Why Britain should have a Financial Transaction Tax

Feckless. That was my reaction to this morning’s news about Britain’s veto of the treaty to save the Euro – only with more expletives and even then ‘feckless’ had a long pause between syllables. Britain has moved from the empty chair to a pariah in Europe, from comically inept to dangerous. Honestly, maybe Europe would be better off booting Britain out.

The veto stems from one key point, allegedly; a Financial Transaction Tax. This would disproportionately affect the City of London which contributes to 50% of Europe’s financial sector and according to neo-liberal theory would drive businesses out of London to seek places with lower tax rates because that means more profit (I personally suggest Somalia – no taxes there; it’s like a neo-liberals utopia). Consequentially, that means jobs will be lost and what little tax they do pay (just over £50 billion) will be lost.

The neo-liberal argument lost credibility since the beginning of the crisis; the theory has failed yet it is not falling. It is too entrenched with extra-democratic forces; the IMF, World Bank, WTO and markets and democratic governments are too tied to them. Capitalism does not need to fall, but be reformed.

Britain not only should adopt an FTT but needs it because...

...The FTT is just 0.01%, for any other industry this would be nothing, such a negligible amount. No one in their right mind would leave because of a 0.01% increase in tax. 0.01% is an accounting error. With this tax, corporations and bosses will not suddenly become impoverished. They will not flee to Japan, the USA or elsewhere because of a 0.01% tax increase. This ridiculously small amount would still raise billions and not for Europe, but for Britain; for our hospitals, our front line police and our schools which the government so desperately want to defend.

...“We are all in this together”. While UK families are being squeezed, seeing indirect and direct taxes go up and public services cut, yet the financial sector cannot cough up 0.01%. This is a clear indication of the government’s concern for the City before concern for the people; it shows exactly where their allegiance lies. I’m not one for Tory-bashing or negative politics, but it is difficult to justify a tax increase and service cut for people and refuse to raise tax by 0.01% for businesses.

...An FTT is in Britain’s interest, contrary to what the PM says. The S&D produced a document that shows that even at a low rate FTT would raise massive public revenues and serve as a weapon against short-termism and speculation. The S&D wanted an FTT of 0.05%; 0.01% will still suffice and not damage business. Now if we look at the strikes, it appears that public interest lies with maintaining the NHS, front line police, Sure Start and better schools. It is the epitome of a “Robin Hood Tax”, inherently it serves the people and is in our interest.

...The government’s arguments are inconsistent. An FTT is “not in Britain’s interest”, yet it is in our interest to cut the deficit at all (other) costs. Even a tiny rate of tax would raise billions more. It simply makes no sense. The Conservatives say that Britain should have a sovereign economic policy, which is a fair enough argument, yet surrenders economic policy to the markets. And economic policy underlies all other policy; even if the UK was out of the EU we would not be sovereign as “Goldman Sachs runs Britain” as one businessman put it. In fact, let’s go further. The Conservatives want powers back from Brussels and British policy to be made in Britain, yet refuses to give devolved power to Scotland and are ardent unionists. Their ideology demands less tax for all, yet tax went up during Thatcher’s years. The arguments for an EU in/out referenda can be applied for every other policy; WTO in/out, an FTT referendum, House of Lords reform and so forth. What the government says is different from what they do and the arguments are contradictory.

...It is possible to have an FTT raising billions and “incentivise” the financial sector to stay by “disincentivising” the leaving. This can be done by legislation; if they leave they must pay an extortionate fine, so high that it outweighs the benefits of leaving. If the EU set up tax and tariff, thus making it cheaper for business to do business in Europe which is still the largest consumer market in the world, the financial sector would not leave because we are a lucrative market and it would be cheaper to stay based here. We should use our leverage.

...Government should be in control, not the markets. Economic policy underlies all other policy; it cannot stay in the hands of the profit-seeking markets. Twice before in history the markets have had dominance – in 1850s and the 1920s. Both times it failed. The former regime collapsed because central government had to intervene to stop exploitation and give some relief to the poor; the markets went too out of hand and against the public good. The latter ended in depression. We need to shed US based neo-liberal ideology for a European based social democratic policy. The UK is European, not American and our culture and ideology should reflect that. The American model is incompatible with our values and their prison, health and education services are unfair and fail.

