The Parallax Brief

Attacking on Defence Will Do Tories No Good This Time

March 11th, 2010 by The Parallax Brief

Iain Martin writes in his superb Wall Street Journal blog that David Cameron has blown “up what’s left of the consensus on defence”, and that the Conservatives may well be able to make political capital by attacking Labour’s record on defence — an area in which the Tories have traditionally held the upper hand.

A win for the under fire Tory leader at PMQs in the Commons this week.

[…]

Labour MPs looked incredulous at such a direct attack on ground they have long thought a political no man’s land: defence. This is an issue Labour long ago thought closed down. The government might be accused of being too gung-ho since 9/11, but the old charge of the 1980s of any weakness on defence hasn’t really been applicable. Now, the allegation that the fighting of two wars was underfunded reopens the argument.

It’s often forgotten, but defence – as much as tax and nationalisation – was the issue the Labour modernisers had to neutralise after the party went mad on the subject after the 1979 election. The party had a generation of robust Atlanticists – George Robertson being the most notable – to help it make the shift back and Ernest Bevin’s noble tradition of muscular patriotism to draw on.

Since the mid-1990s, post-Cold War, this has framed Labour policy. And it’s tended to trap the Tories, removing any natural advantage…

But at PMQs Cameron was signalling in clear terms he thinks that the issue of Brown and defence funding in the last decade is so serious… When you consider the public response around the Help for Heroes campaign etc and concern over casualties it could be that Cameron’s on to something.

Or not, as the case probably is.

It is true that the Conservatives have a traditional advantage on defence: on this point, history has proved them right and British Read the rest of this entry »

Parallax Brief Returns

March 10th, 2010 by The Parallax Brief

The Parallax Brief would like to apologise for his three week absence. This was primarily due to illness followed by an extended period of business travel, during which finding time to post was impossible.

However, starting tomorrow, regular service will resume, with the Parallax Brief offering his usual brand of unapologetically polemic analysis of UK politics, foreign policy, defence and economics between now and the election.

Hope to see you tomorrow morning.

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Do We Still Heckle Politicians?

February 17th, 2010 by The Parallax Brief

Adam Curtis has yet another fascinating post on his new BBC.co.uk blog in which he discusses the demise of heckling at the hustings:

Political journalists I have asked don’t know how widespread heckling is these days – because they don’t tend to stray outside Westminster.

I think it raises a really interesting question. If people don’t heckle any longer is it because they no longer believe in politics, or is it because they no longer believe in themselves?

Is it that they have come to see their politicians as creatures who no longer have any ideas or vision, and who have absolutely no idea or understanding of what is happening in the world, so there is no point in heckling them any longer?

Or is it that we, the people, have no ideas and no understanding of the world ourselves? That we have no vision any longer of what the world could be like, or what changes we would like made – so we have nothing to say? And thus nothing to heckle about.

So however angry we are we remain mute and sullen.

Or maybe we do still heckle? It would be very interesting to find out – please let me know.

The blog is accompanied, as usual, by a compelling rarity from the BBC archive, a film made for the Beeb by Joseph Strick, an American New Wave film maker who was amazed by what was to him the alien phenomenon of political heckling. It’s essential viewing for political junkies.

The Parallax Brief will ask fellow Think Politics blogger, the MP Andrew Gwynne, to watch the film and see if his experience is that there has been a drop in heckling. Perhaps some other politician-bloggers might comment — Iain Dale, for instance, has just been though two open primaries, and it might be interesting to hear whether he was heckled at all.

However, the Parallax Brief believes that heckling has, indeed, reduced, but for more obvious reasons than Mr. Curtis suggests: namely, that politicians do not put themselves in situations where they might be heckled as often as they once did.

It’s television’s fault, and is something that has happened in a wide variety of fields: The Parallax Brief calls it “the Read the rest of this entry »

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Fiscal Fink Tank

February 16th, 2010 by The Parallax Brief

Danny Finkelstein, the Times columnist and former adviser to William Hague, and Frazer Nelson, the editor of the Spectator, have engaged recently in an internet back and forth regarding the latter’s speech to the Centre for Policy Studies’ Keith Joseph Lecture, in which Mr. Nelson argued that the Conservative Party should be far bolder about cutting spending than it has been, especially regarding its ring-fence guarantee for the NHS.

Rightly, Mr. Finkelstein disagrees.

