In Britain, a new PM is waiting
Michael 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.
The strategic decisions made by the Labour government — e.g. joining the U.S. in invading Afghanistan and Iraq — weren’t questioned … it was how they were arrived at that provoked Cameron’s criticism. The cabinet had been sidelined, he said. “Sofa government,” the prime minister’s unelected friends and advisors sitting comfortably on couches at Downing Street and deciding policy had replaced collective decision-making around the cabinet table. This would stop once he was prime minister, said Cameron. There would be a return to the traditions that had stood Britain in good stead. To facilitate cooperation among the various government departments he would form a “National Security Council.”
The lack of a grand vision from the prime minister-in-waiting demonstrates the degree of convergence between the country’s main political parties when it comes to security issues. On the major international crises of the last dozen years of Labour government it is hard to imagine that a Conservative government would have reacted differently.
Your Globalpost correspondent put the question to Cameron: Regardless of whether the decision was reached on a sofa or around the cabinet table, would he not have joined with the U.S. in bombing Belgrade in 1999, invading Afghanistan in 2001 and overthrowing Saddam in 2003?
from The Great Debate UK:
You never know when rates will rise
-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.
Of course, Australia’s economy is vastly different to the UK’s. It has huge deposits of iron, aluminium and nickel that are in demand by mineral-hungry China. That said, Australia did briefly flirt with a downturn, which it successfully corrected with 21 billion pounds of fiscal stimulus.
But the UK is not Australia. We do not have huge deposits of mineral, and we are not near fasting-growing Asian countries either. What we do have are consumers saddled with over a trillion pounds of debt following a decade of binge borrowing, and a national debt burden of similar magnitude. Therefore, it is unlikely that we will experience demand-led inflation. In fact, consumers are saving more of their household income than they have done for eight years.
The most recent Office for National Statistics report shows that between March and June British households saved 5.60 pounds out of every 100 pounds of household income. That is very different from the first three months of 2008 when we not only failed to save any money, but we even borrowed 50 pence for every 100 pounds of household income.
That said, we are still some way off getting our overstretched household finances back on an even keel. So, the savings ratio could go higher. In fact, it is still some way short of the long-run savings-ratio average of 8 percent of household income.
from The Great Debate UK:
The art of the dying general at 250 years old
- Carl Mollins is a Toronto-based journalist who has worked at the Toronto Daily Telegram, Reuters (in London), The Canadian Press news service (in Toronto, London, Ottawa, Washington, DC) and Maclean's magazine (in Toronto and Washington, DC). The opinions expressed are his own. -
It was long ago, in 1761, when Pennsylvanian portrait artist Benjamin West moved east—across the Atlantic. Nine years later in England, he looked back west to produce a controversial but renowned portrayal of the death of British General James Wolfe during England’s seizure of Quebec from France 250 years ago, on September 13, 1759.
Attention to the picture persists nowadays, so long since the British soldiers set up what rapidly became complete English control of the Canadian colony. Perennial prints and publication of West’s art and comparable materials are reminders of what launched Canada as a country divided linguistically, in culture and politically, the situation that remains today.
West devised that picture as the hired “history artist” of King George III, who was already ensnarled in England’s imminent loss of its other North American colonies as the independent United States of America.
That heightened the popularity of West’s picture, despite some criticism of its then-modernistic appearance. Painting Wolfe and the cluster of soldiers around him in battle dress strides away from the traditional portrayal of military heroes draped in capes and god-like postures. West did four paintings, differing in size, and they were repeated in hundreds of prints in the 1870s, more and more ever since.
West’s picture, titled "The Death of General Wolfe", portrays the situation by guesswork and by adding veterans who paid for their inclusion. In the foreground is a half-naked, barefoot, head-feathered person, an apparent tribal warrior of First-Nation Canadians, although the record indicates none were involved.
Even more factually fanciful is a similar picture showing the death in the same battle of the French commander, Marquis Louis-Joseph de Montcalm de Saint-Veran. In fact, the record indicates that Montcalm dies the following morning. Not only does the Montcalm army include First-Nations soldiers, but a tropical palm tree rises above the distraught soldiers.