...The markets should bear its share of the cost of the crisis. It was more responsible for it that the people so, logically, it should bear more of the burden. The markets cannot have unlimited freedom because that leads to irresponsibility. Our society is ‘free’; I can do what I want. But there are laws in place that disincentivise me doing certain actions like stealing or murder where the state intervenes or lying where social convention has shaped me. I am still free but with limitations. The markets have no limitations or responsibilities.

Unless the PM genuinely believes his ideological line which would make him dangerous and blind, the only logic behind a refusal to sign the treaty is political. If his arguments are correct, then it is simply indicative of the over-reliance of Britain to the financial sector, a sector that cannot be controlled or managed but has to be incentivised by ever bigger carrots (we threw the stick out long ago). Britain faces a choice; Europe or USA, Social Democracy or Neo-liberalism, fairness or “freedom” in its basic form.

The FTT of just 0.01% would have raised billions in public revenue, helped pay off debt, been fair and been ‘European’. Instead we are faced with the prospect of deeper cuts to public services and more tax for the people. Way to go, Dave.  

Rethinking Democracy

Democracy is failing. In Western Europe this can be measured by the declining voter turnout at election, declining party membership and decline in trust with the established politicians, but in the Mediterranean the fall of democracy is measured by the imposition of non-elected governments and the control unelected bodies, the IMF and the markets, have over domestic policy. We could be witnessing the end of democracy and the rise of Technocracy.

And yet, direct participation is surely increasing. Protest movements such as the Occupy Wall Street and other anti-capitalist movements, popular protests against austerity and even the introduction of an online e-petition in Britain would suggest that people are not less interested in politics or about changing society, but are less interested in the established ways. In other words, there has been a shift from representative democracy (traditional Western democracy) towards direct democracy.

Representative and Direct democracy are two extremes of the system, and both are insufficient for modern society.

Direct democracy leads to chaos; two examples here. The first is California, the richest US state and if it were a separate country it would be the seventh richest in the world. Yet it has the second worst school system in the USA because of direct democracy; the citizens hold referenda against all new taxes and always vote against them. The other example is of the e-petitions; currently there is a petition to bring back the death penalty, all it needs is 100,000 people. One can find 100,000 people to say anything. Incidentally, there is also an online petition against the discussion of the death penalty; what happens if both reach 100,000? People are uninformed, and this is most evident by any discussion on the EU. It is tempting to say leave politics to those who know what they’re doing; if I was in a doctor’s surgery, I would ask the advice of the expert – the doctor – not the majority. Direct democracy asks a bunch of people who are not experts what to do.

The other extreme is just as outdated. Western democracies have been using representative democracy since the start of Western democracy, basically. There was a time when it was acceptable for an MP to only visit their constituency twice a year and never engage with their people. There was a time when what happened in Westminster was labelled ‘government business’ and no other questions were asked. That time is over. The media and new technology has created new demands and expectations for politicians. Politicians lose touch with the social reality; politicians thought that the average income was £40,000, the reality is more like £21,000. Representative democracy creates, and has created, a dichotomy, a split between “we” the people and “they” the politicians. This separation is entirely undemocratic; we should not have to build bridges but be on the same side.

There are two fundamental flaws in democracy; one is that it allows people who don’t know what they’re talking about to have a say, as outlined above. A fantastic example is of a Manchester City fan who votes Conservative because they are blue. The other flaw is that we humans are not very good at democracy. If there was a referendum on EU membership and 98% voted to leave, I would still call it a huge mistake, refuse to accept the result and, probably, emigrate. Humans do not like being on the losing side and it is hard to accept decisions voted democratically.

So what shape should democracy have? Should we even have a democracy? Is democracy compatible with the free markets? To answer the second question, yes now go and read Locke. To answer the third question, no now go and read John Gray.

Perhaps the most famous quote about democracy which succinctly summarises it is Abraham Lincoln’s oft quoted “democracy is government for the people, by the people and of the people”. This describes representative democracy (for), direct democracy (by) and the equal opportunity for anyone to run for office (of). But there is one important preposition Lincoln missed off and which is relevant for modern democracy; democracy is government with the people.