First, he spells out some political home truths to Mr Frazer, correctly arguing that promising to cut public services has been tremendously unpopular with the electorate. Trimming (or slashing, the verb the Parallax Brief is sure Mr Frazer would prefer used when discussing government spending) public services has traditionally been the kind of political high wire act that sees governments and oppositions topple over to their doom, as, indeed, has happened to the Conservative Party itself in recent elections.

In other words, Mr. Finkelstein concludes with a memorable tartness, it bears remembering “that a party seeking government not simply the paramilitary wing of an oped column.”

This is all very correct, and Mr. Finkelstein could have progressed to make an economic argument against immediate cuts, which if made too early would surely shatter the fragile recovery, reducing GDP and having the perverse effect of increasing the real debt burden.

But what the Parallax Brief was more interested in was Mr. Finkelstein’s implied accusation that Mr. Frazer doesn’t really have an altruistic concern about the budget and sound economics, but is simply furthering a zealous low-tax-low-spending dogma.

“Critics on the right, including Fraser, have spent the last few years before the crisis complaining that the Tories are not fiscally lax enough. They wanted the party to back unfunded supply side tax cuts that they hoped would bring in income through increased growth.

The Cameron-Osborne position that tax cuts came second after stability was ridiculed.”

There is, of course, nothing wrong with demanding tax cuts per se, but it’s a bit rich to demand tax cuts one minute and rebalancing the budget the next. But there are two sides to a budget, revenue and costs, and the right only ever want to decrease the costs. If Mr. Nelson was really concerned about balancing the national books, he would advocate sharp tax rises as well — and he’d certainly not have been advocating tax cuts when Gordon Brown was running a 3% deficit at the peak of the economic cycle from the Treasury.

What’s more amazing is that the right get away with this. It seems to have become the economic norm when a budget deficit needs to be brought under control to argue that there’ll have to be cuts. None of the medjya’s talkingheads ever seem to say, “The budget deficit has reached 12% of GDP, and that means we’re all going to have to pay higher taxes”; but that’s no more preposterous than saying “…and that means we’re going to have to suffer swingeing cuts to the NHS and schools.”

Really, the right isn’t interested in balancing the books, because if you presented them with an argument for doing so with, for instance, increases in estate tax, a new band of income tax for those earning more than a million pounds a year, and increases in VAT on luxury goods and houses costing over two million pounds, they’d balk.

What they’re actually interested in is lower tax and lower public spending.

The Parallax Brief really doesn’t like the idea of tax hikes above the already high burden, and believes it is clear that at some stage in the next parliament the public sector is going to need to be seriously deflated, but the right shouldn’t be permitted to conflate two separate issues.

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Free Iran

February 12th, 2010 by The Parallax Brief

Human Rights Watch has released a report, The Islamic Republic at 31, (a reference to the forthcoming 31st anniversary of the 1979 Iranian Revolution) cataloging some of the human rights abuses in Iran since the presidential election last year, as well as bringing to light testimonies taken over five months from those who have suffered as a result of the Iranian government’s attempts to crush the Green Revolution.

The testimonies make grim reading.

“On June 23, three men in a car arrested me near my father’s house and took me to an unknown location lindfolded and in handcuffs. On June 24, guards beat me violently with something that felt thicker than a whip, possibly a hose. I was not given any food or water. On June 25, fake execution sessions started. They gave us a piece of bread and water that tasted foul. We were randomly selected and beaten. On June 26, prison guards one more time set up fake executions, cursing and randomly beating people who asked for water or to use the toilet.

I said, “Execute me if you want and get it over with.” I received a kick to my stomach and when I fell to the ground more kicks in the stomach, until I started throwing up blood. Another man said, “Take this faggot and make him pregnant, so he won’t be a smartass again.” That man grabbed me violently and pulled me to another location. He tied my hands and feet and pulled down my underwear and [...] while he was Read the rest of this entry »

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The Good, the Bad and the Speculator

February 10th, 2010 by The Parallax Brief

The Parallax Brief has been critical of John Redwood’s hawkish view on monetary policy of late, and given that today Mr. Redwood defends speculators, those oft-mendacious and -pernicious magnets for vitriol, one might expect the Parallax Brief to get stuck in again.

But this time, the Parallax Brief has some sympathy for the MP for Wokingham’s position.