S’funny, my wife’s Quebecoise, and I’m an English nationalist, and we have no diferences on Quebec. The ‘problem’ of Quebec aspirations is similar to that of the Cornish in Britain. A lot of hot air by the chatterers, and very little real substance.The problem if there is one, is that certain vested bureaucratic interests, prefer Stalinistic uniformity, and this attitude conflicts with the sensitiveties of dual culture/government. Good.
from The Great Debate UK:
September 1939 and the outbreak of war
- Terry Charman is Senior Historian at the Imperial War Museum in London. He studied Modern History and Politics at the University of Reading and while there interviewed Adolf Hitler's architect Albert Speer. He specializes in the political, diplomatic, social and cultural aspects of the World Wars, and wrote "The German Home Front 1939-1945" and "Outbreak 1939: The World Goes To War". He is curator of the exhibition Outbreak 1939 at the museum. The opinions expressed are his own. -
In September 1939, in marked contrast to August 1914, Britain went to war in a sombre mood of resigned acceptance of the inevitable. There was no Union Jack waving “hurrah” patriotism as there had been twenty-five years before. After Adolf Hitler had torn up the Munich Agreement in March 1939 and invaded the Czech lands, the British people recognized that appeasement had failed and that the German leader’s aggressive plans would have to be stopped, and if necessary by force of arms.
On September 3, 1939, when Prime Minister Neville Chamberlain announced on the radio that Britain was at war with Germany, for many the news came as a relief from the tension of the past few weeks and months. An anonymous diarist noted: “Even horrible certainty seems better to me than uncertainty.”
While in Bradford a young man of military age wrote in his diary: “I don’t think I’m sorry to die so that Hitler will be crushed, but I do want a final peace this time, without constant crises.” Chamberlain’s over-personal broadcast-“you can imagine what a bitter blow it is to me...”-was hardly a rousing call to arms, and it was followed almost immediately by the wailing of air raid sirens.
Many people thought that they were heralding a devastating air raid that had been dreaded for so long. That morning, writer George Beardmore experienced a sensation of utter panic. He, like so many others, had seen the film “Things to Come” and remembered all “the dire prophecies of scientists, journalists and even politicians of the devastation that would follow the first air raid.”
In the event, it was a false alarm and somehow wholly symptomatic the rest of 1939. These were the months which novelist Evelyn Waugh was to later describe as “that odd, dead period before the Churchillian renaissance”, but at the time was called the “Phoney War”. There were no great battles on the Western Front, and it was not until 9th December that the first British soldier, Corporal Thomas Priday, was killed in action, a victim of “friendly fire”.
After an abortive attack on German warships on 4th September, the Royal Air Force confined itself to dropping aerial propaganda leaflets on Germany.“Fighting with bloody pamphlets” was one sour comment recorded that autumn about the enterprise. Only the Royal Navy, under Churchill’s energetic and aggressive leadership as First Lord of the Admiralty, seemed to be taking the war seriously, tackling the combined threat from German U Boats, surface raiders and magnetic mines.
The British were left adrift by Chamberlain in terms of defense. They literally had no means with which to conduct a war against Hitler. And Chamberlain certainly conveyed a defeatist attitude throughout the runup to the war.Churchill took over at a time when the British were at low ebb, with no real hope for a military buildup significant enough and quickly enough to hold off the Nazis. It was really a hopeless situation.But, by bringing in the old warhorse Churchill, they did exactly the right thing. And Churchill was able to rally the Brits, engage FDR and the Americans, and begin the process of ramping up the British military strength, based largely on American military transfers (probably illegal at the time, but handled deftly by FDR.)The final impetus was given by the Japanese attack on Pearl harbor, which turned around the isolationist tenor in America and allowed FDR to declare a war on Japan (and soon after, on Germany) where a few months earlier that would’ve been political suicide.As the American industrial base was turned from consumer goods to war goods, the two nations — England and America — slowly became a giant German adversary, based largely on an amazing buildup of American war production, and eventually defeated the Axis powers in a long and costly war (the government-mandated and -funded manufacturing buildup for which, incidently, became the major cause of America finally climbing out of the ’30s depression.)But, all of that came after December, 1941. The years of ’39, ’40, and ’41 before that were grim indeed for England, and it was only the force of Churchill’s public speeches to rally a very desolate English people, and Churchill’s bulldog determination that kept the British Isles afloat until America could enter the war.