Time for a metaphor; “a slave who elects his master is still a slave”. But a slave who is cared for by his master, who is fed and cared for by his master, and whose grievances are addressed by his master, he is not a slave. It does not matter if we elect our politicians or not, what matters is their relations with their constituents. A dictatorship could be more democratic that an elected government if the dictatorship maintained effective communication with the constituents. Democracy means more than the ballot box; it means engagement and communication.

Communication is really the key word here, and it is what Deliberative democracy is all about. Deliberative democracy is basically the middle road between the two extremes (no surprise I’m taking the third way). Deliberative democracy engages with the voters, like Direct, but keeps power in the arms of experts, like Representative. It is the model for modern governance.

There are three methods of creating deliberative democracy; the Polder Mode, the Nihil Novi principle and to assess the role of the party.

The Polder Model was the model of government in the Netherlands in the 1980s and 1990s, responsible for the ‘Dutch Miracle’. Government, trade unions and employers consulted each other and compromised to get the best deal. This is linked with the principle of Nihil Novi Nisi Communae Consensu or “nothing about us without us”. Basically, education policy should be made with the collaboration with teachers via the NUT, and hospital policy made with the collaboration with doctors, nurses and so forth. Policy is made with people who are affected by it; they know what is needed more than politicians, yet government can keep an overall eye on all areas and how they link. Deliberation means communication, collaboration and compromise to produce stability and fairness.

It is no secret that Social Democracy is in electoral crisis. There is one common factor across all social democratic parties; they have become part of the establishment they sought to change and lost touch with their original audience; the people. They have focussed too much on the ‘Social’ and not on the ‘Democracy’. Deliberative democracy can remedy this. For too long they represented interests of a particular group; a class, an ideology, a pulse, an issue. Now, in the modern, post-ideological age with blurred class boundaries, the modern political party must become a vehicle for deliberative democracy. Each party still has a ‘unique selling point’; a set of policies, the people who run it, an ideal. The social democratic selling point is its relation with the people; we listen, we respect, we fight for and we alleviate their burdens. We need to revolutionise the Labour Party, take it back to its roots as a social movement rather than revolutionise the system. Labour needs to become a social movement once more.

There are two ways to create a more democratic system; reform the institution of government, and reform the attitude to and of politics which requires an assessment of the role of the people and politicians. If democracy is to improve society, it needs to embrace the people and the parties need to start practising deliberative democracy or else face growing protest. Because this change comes from the party it is possible – its possibility is what makes it necessary. We face a New Democratic age; democracy and politicians need to readjust themselves.

Towards a Fairer Society

We live in a pretty good society, relatively speaking. We do not have to worry about food shortages (yet), we are for the time being provided with free education, should we have an accident we have fairly advanced hospitals (the UK is ranked 18^th in the world based on data from 1997), and we do not have to walk the streets with weapons. Meanwhile, technology has made our lives easier and more comfortable. Clothing is not an issue or a chore apart from choosing what to wear. Ok, our consumerism is repugnant and the prevailing current ideology is not what we would prefer. But life has never been easier. At no time in human history have things been this great, even despite current economic problems.

Yet there is one prevalent under-current in this society that is too often put under the rug; the endemic rise in income inequality and its effects.

Income inequality has never been higher in the modern age (since1945). The richest tenth of the population own 31% of income, the poorest half own 23%, with the poorest tenth owning less than 1% of income. In 1979 13.7% of the population lived in poverty, in 2010 it was 22.5% with over 30% of children living in poverty. That is just in Britain, whose rise has been faster than any other Western European nation. Globally the picture is starker.

Before 1979, although the rich were getting richer, the poor were getting richer at a faster pace thus inequality was declining. However, since 1982 there has been an explosion in poverty and inequality; the culprit is the Washington Consensus, Thatcherism and Reaganomics. In 1979 7.5million lived in poverty, of which 1million lived in extreme poverty. By 1997 that figure was 14million with 5million in extreme poverty. New Labour did a lot of good in its time; some figures show that poverty was cut by 49%. But during New Labour the rich gained £365 in weekly income while the poor lost £7. Inequality remained static; it did not go down or at least not a great deal. And now the forecast is gloomy; tax will hit the poor hardest, the poorest tenth are set to lose 8% of their net income while the wealthiest tenth will lose 3.2%. Even under Labour’s pre-June 2010 budget there was a disparity of 1.6%. This is part of the neo-liberal mantra of “get the rich to work harder by paying them more, get the poor to work harder by paying them less and taking away their benefits”.

