Opinion

The Great Debate

from Anatole Kaletsky:

It ain’t over yet: Last-minute promises to Scotland will scar the UK

Britain's Prime Minister David Cameron delivers a speech at the Aberdeen Exhibition and Conference Centre in Aberdeen, Scotland

Astonishing as it was to contemplate the breakup of Europe’s most stable nation-state threatened by last week’s Scottish referendum, we now have an even more extraordinary possibility. In the days since the Scottish voters rejected secession 55 percent to 45 percent, a new threat has suddenly appeared to blight Britain’s political and economic prospects for years ahead. It now looks like Britain may be dissolved by one rogue opinion poll.

The YouGov survey, released shortly before the referendum, found nationalists overtaking the unionists for the first time. (And, as it turned out, the last time.) This triggered total panic among Britain’s establishment politicians.

The outcome was a signed statement on the front page of the Scottish Daily Record by Prime Minister David Cameron, along with the leaders of Britain’s Labour and Liberal Democrat parties, promising immediate legislation to give the Scottish Parliament almost complete control over income tax, health and welfare policies -- on top of the autonomy it already enjoys. They also issued a permanent commitment to channel £1,700 more per head in government spending to Scotland than to England, despite per-capita incomes that are approximately the same.

Deflated "Yes" campaign balloons lie on the grass in George Square after Scotland voted against becoming an independent country, in GlasgowBy signing the statement, Cameron and the other party leaders opened a Pandora’s Box of political and economic controversies that are certain to destabilize British politics. Businesses and investors who have viewed Britain as the most politically predictable and stable nation in Europe are in for a shock.

The Scottish vote, instead of confirming Britain’s historic stability, now looks like the prelude to a long period of constitutional, legislative and fiscal turmoil. This will certainly damage the current government’s re-election chances and could yet threaten a chaotic breakup of Britain.

from Anatole Kaletsky:

Why breaking up Britain could tear apart the EU, too

A bunch of 'Yes' balloons are seen as Scotland's First Minister Alex Salmond campaigns in Edinburgh, Scotland

While recent opinion polls have swung slightly back toward the "no" camp, there remains a distinct possibility that Thursday's Scottish referendum will trigger a previously unthinkable breakup of Britain.

If this were to happen, the biggest risks for global businesses and investors do not lie in the economic problems created by Scotland’s choice of currency or the inevitable arguments about sharing North Sea oil revenue and the British national debt. These are crucial challenges for Scotland and have been much discussed in financial institutions and think tanks. But the crucial issue for the world economy and financial markets is about the resulting impact on the European Union -- and especially on Britain, which would remain the world’s sixth largest economy even if Scotland departs.

These political risks, which I discussed here last week, can be broken down into four questions: What would Scottish independence, if it happens, mean for British politics and economic management over the nine months, until the May 2015 general election? What effect would it have on the election results? How would all this turmoil affect Britain’s fraught relationship with Europe? Would Scottish independence act as an inspiration for secessionist movements in other European countries?

from Anatole Kaletsky:

Can central bankers succeed in getting global economy back on track?

Stanley Fischer, the former chief of the Bank of Israel, testifies before the Senate Banking Committee confirmation hearing on his nomination in Washington

Why is the world economy still so weak and can anything more be done to accelerate growth? Six years after the near-collapse of the global financial system and more than five years into one of the strongest bull markets in history, the answer still baffles policymakers, investors and business leaders.

This week brought another slew of disappointing figures from Europe and Japan, the weakest links in the world economy since the collapse of Lehman Brothers, despite the fact that the financial crisis originated in the United States. But even in the United States, Britain and China, where growth appeared to be accelerating before the summer, the latest statistics -- disappointing retail sales in the United States, the weakest wage figures on record in Britain and the biggest decline in credit in China since 2009 -- suggested that the recovery may be running out of steam.

As Stanley Fischer, the new vice chairman of the Federal Reserve Board, lamented on August 11 in his first major policy speech: “Year after year, we have had to explain from mid-year onwards why the global growth rate has been lower than predicted as little as two quarters back. ... This pattern of disappointment and downward revision sets up the first, and the basic, challenge on the list of issues policymakers face in moving ahead: restoring growth, if that is possible.”

from Anatole Kaletsky:

World War One: First war was impossible, then inevitable

British troops advance during the battle of the Somme in this 1916 handout picture

Why does the assassination of Archduke Franz Ferdinand -- the event that lit the fuse of World War One 100 years ago Saturday -- still resonate so powerfully? Virtually nobody believes World War Three will be triggered by recent the military conflicts in Ukraine, Iraq or the China seas, yet many factors today mirror those that led to the catastrophe in Sarajevo on June 28, 1914.

The pace of globalization was almost as dramatic and confusing in 1914 as it is today. Fear of random terrorism was also widespread -- the black-hatted anarchist clutching a fizzing bomb was a cartoon cliché then just as the Islamic jihadist is today. Yet the crucial parallel may be the complacent certainty that economic interdependence and prosperity had made war inconceivable -- at least in Europe.

