Category Archives: Britain

Britain, Economic, Financial Markets, Government, Politics, Society

The real crisis of capitalism

ECONOMIC

THE past week has been a time for recalling the events of September 2008, their long shadow over the economics and politics of the past ten years and for drawing the right lessons for the future.

In particular, did the financial crisis prove that capitalism is fundamentally unstable and that a new model involving greater control and a much bigger role for the state, as favoured by Jeremy Corbyn’s Labour Party, is a better one? Or, the fact that the guilty men and women mainly got away with it, meant that public anger over the crisis was never assuaged?

We should understand that the financial crisis did not begin on the weekend of September 13-14, 2008, which saw frantic but unsuccessful efforts to save Lehman Brothers, the Wall Street investment bank. The crisis had been simmering for well over a year, a period that saw the run on Northern Rock and the start of Britain’s deepest recession in the post-war period.

The bankruptcy of Lehman, announced on September 15, turned a smouldering crisis into a ravaging forest fire that spread rapidly around the world. Banks were bailed-out by free-market governments using public funds. Alongside near-zero interest rates, central banks including the Bank of England did things they never would have contemplated in normal circumstances, most notably quantitative easing (or the printing of free money). Governments spent vast sums of money that ran into the billions boosting their economies to ease the impact of the crisis, but on the basis that they would cut back later. Austerity, on a scale and duration not seen in this country since the Geddes axe of the 1920s, was the course chosen by the coalition government in 2010.

 

MOST of what people think they know about the past decade is wrong. The danger in 2008 was of a prolonged period of deflation – falling prices and economic depression, a modern version of the 1930s. The reality is that both were avoided. After the shock of the crisis the economy grew more slowly than had been the norm, but it grew. All advanced economies were afflicted by weaker growth.

Income inequality in Britain has fallen since the crisis, not least because the burden of tax faced by the highest earners has increased. This financial year, 2018-19, the top 1% will pay almost 28% of all income tax, compared with just over 24% in 2007-08, paying £12bn a year more in tax than before the near meltdown. The top 10% accounts for 59.7% of all income tax revenues, up from 54.3%.

Austerity, as practised by the coalition led by David Cameron and now by a Tory minority government under Theresa May, was never about shrinking the size of the state for ideological reasons. The coalition’s mantra before the crisis was that after the spending splurge under Gordon Brown, the “proceeds of growth” would in future be shared between tax cuts and increased public spending.

Even faced with the task of reducing an out-of-control budget deficit, Mr Cameron ring-fenced NHS spending and imposed a target of spending 0.7% of gross national income on foreign aid. A better criticism of Tory austerity is that too much of it involved cuts to government investment and that the process has dragged on for too long, partly because it was leavened with tax cuts, mostly for working people.

 

THE financial crisis and its aftermath were painful but too many Tories seem to have been cowed by it from making a robust case for capitalism. This leaves the way open for Jeremy Corbyn and John McDonnell, Labour’s anti-capitalist chancellor. When a privatised rail company messes up, or a housebuilding boss is awarded a bonus running into tens of millions of pounds, there is rightly an outcry. The crisis itself was the product, yes, of many greedy bankers and a few in handcuffs might have satisfied public opinion, but it was also the consequence of regulators whose job it was to stop them failing. In many cases, including the recent collapse of Carillion, many of these problems arise at the interface between the public and private sector.

Of course, we all want to return to a time when living standards are rising at a decent pace. That will be achieved only when productivity growth also returns to something approaching past norms. Capitalism in Britain has, since the crisis, delivered something like seven times the number of new jobs as those cut by the public sector. Unemployment is at its lowest since the mid-1970s. It is the private sector, not failed prescriptions of anti-capitalism, that will deliver prosperity in the future.

 

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Britain, Defence, Military, NATO, Russia, United States

Russia flexes its military muscles

VOSTOK-2018

RUSSIA is conducting a “worrying and alarming” build-up of military power in regions across the world.

As defence sources have warned that manoeuvres by Moscow should be regarded as a “threat to western democracy”, it has been increasing its submarine activity off British shores in a bid to gather intelligence.

And in recent weeks Russia has sent numerous warships and supply chains through the English Channel en route to the eastern Mediterranean. It is feared they are amassing ahead of an air assault on the rebel-held area of Idlib in Syria, which could risk the lives of hundreds of innocent civilians.