Welfare payments are due to be slashed, but that is only part of the picture. Over nine million adults rely on state benefits as their source of income as of 2009. Two-thirds of welfare goes to pensions, which the government says it will protect (convenient that pensioners are more likely to vote Conservative or at all). That leaves only one-third of the welfare pot to tamper with to meet its Draconian targets, of which only 2% goes towards unemployment benefits. Speaking of getting tough on welfare claimants, £5billion a year is lost on welfare fraud. So it is right for the government to come down on that. But over £45billion a year is lost on tax dodging, yet the government makes Philip Green, who owes £5billion, a government advisor.  

This view of taxation is epitomised by the attitude towards the EU’s Financial Transaction Tax, a variant of the popular Tobin Tax. A tax that, at just 0.1%, would raise £50billion a year. It is opposed because it would disadvantage British and also European business. That logically leads to a conclusion that there can be no global market without global standards; Europe is being punished for implementing the minimum wage and protecting workers dignity. And now some economists from the city want a tax cut from the 50p top up rate. Boardroom pay of large corporations have risen in successive years by 16% (2003-2004), 13%, 28% and 37% (2006-2007) when inflation was just 2%. The ILO has concluded that there is no correlation between executive pay and performance. This is while some people in Britain, one of the richest five countries in the world, has over a fifth of the population in poverty.

The poor use state services more than the rich; the rich can afford private health, private schools and can afford a private pension. They do not need state pay-offs to live. Yet it would cost the poorest tenth 30% of their income to replace the services lost to them, with an average of 10%, and the richest tenth just 2%. There is currently a disparity; the number of GPs per person is double in affluent areas due to geographic size. So although the rich do not need state paid doctors, they have double the amount of those who need and use them.

Supporters would argue that Britain has become wealthier since then. While it is true that the GDP in Britain has increased, we have become socially poorer. An extreme example is the Irish Republic; hailed as the model neo-liberal state in the 1990s, before the ship sank Ireland had a higher GDP per capita than the UK. Statistically, the Irish were richer than the British. However, Ireland also had a higher poverty rate than the UK. Despite higher GDP per capita, British hospitals were rated better than Irish ones (and considerably better than US ones by 19 places). Wealth is pointless if it not spent right and redistributed effectively. What the country gained economically, we lost socially and morally.

The effects of income inequality go beyond economic wellbeing. The most striking is the effects on health. There is a direct correlation between life expectancy and relative wealth; a perfect correlation. The wealthiest tenth have a life expectancy of 79, the poorest of just 66. The average is 74. There are places in Glasgow where just crossing the street would increase life expectancy by ten years. More equal societies have less crime, better educational standards, better health both physical and mental, recycle more, have tighter communities – basically everything good increases in an equal society (except, strangely, suicide). These are not just statements; they are statistics too numerous to list here but I direct you to The Spirit Level: Why More Equal Societies Almost Always Do Better by Richard Wilkinson and Kate Pickett. There’s at least three copies in the library – so there’s no excuse not to read it.

Inequality and poverty are what the Labour party was created to fight. To create a fairer, freer and safer society we need a radical reforming plan, but not a revolution. We should fully support a Financial Transaction Tax, pursue a policy of free trade and fair trade, an ‘ethical tax’ against companies that do not pay the British minimum wage to overseas workers, a European tax and tariff on non-European good with a concomitant re-industrialisation of Europe, and a refocus of economic policy towards employment. Fighting inequality needs to be more than just policy, it needs to be the foundation of all policy. It is not impossible to overcome.

Until we tackle income inequality, a better society will remain an illusion. Until we end this endemic cycle, this sickness in our society, we have no right to play politics. Until we collectively acknowledge these statistics, until we recognise the social reality, until we put them forth and press this issue to those who have the power to change things – politicians, the media, corporations, until then no idealised society can come to fruition.

