"Gordon Brown appeals to US Congress for help to save the world", headlinesThe Daily Telegraph. There was a time when we did care … and wrote about it in impassioned terms, such as here , here and here. … Britain could have been stricter in its supervision of financial markets, but defended his response to the global financial crisis. "We should have been tougher in some areas," he tells the BBC.Thursday, March 05, 2009
Yesterday in Parliament
Tucked away in prime ministers' questions yesterday (held by Harperson deputising) was a question from the redoubtable Ann Winterton. She asked for confirmation that:… the real reason for part-privatising Royal Mail stems directly from European Union postal legislation, which forced Royal Mail to divest itself of its most profitable business, thereby handing it over lock, stock and barrel to European competitors.
According to Ann, there was a sudden hush in the House - an embarrassed silence – almost as if someone had done something unmentionable in church. Then Harperson, dutifully briefed by her gifted civil servants, delivered her "non-answer". The "real reason", she said, was "the analysis in the Hooper report, which we commissioned as long ago as December 2007."
Now, this is an interesting response, as the Hooper Report tells us that the real reason for part-privatising Royal Mail is ... er ... European Union postal legislation, and also EU state aid rules.
Basically, says Hooper, Royal Mail needs to modernise, which requires considerable investment. But "that transformation would have to be carried out under European rules on restructuring aid." That in turn would "impose considerable restraints" and thus take time. But, unless Royal Mail can modernise faster than EU rules would allow, "a forced restructuring under European rules is highly likely."
That, concludes Hooper, "would be a costly and poor outcome for the taxpayer, for consumers, for Royal Mail and its employees." By contrast, he adds, "private capital is generally more flexible and more tolerant of necessary risk. It can be raised more easily, faster and for a wider range of purposes and does not come at the cost of competing public priorities."
Thus does Hooper recommend that "there should be a strategic partnership between Royal Mail and one or more private sector partners." And, while the precise nature of such a partnership is a matter for the Government to negotiate, at its core, "will be Royal Mail's obligations under the universal service, as required under EU and UK law." The UK law, incidentally, largely transposes EU law.
As to why Royal Mail cannot fund its modernisation programme from its own resources, Booker explains in his column that the problem is Britain's keenness to comply with three EU postal services directives, designed to end national postal monopolies by 2010 and to promote "cross-border" integration of the EU's postal services.
As a result Royal Mail had to surrender the most profitable part of its operations, when bulk business mailing was opened up to rival firms. It still has to deliver business mail, for a knock-down price of 14p an item, while the 19 companies that bid successfully for the business of collecting and sorting them cream off all the profits. This was a major factor turning Royal Mail's profits into a £179 million annual loss, which means it has no money for its modernisation programme.
As to why other European postal services have not been similarly affected, Hooper himself notes that "the UK has been amongst the first countries in Europe to open the postal sector to competition." In other words, this is exactly the situation described by Booker.
So why was there such a deathly hush in the House? Well … the Conservatives are supporting the Government, against the Labour back benches, to get the legislation passed.
The last thing the Tories want is for it to be known that the privatisation programme is entirely driven by the EU, thus putting the party in a position of supporting EU rules. This, with the euro-elections coming up, would not conform with their new-found (and temporary) image as a eurosceptic party.
Thus we had the hush of anticipation, bolstered by a frisson of fear, in case Harperson gave the game away. When she did not – and, of course, she was not going to – there was a collective sigh of relief. Business continued as usual – in Europe and ruled by Europe … but this must never be admitted.
COMMENT THREADWednesday, March 04, 2009
Not all that illogical
It would seem that the people of Germany (or, at least, some of them) are more logical than the journalists of, among others, Der Spiegel. Nothing surprising in that – to be a journalist these days involves taking classes in complete unthinking.
A couple of days ago this article appeared, full of surprise at the apparent illogicality of the people. Here we are in the middle of a serious financial crisis (though not actually a melt-down unless governments collectively make it worse) and yet the free-market politicians are gaining popularity. How can that be?
This surprise is predicated on an extraordinary misreading of the situation. Extraordinary in the sense of being completely and utterly wrong but not in the sense of being surprising. The assumption on which what passes for thinking in the media is based is that somehow miraculously we live in unfettered capitalism, free markets and government so small as to be almost invisible.
I recall something along those lines being peddled during the foot-and-mouth catastrophe. Look, I was told, look what happens when markets take over food production. To which, I could only reply: "You what?"
Agriculture and food production, I tried to explain, were more controlled by government (mostly the Brussels one but that's all the same,) least market driven part of our economy. How is FMD the fault of the markets?
