not of her own making. Rather, it is the product of years of fantasy, lies and now a refusal to face reality. 

What will happen then, when May does put the deal to the Commons? It’s anyone’s guess. To my mind there are 3 main outcomes:

  • The deal, by a mixture of scaremongering, practical thinking and some pragmatism is begrudgingly accepted by the Commons
  • The deal is rejected by the opposition and unsatisfied Tory Backbenchers, May resigns and the country slips through a mixture of apathy and incapability into no-deal
  • The deal is rejected, parliament manages to organise itself and utilise Dominic Grieve’s amendment to in some way extend Article 50, and at this point a confidence vote in the Commons would probably be a reality

May, no doubt is hoping for the first of these to occur, and to be honest, for all my distain for the constitutional disgrace that is the current government, so am I. At this stage pragmatism should be paramount. Yes, May is a malignant spectre no one seems able to exorcize, but it is clear now more than ever that she is right on one count: her deal is the only deal. The EU will not give anymore, so accepting her agreement is the logical option. It is for this reason I would not advocate for my third outcome, because the problems would be identical no matter how long we extended Article 50 for. A General Election might change the arithmetic, but there is no guarantee.

But for god’s sake we must avoid no-deal at all costs. Business cannot afford it; people cannot afford in and nor can the nation. The total dismissal of the reports produced by The Treasury, Bank of England, IMF and countless other independent economic experts which forecast potentially devastating ‘short-term’ impacts of a no-deal, both “chaotic and severe” is frightening. The dismissal of such predictions, by people devoted to these subjects, by experts in the field, by Mark Carney whose duty it is to defend the economy is beyond naïve; its utter recklessness. All have predicted major economic strife should Britain leave the EU with no-deal, the loss of jobs, further wage squeezes and less funding for public services. And yet so many accuse them of scaremongering, of launching ‘project hysteria’. The leading Brexiteers are always first to rubbish the views of the experts: John Wittingdale called one report which forecast dangers for the economy “unduly negative… rushed, skewed and partisan”. These people are not interested in facts unless they support their position. A good analogy would be going to the doctor and being told your drinking habit was bad for your health, and then dismissing your doctor as “partisan” or “negative”, demanding a second opinion, and when that come back the same, dismissing all the opinions as “negative”; running a “fear campaign”… promptly drinking yourself to oblivion.

The reality of the situation is simple. The British economy, as the experts rightly point out is not prepared or strong enough to sustain a no-deal Brexit without significant damage. We lack the infrastructure, for instance, to make or supply the parts required by manufacturers in the auto or aerospace industries without imports, free of tariffs and checks, from the EU. Now, in the ‘long term’ this might become less of an issue, but how long before companies find it no longer economically viable to operate from the UK? Small business who rely on EU trade wont even have that long. Most work in the short term. So while one might argue the larger companies might ‘hang-on’ until a deal can be arranged, small businesses wont. Even those who don’t rely on EU trade will feel the pinch. Any recession will squeeze incomes and raise prices, and as people become more conscious of the money they don’t have, so the small and medium sized companies, whether they rely on the EU or not will suffer falling profits, with job losses the inevitable result. The argument of many on the hard-Brexit side, that a hit, however severe, to the economy would be a ‘short-term’ event and that Britain would pull through ‘in a couple of years’ may be true, but unfortunately, most businesses wont have that long in the event of no deal, and I suspect larger companies wont stomach higher costs and a weaker economy for as long as the Brexiteers hope.

The Brexiteers would ‘get our country back’, but what sort of country would they have? And at what cost? That is why I say, whatever your views on May and her infamous behaviour, realise that the ‘game’ she is playing is one she has been forced to take part in. The current impasse is the product of deep-seated ideological stances and intransigence by MPs. Back her deal. Principles are all well and good, but now is not the time for fine words. In 100 years time, our grandchildren will not remember the impassioned speeches against or for this agreement, only the result, because that is all that matters. Let us do the pragmatic thing, so that they may not look back at us with distain and regret; so that we may gift to them something more than hollow words, broken promises and a national disaster. Let us not leap into the dark.

‘A Leap in the Dark’ (Punch, 1867)

 

 

The Carillion Problem

This week has seen the fall of the ‘sick old man’ that was Carillion. The UK’s second largest construction firm, which holds hundreds of government contracts and employs tens of thousands of workers has finally collapsed. The fall-out will, I have no doubt, be immense and raises some important if troubling questions.

First, there is the question what will happen to the hundreds if not thousands of small businesses Carillion has contracted to undertake some of its private sector contracts? Some are, it has been revealed, owed payments totalling millions of pounds, which the company has been unable to pay due to its continuing financial difficulties. Some firms have already had to begin redundancy processes, having resigned themselves to the all too clear fact that Carillion will take the money they are owed down with it. There is, for what its worth to both Carillion’s employees and former contractors, to be an investigation into the conduct of the company’s bosses. The questions that need to be answered are all to apparent: for one, why Carillion continued to take-on new contracts despite profit warning as early as summer last year?

But then, why was a company with such a crippling hole in its pocket given them in the first place? This is a particularly potent question when it comes to the government contracts the company was allowed to retain and continued to be given throughout the period of financial difficulty. It has been quite clear for months that the company was likely to, in some way falter financially yet ministers still saw fit to award it a myriad of contracts. Its like asking a builder who you know might very soon go bust, to renovate your lounge, upgrade your bathroom, re-design the kitchen and build the new conservatory; with your help of course! The folly in such actions is evident and no sane individual would take such a blatant risk, particularly with public money. Yet, our esteemed government seemed to think such reckless action on a macro scale advisable…

Indeed, the fact that the government gave Carillion so many contracts over the past few years also in itself raises issues. For one, what happened to the notion of competition? By handing the same rather precariously balanced construction firm so many contracts, the government effectively hamstringed itself, and will now have to take them over, and in the process recoup and money used for the task…… we hope. But why were so many contracts handed to Carillion? What was the nature of the relationship between ministers and the walking corpse that was seemingly their bed-fellow? The selection process must come under scrutiny, but I have little doubt this will be resisted by ministers who will want to contain the cataclysm as much as possible, particularly if its roots are within government.

But what of the future? The Carillion problem really does speak volumes to the way government have handled public-private partnerships. In shackling themselves so closely to one large firm, ministers in essence created the leviathan that collapsed on Monday. This case should serve as a warning to future ministers over how not to handle such contracts, and makes plain the notion of having many contractors, both competing and carrying out work is both more effective and safer for the government. Indeed, this debacle also has the potential to re-open the already seeping wound that is the question of public works. The fall of Carillion will most certainly be utilised by those wishing for increased public investment in infrastructure projects. I don’t blame them. Its easy to see why many believe public projects to be the answer to issues such as those Carillion highlights. But, with the Tories in power, the chances of change in this respect are virtually nil. A party so ideologically bent on privatisation and far to close, in bed even, with large firms like Carillion will never change course: the humiliation would be too great.

The death of Carillion has been slow but certain, it isn’t the first and won’t be the last, I only pray that lessons are learned.