I don’t want to sound Biblical, but “the love of money is a root of all kinds of evil, and in their eagerness to be rich some have wandered away from the faith”. That “faith” need not be Christian or even socialist, but simple common decency and responsibility.

Homage to Friedman

No political figure has had a bigger impact on the modern world than Milton Friedman, whose supporters will be celebrating his centenary and whose adversaries will be celebrating 10 years of his death. Whether one agrees with him or not, there is no denying that his ideas have shaped the modern world and he has had a bigger impact on British thinking and possibly on British Labour party than Marx.

His seminal work, Free to Choose, was written in 1979. Just two years later Ronald Reagan became president of the USA and enacted the ideology outlined by Freidman. Thatcher caught onto it in Britain, and soon supra-national entities started embodying it; the IMF set up in 1946, the World Bank, the WTO, OECD and even the EEC. Unelected bodies so when the people got fed up of Friedman, there was no way to overthrow his ideology. His ideology transcended democratic states; it is here to stay. 

Friedman’s ideology, neo-liberalism, was not revolutionary or new. It was based on the laissez-faire politics of Victorian Britain and pre-progressive America. William F Buckley and the neo-conservative “pulse” had a voice before Friedman’s work and a lot of similarities can be drawn with another thinker, Friedrich von Hayek. But these were fringe figures, none more so that the obscure though now celebrated novelist Ayn Rand. It was Friedman who brought their line of thinking to prominence, primarily through timing. Keynesian theory was on the brink in 1979, and the progressive era of American politics which saw co-operative federalism was at an end in 1974 due to the Watergate scandal. The Republican Party in particular needed a clean break. The world needed a new economic policy.

Hayek played an important role in the rise of neo-liberalism. He was condemned as a heretic in his time, his writings of the 1950s only came to fashion in the 1980s. Considering that he did not believe in social justice and ‘so long as we do totalitarianism will follow’, I personally lean towards giving him the ‘heretic’ label. Where Friedman is flawed, Hayek is rabid, particularly his opposition to socialism or the state in any form. Like his followers, he held human nature in low regard; most neo-liberal thinkers view man as inherently egoistic, following a misreading of Adam Smith. Hayek regards man as inherently lazy, and yet he deplores any form of state intervention to overcome laziness. He also says that men are inherently egoistic and overcome this to become socialist, the very thing he decries. There are very few credible ethical theories where egoism is good and altruism, the “virtue of socialism” (Hayek), is bad. Yet that is Hayek; a peculiar theorist with a sensational aversion to socialism who played a major role in Friedman’s ideology.

The danger of ideology is that it assumes absolutes; that there are truths that transcend time and space. “Government does more harm than good” is a classic absolute of economic liberals, from Hayek to Friedman. Yet it was government that stopped the exploitation of children, that set owners straight, that introduced a humane minimum wage, provided affordable healthcare to millions, cut hospital waiting times, tackled crime, increased educational standards and availability, and most important of all that cut poverty. It is not rhetorical but empirical; the ‘trickle-down effect’ is not and has not worked here in Britain. Charities and voluntary organisations are great for a community, but they are an underfunded, undertrained and overstretched sector. Time and again government has intervened and done good. Government is a tool, like a hammer. A hammer can be used for bad, such as to hurt someone, but it can be used for good, such as to put a nail into a wall. It is not intrinsically good or bad. Government has the potential for bad and to be misused, and it has been as 20^th Century European history has shown. But it can also be used for good, to help people, to protect. In late 19^th Century England, post-war Britain and now government is needed.

The reason why America got ahead of the game was because of geography; there was plenty of land to expand and isolation from Europe. The USA had to use its own resources and industry as it could not import cheaply. Further, tariffs were in place to bolster American industry. The free markets did not make America rich, but protectionism and geographical limitation did.

If the ideal state is one of no government intervention, no taxation and where the individual is supreme, then Somalia is the ideal state. A novel suggestion to make towards neo-liberals and neo-conservatives, and perhaps even the road Britain is going.