Today Greek and Spanish officials are briefing that bond speculators are bringing down their government debt for no good reason. Apparently investors and markets should go on lending as much as these worthy Ministers and officials want to borrow, so their salaries can be paid regardless of the financial plight of their countries.

It’s tempting to blame speculators for creating market situations that can seem very much like self fulfilling prophecies. Market players bet that a certain currency or bond or equity will fall, which then puts pressure on that security or currency, which then increases the number betting it will fall, which puts more pressure on the currency or security, which forces people to actually start selling, which actually forces the currency or security down, and so on. If only they wouldn’t short so aggressively (or at all), then perhaps things wouldn’t get out of control so badly. Further, these people are ultimately, when it comes to betting on currencies or sovereign bonds, costing the people of the country they’re betting against hundreds of millions, and often billions, of dollars. It seems so cruel.

But there’s a simple solution to this problem: don’t sell government bonds to the market. If governments didn’t run up debt, if they never borrowed from the market, there would be nothing to bet against. Once they do sell bonds to the market, obviously the market will want compensated for loaning its money — otherwise, why not just hang onto it? — and that compensation will have to be commensurate to the risk individual players in the market believe is involved in the loan. “How likely am I to get this money back?”, people reasonably ask.

There’s nothing wrong with that, and no rule to say that governments have to borrow. Got a problem with speculators? Don’t sell bonds that can be speculated on.

But, there’s a caveat.

Exhibit A: A recent article in the New York Times about Goldman Sachs’s part in the AIG collapse. For those who do not wish to read the lengthy investigative piece, the timeline is neatly summed up in the Washington Independent:

The people at Goldman Sachs invested in mortgage-backed securities they expected to decline in value in order to make money off the insurance claims.

Due to a long-standing relationship, they went to AIG for a kind of insurance — credit default swaps — which were not regulated.

They then used other companies, including Société Générale, to purchase more of the unregulated insurance that AIG might not have otherwise underwritten in order to manage its own risk.

When Goldman’s investments declined, they submitted insurance claims for the losses, but insisted on determining the amount of their damages on their own, without any input from AIG, any auditor or the market.

After Goldman got as much money out of AIG as they thought they could, their stock analysts issued a report about how AIG was bleeding cash and their creditors wouldn’t negotiate, without mentioning that AIG was bleeding cash because of them and that Goldman was the creditor that wouldn’t negotiate. AIG’s stock tanked.

The government stepped in, took an 80 percent share in AIG and then paid Goldman and the other creditors all the money they’d asked AIG for at the start of the negotiations in 2007, without using their power to force AIG’s creditors to negotiate.

This is nothing short of immoral. Is there anyone who can summon a reaction other than fist-clenching contempt after reading this? Does the Parallax Brief need to include details of the Goldman Sachs bonus pool for the last 12 months to ram home the point?

It’s all well and good railing against popularist criticism of speculators, and indeed, Mr. Redwood is right to chasten the Greek government for seeking to transfer the blame that should lie on its own shoulders. But the problem is that speculators are also involved in nefarious activities that deserve every quantum of popular outrage generated.

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A Weaker Pound is a Good Thing

February 8th, 2010 by The Parallax Brief

After egregiously criticizing the Bank of England’s Monetary Policy Committee (MPC), the committee responsible for conducting the United Kingdom’s monetary policy, John Redwood — astonishingly — piles right into an attack on a weakening pound:

“Today the pound opened lower again on the exchanges against the dollar. That means dearer petrol, dearer commodities, dearer imports from dollar related parts of the world including China. We are poorer as a result.

[…]

Months ago I started warning they were overdoing the easy policy which was bound to lead to a lower pound and higher prices… Why can’t they find people who can get it right?”

But in fact, a weaker pound is just what the British economy needs now.

Currently, the country has a large current account deficit, meaning that we currently import – and therefore must pay for – more goods than we export. Or, to put it another way, we spend more than we make.

A weak pound will simultaneously discourage the purchase of foreign made goods, in favour of suddenly relatively cheaper homegrown fare, while making British made goods and services more competitive across the globe.

At one fell swoop, Britain’s current account deficit is helped back toward balance, while our manufacturing sector becomes more competitive at home and abroad, creating jobs.

So while a weak pound might be bad for those who want to buy BMWs, Chinese-made electronics or foreign holidays, it’s good for jobseekers and people who have invested in British factories.