Pensions and the coming savings boom
– James Saft is a Reuters columnist. The opinions expressed are his own –
The explosion in company pension fund shortfalls in Britain nicely illustrates issues which will dominate economics and investment in coming years: the re-pricing of risk, a disillusionment with equity markets, and the boom in savings these shortfalls will help to drive.
Under current accounting rules, the pension funds of companies in Britain’s FTSE 100 index are together 96 billion pounds ($170 billion) underfunded, more than double the deficit of a year ago and an all-time record, according to a report from pension fund consultants Lane, Clark & Peacock.
This is partly for the very positive reason that people are living longer but principally because of the dire performance of financial markets, especially equities, over the past year.
To make matters worse, the surge in corporate bond spreads, which are used to calculate the current value of pension plans’ future liabilities to retirees, has actually minimised how underfunded British pension plans look when accounting measures are applied. Minimised how underfunded they look, but not how underfunded they are.
One of the net results of all this is that companies are getting out of the pension providing business as fast as they can, pushing employees into plans where the saver takes all of the investment risk and the company is purely a contributor and a facilitator.
Individuals are less able to take the long view and hold riskier assets like equities during downturns, meaning they are more likely to hold more in cash and bonds than are company pension plans.
Of course, the folly of the savings premise is that it is that cash or cash equivalents at the low interest rates of today, are not savings at all, but acquiescence to the loss of value implicit in inflation caused by the Fed printing money and the government soaking up so much of the capital with programs that have reverse productivity. In short, the currency is being debased.
Today, savings is not a risk management strategy, it is the acceptance of loss. Because the entire spectrum of institutions has been corrupted by conflict of interest, misfeasance, malfeasance and outright larceny, the only hope for pensioners is to try to determine the next bubble and get on board. Until the corruption and self-dealing are attacked, we are doomed to suffer financial insecurity. But since the political institutions have also been corrupted, I would not hold my breath waiting for things to change.
The only savings worth the name is actually expenditures made to reduce living costs. Get on solar energy. Drive hyper fuel efficient vehicles. Invest in durable products before the hyper inflation hits. How far we have fallen! Bush/Cheney were the coup de grace.
Where the healthcare debate seems bizarre
Michael Goldfarb serves as a GlobalPost correspondent in the United Kingdom, where this article first appeared.
In America, the health care debate is about to come to a boil. President Barack Obama has put pressure on both houses of Congress to pass versions of his flagship domestic legislative program prior to their August recess.
Good luck.
Opponents are filling the airwaves with the usual litany of lies, damned lies and statistics about socialized medicine and the twin nightmare of bureaucratically rationed health care and high taxes amongst allies like Britain, France and Germany. So here is a brief overview of health care in some of Europe’s biggest economies: Britain’s National Health Service is paid for out of a social security tax. Services are free at the point of provision. No co-pay, no reimbursement. The budget last year was 90 billion pounds (about $148 billion). That makes the average cost per person about 1,500 pounds ($2,463).
The NHS is big — huge, in fact. With 1.5 million employees it is one of the largest employers in the world. Only China’s People’s Liberation Army, India’s state railways and good old Wal-Mart employ more folks. Sixty percent of the NHS budget goes toward salaries.
The French system is run on a compulsory purchase of insurance through the workplace. The insurance cost is based on how much a worker earns. Low-income workers pay nothing. The average contribution per person is about $4,000. The government sets fees for services and negotiates the price of drugs with pharmaceutical companies. (See related GlobalPost story “Why French doctors still make house calls.”)
Interesting analysis. I still prefer Singapore method of managing healthcare.
It’s an automatic opt-in personalized (the premium based on age of individual) system with option to upgrade. The government provides heavy subsidies for lower income and various schemes so that basic medical care is available to all.
Those who want better service can upgrade.
Europe frets over crisis exit strategy
– Paul Taylor is a Reuters columnist. The opinions expressed are his own –
Higher taxes? Lower public spending? Devaluation? Inflation? Investment in green growth?