The implementation of Friedman’s ideology has had wide ramifications for social life, a good indicator is the family. Friedman claims that the state is to blame for the weakening of the family. This ignores the observation that fascist states often had stronger communities. But just look at some graphs; the policies of Friedman coincides with an explosion in income inequality, this correlates with a breakdown in community spirit, a rise in crime and deterioration of the family. Let’s take ‘family life’ as traditional conservatives like it; in 1979 74% of women aged 18-49 were married, that fell to 61% in 1991. Births outside marriage doubled during the 80s. This could simply reflect changing attitudes and is fairly harmless. But the number of one parent families rose from 12% in 1979 to 21% in 1992. In 1991 there was one divorce for every two marriages in the UK, a rate only comparable to the USA. Households that were wholly workless increased from 6.5% in 1975 to 16.4% in 1985 to 19.1% in 1994. Family life is one example of where Friedman was hopelessly wrong.

This is a man who opposed the minimum wage. This is a man who detests the British NHS and claims it has hindered more people than it has helped. Perhaps he, or rather his adherents, should work on the US minimum income and then make their case. “Free markets allow man to flourish freely” is a false mantra. The free markets allowed exploitation, domination and slavery.

A major vulgarism within Friedman’s work is the ethical basis for his theory. Many neo-liberal thinkers have a low view of human nature. It all comes down to whether one believes man is innately egoistic and lazy, or that man can be genuinely good. And this is where Aquinian naivety becomes a virtue in politics. But the economic system, political order and society favoured by Friedman and his acolytes is based upon greed and profit. Literally, “greed is good”. An economic system whose basis is greed and profit is a pretty rotten system, particularly if it has no desire to overcome this natural flaw. The whole theory is founded on and advocates vice. Only an incredibly small handful of ethicists have ever considered greed to be a virtue, and those who are believed to have supported greed are often misread; Machiavelli, Hobbes and Adam Smith were all more benevolent than they are credited. Free to Choose begins with a quote from Adam Smith, and throughout the book Friedman refers to Smith. Essentially, Smith is the basis of neo-liberalism. But Smith was not an economist, he was an ethicist. The Wealth of Nations was not his main work, Theory of Moral Sentiment was and both were part of an incomplete trilogy outlining Smith’s virtues. Adam Smith claimed that man had an innate leaning in his conscience towards helping each other and benevolence, not egoism. The whole of modern neo-liberal thought emerged from at best a misreading and at worst a bastardisation of an 18^th Century ethicist’s second book. An economic deficit is no reason for a moral deficit.

One massive criticism of Friedman is his skewed history. He considers the laissez-faire period of Victorian Britain a “golden age”. What brought this age to an end was the need for the state to intervene to curtail the exploitation of the workers. It was not a “golden age”; it was an age of abject poverty, of child exploitation, of rampant disease and overcrowded urbanisation, of depravity. And then his false history continues with “the Great Depression was produced by a failure of government”, with the responsibility of free market capitalism to the depression being branded a “myth”. One man’s myth is another man’s truth, but there is no compelling case here. Friedman’s interpretation of history leaves a lot to be desired.

Just as the world needed a new economic order in 1979, so we need one now. Friedman has become outdated and irrelevant. That is the fatal flaw of ideology; it is always caught in the author’s sitz in leben. We need to move on from Friedman; his experiment has failed just as the Marxist one has. Even capitalist supreme George Soros said “The collapse of the global marketplace would be a traumatic event with unimaginable consequences. Yet I find it easier to imagine than the continuation of the current regime”.  It is time to consign Friedman to the fires of history alongside Marx and Keynes, to perhaps be reinterpreted in the future. God help that future generation, because under that system the state won’t.

Trial of our Peers - The Case for Lords Reform

“...whereas it is intended to substitute for the House of Lords as it at present exists a Second Chamber constituted on a popular instead of hereditary basis, but such substitution cannot be immediately brought into operation.”

This text appeared in the preamble to the 1911 Parliament Act, meaning that it has now been a century since the desire to implement a more democratic upper chamber appeared on the statute books.

In British politics, there are three ‘centres of power’: the House of Commons, the House of Lords and the Monarchy. May 2011 saw the attempt to change the electoral system for electing our representatives to the Commons defeated. Opinion among the progressive left was mixed on whether AV is genuinely a better voting system than FPTP, but largely the debate was irrelevant; AV represented not a paradigm shift, but a tinkering around the edges. What is worse, it was a reform to what is already the most democratic of the three power-centres.

