The Three Horsemen of the Apocalypse

“And I looked, and beheld a pale horse, and the name that sat on him was Death, and Hell followed with him” (Book of Revelations 6:8)

There are many horrors that keep little children awake; the monsters under the bed, the bogeyman or images of the Chuckle Brothers. My own personal tormentor was Struwwelpeter, a series of stories in which various protagonists are punished for their petty misdemeanours in a horrifically disproportionate manner. For years it gave me sleepless nights and an unhealthy fear of tailors, however I digress. But as teenagers and adults, our irrational fears of the petty and the unknown are replaced by something more tangible… something more real.

For economists, elected representative and stockbrokers, this one graph represents every monster under the bed, every bogeyman and every Struwwelpeter that they can image. On 6th May 2010, the Dow Jones Industrial Average Index dropped a staggering 9.2%, without a single identifiable reason. This news barely reached our shores due to the General Election, but had most American commentators reaching for their Valium. The consequences could have be dire; a system based on the confidence of investors could have reacted irrationally and began panic-selling their stock, which in turn may have sent one of the oldest and most respected financial institutions into economic meltdown. Many economic commentators have insisted that this stock market ‘shock’ was due to a perfect storm of economic variables that aligned to create the biggest single day drop in the Dow Jones’ history; a mixture of ‘Fat Finger Trade’, exchange rate issues, insider trading, the large purchase of put options and the financial crisis in Greece.

The Greek financial crisis is possibly the most interesting and significant of these economic variables. There is no doubt that the Greek economy has been build on very weak and unstable foundations; in which the Government was receiving less in tax receipts than it was spending in the public sector, additionally the current strength of the Euro significantly exasperated the situation. However, the crisis was intensified by the international credit rating agencies Standard & Poor’s, Moody’s and Fitch Ratings negatively re-evaluating the credit worthiness of the Greek economy. The impact was devastating on the Greek economy and questions are now raised concerning other European economies. However, questions need to be asked about these credit rating agencies – how can these undemocratic institutions exert so much power and influence over international affairs?

Surely it is a huge conflict of interests that the companies, institutions, governments, hedge funds and investors that pay these credit rating agencies to evaluate the economies of various countries are the same companies, etc that benefit if Standard & Poor’s, Moody’s and Fitch Ratings devalue a credit rating since they can charge a higher APR. They are masquerading as an independent advice support system that enables their clients to make informed choices for their investments; but in actuality they are acting as hunters, killing off weak prey for investment vultures to feed on the carcasses of the nearly dead. There are many examples of these credit rating agencies threatening to downgrade a country’s credit worthiness for no apparent reason, costing a country millions, if not billions, in higher interest charges.

Given the economic crisis of the past few years there needs to be a significant re-evaluation of global economic priorities – no longer should companies like Standard & Poor’s be able to act with impunity, there must be stricter regulations on all financial systems in which short-term financial gambling and market manipulation can not prosper. Furthermore, the needs to be a clear delineation between Governments, financial regulatory institutions and the private sector, otherwise we are doomed to repeat the same mistakes of the past, and next time the consequences maybe worse than a deep recession.

First Published 23rd May 2010

And the Winner is…

As the dust settles on the battlefield that was the 2010 General Election, it is now possible to identify some big political winners and losers. The election promised to be a bloody encounter, with the aftermath resembling the Battle of Naseby, but for all its pre-match hype the election descended into a bizarre episode of It’s a Knockout, where the result is rather inconsequential, but everyone enjoyed the ride. With Sky News’ “political heavyweight” Adam Boulton as the over overexcited Stuart Hall, demeaning the contestants at every given opportunity as they attempt to carefully manoeuvre themselves through a political obstacle course.

On the surface it is possible to assert that David Cameron and the Conservative Party won the election, they won more seats and more of the popular vote than their rivals. However, given the unpopularity of the incumbent Prime Minister and government, the state of the economy, unemployment and the spectre of the Iraq War, this Tory victory almost feels like a defeat. The result – an unsatisfactory coalition with the Liberal Democrats and an election that the Bank of England Governor Mervyn King believes will leave the winning Party out of power for a generation due to the unpopularity of the necessary austerity measures. Parallels could be drawn with the 1992 General Election, in which neither the Labour or the Conservative Parties particularly wanted to win due to the gathering economic storm, and ultimately Labour’s short term defeat was their long term gain.