How is the fiscal crisis the fault of the markets given the astonishing amount of incoherent control and high taxation that has been the lot of the business community and, particularly, the more entrepreneurial part of it.
Even if the great brains of Der Spiegel do not understand this, the people of Germany seems to have got an inkling; only an inkling so far but who knows what that might lead to. When it came to Germany's upper house of parliament, the Bundesrat, the decisive moment actually came days before last Friday's vote. Normally seen as little more than a formality, the body's approval was far from assured until the middle of last week. And the reason for the nail-biter can be found in an unexpected place.
In the end the party went along with that "stimulus" package that will stimulate nothing but the precedent has been set. Maybe it will be Germany that will start seeing the benefits of a genuinely free economy.
With the economy in a shambles, financial markets frozen and capitalists in disrepute, Germany's neo-liberal political party, the Free Democrats (FDP), are enjoying remarkable success in both the polls and the voting booth. Its newfound self-confidence combined with double-digit survey results could shake up Germany's political landscape ahead of national elections scheduled for the end of September.
The first indication that the business-friendly FDP was on the upswing came in the state of Hesse, home to Germany's financial center Frankfurt. In late January state elections, the FDP raked in 16.2 percent of the vote, much higher than what the party normally receives. The success landed the FDP in the state's governing coalition -- and handed it enough leverage to block legislation in the Bundesrat.
COMMENT THREADSad
This man definitely hasn't got the hang of the saving the planet business. He wants help? What kind of a superhero is that?
COMMENT THREADMedia bias?
Julia A. Seymour of theBusiness & Media Institutelaments about how the media networks are mostly ignoring signs of cooling. She has a point.
If you go to Google News and type in "cooling trend", you get 45 hits. Try the same thing with "global cooling" and you will get 177. Now do "global warming" and you get 26,993 stories. For "climate change" you will find 48,791.
There is, nevertheless, hope for us yet. One of those "climate change" stories is fromThe Guardian which has a scandalised Lord Drayson, now in his role as science minister, complaining that "Industry leaders [are] denying climate change" (pictured visiting NASA).
There is, says Drayson, "an urgent need to restate the scientific evidence for global warming" and he calls for companies to "focus on their environmental obligations".
This is the same Lord Drayson who was once our defence procurement minister, he who famously got up in the House of Lords in June 2006 and proclaimed that, "the Snatch Land Rover provides us with the mobility and level of protection that we need." He was then famously over-ruled by his boss who told him to go out and buy some decent protected vehicles.
That, in many ways, tells you as much as you need to know about Drayson but it is entertaining to note that a so-called "science minister" is "shocked" at the number of "climate change deniers" among senior industrialists. Of those who acknowledged that global temperatures were rising, he says, "many blamed it on variations in the sun's activity."
Furthermore, says the scandalised Drayson, "There is a significant minority of senior managers who do not accept the evidence for climate change and don't see the need to take action." He adds: "It really shocked me that those views are held, and it's not limited to the car industry."
We can only express some optimism that, despite the huge media bias and the stupidity of a man who should immediately present himself to Trading Standards and report himself for misrepresentation, there is still a significant number of industrialists who do not buy into the scare.
However, it seems that we're not even allowed to call them sceptics any more. Do you see a trend emerging here?
COMMENT THREADThe reality is worse
There has been somefluttering in the dovecotesover an imagined conspiracy of silence over EU bank debt. This arises from an unexplained change in an article published under Bruno Waterfield's byline on 11 February.
The original copy was headed: "European banks may need £16.3 trillion bail out, EC document warns," claiming access to a "secret document" which put an estimate of toxic debt in the European banking system at that figure - £16.3 trillion.
The implications of this are truly staggering as the IMF estimates total global losses related to asset impairment at a "mere" $2.2 trillion, putting the potential European write-down at getting on for ten times the global figure.
Less than 24 hours later, however, the headline was changed to become "European bank bail-out could push EU into crisis". The specific reference to the £16.3 trillion had disappeared, along with two paragraphs of the original text.
Despite this, there is no conspiracy. I spoke to Bruno earlier today and he dismissed any such idea. Under pressure of a deadline, he had misread an obscure passage in the Annex to the document, which retailed speculations on what figures had been considered. The figure was not an estimate, per se, merely a record of what some had speculated it could be.
Bruno was not the only one to make the mistake. Guardian correspondent David Gow, made the same mistake, yet his article still stands, with a header: "Bank protectionism will destroy European single market, finance ministers warned".