Leaving the issue of the Monarchy for another day, and with the House of Commons already elected by direct universal suffrage, this leaves the red-cushioned Chamber. It is commonly perceived, at best, as a constitutional check-and-balance, but more often as merely a politicians’ graveyard, a place for the senile to talk at length about hobby-horses and a way for parties to reward loyalty to the whips.

A recent example of the ‘zaniness’ of the Upper Chamber is the speech given by Lord James of Blackheath on the 1^st of November 2010 where he began by giving his opinions on the 1947 Broadway musical Brigadoon, then gloated at his involvement in terminating over £1 billion of the IRAs funds during his employment with the Bank of England, before finally extrapolating at length over a mysterious ‘Foundation X’ who have offered to provide the UK with £22 billion ‘by Christmas if need be’. And all this in the middle of a debate about the then Spending Review! This is just one of many peculiar episodes and utterances which are regularly heard in the Lords.

In a long-standing custom dating back to the belief that the aristocracy can be trusted to behave nobly, courteously and with honour, the Lords is self-regulating. This is likely responsible for the meandering narratives and time-wasting which characterises much of the debate in the Lords. This may also be the reason for the increase in disruptions to its functioning of late, perfectly illustrated in the filibuster by Labour peers and the consequent threat of ‘guillotine’ earlier this year over the Parliamentary Voting System and Constituencies Bill.

Some have argued that simply instituting a stricter code of conduct on the Lords would improve its functioning, and while no doubt it would increase efficiency, this would act to further reduce the independence of our already noticeably powerless second chamber. However, procedural changes alone will not account for a revitalised and productive legislature. At their best, upper chambers in bicameral systems offer increased accountability of the executive branch, more robust scrutiny of potentially flawed legislation and the ability to formally represent diverse constituencies.

In a UCL document (House Full) released in April of this year, it was reported that there have been 117 new peers created under Cameron in the 11 months following his election. This can be compared to an average of 12 new peers per year under Brown and 37 per year under Blair. Indeed, up to April, of the 71 new Lib Dem or Conservative peers, 64 had never voted against the government. If we believe that the separation of powers is desirable, and the 2009 creation of the Supreme Court in order to remove the Law Lords from the legislature suggests that we do, then this kind of executive branch interference in the composition of the upper chamber cannot be condoned. How can the Lords be genuinely independently-minded when it is so susceptible to the whims of the Prime Minister of the day?

As Tony Benn has commented in parliament, “every generation has done what it liked with the House of Lords”. There is a long history of the house making up the rules as it goes along and reforming itself as the situation has required it to do so. We should not shy away from reform out of any sense of ‘respect for tradition’ as it has been argued. On the contrary, the most traditional aspect of the Lords has been its adaptability; a willingness not to let conventions and protocols get in the way of good governance.

Ed Miliband has previously stated that on issues where there is agreement between the government and Labour, such as on prison reform, that he will support these proposals in parliament. This must be one of those issues: all three parties included a pledge in their manifestos to introduce either a partially or fully elected Upper Chamber, as did the Coalition Agreement. It would be detrimental to both the image and the core values of Labour if we were to oppose reform on purely party political lines, when so obviously the will is there for parliamentary reform.

Ideally then, we will see a paid, slightly smaller but proportionally representative and wholly elected second chamber, with slightly longer terms of office; perhaps six or nine years, elected by thirds. This body would thereby have the democratic mandate necessary to hold the lower chamber to account, while the regular, relatively frequent elections would ensure an accurate depiction of the will of the people at any given time. And as for the name, let’s just stick with ‘Lords’ for now.

The Scourge of Europe

Unless you have been under a rock for the past year, Europe is in financial meltdown; nations need bailouts, Italian and Spanish bonds have hit record highs, no one believes European countries can pay their debts. Europe is plagued by a scourge of economic pessimism; its source is the shady world of rating agencies.

