Beating the Bully Boy Assad

In the macho world of global politics appeasement is the dirtiest of all words.  Failure to stand-up to the bully, whether in the play-ground or at the United Nations is, for most Westerners, a cardinal sin.  The moral maze is simple to navigate when the bully turns his attention to neighbouring states, we should be free to step in to protect the interest and sovereignty of a defending nation – so with Kuwait in the first Gulf War – but when the violence is contained within the Bully’s own borders the maze becomes exponentially more complex.  Accordingly, politicians who turn their military might on their own people are amongst the most reviled of men, but calibrating the correct response is problematic in the extreme.

Mondeo Man Trap can win Cameron the next election

The tide has turned on the British economy; after the tsunami of the credit crunch we have been beached on the mudflats of no/low growth of for four years.  There have been moments when it seemed the after-shocks would create move waves, the Euro crisis being the most obvious risk.  There have even been moments when recovery seemed to be ebbing our way only to evaporate into the stinking sands of a flat-lining growth.  In December last year I blogged that we were at the beginning of the end and amazingly I think I called the low water mark correctly and 8 months on the sparkling waters of recovery our flooding in bringing relief to many parts of our economy. 

Low water - but the tide is coming in!

This change in the tide is very welcome but growth is still weak and localised.  Most of the benefits are being felt in London and its hinterland and only in pockets outside the south east of England.  More worrying our neighbours in Europe are still up to their knees in thick mud and going nowhere fast.  With a new governor at the Bank of England and only 20 months of the coalition government to run people in high places can't afford another false start, they need a full spring tide to come flooding in to all parts if our economy. 

Zero to Hero the UK's flexible economy

News this week that there may be as many as 1 million workers on ‘Zero Hours’ contracts in the UK has come as a bit of a shock to the liberal elite.  A Zero Hours contract is where the employee signs up to an employment contract, which has no guaranteed pay or hours of work, these contracts are used by retailers and hotel industry, which need a ready supply of unskilled workers without the risk of taking on more fixed costs. 

The Full Monty on Osborne's economic policy

In the five years that have elapsed since the global financial crisis  erupted in the summer of 2008 living standards in the UK have dropped sharply (in 2008 a single person earning £13,000 would have reached the minimum they needed to get by. if their wage had risen in line with average increases, they would now be earning £14,000 – which is roughly three thousand short of the £16,850 salary needed to cover the same basic standard of living today).  During this period we have had two governments who have been  attempting to nurse our broken economy back to health.  In  the first two years of the crisis we had the 'fag end' of a long running Labour government, who had little stomach for the fight.  The only Labour minister who came out of this period with any credit was Alistair Darling the who, despite constant interference from Gordon Brown (self styled saviour of the world), did an excellent job of first aid on a patient that was dead on its feet.  His sensible approach to encouraging consumption through sales tax reductions and the motor car recycling scheme combined with a massive blood transfusion of QE made sure that Britain survived the trauma of an imploding financial services industry and the cataclysmic effect this had on credit markets and the tax take.  The rest of the Labour government were in shock as they watched 13 years of neo-socialism unwind before their eyes. 

Carney's Conundrum declining productivity

Understanding the mystery of our terrible productivity performance since 2007 in the UK is at the heart of Mark Carney’s concerns (this is a topic of great interest  to Mr Carney).   His analysis of this productivity fall is important to get right as it will determine whether the Bank of England decides to pursue a looser monetary policy or not.  Many economists believe that, after a brief period of decline at the start of a recession, productivity should pick up pretty quickly as a slimmed down labour force is raises production per head.  Before examining why our productivity has declined so much we should look at some numbers.

Less is More More or Less

Three years ago many were expecting the worst from austerity, how could we possible keep the lights on whilst slashing public expenditure - crime would soar, schools would fail and there would be rioting on the streets.  But how different things look now, a new light now shines on the old problems and there is a shake up to the accepted liberal order.

On the PIIGS back - time to dump the Euro

It’s a life time since the Great Depression but the events on the twenties and thirties maintain a strong hold on our economic and political psyche.  During the intervening years the gold standard has figured prominently as the boogieman that deprived countries of the policy options required to combat the deepening slump. Firm evidence for the overly restrictive nature of the standard is provided by the economic rebound enjoyed by most countries choosing to exit the system, Britain being foremost in this regard.  What’s puzzling us today is why countries stayed wedded to the gold standard for so long.  The relative merits of the gold standard depended on the valuation on joining;  France joined as an under-valued currency whereas Britain re-joined in 1925 as an over-valued currency, this meant that when recession struck Britain was at a significant disadvantage to France and other competitive economies.  Without room to manoeuvre (easing monetary policy and lowering interest rates)  Britain ended up in economic and political turmoil, with an unemployment rate of  25% and the collapse of the Labour government who did not return to power until 1945.

Devolution with dilution solving the Lothian question

Right the way across the globe old political structures are being torn down, the Arab spring has turned to Muslim winter, austerity in Europe drives people against their politicians and more generally the catholic South of Europe is in conflict with the Lutheran North.  In the BRIC economies rapid growth has not assuaged the thirst for change.  It must be something in the water that’s affecting us all, or is it just money or the shortage of it?  Interestingly it’s the middle classes and in particular the young middle classes who are after a change and they have forgotten their manners;  the post baby boomer generation thought they had it all in the Credit Boom and now they are feeling the pinch and look likely to be in recovery mode for years to come. In Blighty we have been somewhat protected although we having to acclimatise to coalition government and the rise of independence fever.  We may not be rioting on the streets in protest to austerity but we are close to a more fundamental breakdown.

The politics of Austerity – north south divide

There are two threats to recovery in the Eurozone, one is rising interest rates an inevitable consequence of Europe being two years behind the US in the recovery cycle and the second is politics.  It could prove to be a long hot summer in the PIIGS economies and in the dusty hallways of the European Central bank (ECB).  The good people of Italy, Spain, Ireland, Greece and specifically Portugal are being asked to endure years (potentially a decade) of austerity.  This Lutheran penance is being applied on these warm blooded catholic nations by the iron will and ice cold determination of German and Dutch bankers supported by the EU and the IMF.  The cheer leader for this chilling approach is Jeroen Dijsselbloem, Dutch finance minister and president of the Eurogroup, the Eurozone’s finance ministers.  His determination that these indebted economies on the fringe of the Eurozone should bail themselves out at breakneck speed is at the heart of the politics.

Money can't buy me love - but it'll get me new hip

In the last month there has be a sea change in British politics, which threatens to overturn the consensus that has held sway since 1945.  All the major political parties have finally recognised that there needs to be a more sustainable relationship between the size of our economy and the scale of our welfare state. We are all children of Beveridge and his report (published in 1942),  which set the roadmap for defeating the ‘the five greats’ - squalor, ignorance, want, idleness and disease.  It’s clear that much of his mission is now accomplished and its time to redefine these ‘greats’ (mine would be Debt, Greed, Intolerance, Ignorance and Security) but the vision can wait, all the focus is now devoted to the funding model for our state provided services.