Only if the pound drops precipitously should we worry: at that stage, investors would likely take flight from sterling denominated securities — including gilts — which would have disastrous consequences for the economy.

But we’re nowhere near that yet, and the current state of neglect for the pound really is a benign economic force.

The Parallax Brief suggests that if the Bank of England ever does decide to look for someone who “can get it right”, it will find pretty fallow ground in Wokingham.

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America Gives Succour to Fans of First-Past-the-Post

February 8th, 2010 by The Parallax Brief

There are many faults with the British parliamentary system and the voting procedures which elect its members: the smaller parties are grossly underrepresented in Parliament; the government in power can simply force through any legislation it wants; there is no real separation of the legislative and the executive branches of government, and power has been increasingly centralized with the executive during the ministries of four consecutive prime ministers.

However, one might wonder, looking at the legislative constipation currently clogging the US Congress, whether Britain really wants to abandon a system which so implacably prejudices against minority and coalition governments.

Nobel Laureate Paul Krugman offers some historical context in his New York Times Column today:

A brief history lesson: In the 17th and 18th centuries, the Polish legislature, the Sejm, operated on the unanimity principle: any member could nullify legislation by shouting “I do not allow!” This made the nation largely ungovernable, and neighboring regimes began hacking off pieces of its territory. By 1795 Poland had disappeared, not to re-emerge for more than a century.

Today, the U.S. Senate seems determined to make the Sejm look good by comparison.

Last week, after nine months, the Senate finally approved Martha Johnson to head the General Services Administration, which runs government buildings and purchases supplies. It’s an essentially nonpolitical position, and nobody questioned Ms. Johnson’s qualifications: she was approved by a vote of 94 to 2. But Senator Christopher Bond, Republican of Missouri, had put a “hold” on her appointment to pressure the government into approving a building project in Kansas City.

This dubious achievement may have inspired Senator Richard Shelby, Republican of Alabama. In any case, Mr. Shelby has now placed a hold on all outstanding Obama administration nominations — about 70 high-level government positions — until his state gets a tanker contract and a counterterrorism center.

[…]

In the past, holds were used sparingly. That’s because, as a Congressional Research Service report on the practice says, the Senate used to be ruled by “traditions of comity, courtesy, reciprocity, and accommodation.” But that was then. Rules that used to be workable have become crippling now that one of the nation’s major political parties has descended into nihilism, seeing no harm — in fact, political dividends — in making the nation ungovernable.

How bad is it? It’s so bad that I miss Newt Gingrich.

Readers may recall that in 1995 Mr. Gingrich, then speaker of the House, cut off the federal government’s funding and forced a temporary government shutdown. It was ugly and extreme, but at least Mr. Gingrich had specific demands: he wanted Bill Clinton to agree to sharp cuts in Medicare.

Today, by contrast, the Republican leaders refuse to offer any specific proposals. They inveigh against the deficit — and last month their senators voted in lockstep against any increase in the federal debt limit, a move that would have precipitated another government shutdown if Democrats hadn’t had 60 votes. But they also denounce anything that might actually reduce the deficit, including, ironically, any effort to spend Medicare funds more wisely.

And with the national G.O.P. having abdicated any responsibility for making things work, it’s only natural that individual senators should feel free to take the nation hostage until they get their pet projects funded.

America-watchers will no doubt feel a pang of deja vi writ large: California was last year held hostage by the Republican minority because the state budget had to be voted through the State Congress on a two-thirds majority.

While a country wouldn’t want to become subjugated to the tyranny of the majority, it’s also fair to say that the last thing we need is America’s situation, where parliamentary rules and circumstances allow one minority party — or, worse, individual MPs — to effectively clog the entire legislative system.

Of course, politics here is not as viciously partisan as it is across the Pond — and there is clearly no facsimile of the grossly irresponsible, wantonly contrarian Republican party — but Britain is currently facing a fiscal outlook worse than any since the Winter of Discontent, and even the slightest delay while backroom deals are made, or the merest hint that the bitter medicine Britain needs to swallow to rebalance its books will be watered down to satisfy coalition partners or backbench swing-voters, will be swiftly punished by the bond market, with catastrophic consequences for the economy and the country.

It seems that first-past-the-post might be on the way out just when we need it most.