Despite the focus often put on Russia’s cyber-warfare capabilities, this week it will conduct its largest military exercise in 37 years, involving almost 300,000 troops, in a huge demonstration of force that is causing alarm in Whitehall. Moscow has boasted that the war games – which serve as a reminder to other nations that Russia maintains a huge conventional military arsenal – will involve 1,000 warplanes, helicopters and drones, up to 80 combat and logistics ships and around 36,000 tanks, armoured personnel carriers and infantry fighting vehicles.

The exercises, called Vostok-2018, will be held in central and eastern Russia and will also include participants from the Mongolian and Chinese militaries.

The Kremlin says the drills are justified given the “aggressive and unfriendly” attitudes towards their country. Russia’s Chief of the General Staff Valery Gerasimov said they will include “massive” mock airstrikes and tests of defences against cruise missiles.

A defence source in Britain said: “We are seeing an alarming amount of military power being brought to bear around the globe by Russia.

“We consider it a worrying build-up of conventional forces and arms. It can clearly be regarded as a threat to Western democracy. A miscalculation could very easily lead to an escalation.”

While NATO has beefed up defences in Eastern Europe, the Russians have been accused of undermining international efforts for an Afghan-led peace process by inviting the Taliban to Moscow for peace talks. And they have also been accused of indirectly arming the Taliban – something they have repeatedly denied.

Defence Secretary Gavin Williamson has warned of the disruptive influence that the Russians were having on the peace process in Afghanistan. Mr Williamson says that we’re seeing a much greater interest from Russia in Afghanistan and Afghan affairs. There is ample evidence of Moscow meddling.

Mr Williamson said: “I would describe it as them wanting the NATO mission to fail. They do not want there to be seen to be the success of both the Afghan government and NATO. What it is very much designed to do is be a disruptor to other western nations which are trying to build stability in Afghanistan.”

The scale of the Vostok-2018 war games is equivalent to the forces deployed in one of the big Second World War battles. The exercises have been compared to Soviet manoeuvres in 1981, called Zapad-81, which involved simulated attacks on NATO.

President Vladimir Putin has made military modernisation, including new nuclear missiles, a priority.

The giant drill is an important show of strength by Putin, as a demonstration that – despite Western sanctions, including ones targeting his defence sector – his country remains defiant.

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Britain, Europe, Government, Russia, Society

The prospect of an escalating global war is terrifyingly real

THE WEST AND RUSSIA

THERESA MAY made perhaps the most momentous statement of her political career at Westminster when, in a dramatic scene in the Commons, she effectively accused the Russian state of an act of war. She said the Kremlin had instructed its military intelligence agency, the GRU, to assassinate the defector Sergei Skripal in March.

Backed up by a wealth of irrefutable evidence about the two Russian intelligence agents who carried out the assignment, which ultimately resulted in the death of a British citizen and three other serious poisoning cases, Mrs May’s assertion has huge implications, not only for Britain’s relations with the rogue Russian regime, but also for European and Western foreign policy as a whole.

The Salisbury incident is truly shocking. It is the first time that a Briton has been killed on our home soil by a chemical weapon deployed by a foreign power. Yet until it happened, Britain seemed utterly indifferent to the brutality of Vladimir Putin’s government.

 

AFTER Putin sanctioned and authorised another well publicised assault on British soil in 2006, when ex-Russian secret policeman Alexander Litvinenko was murdered with a radioactive poison in London, the initial shock and anger soon ebbed away to apathy, thanks in large part to the feebleness of our Government’s response.

Whilst it is true that the British authorities were quick to name the Russian suspects, the speed of this early announcement was not matched by resolute action from the Government.

The huffing and puffing in Whitehall produced half-measures. That can only have reassured the Russian spymasters that they could get away with assassination.

Sine then we have all become aware of the litany of charges against Russia, like its seizure of Crimea, its blood-soaked intervention in Syria in aide of President Assad’s tyranny and its shooting down of the Malaysian airliner MH17 over rebel-held Ukraine in 2014.

But all those atrocities happened abroad, it was argued. They were nothing to do with us, so a proverbial slap on the wrists would surely do.

In contrast, from the start of the Skripal case, the Prime Minister has been far tougher, imposing sanctions, expelling Russian diplomats, galvanising NATO, and even winning the support of Donald Trump’s White House and the EU for her actions.