Again a case could be made for the Liberal Democrats and Nick Clegg as the big winners of the 2010 General Election; an increase in their share of the popular vote, increased exposure on a national level and the possibility to influence legislation at a cabinet level. But, and there was always going to be a big but, are the Liberal Democrats trading short term influence for long term obscurity . Many voters feel betrayed that the Lib Dems are propping up a Tory administration that are ideologically significantly separate and are going to be used are a tool for David Cameron to modernise his own party. It will be too easy at the next general election for the Conservative Party to blame the Liberal Democrats for the failings of this current administration. Damned by both sides of the party, the Liberal Democrats could spend another thirty years waiting for a taste of power.

If there is a significant loser in this election there is little argument that Gordon Brown has achieved this most dubious of accolades. But it always was likely to happen, any incumbent Prime Minister has a record to defend and Gordon Brown just was not that good at defending his legacy. However, the Labour Party could be the big winners of the election in the long term, even though the electorate roundly rejected their current reincarnation. There obviously is a will amongst the British electorate for a progressive policy agenda, and probably the Labour Party would have polled better if Gordon Brown was not in power, but the loss was not a rout as many commentators had predicted. If the Labour Party reorganise and realign themselves during their period in opposition the next election could be a significant success – if Mervyn King is to be believed.

And the winner is… No one!

 

 

First Published 19th May 2010

What Price Power?

One of the most noticeable changes in British politics over the last five years has been David Cameron’s attempts to shift the Conservative Party to the centre-right of the political spectrum. The party of Michael Howard, Iain Duncan Smith and David Davies seemed a distant memory for many new Tory supporters, the ideology of a small state and the infallibility of the economic marketplace was replaced by protection of many New Labour initiatives and strengthening many regulatory bodies (however, this was probably inevitable after the banking crisis).

So with rumours abound that David Cameron has ceded to many Liberal Democrat policy demands in order to have the strength to form the next government, what price has he paid for the acquiescence of the “right wing” of the Conservative Party? Obviously, there is a price to be paid, even the slightest suggestion of the EU normally has the Tory Party split down the middle, so forming a government with the most Pro-European party can be perceived as forming an unholy alliance.There has to be a sweetener for the Right Wing Tories to swallow the bitterest of pills. The suggestion is that for the silence of the Right, David Cameron has agreed that certain senior cabinet positions will be filled by the aforementioned Michael Howard, David Davies and, possibly most surprisingly Iain Duncan Smith.Their reintroduction back into the front line of British politics will surely shorten the shelf life of any coalition government, but it also raises important questions concerning the direction of new Conservative Party policy. The British electorate overwhelmingly voted for centre left, progressive parties (over half the country at the last count), but the influence of these Right Wingers at cabinet level will surely result in an unpopular shift towards the Right of the political spectrum.

Aneurin Bevan once commented after brokering the deal between the Ministry of Health and the BMA for the NHS, that the concessions he had to give was akin to “stuffing their mouths with gold”. David Cameron probably has a lot of sympathy for Nye’s sentiments…

First Published 11th May 2010

Faustian Deal or No Deal…

With rumour and counter rumour, the General Election malaise continues to remain unresolved. The central issues surrounds the options available to Nick Clegg and the Liberal Democrats; it would not be overstating the issue by pronouncing that Mr Clegg and his advisers have a chance to revolutionize British politics. The Lib Dems are a party standing on the edge of the precipice, one ill advised step the party could become an irrelevant side show for another 90 years, alternatively if they carefully plot their way through this political minefield the Liberal Democrats could conceivably become a genuine third party.

The warnings are clear and well signposted – join a Conservative coalition and risk alienating most of the core support, join a Labour coalition and be perceived to have no mandate from the electorate whilst becoming the crutch for an ailing Prime Minster (damnation by association, if you will). Yet the easiest road to follow could be the hardest for the general public to forgive, that is do nothing – allow the Conservative Party to form a minority administration and pass a Queen’s Speech, but only provide support on an ad-hoc basis. If the economy begins to struggle the Conservative Party and Tory supporting press will have the perfect whipping boy to blame for the indecision in the market – that is the Lib Dems refused to help the nation during difficult times because of petty partisan politics. But if there is a significant improvement in the economy David Cameron can take all the credit for leading Good Ship Britannia through the worst of economic storms despite the hindrance of the “unpatriotic” Mr Clegg.

However, the “do nothing” option is quite tempting for many Liberal Democrats, it would not alienate the core support, allowing the party leadership to only pass legislation that was politically palatable, it would also allow the Labour Party to regain some of their former strength with a brief period of opposition (i.e. sack Gordon Brown) and with the prospect of an autumn general election due to a weak government the Lib Dems could form a coalition with their more natural bedfellows the Labour Party. This is a long shot, but a risk/reward calculation could provide the Liberal Democrats with an opportunity that seems to arise once every hundred years – the opportunity to redefine the political caste.

