Category Archives: Politics

Egypt, Foreign Affairs, Politics, Society

Opinion: Inclusive democratic governance in Egypt must be a priority…

The prospect of a military intervention in Egypt looks inevitable given the country’s chaotic transition.

If the generals do seize the mantle of leadership that others have failed to effectively grasp, their move would suggest something much deeper than crass opportunism. Paradoxically, any military coup would underline one of the most striking features of Egyptian politics since the January 25, 2011, uprising: the absence of a political vision that should have been central in unifying the country.

The popular revolt that has seen millions of people take to the streets maybe a catharsis of empowerment that the Tamarud (or Rebellion) Movement has generated, but by itself this will not produce new leaders capable of deflecting the military’s renewed efforts in shaping the course of political change. In any event, the generals will be sailing against the headwinds of widespread public dissent.

To appreciate the challenges facing Egypt we should be clear who bears the most responsibility for this crisis. That responsibility sits firmly with the Muslim Brotherhood and its Justice Freedom Party. The Brotherhood has failed to grasp the important task of how elected leaders in any society should define a new basis for democratic national unity. Central to that is the need to create a symbolic language that promises both inclusion and reconciliation. Language is not merely about a perfunctory readiness to share power with rivals, but, along with reconciliation, must be pivoted around public acts and rhetoric that reassures those who have the most to fear from the type of democracy unfolding in Egypt.

It has been on this level that President Morsi of Egypt has failed, and why so much of the post-mortem analysis of the transition misses the point. The defenders of the Muslim Brotherhood have portrayed a story of efforts to include non-Islamists in the Cabinet of Mr Morsi and of the assembly that was drawn up to write a new constitution. They have, though, been carefully selecting their details.

Mohammad Morsi promised on his inauguration day to represent ‘all Egyptians’. Yet, in the year that followed, Brotherhood leaders communicated intolerance and arrogance to both their secular rivals and their Salafi competitors. Such language has only reinforced the commitment of the Brotherhood’s rank and file to marginalise and humiliate their rivals.

This humiliation came to a head in December 2012 when secular activists were taken hostage by Brotherhood radicals and tortured. The Internet videos of Brotherhood extremists delighting in the pain and degradation of their prisoners destroyed any basis of trust there might have been.

But if the Brotherhood bears most of the responsibility for the current crisis, the leaders of the Tamarud Movement must also face some tough questions. Having brought millions of people into the streets, what is its game plan? How, too, will the Tamarud avoid signalling to all Egyptians that the price its followers must now pay for two years of bad leadership is yet another form of political exclusion or a political process that might ultimately end up being controlled by the military?

Under Hosni Mubarak the Muslim Brotherhood had been prisoners of a system that denied them any hope of exercising any real political power. Freed from such shackles by the January 25 uprising, they sought immediate political vengeance.

But if the Brotherhood is at fault by taking revenge, the leaders of the Tamarud must now face the challenge of putting aside their own desires (or that of their followers) for score settling and focus instead on building a grass-roots political party that can help Egypt back to inclusive democratic governance.

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Britain, Consumer Affairs, Economic, Government, Politics

Consumer Affairs: Payday loan firms…

PAYDAY loan firms will not be banned from charging excessively high interest rates, despite a promised Government crackdown on sharp practices in the industry.

Leading companies were summoned for talks in Whitehall with Consumer Affairs Minister Jo Swinson MP, today, amid a myriad of concerns that they are driving desperate families to financial ruin.

In a toughly-worded intervention, Miss Swinson, the Member of Parliament for East Dunbartonshire, said she is determined to curb ‘irresponsible behaviour which exploits vulnerable consumers in financial strife’.

The minister of state confirmed payday loan firms such as Wonga will not be ordered to cut their interest rates. The LibDem MP cited concerns that people could be forced into borrowing from even shadier loan sharks.

Critics of payday loan firms insist that the exorbitant interest rates, which can reach 5,000 per cent a year, are the root cause of misery suffered by hundreds of thousands of people taking out payday loans.

Recently, the Archbishop of Canterbury, Justin Welby, called for a legal cap on payday lenders and the level of interest they are allowed to charge.

The Archbishop said:

… Once you have taken out the loan, it is difficult to get out of the cycle. With the rates offered, simply paying off the interest becomes a struggle.