European governments are pointing in very different directions as they debate an exit strategy from the global financial crisis. Despite European Union efforts to coordinate economic policy, there are clear signs that the main European economies will charge off in disarray towards separate exits.
Germany is stressing an early return to fiscal discipline despite economists’ warnings against a premature withdrawal of fiscal stimulus. Berlin has just amended its constitution to anchor a timetable for a balanced budget, and is holding down labour costs to promote an export-led recovery.
“This means that the German constitution now forces a very harsh austerity stance on Germany for the coming years,” economist Sebastian Dullien wrote on the Eurozone Watch blog.
“For the rest of (the euro area) this means that after the crisis, Germany will consolidate its budget much earlier and much quicker than the rest of Europe,” he said, arguing it would weaken domestic demand and hurt growth.
German and EU officials say the amendment merely enshrines existing European budget rules and note that a get-out clause allows parliament by a simple majority to set aside the target.
Growth is the mantra of all economists. It has become the paramount concern of governments. Why? More earnings, more tax revenues. Is there nothing worth doing unless it brings economic growth?
The investments we make in education, green energy, transportation and health care will pay huge dividends in the future. Humans however are impatient and want immediate consequences. Thus as a society we are unwilling to sacrifice now in order to pay for the benefits that we would bestow upon our children and grand children in the future.
UK suffers from banks’ Darwinian hibernation
– James Saft is a Reuters columnist. The opinions expressed are his own –
Britain’s banks are fulfilling their Darwinian role, to survive, rather than their economic one, to lend, and there is no easy or painless way out.
A glance at the latest Bank of England Credit Conditions Survey makes grim reading, with yet another marked tightening of lending conditions to households and businesses. Loans are harder to get and more expensive where available, which is hardly surprising given rising defaults and a hardening view that the UK will suffer a long and deep recession.
Mortgage approvals are running at a record low and there are widespread, though anecdotal, complaints of otherwise healthy small and medium sized businesses being squeezed to the point of failure by lack of finance.
On the face of it, Britain’s injection of 37 billion pounds of capital into three major banks and its guarantee of a further 250 billion pounds of interbank lending are not having the desired effects.
Banks, understandably, are hunkering down and trying to survive the next liquidity squeeze and minimize exposure to future risk, rather than taking risks and reflating the economy. While this may help individual banks, if they are sure footed enough, it will ultimately make the recession worse, defaults more frequent and lead to more bank failures in aggregate.
Given this, it is very likely that Britain will again have to intervene, either by further recapitalizing or nationalizing its banks, by providing some sort of state guarantee to lending, by forming a “bad bank” vehicle to fund or buy up doubtful assets, or some combination of all.
Gridlock in lending markets is also a question of skills. Most of the “bankers” who presided over the recent lending free for all are marketing gurus. They dished out all manner of loans with little regard for good lending practice.
To get good lending flowing the banking industry needs to replace these marketing types with real bankers who understand what lending is all about.
Unfortunately good lenders are in short supply and much sought after
Fighting deflation globally ain’t easy
– James Saft is a Reuters columnist. The opinions expressed are his own –
With the U.S., Japan and Britain — nearly 40 percent of the global economy — facing the threat of deflation, it’s going to be just too easy for one, two or all three of them to get the policy response horribly wrong.
The global economy is so connected, and our experience with similar situations so limited that the scope for error is huge.
Think of it as having three pilots flying a jet plane, one each operating a wing and the third managing the tail.
Oh yeah, and they all work for different airlines.
Though there will be much talk of international coordination in the next year, and though the central banks and governments of the world will likely be rowing in the same direction, their ability to gauge the effects of monetary policy and government spending on their own economies will be pretty limited, and even more so on the whole.
Failure when fighting a global recession, a global balance sheet adjustment, a global banking recapitalization, debt deflation and very possibly actual deflation can take many forms.
The economies in the western world are now in free fall with various governments in panic mode such as the British government which have unveiled their latest strategy to spend its way out of the recession, Its instructed the banks which have been nationalized to get lending back to 2007 levels. The US bail out is just another example that the governments have no option but to keep spending but this cannot continue the west is bankrupt and the future is grim, governments will fall the wealth will be removed from the rich and at present the powerful the outlook is for a break down in law and order.