An undated archive picture shows German soldiers offering to surrender to French troops, seen from a listening post in a trench at Massiges, northeastern FranceA 1910 best-selling book, The Great Illusion, used economic arguments to demonstrate that territorial conquest had become unprofitable, and therefore global capitalism had removed the risk of major wars. This view, broadly analogous to the modern factoid that there has never been a war between two countries with a MacDonald’s outlet, became so well established that, less than a year before the Great War broke out, the Economist reassured its readers with an editorial titled “War Becomes Impossible in Civilized World.”

from Nicholas Wapshott:

Fighting for the future of conservatism

Britain's Prime Minister David Cameron delivers a speech to placard waving Conservatives during an European election campaign rally at a science park in Bristol

Establishment Republicans have been delighted by the victory of Thom Tillis, their favored candidate in last week’s North Carolina primary. After expensive advertising campaigns by establishment bagmen like the U.S. Chamber of Commerce and Karl Rove’s American Crossroads, mainstream conservatives believe they have a candidate who can beat Democrat Kay Hagan to win a valuable Senate seat in November.

Some commentators see Tillis’s triumph as a sign that other impending GOP primary races will also deliver electable candidates. Having watched the Senate slip from Republican grasp in 2012, as Tea Party candidates such as Todd Akin in Missouri, Christine O’Donnell in Delaware and Richard Mourdock in Indiana depicted the party as too extreme, they say the Tea Party is in retreat.

Not so fast. The experience of conservative parties elsewhere suggests that when pragmatists triumph over dogmatists, the dogmatists either regroup and go on to overwhelm the moderates, eventually making the party their own. Or they set up their own party -- and trounce the moderates at the ballot box.

from Nicholas Wapshott:

No, austerity did not work

There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity -- in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms -- imposed indirectly by Germany through the European Union.

from Nicholas Wapshott:

Austerity is a moral issue

Security worker opens the door of a government job center as people wait to enter in Marbella, Spain, December 2, 2011. REUTERS/Jon Nazca

In the nearly five years since the worst financial crash since the Great Depression, the remedy for the world’s economic doldrums has swung from full-on Keynesianism to unforgiving austerity and back.

The initial Keynesian response halted the collapse in economic activity. But it was soon met by borrowers’ remorse in the shape of paying down debt and raising taxes without delay. In the last year, full-throttle austerity has fallen out of favor with those charged with monitoring the world economy.

Thatcher: Master of the ‘unexpecteds’

The passing of Margaret Thatcher comes at a time when the great theme that shaped her years as Britain’s prime minister – the frontier between government and the private sector – is again the focus of serious public debate. Her historic achievement was to widen the frontiers of the “market” and, as she said, to have “rolled back the frontiers of the state.”

There is, however, a pendulum in this relationship between government and private sector. The role of government in the economy has expanded greatly since the 2008 financial collapse, along with government debt. So we will likely again see a struggle to rebalance the respective realms of state and market. And it will again be a battle.

The former prime minister’s memorial service Wednesday provides timely reason to ask: What was the Thatcher Revolution about? I tackled that question 15 years ago – for my book The Commanding Heights: The Battle for the World Economy – and I decided the best way to answer was by asking Thatcher herself. So I turned up at the Thatcher Foundation, a town house in London’s Belgravia, which was the operating base for then-Baroness Thatcher.

In Britain, a new PM is waiting

Britains opposition Conservative Party Leader, David Cameron, speaks at the Confederation of British Industry (CBI) conference in London November 23, 2009. REUTERS/Toby Melville

global_post_logoMichael Goldfarb serves as a GlobalPost correspondent in the United Kingdom, where this article first appeared.

The press was summoned early one recent morning to Chatham House, Britain’s leading foreign affairs think tank, to hear the thoughts of Conservative leader David Cameron on Britain’s national security. As Cameron is likely to become prime minister later this spring, attendance was high.

Anyone in the audience who, like me, thought they would hear a talk about his grand strategy for how to deal with threats to Britain’s national security in these extremely insecure times was disappointed. Cameron, bright and confident, spent most of his brief remarks outlining how he intended to change the internal decision making of government on national security issues rather than outlining a new approach to Iran or China.

from The Great Debate UK:

You never know when rates will rise

David Kuo-David Kuo, Director at the financial website The Motley Fool. The opinions expressed are his own.-

Go on. Admit it. You didn’t see it coming, did you? You never thought a member of the G20 nations would dare to break ranks and raise interest rates this soon.

But Australia has done just that. The Central Bank of Australia has increased the cost of borrowing by 0.25 percent to 3.25 percent. It is doing what it thinks is right for the country regardless of what the rest may think. Now, Asian countries, keen to avert another bubble, may follow Australia’s lead and ratchet up interest rates before long.

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