That Referendum

I shall start by saying that I believe strongly that the UK should and must remain a member of the European Union. We should, I think, because I am strongly anti-nationalist and so believe that integration suppresses nationalism, a force which, throughout history, has been almost invariably negative in its impact. (Its main positive impact has been when it has been a force against colonialism and exploitation). I think we must, because our economy is now structured to take advantage of the free market. If we left that market our economy would collapse. The threats, for example, being made by motor manufacturers that they would have to leave Britain if we left the EU are not empty. Of course they would leave. They would otherwise lose all the tariff advantages they have here. This is not blackmail, merely economic necessity. So, starting from this premise, I think that both pro and anti Europeans should welcome the possible referendum on the issue. I am pretty convinced that Britain would vote to stay in the EU. We need the vote to confirm it to shoot the UKIP fox and consign the party to history and it would stabilise British politics by taking away such a divisive issue, at least for a generation. The anti Europeans will welcome the vote, of course, because they expect to win in and that is totally understandable. The one great fear I, as a pro Europe person, have is that the referendum may be fought too much on the issue of human rights, i.e. on the mistaken belief that the contentious European Convention on Human Rights was created and is run by the EU. I suspect that more than three quarters of the general population believe that. The anti Europe press, UKIP and the 'OUT' campaign will do nothing to dispel this misapprehension. So I am going on ECHR watch from now on, spotting statements from various quarters which are deliberately designed to try to hook the ECHR onto the EU in people's minds and so win the referendum on a false premise. The 'STAY IN ' campaign should note this warning.

The minority factor

I think it axiomatic that there is little that is more dangerous in the world than a minority that doesn't care that it is a minority because it believes it is right. Arguably Tony Blair knew he was in a minority when he sent troops to Iraq but believed he was right. I rest my case. In recent times we see many examples. these include the republican movement in Northern Ireland, militant Zionists in the middle east, Islamic fundamentalists of various kinds and the Tea Party in the USA. It is useless trying to persuade these groups either that they are wrong, or that the democratic principle should prevail and they should accept that they are in the minority and desist. Perhaps sadly, the only way is negotiation. The alternative is perpetual war, part of the Orwellian dystopia.

Oligopoly

There has been a long gap since my last blog. I had a load of academic writing to complete which occupied my mind. That's done now, so here goes. Like most of us I was pretty horrified by the energy price increases, but even more alarmed by David Cameron's exhortation that more competition was the answer. I don't know whether he or George Osborne studied Economics at school or university (I think they both did)but they seem to have forgotten what they learned about oligopoly theory. Incidentally, Economics rightly gets a bad press for the unrealistic nature of many of its theories, but the oligopoly bit is intensely practical and substantially accurate in the real world. For those who don't know or remember, oligopoly means competition among the few. The energy generation and supply market is a classic oligopoly with its six dominant players. The theory says that oligopolies tend to behave in predictable common ways and have similar characteristics. Among these are : There are natural barriers to entry for new firms. This usually means that the required investment is so prohibitively high that smaller firms can't enter or complete. They do not enjoy the economies of scale of the existing players. Of course if such barriers are created by the existing players, they are artificial and invariably illegal. This would make the oligopoly in question a cartel. There is no suggestion the energy market is an illegal cartel. The main characteristic is called price 'stickiness' and a tendency for all the players to charge a similar price. There is a natural resistance to competing on price. This is for the following reason : If one firm drops its price below that of the others in an attempt to capture market share, it fears that all the others will follow suit so it will gain nothing. Furthermore, if such a price war occurs no one will gain (it becomes a zero-sum game) and everyone will lose profitability because prices end up lower. We consumers would love this to happen but it just doesn't. Think about it. Go to a number of electrical stores and compare the price of the same TV set or washing machine. They'll all be the same. By the way, a friend of mine, noticing this, used to go to such stores and ask each one to persuade him to buy a product from them rather than the shop over the road which was asking the same price. He often was offered a discount. Worth a try if you've got the bottle ! Don't try it with energy companies. Well, on second thoughts why not ? It often works with insurance companies. Normally firms engage in non-price competition. This means charging the same price but claiming their product is better quality, or their service is superior. Airlines typically do this. The problem with the energy market is that gas is gas and electricity is electricity no matter from whom we buy it. (note how petrol companies face a similar problem. They try to claim their petrol is better but we know its all the same). This means there is no competition at all, either on price, quality or service. What they have done is produce various different tariffs to give the appearance of competition. There has been one further problem with competition in the energy market. In competitive markets consumers are said to have 'perfect knowledge' of prices and products. They can also switch easily from one supplier to another. The supermarket market is like this. In the energy market consumers are confused by various price regimes and it is difficult to switch. Quite rightly the government forced the banks to make switching easy, but this has not happened in energy as yet. The energy market is not really a 'failed market' as many say it is. This is because oligopolies are expected to behave more or less like this. Oligopolies, in other words, are bound not to compete in the way other markets do. All this means that the idea that more competition is the answer will not wash. I'm afraid that even neo-liberals must accept that some state intervention is required.

