Monthly Archives: October 2013

Foreign Affairs, Iraq, United States

Iraqi casualties of war continue to rise…

IRAQ

Recent research suggests that around half-a-million Iraqis died as a result of the war and occupation of their country between 2003 and 2011. Reliability of data on war deaths will always raise questions of a dubious nature because of the difficulties of conducting and reporting a comprehensive survey in a war zone.  Equally, too, there will always be political controversies over the figures presented. In the case of Iraq, a lower-than-expected death toll may be co-opted by those who wish to maintain that intervention was justified, the reverse holding true for detractors who will naturally imply the toll is far too high. Opposing views, however, should not distract from the fact that the tally- count is overly ghastly either way.

Much blood is still being shed in Iraq. The war itself may have officially ended when the U.S. withdrew its troops in 2011, but the death toll continues to rise. The situation is steadily worsening because of the cold-bloodied civil war in Syria. Events over the border have added to the abiding strains on Sunni-Shia relations, as well as providing extremist groups that are active throughout the region – particularly in unstable Iraq – with an incentive to push their own agendas.

Sectarian violence in Iraq reached its peak five years ago, but by any reckoning it is now back on the rise. With more than 5,000 deaths since April, this year is already the bloodiest since 2008.  In September alone, close to 1,000 people were killed – the majority of whom were Shia civilians wiped out by insurgent bombs exploding at public events like funerals or at markets. Such tactics are being used to cause maximum bloodshed.

Nouri al-Maliki, Iraq’s Prime Minister, has not helped either. By failing to conciliate Iraq’s Sunni majority, his corrupt, Shia-dominated government has pushed the disaffected into the embrace of murderous terrorist groups. So long as the conflict in Syria continues, Iraq will continue to endure the painful repercussions.

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Economic, Financial Markets, Government, Politics, Society, United States

A US default would trigger financial-armageddon…

AMERICA ON A PATH OF SELF-DESTRUCTION

For weeks, now, the world has watched anxiously as the richest and most powerful nation on earth has set itself on a definite course of self-destruction. First came the partial shutdown of the government over Congress’s refusal to agree a budget resolution; now, with even more seriousness, America is approaching the point at which it will reach the ceiling for its national debt, and will, presumably, have to default because no money is available for the U.S. to pay its debts.

The seriousness of the situation is such that the global financial system is built around the idea that America’s debt is the safest of all – usually in the form of bonds issued by the U.S. Treasury. It is this underpinning that makes the dollar the world’s main currency reserve, with Japan and China having each bought more than $1 trillion of U.S. bonds. Other nations around the world have also invested heavily, with hundreds of billions tied up in U.S. treasury debt. The thought now that such borrowing might not be secure has sent tremors through financial markets.

The consequences need to be understood. In a worst-case scenario, a U.S. default would trigger a financial-armageddon, and one that would match or eclipse that of the 2008 financial crisis. More likely, though, is a selective default, with individual bonds failing to be recognised (as each rolls-over). Whilst that would not immediately undermine the dollar’s currency reserve status, it would chip away at the faith and confidence the world has placed in America, accelerating the decline that many feel is already under way. Beijing’s repeated calls to ‘de-Americanise’ the world economy is eroding America’s prestige and prosperity, but, that said, there is no alternative reserve currency waiting to take the dollar’s place, as there was when the pound fell from global prominence.

Then there are the economic ramifications. Once the debt limit has been reached, the U.S. would be forced to live within its means. In the long-term that would be a good thing as expenditure could only be pared against tax receipts. The immediate constriction of government spending, however, on such a scale – given the current levels of American borrowing – would prompt an immediate and severe recession. The world economy would be brought to a shuddering halt.

One wonders whether the current antics, particularly that of the Tea Party, is appreciated to such an extent that it is undermining America’s image, power and credibility. The willingness of Tea Party Republicans to renege on fiscal promises that Congress has already made does raise questions far exceeding political gerrymandering.