A Brief History of Quantitative Easing — and Why it is not Inflationary

February 7th, 2010 by The Parallax Brief

Last week, the Bank of England ended it’s quantitative easing (QE) program last week, and the Parallax Brief thought this might be a good time to look at QE, what it’s designed for, and some of the myths spread by those on the conservative right.

QE is a tool available to central banks to further loosen monetary policy beyond zero percent interest rates. Ordinarily, interest rates in Britain are raised when inflation looks as though it will rise above 2%, and are lowered when inflation looks as though it will fall below 2%. Raising rates makes money more scarce, putting the breaks on economic growth and the money in circulation, thus holding down inflation; lowering rates does the opposite, increasing the money in circulation and boosting economic development.

However, during the financial crisis, interest rates reached zero, yet the inflationary situation, and the economic outlook, still demanded looser monetary policy. So, what can the central bank do? It cannot lower interest rates below zero because the one does not accept a fee to take a loan — or, to put it in simpler terms, you wouldn’t expect to get interest from the bank every money to borrow its money! — and yet inflation is still falling. QE is the way around this. What it does, in effect, is further loosen monetary policy by printing money and using that money to purchase government bonds (or other securities), thereby increasing the money in circulation even beyond that which would normally by permitted by zero interest rates and holding down to real cost of borrowing.

Yet the monetary hawks argue that this will inevitably lead to inflation. Print more money, they argue, and more money will be chasing the same amount of goods, and prices will rise, inevitably leading to inflation. Worse, they say ominously, inflationary expectations will rise and the government will have to fight tooth and nail to put the genie of inflation back into the bottle, lest Britain descend into some kind of Weimar-inspired hell hole of hyperinflation.

But is this really the case? No. Britain is in a liquidity trap situation, whereby the extra money does not necessarily find its way back into the real economy, and stays trapped as banks struggle desperately to repair their savaged balance sheets.

The inflation hawks are divorced from reality. Their views are destroyed by one chart. Above is the seasonally adjusted M3 money growth for the last ten years, and we can see it is currently near its ten year low, despite QE.

Being concerned about inflation in a liquidity trap situation is like finding a Mars bar during a famine and worrying about getting fat.

It’s time for the inflation hawks to own up and admit they were wrong.

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Adam Curtis — The Power of Blogs

February 7th, 2010 by The Parallax Brief

Adam Curtis is the finest documentary maker in the world. He picks subjects which look at the broad sweep of intellectual theory and the unintended and awesome consequences they have on society. His documentaries have included The Century of the Self, which examines the influence of Sigmund Freud’s research on controlling and sculpting individuals and society, The Trap, which examines the two concepts of liberty as set out by Isaiah Berlin, and the consequences of pursuing negative freedom in the west, The Power of Nightmares, which chronicled the parallel histories of the Neo-Conservative and Islamists, and The Mayfair Set, which looked at the lives of a small group of industrialists and entrepreneurs connected through the Claremont Club in Mayfair, London and the improbably huge impact they would have on Thatcherite/Reaganomics, western relations with the middle east, and the structure of modern society.

More important than the subject matter, however, his work is a remarkable fusion of spoken word, popular music, film sound effects, and a blizzard of tangentially relevant imagery, film and nerdishly sourced archive footage. It’s clear that he was a huge influence on Michael Moore, but, like Oasis and the Beatles, the original is far superior to the facsimile.

Even if one doesn’t agree with his conclusions or interpretations, one must appreciate the skill of the artist.

If you haven’t seen any of his work before, here’s a four-minute film he made for the BBC recently, about the rise and fall of the television news journalist.

Anyway, the point of this verbose preamble is that Adam Curtis has recently started writing a blog for the BBC. He discusses major historic events and minor curiosities, and accompanies each entry with wonderful rare archive footage — the type of thing which finds its way into his documentaries.

So can the Parallax Brief please recommend the blog, but specifically his latest post, on Afghanistan, and the parallel stories of Benazir Bhutto and Yegor Gaidar, who Curtis argues tried to save their countries from the acute crises caused by Afghanistan, but whose actions had terrible unforeseen consequences.

It’s a familiar theme for those who have watched his documentaries, and like the documentaries, you may not agree with all his points, or his conclusion, but the archive footage and the skill of the storyteller makes the experience addictive.

Enjoy:

ILLUSTRIOUS CORPSES – PART ONE

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