Senior Labour politicians who need a good smack

I am becoming increasingly frustrated these days when I hear Labour politicians being interviewed, notably Ed Miliband and Liam Byrne. Perhaps I am just being a grumpy old man, but their constant refusal to commit themselves to any firm policies is really rather irksome and I want to give them a good smack on their leg. The excuse for non-commitment is usually, 'let's wait and see what the state of the economy is at the time of the next election'. This is ridiculous. We all know the economy will be in about the same state as it is now. Perhaps a little worse, perhaps a little better, but fundamentally the same. So we know what the 'country will be able to afford', don't we ? Worse still is their refusal to tell us what they actually believe in. For example the issue of whether benefits for senior citizen pensioners should be means tested or not, or even some of them abolished is a fundamental question. It should not be a matter of 'what the country can afford ?'it should be a matter of what do you believe is right. If you are a social democrat or left of centre politician you MUST have views on such issues. Why not tell us what they are and have done with it ? Similarly, Labour politicians spend large parts of any interview they face trying to tell us how badly we are being governed by the coalition. We can make our own minds up about that, thank you. Slagging off the government is not an acceptable excuse for refusing to tell us what you actually believe in, is it Ed ? Is it Liam ? Smack! This kind of pragmatic managerialism combined with obfuscation is an insult to the origins of the Labour Party. I know that class based politics is seriously out of date, but that is not a reason for them refusing to tell us what they believe in. We expect Conservatives to be pragmatic and cautious - it is part of their tradition, but it will not do for Labour. No wonder Boris and Nigel are doing well. At least they tell us what they think. What I would really like to hear, apart from the sound of a leg being smacked, on the radio is one of the increasingly frustrated interviewers say something like, ' Well I have asked you this question three times and you continually refuse to answer it and insist on merely criticising the government so I am going to terminate this interview. Thank you. Smack !

How coalitions should work

This morning's (March 18) news that a deal has been done over post Leveson press regulation is a welcome development as there was a danger that it would go the way of Lords reform where all agreed on the need for a change, but nothing happened because they could not agree on the precise nature of that reform. Whatever the merits of this agreement it seems to be a good model for how coalition government should work, as opposed to how it has been working. The Liberal Democrats, for once, put their money where their mouth is and stood their ground. The government, recognising that its policy was in a minority, accepted a compromise. In other words coalition may have been successful in achieving consensus, rather than simply highlighting the differences within government and demonstrating the weakness of the junior partner. It may have been an exercise in brinkmanship, but the truth is that brinkmanship often works, as has been seen recently in Scotland and in the USA.

Two requirements for a dynamic economy

I will not claim these two truisms , but can't remember where they came from, so I am merely recycling. It could be said that there are two requirements for an economy to work efficiently - and these go back to the Roman Empire and perhaps beyond. The first is an efficient and effective method of collecting and using taxes. This invloves reducing to a minimum inefficent collecting, evasion, avoidance and corruption. It also means that ALL taxes collected should be used for the public good, as identified by government. The second is the effective conversion of savings into investment. This, of course, involves the banks, equity and bond markets and other financial institutions. In the UK we are certainly making progress in the first requirement. It is the second that remains a huge problem. The recent poor lening figures from the banks illustrates the depth of this shortcoming. Governments need to make this a major priority and this emans they will have to face down the banks and call their bluff regarding competition and the threat to wihdrw their operations. They won't, so do it.

Beastly Eastleigh

Eastleigh is an unusual constituency. It ought to be a very safe Conservative seat but has been held by Liberal Democrats for many years, probably because of a very strong local organisation. It was therefore inevitable that the by election would also be unusual, and so it has proved. The most extraordinary event, even by Nick Clegg standards, was his assertion that the LIb Dems won a 'stunning' victory. He has to be upbeat to be sure, but one suspects he may believe his own rhetoric. It was a very poor result for the Lib Dems, who lost so many of their votes, though not as bad as it might have been given the circumstances. The fees issue probably does not play too much in a place like Eastleigh because the population is very well heeled. the fees issue will dog the Lib Dems in less well off places. The only stunning thing about it was that the Lib Dems were stunned that they won. It was bad for the Conservatives - obviously - and very bad for Labour, whose candidate, whom I like in general - fought a hopeless campaign. Labour should be gaining votes simply on two issues - the NHS and inequality. It is not and that is extraordinary to see. Miliband 's role was almost invisible. It also demonstrates the severe damage that Ukip can inflict on them. Even if their vote halves in a general election, it will be enough to deprive the Conservatives of many otherwise winnable seats. The electoral system is now turning back and biting its own master ! So all three parties will be gald to see the bacl of Eastleigh at least until 2015. They will all feel on safer ground in kinder places. Who was the real winner ? Probably Boris Johnson.

