Month: May 2008

The loathsome government of Burma is an extreme example of an all-too-common phenomenon. Too many people in power have a cruel desire to control everything in the society they are meant to serve. They wish to manipulate the media, send out only positive images of themselves, and exclude, punish or destroy anyone who wishes to disagree with them. The military junta produce ludicrous television pictures of a happy people gratefully receiving aid from the army, at a time when thousands are close to death without shelter, without enough clean water or food, and prey to disease. They seek to ban any foreigner from coming to their country to help, as they fear they will send back words and pictures reporting the truth, and fear they will expose the gross inadequacies of the regime’s response to such a major human tragedy.

I admire the bravery of the anonymous BBC reporter who has sent back vivid and worrying words to describe the tragedy unfolding in the delta. I admire the patient work of the humanitarian organisations, trying to persuade the military government that they should be allowed to help. I regret the clumsy, attention-seeking intervention of the Lib Dem leader, Mr Clegg, who suggested dropping food supplies from helicopters or planes without the permission of the Burmese government. Has he checked that the military regime would leave such planes unmolested and not treat them as enemy aircraft? Has he thought about the problems of the terrain in the flooded delta, and how difficult it would prove to retrieve many of the large packages sent from the skies? How would he prevent the junta seeking to intercept those parcels which could be reached, and taking them for their own purposes? Did he not hear the impatience in the response of those who are trying to negotiate an agreement with this dreadful government? We all share his wish to do something, but believe the international community can do more if it works with, and through, people on the ground in Burma.

The Burma regime is clearly paranoid. It remembers that the US, EU and UK have all condemned it in the past and have imposed sanctions. It fears they will use this opportunity to expose it and will be intimidated by proposals for unilateral western intervention. It naively believes it can control the information, words and pictures coming out. Fortunately, in a footloose world where westerners are already in Burma for other purposes, and in a world where there are so many cameras, mobile phones and communications equipment, pictures and information will flow out to tell the rest about us of the sad plight of so many Burmese.

The international community wants to help, and can help. To help effectively the regime has to be persuaded to take in not just more food and water, but also equipment to deliver the supplies to the dispossessed, and technical assistance to begin the recovery. That cannot be done by aerial bombardment. It can only be done by negotiation.

Vote Conservative in the cold and wet, dodging the hailstones, on May 1st, and enjoy a week of sunshine and summer temperatures.

Let’s hope this felicitous coincidence will be matched by improvements from Conservative government in action at the local level. I was pleased to see Boris has set up a Commission to help him cut costs at City Hall. They will be spoilt for choice, starting with the over the top 70 press officers, and working through the advisers Ken needed to run an alternative foreign policy.A staff freeze from day one, with new recruitment only permitted with Mayoral authority, would soon start to save the Council taxpayer serious money.

The other day the head of a major services company which takes on public sector work came to see me. He said they could perform more or less any administrative function currently undertaken by branches of UK government for between 15% and 30% less than its cost in house, and they would take on all the staff involved in the activity because they could find other things for them to do where they were not needed to carry out the original operation. If they can do, so could the in house teams if they were under pressure to do so.

Savings of that magnitude should be easy – the system has not been asked to deliver more for less for a decade, and looks very flabby compared to the best of the private sector under the cosh of international competition from China and India.

Today Russia commemorates the ending of the Second World War, one day after our VE day as always. The new President, doubtless influenced by Mr Putin, has decided that Russia is now strong enough to parade her military might as part of the display. As the oil price climbs to ever higher levels, Russia’s income grows. As her income grows, so she spends more on weaponry, to remind the USA that she is not unchallenged.

On another ocean, two Asian powers are also questioning US supremacy.

The Japanese have been honorary members of the Anglosphere since 1945, plugged into the first world of corporate activity and progressively freer trade. They have usually accepted US leadership. At the end of 1980s Japan started to flex her diplomatic muscles, doubting the US ability to adapt and grow. She chose to do so at a time when the Japanese bubble was at its most full blown. The Japanese sell off of the early 1990s coincided with the strong US move forward based on digital technology and the communications revolution, leaving the Japanese looking foolish and weak as their markets crashed and stayed down for a long time.

Today some Japanese pundits are questioning US supremacy again. They point to the weakness of the dollar, the sub prime problems, and growing dependence of the US on Chinese goods. They would be wrong to read these as signs of the end of US economic supremacy, just as surely as they were wrong about the collapse of the USA in 1990.

The truth is that the USA has outgrown both Japan and the EU over the last decade. Despite starting with more income per head and with a technological lead which others can learn from, the strength, breadth and depth of the US economy has been on display during years of poorer performance from both Japan and the EU.

Japan worries about her position, perched close to China in the Pacific half of the world. This may be the Pacific century, and the excitement may come from the West coast of the USA, from India and China, but that does not necessarily make it comfortable for Japan. Japan will be watching very carefully the military build up in China, and asking herself when the US will accept that China has serious military power to allow her to influence the patterns of politics and economics in her corner of the world?

Although China has 2.1 million military personnel, buttressed by a further 800,000 reserves, she still lacks aircraft carriers and overseas bases to project this conventional power far from home. The fleet comprises 29 destroyers , 46 frigates and 59 submarines. The air force boasts 1762 combat aircraft.

Whilst a lot of this equipment is not up to western standards, the latest planes and ships are much more sophisticated. Given the wealth of the country and the willingness to spend on armaments, we should assume a lively pace of new armament.

More significantly China has 806 missiles of varying capability (IISS Military Balance 2008) including intercontinental ones which could reach the USA and the EU. China is a nuclear weapons power, with more warheads than the UK but fewer than France at around 200.