Admittedly, this was partly because the potential consequence of the Salisbury poisoning was even more serious than the Litvinenko case, given that Novichok put hundreds of lives at risk.

Nevertheless, the British Government has, despite all its problems with Brexit, displayed a commendable spirit of resolution that has been all too absent until now.

Through her clear-sighted resolution, Theresa May has mounted a direct challenge to Putin’s regime.

And although it has taken six months to name the alleged perpetrators, it has been worth the wait. Thanks to the thoroughness of the investigation, the sheer weight of incriminating material she was able to announce in the Commons means that the Russian state cannot slide away from its responsibility for this crime.

What her Commons statement also did was to blow apart the absurd conspiracy theories about the Salisbury assault that have been circulating, many of them promoted by Putin’s regime or by Kremlin sympathisers.

The evidence, gathered by 250 detectives from 11,000 hours of CCTV footage, shows incontestably where the blame lies. This raises the question as to why the Kremlin resorted to such an act. The answer lies in Putin’s security policy, which is so important to his macho political persona and the image of his regime’s invincibility.

As a former KGB officer himself, he has made ruthlessness a central part of his strongman reputation. It thereby enhances his appeal among the Russian people.

When he first came to power in 2000 on his election as Russian president, there were profound weaknesses in the country’s security apparatus, epitomised by the defections of agents like Litvinenko and Skripal.

 

SO much information was leaked after the fall of communism that Western intelligence thought they had crippled Russia’s GRU agency, giving MI6 and the CIA a window directly into Russian policymaking which helped them to predict the Kremlin’s actions.

But Putin changed all that through a pitiless crackdown. Internal security was vastly improved and leaks closed.

The CIA has privately admitted that many of its contacts in Moscow have gone silent. Some have disappeared. Others simply do not respond to efforts to contact them.

Dealing mercilessly with the defectors became an essential part of that security crackdown.

Since March, it has often been asked why Skripal, a former double agent, should still be a target, so many years after Putin let him out of the Gulag and allowed him to retire to Britain. It appears that Putin’s intelligence services have decided that letting defectors sleep soundly at night offers too much temptation for others to follow suit.

Kill one, frighten 10,000 is an old tactic, and one that the Russians seem to have adopted. Washington certainly believes that putting the fear of God into potential double-agents was the real reason for poisoning Sergei Skripal.

The Salisbury attack may also reflect Putin’s wider, geopolitical strategy, with its focus on dividing the West through surprise, propaganda and intimidation. Years ago he decided the West, particularly America and Britain, wanted to get rid of his regime.

Instead of asking what he could do to allay Western concerns, he adopted the opposite course by using Russian wealth from the country’s energy resources, plus the long experience of Soviet spycraft, to mount campaigns of disinformation and denial.

Until Salisbury, that strategy appeared to be working. The Novichok assault, however, led to an unprecedented act of unity – due in part to the British Government’s resolve.

The West hung together and backed Britain. The question now is whether this accord will last. The Prime Minister has said that she will be trying to mobilise the EU to harden sanctions on Russia and co-ordinate counter-measures against Russian intelligence operations in Europe.

That could be easier said than done. The wall of unity is already showing signs of cracking. Apart from the awkwardness created by Brexit, Putin’s policy of divide and conquer is also having an impact, for the Russian president has been soft-talking allies in the EU.

Last month, for instance, he was a guest at the Austrian foreign minister’s wedding, and Vienna’s Right-wing government is one of the loudest voices in the EU clamouring for improving relations with Moscow.

In Italy, the new government is led by a critic of sanctions against Russia, so imposing new ones is unlikely to win Rome’s support.

Yet, Britain cannot possibly let the Salisbury attack slide away into unpunished oblivion as it did the Litvinenko case.

The need for action is all the more important because, worryingly, the balance of global power is sliding away from the West. The U.S., Britain and the EU are still economically potent, of course, but the rise of China as both an economic and military superpower adds to the challenge posed by Russia and other states.

Even Turkey, a member of NATO, is moving away from the West under President Erdogan. The fact is that the Salisbury outrage is a graphic indicator that the world is becoming a less stable place. It was a rare but disturbing episode that exposed the nature of the escalating global war between spy agencies.

In its aftermath, that war is likely to intensify.

Which makes it all the more imperative that the Government is robust and vigilant. The West needs to be resolute and united in the face of Putin’s ruthlessness.

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