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Britain, Economic, Energy, Government, Politics, Society

The folly of Labour’s energy policy and what needs to be done…

ENERGY MARKET

Ed Miliband’s headline-grabbing pledge to freeze energy prices until 2017 if Labour is elected at the next General Election has already seen one of the ‘Big Six’ suppliers, SSE, raise its prices by an average of 8.2 per cent. Dire warnings have followed that if other utility companies follow suite, as they are expected to, the poor will have to choose between heating and eating as the winter bites. Mr Miliband could not have planned it better – first, we witnessed billions being wiped off the stock market following his announcement on an energy-price freeze at the Labour Party conference. And now, two weeks on, we are braced for yet another round of what could amount to double-digit increases to the basic price of energy for consumers.

Despite SSE’s decision, we must examine more closely why the facts of the energy market fail to conform to Mr Miliband’s egalitarian rhetoric. To start with, while British consumers may well be aggrieved with rising energy bills, they are hardly in isolation. Last year, our electricity prices were ranked 12th highest in the European Union, below all of our major rivals (except France). Britain’s gas prices were the lowest in Western Europe.

Next, it should be pointed out that many of the factors behind rising prices are beyond the control of any energy company or politician. As North Sea supplies dwindle, the UK is increasingly reliant on imported gas from countries such a Qatar. Others are in the same fix, too, with prices being driven in accordance with the laws of economics and the market.

What comes next is even more important to understand. While Mr Miliband has sought to frame the energy debate as a ‘cost of living’ issue, this is cunning and shrewd brinkmanship. The fact that energy bills have risen by a quarter over the past five years, at a time of huge pressure on incomes, has infuriated many. Nowadays, though, energy prices are being more robustly used as a policy tool. They are being used to subsidise the next generation of power stations – where the cost of building and construction has risen sharply due to Labour’s failure to replace those it mothballed. This raises the extraordinary prospect of widespread blackouts as the conceivable position arises of demand outstripping supply. Surging energy bills are also being used to fund a decarbonisation agenda that has seen non-competitive renewables receive bountiful sums in subsidies.

Yet, all the more surprising that the Labour leader does not recognise this, despite the fact it was Mr Miliband who had set-up the regime in the first place, when he was energy and climate change secretary in the last Labour government. At first, and to be fair, the Conservatives were happy to go along with it, although they have increasingly had second thoughts. Unfortunately, when the coalition came into being the control of energy was handed to the Liberal Democrats – who remain as fixated to the green and environmental agenda as Labour. The LibDem part of the coalition has made clear – through Vince Cable, the Business Secretary – that the renewables levy is non-negotiable.

So, what could the Conservatives do to bring down prices – and persuade voters that Labour’s offer is pie in the sky politics, if not complete nonsense?  A blueprint on Tory energy policy could be set out, countering the need to argue on a point-by-point basis with Labour on its policy, and one which should be designed to provide immediate relief. This is an opportunity for the Tory party to show how a majority Conservative government would help consumers.

A plan to create a proper market in energy, with smaller providers able to compete, would provide the market with competition that is much needed, particularly if new entrants to the market were made exempt from eco-levies. The current oligopoly serves no one’s interests other than the shareholders of the Big Six and the huge profits retained by them.

A new vision should accept that more money will be needed for energy infrastructure, but one where the new generating capacity is as cost-effective as possible, and delivers electricity at the lowest possible price. Embracing the shale gas revolution, for instance, would be a good start in that direction. Others might suggest decarbonising by building other types of energy driven plants but with a more rigorous subsidy regime in place. The sums wasted on renewable energy supplies have been astronomical. The status quo is to continue lumbering businesses and firms with unaffordable and uncompetitive energy costs.

Those subsidies that survive under such a plan should be stripped out of energy bills and instead become part of general taxation. Disguising such costs by loading them onto consumers discriminates against the poorest, an unfair and dishonest approach when many are struggling to pay for their gas and electricity anyway.

Keeping energy costs down can only be achieved if the market is made to work properly, not through a price-fixing cartel where the market is effectively rigged.

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