The reality, though – Bruno tells me – is actually worse. There was no formal estimate as to the extent of the toxic debt in the European banking system because the commission has no idea of what it might be. Debt has been spread through the international system so much that no one is sure of the ownership, where the liabilities lies, or even the order of magnitude. It could be £16.3 trillion, it could be less – but it could be more. No one actually knows.
It is this uncertainty, more than anything else, which is crippling the system. That much is reflected in a comment in the IHT that refers to tensions between France and Germany over the crisis.
What worries everybody, but Merkel most of all – says the piece - is that no one knows how long the crisis will last or how much deeper it will go. No one knows if the economic stimulus measures introduced by several EU member states and the United States will safeguard growth. And above all, no one knows what will encourage the banks to start lending again.
Behind that is indeed the spectre at the feast – that uncertainty which prevents anyone suggesting that any measure, once and for all, can address the crisis and set the global economies on the path to recovery. Effective measures require at least some knowledge of the extent of the crisis, and knowledge there is none.
Whoever said "ignorance is bliss" cannot have been thinking of the global banking system.
COMMENT THREADWhat to do about Pakistan?
Of the many thought-provoking pieces on yesterday's atrocity, we see Melanie Phillips tell us that it "highlights the intimate connection between the two in a web of terror that spans the world."
Michael Burleigh tells usPakistan presents a terrifying threat to world stability far greater than Iraq or Afghanistan, andThe Daily Telegraph says, "It is no use blaming outsiders: the canker is within. Pakistan needs to wake up."
We have a direct interest as well as the broader strategic interest. What happens (or does not happen) in Pakistan directly impacts on the campaign in Afghanistan. To that extent, it is an Afg/Pak problem rather than an Afghani problem. Can one be solved without the other? Many doubt it.
Could stability in Afghanistan serve as a beacon for Pakistan, illustrating what can be achieved, or will the campaign in Afghanistan necessarily fail unless we also deal with Pakistan. And, short of invading that country as well, what can we do?
COMMENT THREADDo we care?
Months later, we see this piece suggesting that Tory MPs need to grow up. We didn't write it. But we agree with it. They will not – and by failing so to do they doom themselves to irrelevance.
They will gain office, but not power. There are bigger games afoot, and they will not be part of them.
COMMENT THREADReality is a nasty place
Simon Heffer offers a laborious analysis today, which amounts to a prediction that the euro might not survive the recession. Or is it wishful thinking?
In a way, the euro is like the bumble bee – in theory neither can fly but they do. The euro should have nose-dived many times, but it has led a charmed life and continues on, despite the gathering clouds of the economic storm.
The point that Heffer makes, though, is two-edged. Invoking Milton Friedman, he asserts that "there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money – money tempted to inflate – put out by politically independent entities."
What perhaps he misses is the qualifier "politically independent entities", in which context there is an alternative that he does not fully explore … that the "entities" cease to be independent.
The essence of the European "project" is that there has emerged a European political class, where the ruling élites have more in common with each other than the people they govern. We have also seen of late more than a little nervousness amongst those élites about the prospect of civil unrest, and not a few of them must have looked anxiously at Iceland and then Latvia, where the governments have been deposed.
The idea of "independence", therefore, is strictly one for the proles. This is not something that will at all bother the élites – their concern is survival and their own protection. And, having conspired against their own peoples for so long, the driving force amongst them will likely be, "hang together or hang separately".
For all their comedic elements, we see in the statements of Joaquin Almunia and others of the "colleagues" a determination to stretch the rules to breaking point and beyond. When it comes to the Treaty provisions and what is legal and what is not, we are well beyond the stage of keeping within the treaty boundaries. The "colleagues" will do whatever it takes to survive.
Effectively, in so baldly stating that, "It's not clever to tell you in public…" what they intend to do, Almunia is admitting that they have torn up the rule book and are flying by the seat of their pants.
Thus, we would like to think – as indeed does Heffer assert – that national interest will prevail, and in so doing bring down the euro and thence the whole edifice of the EU. But there is a greater, stronger interest at play – the interest of our ruling élites as a collective.
As long as they feel safer together, and can look to each other for mutual support, national interest will take second place. In there lies reality, where the rulers are responsible to their peoples and accountable for their actions.
That, for the "colleagues" is a nasty place to be and they do not want to go there. They will do everything in their power to prevent it happening.
COMMENT THREADBrown says …
"But …". This is a politician talking, so there's always a "but".
".... there is a whole series of issues where you needed international cooperation because you are dealing essentially with global financial flows and you cannot solve that problem unless you have the kind of international supervision that I think you'll admit I've been pressing for 10 years."
So that's alright then! Not my fault, guv!
COMMENT THREAD
Thursday, 5 March 2009
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