 

 

First Published 10th May 2010

Fear and Loathing on the 2010 Tory Campaign Trail…

Harold Wilson once perfectly defined the British political landscape with his truism that a “week is a long time in politics”, and for David Cameron the last week has possibly felt more like an epoch rather than just a long time. The only other person that can truly relate to this incredible sense of time distortion is the Chinese tanker Captain who crashed into the (not so insignificant) Great Barrier Reef, after sailing through illegal shipping lanes, causing untold environmental damage. He knew the outcome a long time before the accident happened, but he still tried in vain to turn the ship around, but those tankers take a lot of turning and the crash was inevitable.

This general election has already thrown up a few surprises (the Lib Dems second in YouGov latest opinion poll, anyone?), but the biggest surprise of the whole election campaign is the Tories inability to gain any significant political momentum. Given the economic conditions and the unpopularity of the incumbent government, the Tories must have believed that the election would be an easier fight than it has been…

The constant media references to the similarities between David Cameron and Tony Blair, have been somewhat misleading – giving the impression that the 2010 general election was going to be an inverse repeat of 1997, in which Labour swept to power on a popular tide of goodwill and hope. Probably a more insightful comparison would be to compare this election with 1992: the opposition in both examples are trying to reinvent themselves, attempting to throw off the shackles of negative public opinion and a lack of trust. Plus the rising spectre of increasing tough economic conditions, in which the harsh realities of a global recession will come to bear – the public may just be comforted by the devil they know.

There are several key factors which are impacting upon the Conservatives inability to gain a significant lead in the opinion polls:

• The Shadow Cabinet is weak and unable to connect with the public – in 1997 the Labour Shadow Cabinet was a significant strength of Tony Blair’s election strategy, whether it was Robin Cook, Mo Mowlam, Gordon Brown, Jack Straw or David Blunkett; the Cabinet was prompted as a ‘Cabinet of Talent’. Currently the Conservatives are appearing to focus solely on David Cameron and George Osborne, sidelining the poor(!) Chris Grayling for fear of costly gaffes. Even John Prescott was given meaningful airtime in comparison.

 

• Lack of a coherent message – the main focus of the Conservatives’ election manifesto is the ‘Big Society’ in which the public can effect the running and management of many public institutions. The issues for most people are rooted in real problems, employment, transport or education, but the Tories have proposed an abstract concept that generates few pragmatic solutions for real issues. The Labour Party in 1997 offered a tangible response to the genuine concerns of the nation. The ‘Big Society’ is perceived as empty rhetoric, from the party that once claimed that “there is no such thing as society“.

 

• Whilst other parties are weak on the topic of Europe, the Conservatives can not exploit their advantage – in the public’s opinion the European Union is at a particularly low point, the rise of UKIP is testimony to this fact. The Labour Party and the Liberal Democrats are potentially committed to further European integration, but David Cameron is wary of using the populist EU stick to beat his opponents for fear that it may open old wounds, in the Conservative Party, that have only been plastered over – not healed. Witness the undercurrent of discontent at the 2009 Conservative Party conference, with David Cameron’s pledge that if the Lisbon Treaty was ratified the next Tory government would work within its parameters.

 

• David Cameron’s inability to connect with many of the electorate – whether this is due to old fashion class prejudice or the perception that he is style over substance, David Cameron has struggled to find a voice that speaks to a majority of people. This is not helped by an advertising campaign, organised by Andy Coulson, that appears to be confused and artificial. Most elections that are fought on the concept of ‘change’ have their vanguard amongst a section of the population that have been under-represented in previous regimes; youth, working class or ethnic sections of the community. It is difficult for the general public to believe that a privileged and wealthy white man is sincere about significant change – also it is not a typical election pledge by a party that is perceived to be more concerned with the conservation of society rather than its radical overhaul.

 

• The inability of the Conservative Party to reassure the public that the recession would have been better under their guidance – even though there are significant differences between Labour and Tory economic policy, it would have been impossible for the Conservative Party to have claimed that they would have avoided the recession with tighter regulations of the banking sector. After all it was the Conservative Party that actively encouraged deregulation of the finance sector allowing ‘bankers’ the freedom to recklessly gamble the country’s economic stability by chasing larger profits.

The Chinese tanker Captain and David Cameron have both discovered something important in the last fortnight – big ships take a long time to turn so it’s vital to make sure that you have plotted correct course before you sail.

 

 

First Published 20th April 2010