Consumer organisation Which? published a study showing a million families a month are forced to take out payday loans. It found some 400,000 people take out the high interest loans to pay for essentials such as food and fuel. A further 240,000 need the cash to pay existing loans.

Which? says that almost half of the people taking out payday loans could not cover their repayments, forcing them deeper into debt as their ‘short-term’ loans are ‘rolled over’, with fresh interest added.

The Whitehall summit comes days after the £2 billion industry was referred by the Office of Fair Trading (OFT) to the Competition Commission. It will have the power to ban or limit the industry’s products, but will take up to 18 months to report.

It is understood the OFT has given the 50 lenders until the end of July to respond to calls for them to clean up their act or face closure. Five firms have since surrendered their licence, but only 20 have responded to date.

Labour MP Stella Creasy accused ministers of being too cosy with the industry. She said:

… Having a summit about payday lending without talking about capping interest rates is like discussing arson without mentioning matches.

In reply that interest rates should be capped, Miss Swinson said that could shut down short-term loans and force people towards illegal loan sharks or by taking other extreme measures. She has suggested, though, that the focus should be on limiting the ease with which loans are ‘rolled over’.

The Consumers Affairs Minister also raised concerns about automatic payment systems that let lenders raid bank accounts of clients to claw back money they are owed.

COMMENT

Payday lenders are notorious by the way in which they operate and the rates they charge should be capped. This opinion is based on the assumption that lending money to people with poor credit histories at sky-high interest rates is wrong. Unfortunately, the problem of unsecured lending is a warren of complexity.

The empirical evidence elsewhere is important to consider. In many other countries, including France, Germany, Australia and Japan, and in many states in America and provinces in Canada, interest rates are capped at a ceiling – such as 36 or 48 per cent a year. But this means that companies cease to offer loans to risky customers, who are then forced into the hands of illegal loan sharks, often run by organised crime gangs. Arguably, it is better to have payday lending in the legal economy, where it can at least be regulated, than to drive it into the criminal underworld.

Stella Creasy MP has campaigned tenaciously against irresponsible lending. She has said that the problems with a rate cap should not mean that we cannot act. Rather, she says, we must work harder and learn from others how best to act. She has proposed a cap on total repayments to try and break the cycle on compound interest and rollover debts that end up many times the size of the original loan. A way needs to be found without choking off the legitimate market for emergency short-term borrowing.

This, however, should be just the start of a programme of reforms to limit abuses in the payday-loan market. Further issues should be addressed by the Competition Commission following the investigation launched last week.

The Commission’s task is to look at unfair competitive practices that are suspected of giving borrowers a bad deal, such as convoluted information about interest rates and how they are applied. Lenders are also known to make it hard for borrowers to switch to a rival company.

A plethora of reforms are needed within the payday-loan industry. Any programme of serious reform should start first with the underlying causes of problem borrowing. Advertising, for example, should be restricted, on similar principles that have already been applied to the advertising of alcohol and tobacco. Adverts for payday loans could carry information about where to get debt advice. Payday lenders could be required, too, in paying a levy to fund helplines and services to help with addictive and self-destructive behaviour that leads to indebtedness in the first place, or to support the work of credit unions.

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Britain, Economic, Financial Markets, Government, Politics

UK economy: Growth is returning and the signs are promising…

SPENDING REVIEW

The Chancellor, George Osborne, is determined to stick to his guns, with yet another £11.5 billion of budget cuts to be delivered in an election year. Some may say this is a massive gamble for a Conservative Chancellor who will wish to see his party elected at the next general election.

But the Chancellor has to retain the confidence of the financial markets by showing he is willing to tackle the legacy of deficit and vast levels of debt left by Labour.

If the markets no longer have confidence in the economy, Britain’s low interest rates, which are so vital a component to recovery and growth, will come to a shuddering-halt. If that was to happen, many would face financial disaster.

The first fruits of Mr Osborne’s determined approach is seen in the latest publication from the Office of National Statistics which has presented its revisions of gross domestic product (GDP), the key measure of the total output of the economy.

After a dreadful couple of years, the economy appears to be genuinely on the mend. In the first three months of this year it recovered healthily, despite some poor weather which usually slows down performance, but this trend is confirmed by all the major economic indicators and surveys.