What is it about the Liberal Democrats ?

It is, to say the least, notable that a large proportion of leading members of the Liberal Democrat Party seem to get themselves into hot water over a variety of scandals and problems in their personal lives. The list is remarkable : Paddy Ashdown, party leader up to 1999, was revealed to have had an affair with his secretary (resulting in his being nicknamed, 'Paddy Pants Down'), though it did his position little harm. Charles Kennedy, Ashdown's successor and leader from 1999-2006, resigned when it was revealed he was having treatment for alcoholism. Mark Oaten, one of the leadership contenders after Kennedy's resignation, withdrew when there were allegations he had had an affair with a rent boy. David Laws resigned after only a few weeks as a member of the coalition cabinet in 2010 over alleged MPs' expenses irregularities. Chris Huhne, guilty of perverting the course of justice in 2013 and involved in messy court cases involving his former wife and mistress. Lord Rennard, Party Chief Executive 2003-9 now faces accusations of improper conduct towards several women, as yet merely allegations. Given that the party's leadership cohort is inevitably limited in number, this represents a high proportion. So what is it about Liberal Democrats ? Three theories come to mind : 1. It is part of classical liberal ideology that one should be free to act as one wishes, provided one does no harm to others. Certainly some, though not all, of the above could claim to be folowing this maxim of John Stuart Mill. It also has to be said that most of the problems do not seem to have adversely affected the fortunes of the party, so little harm done there either. So they are merely putting into practice their fundamental beliefs perhaps. 2. Liberal Democrats simply get caught more often. There is no explanation for this phenomenon so it cannot be substatiated, but it is a possibility. 3. Until recently there was no prospect of Liberal Democrats being in power. And now there seems little prospect of them regaining power for the foreseeable future. This means they have too much time on their hands and so inevitably get themselves into mischief. Take your choice. But another thought occurs to me. Nick Clegg has escaped any whiff of 'scandal' at all. Yet it could be argued that he has done more harm to his party than any of the above. His breaking of several pledges and now his risible explanations of his part, or non-part, in the Rennard affair, seem to be wrecking the Lib Dems chances in the Eastleigh by election. We shall see.

kicking into an open goal

I am not an apologist for the Labour Party, but it seems to me that Miliband is shooting at an open goal. All the polls and the public mood suggest he should have an easy task in inspiring voters to abandon both coalition partners and try Labour again. He will have to accept a share of the blame for the recession but, afetr five years, the charge that the government was left with a mess is beginning to weaken. It also seems clear that the issues which will, and should, attract public support are now obvious. What's more, they mostly accord with traditiuonal Labour vaues so there need be no charges of opportunism. They are : 1. Give the electorate a vote on the EU. Labour has always been somewhat sceptical. I am convinced that, provided the 'stay in'campaign can convince the electorate that the EU is not resposnible for the European Convention on Human Rights, their campaign will prevail. This wil shoot the foxes of both UKIP and the Tory Right. If all three main parties, plus UKIP, promise a vote after 2015, it will cease to be an election issue. 2. Taxing the very rich is a no brainer. What Miliband needs is some specific proposals, not vague aspirations. Over 90% of the population will support it. 3. Bearing down on tax avoidance and evasion. Again specific proposals are needed. Naming and shaming will work well, I am sure, but there needs to be new laws closing tax avoidance schemes, if possible international. 4. Accepting the welfare and tax reforms now in train. 5. A huge re-commitment to 'saving' and improving the NHS. 6. Even more redaical proposals for care of the elderly than are now proposed. 7. Accepting tighter immigration and migration controls, but stressing the importance of a diverse society. 8. Do nothing on primary/secondary education - a moratorium on reform and making a virtue of it. Teachers (who vote) want some stability. However, much more radical policies on opening wider access to higher education. Specific proposals needed again. 9. He should look at the Japanese model of financing major intrastructure projects using quanitative easing to finance it. Clearly providing extra liquidity to the banks was a failure. Any new injections of liquidity must go directly into capital expenditure. This will end recession and boost employment. It is an inflationary policy, but we can stand a small rise in prices and the increased interest rates that will result. Low interest rates may have gone on too long. There is huge low interest fatigue among savers - and savers are often voters. Above all, he needs to develop specific proposals now - it is no longer acceptable to have vague aspirations and telling the electorate that specifics will come later. he needs to capture the political agenda now. Every indication says that Labour should not lose the next election. Labour supporters, however, must now be worried that Miliband could snatch defeat from the jaws of victory (remember Kinnock in 1992). Kinnock probably lost because of hubris, Miliband might lose through sheer indecisiveness and lassitude. Of course, all this could not disguise the lack of long term vision within Labour.......but that's another issue.