We should expect China as she grows economically to buy in better weapons technologies from abroad and to re-arm heavily.

The US remains overwhelmingly stronger than Russia or China militarily, with a huge technological lead. Her command of the digital revolution, the US ability to see and hear an enemy and to strike one from a great distance are far ahead of what would be rivals can do. Nonetheless, the world is a more uncertain and dangerous place as China and Russia re-arm. The USA has to learn to operate with diplomacy and persuasion more, building more alliances with those who share her democratic and economic values.

This week has seen more moves to ease the Credit Crunch in the USA. The Fed has taken the drought in the money markets seriously, and has kept a big flow of liquidity available to ease the worst of the problem. The Term Auction facility is now up by another $50 billion to $150 billion. There are $100 billion of 28 day repurchase agreements, and $62 billion of reciprocal currency facilities with other Central Banks. There are some signs that rates in US money markets are falling from the extreme differentials of the worst of the Credit Crunch as a result of all this extra liquidity.

Now the jeremiahs are worrying that this will be bad for inflation, forcing higher interest rates ere long when the Fed realises the evil of its ways.

The latest figures for the US economy do not illustrate an inflationary problem. Over the year ended 31 March 2008 US productivity grew by a satisfactory 3.2%. Because people across the economy were working 3% smarter, with modest wage and salary rises overall, costs were under good control. Unit labour costs only grew by 0.2% for the year, hardly evidence of an incipient inflationary lift off.

The price increases are all coming from the price of food, energy and raw materials, which have been rising dramatically worldwide over the last six months. The surge in food prices is most alarming, as it is pricing the poorest out of their basic diets. The big rise in oil and other energy prices has a knock on effect to all prices of goods that need energy to produce them and energy to transport them.

The flooding of rice lands in Asia, the impact of the severe winter in China on agriculture and the demand for energy, and the diversion of crops for bio fuels have all helped force prices upwards. The Indian government is now seeking to stop “speculation” in food by preventing Indians buying and selling certain food based contracts. Several Asian countries are imposing export bans on staple foods.

These responses are understandable but they are not going to solve the underlying problem. There are “financial” buyers of wheat and rice futures contracts, but it is difficult to distinguish a “speculative” buyer from a trade user of such contracts. If just a few countries seek to ban trading in such items, the trade will continue elsewhere in the world. It is unlikely that Chicago will shut down its commodities trading markets, and if it did farmers would be up in arms as well as speculators. Nor will export bans solve the problem. The country that imposes an export ban on Item A will still want to import Item B and will be relying on other countries not imposing export bans. If too many export bans are put in place the world will become poorer, as trade will be damaged.

The shortages and high prices are squeezing us all, but they are especially bad news for the poor. The prices going up are the prices of the basics – food and fuel. The answer has to be more production of both, to cater for the growing demands of a rapidly rising world population. The high current oil price is leading to more exploration and more oil finds. The high prices of grains should lead to more land going under the plough, and the adoption of more intensive methods of growing grains in developing countries. In the meantime the UN needs to redouble its efforts to help the poorest in the worst affected countries. The answer is not to move to protectionism, the system which intensified the slump of the 1930s.

The Labour leadership’s astonishing U Turn on a referendum about Scottish independence in Scotland leaves Gordon Brown in an even weaker position over both the EU and England.

Up to this point we have been told that big constitutional issues – like Who governs the UK – is a matter for the UK Parliament and not for a popular vote. We have been deprived of the promised EU referendum on the grounds that it is too complicated for the voters to grasp and has to be left to professional politicians.

Now we learn that the question of who governs Scotland is a matter just for the Scottish people.

In that case Who governs the UK? should be a matter for the UK people. The case for a referendum on the big transfer of powers recommended in the EU Constitutional Treaty on this logic has to be put to the voters.

The Scottish example comes across as yet another injustice to England. If Scottish voters can settle their fate within the Union unilaterally, why can’t the English? Gordon Brown should now offer the English a vote on whether they wish to stay in the Union, which would force him to recognise the unfairness of the current settlement and to offer improvements in order to secure the continuing consent of the English to his constitutional arrangements. As a Unionist myself I want English votes for English issues – the restoration of the English Parliament at Westminster with dual mandate English MPs.

Under Labour we have had to put up with lop-sided devolution for a decade. Now under Labour we have to put up with lop sided democracy, where five million Scots can express a view on our constitution, but 50 million English cannot. When Labour first presented its skewed devolution proposals I argued that, far from strengthening the Union, they would weaken it as they were unfair on England. This further twist will do yet more damage. It is as if the SNP has found a way to get the London government to do its job for them. It has always been SNP strategy to make England angry with the Union. They have an able assistant in this cause in Gordon Brown.

The alternative explanation is that he is so weak he cannot control or influence Wendy Alexander, the Labour leader in Scotland. Labour’s devolution has badly miscarried from their party political point of view. They now have a Conservative Mayor of London, an SNP-led government in Scotland, a coalition government with the Welsh Nats in Wales, and no Labour representation in the Northern Ireland Assembly. I am sure their original idea was to create devolved government in places Labour usually won, and offer a voting system which made it difficult for anyone else to gain a majority.

There have been some great replies to the challenge to name some taxes.

I like:

Alcohol Duty – Fun tax
Betting Duty – I have a dream Tax
Congestion Charge Fine – Forgetful Tax
Air Passenger Duty – I should have stayed at home Tax
Vat on fuel – Tax on Tax Tax

and I would add

Inheritance Tax – The In case you’ve something left Tax.