The influential National Institute of Economic and Social Research, an often stringent critic of the government, says that output expanded by 0.6 per cent in the last three full calendar months.

This means that the ‘modest recovery’, often referred to by the retiring Bank of England Governor Mervyn King, is well and truly underway.

Earlier estimates of GDP underplayed the actual health of the economy. Early estimates of construction activity, for example, fell short of the true picture. Building programmes ranging from shopping centres in Leeds, to new office towers in the City of London, as well as new homes being built across the land is evidence of that.

The building industry certainly looks to be doing much better than was previously thought. It is this improvement – together with a formidable robust service sector, sharply better production from the North Sea, and higher export levels (especially to America) – that is turning the economy round.

According to fund managers Henderson of the City of London there has been a strong pick-up in the amount of money circulating in the economy. They suggest that, on current trends, the UK could be among the fastest-growing leading Western nations this year, expanding by a remarkable 2 per cent.

In his House of Commons address, Mr Osborne hinted at the underlying strength of the economy. He pointed out that for every one public sector job that has been lost as a result of austerity and cost cutting, another five have been created in the private sector.

Essential to the delivery of continuing growth, however, will be the discovery of new markets for Britain’s goods and services – not least because of the appalling health of the economies of our major trading partners in the European Union.

The Chancellor said that one of the keys to this will be a ‘strengthening of trade and investment links with China’. As a spending priority, the Government is planning to work with Britain’s exporters to set up a series of centres to promote British goods and services in China’s fastest-growing cities. Switching the focus from Europe to the new wealth-creating economies of Asia is going to be critical for our continuing recovery.

In the meantime, however, it is Britain’s close trading and financial relationship with the United States and its recovering economy that is proving most important to export-led growth. Exports of both goods and services to the U.S. have been climbing strongly in recent months.

Amid the intense interest with what is going on in Brussels and the eurozone, it is often forgotten that America is by far our most important single marketplace. The UK exports to the U.S. everything from Rolls-Royce engines to defence equipment as well as music made by British iconic figures in our pop industry.

No one, though, should underestimate the task of what the government is faced with in building up the economy to the peak it reached before the 2008 financial crisis.

The UK’s debt is continuing to climb despite the cuts and will not reach its height until 2016, when it will be the equivalent of an alarming 93.2 per cent of the nation’s output according to the latest IMF forecast.

If items such as public sector pension liabilities, which are hidden from the country’s balance sheet, are included, our debts will actually exceed national output in 2016. The Chancellor’s latest reductions in spending, in fact, represent less than 0.1 per cent of the national debt as projected in the year 2015-16.

The Chancellor’s trimming of the national budget, despite the hysteria of hard-hitting cuts, is no more than a holding operation designed to stabilise market confidence between now and the election.

The arrival nest week of the new Bank of England Governor, Mark Carney, poached from the Bank of Canada, has the task of not just keeping inflation close to the Government’s 2 per cent target but also to support growth.

Now that the housing market finally appears to be recovering from the shock of the financial crisis, and more small and medium-sized businesses are taking out bank loans to expand, any increase in interest rates by Mr Carney would be the last thing the Treasury needs. Mr Carney will chair his first meeting of the interest-rate-setting Monetary Policy Committee next week and will set in place the new mandate for the Bank of England as outlined in the budget.

Mervyn King has warned of the dangers this would pose in terms of homeowners struggling to pay mortgages and the loss of confidence in business circles.

The financial markets, it should be remembered, are still extremely jittery. The mere suggestion last week that the United States might curb its huge amounts of quantitative easing (Q.E.) – or printing money – sent share prices crashing across the globe. Mr Carney will want to prevent that happening at all costs, as will the Chancellor.

State spending reductions, while necessary and essential to calm the markets, can only make a small dent in Britain’s deficit and debt. It is higher-than-expected growth that could radically alter the picture.

The greater the output of the economy, the more taxes are paid – and the less money is paid out in welfare benefits because so many more people are employed.

If Mr Osborne can deliver sustained growth by the election, he would then be in a strong position to be even more radical, by taking a long-overdue axe to Britain’s mammoth social security bill – by removing, for example, many generous benefits to wealthy pensioners – and put the economy on a path to true prosperity.

 

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