The EU and the HRA

Just a short post to express a fear I have regarding a forthcoming referendum on UK memebership of the EU. I have spoken to quite a number of well educated and informed people and find a fair proportion of them believe that the European Convention on Human Rights has something to do with th EU. In many cases people believe it is actually controlled by the EU. Of course this is entirely wrong. The European Convention and the Court that enforces it are part of the Council of Europe, a completely different body set up by, among others, Churchill, in the 1950s. If well informed people make this mistake, what chance the rest of the population ? The problem is that a great deal of anti European sentiment is based on opposition to the Convention, notably with regard to asylum seekers, immigration appeals and terrorist suspects. It is seen as unwarranted European interference with UK sovereignty with regard to the security of our borders. This is all very well but it has nothing at all to do with the EU. But it could well swing the referendum result against the EU.Supporters of a 'stay in' vote must therefore hope that the campaign will highlight this common misapprehension.

What Britain makes

We often hear complaints that Britain has lost its heritage as a great manufacturing nation, that we don't actually 'make' anything anymore. Well, in terms of metal and wood and plastic that may well be largely the case, though, for reasons I don't understand, we seem a popular place to make case. But it is far from the truth to say we don't make anything, we make plenty of things; its just that they are less tangible and are often of an intellectual, technical and creative nature. We are clearly very very good, sometimes world leaders in these kind of products : entertainment biotechnology and research environmental research and devlopment energy technology civil engineering medical research and treatments sport and related activities and services higher education design and architecture The 'Arts' computer technology software development financial services (with a health warning on that one !) There are more, I am sure, but this is an impressive list. What's more, these tend to be high value products while much traditional manufacturing involves low value products. So Britain is in a strong position to exploit our high value specialisations in which we seem to have a comparative advantage. So the first thing to say is to stop bleeting about the loss of our manufacturing tradition. More seriously, though, we need to recognise where our strengths and advantages lie and to nurture them carefully. This means being willing to invest a large proportion of our national income in these kinds of areas : education generally higher education and research sport and entertainent infrastructure Medical research and top class treatment centres biodevelopments, including sustainable energy The Arts Such investment can be undertaken both through the private and public sectors as appropriate. I think we could be on the brink of a new period of regional, if not global dominance in a variety of economic sectors. But before we do what is necessary to nurture them, we need to recognise what they are worth and not hanker after something that is well behind us and in which we do not enjoy comparative advantages.

Modern capitalism and the new marxism - part two

Part one of this post suggested that the excessive inequalities now being seen, especially since 2008, my be leading to a crisis of capitalism, perhaps as severe s 1968 or even earlier those in the nineteen-tens and twenties. But the prospect of hoards of the poor pouring into London from Cornwall, South Wales, Northern Ireland and Northern England seems rather remote. This kind of traditional revolutionary activity would be neither likely not effective. The growing importance of the Internet presents us, however, with a very different picture. The Internet, I would suggest, presents us with two alternative visions of revolution. The first is that revolutionary sentiments may become diffused by the internet. There may well be a groundswell of discontent, but this might lack focus and may fail to mobilise its forces effectively. the way in which the 'Occupy' movement seems to have blown itself out rapidly may be an appropriate model of such an effect. The second vision suggests that the Internet may indeed facilitate opposition to capitalism's excesses and may one day become so overwhelming that it will topple the vested interests that are promoting inequality. If we adopt a clasical marxist perspective, an Internet movement will not succeed because it would lack 'class consciousness'. The weakness of the working class, said Marx, lies in two of its characerists. One is a lack of awareness of its own position, notably its own exploitation. The other is the danger that memebers of the working class lack solidarity because individuals under capitalism are forced to compete with each other for scarce resources. The Internet certainly can encourage class consciousness, but it also prevents the formation of a class in the first place. Users of the internet are intensely individualistic - that is the nature of the beast and its attraction - and so it is difficult to envisage a coherent anti-capitalist movement springing from the social media. I therefore think I conclude that a marxist analysis does indeed suggest that the conditions for revolution certainly are coming into existence, but that capitalism will survive because of the lack of a strong enough class which could carry out the sentence of death that history has pronounced on it.