In recent months, the rating agencies Moody’s, Standard & Poor’s and Fitch have been busy and predatory across the EU. Their most recent target is France, one of the few states to retain a top AAA rating. But these agencies are still downgrading; Fitch downgraded Cyprus on 10^th August, Spain and Italy at the start of August, Greece again at the end of July – it is a never ending cycle. So busy are these agencies that El Periodico has reported that their market value has trebled since 2006 (El Periodico, 14/07/2011).

The same piece in El Periodico points out the problems of rating agencies; they are an ‘oligopoly’ working in tandem with each other, they have a huge influence on unregulated North American based financial markets, they create sub-prime derivatives which were rated AAA until days before the crisis. But the criticism of these agencies are more than economic; the rating they give states affects domestic policy and state spending, by downgrading they send nations into austerity and create unemployment – and all for their own profit.

As Spanish daily ABC noted, “rumour mongering has caused dramatic falls in global markets” (ABC, 11/08/2011). While the second Greek bailout was being discussed, a rumour emerged from Wall Street that Greece had defaulted; the simple questions are who and why? Further, why are these people who failed to predict the recession in the first place having their advice so trusted? They suck at their job, and yet people trust them to do it.

Someone somewhere is making a profit from austerity and poverty. Governments are cutting public expenditure; hospitals, schools and policing (maybe not policing in Greece) because they do not want to be downgraded by these rating agencies. The wellbeing of the economy is so central to government domestic policy that it cannot be left in the hands of the few. The self regulating markets are about as responsible as any other self-regulating body. Look at the internet; give some people total freedom and you end up with 4Chan – perhaps the best example of why self-regulation does not work.

Governments are being held to ransom by rating agencies. They have caused far more pain than any other force. Every time a plan is made or a meeting arranged to save the Euro, or any other solution to the crisis is proposed, they sabotage proceedings; just days after Greece was saved the Euro was in crisis again, countless crisis talks have ended with plans that have been instantly dashed by these agencies “feeling uncomfortable”. Economics should never be tied to how “comfortable” some wealthy speculator on Wall Street feels. Rating agencies offer no obvious benefit to any state and make a living and a handsome profit from poverty. They are idle profiteers of the worst kind. The sooner we shed our economies of their influence, the sooner Europe can get out of this crisis. It is the first thing that the EU must do; get rid of rating agencies. Only in solidarity can our states get rid of them.

The signs are good; recently there have been suggestions that Europe create its own rating agency. It’s still a rating agency, but at least it’s not one based in Wall Street or sympathetic to American neo-liberal ideology which is simply not compatible with European welfarism.

Having said that, an article from the Czech paper Hospodarske Noviny (25/08/2011) headlines that Standard & Poor increased the Czech Republic’s rating by two notches, which is a move that should be welcomed and perhaps puts an end the question over Czech joining the Euro (various comparisons have been drawn to Slovakia as to which nation benefited from joining or abstaining). But the worry in the article is the new criteria in place by Standard & Poor; “which from now on will emphasise the government’s political and economic orientation”. Economics affects domestic policy so intrinsically that this is a worrying move, particularly for any government wishing to take a tough stance on rating agencies, neo-liberal ideology or the markets. Agencies will now consider a government’s political orientation; too hostile to the markets to make them uncomfortable and one’s ratings can easily be dropped. This makes government policy inherently pro-market at the risk of downgrade; essentially blackmail.

Following on from this, it is interesting to note that out of the six socialist governments that started 2011, three have been hounded relentlessly by these agencies and another gravely warned while Ireland and Italy, despite having equally serious problems, have not been targeted so much by rating agencies. Add into this the curious case of Dominique Strauss-Kahn and the stench of conspiracy is hard to purge. But I’m not paranoid enough for that (they’re watching us...)

The EU is accused of lacking democracy and taking sovereignty from the nation state, yet in reality economic sovereignty has already been taken by the international markets; economic policy is not dictated by national governments or by the EU but by rating agencies and unelected forces. As economic policy is so tied to all other policy, governments are caught in the whim of the market. If anything, the EU and the proposed unelected Eurozone central governance will rein sovereignty back to the states and consequentially closer to the people.

The “economic crisis” is really two crises; the first was a recession, the second was a budget deficit which added to existing debts creating a debt crisis. This deficit was largely caused by the recession; it is an economic fact that to get out of recession and avoid depression a government must spend its way out. That is what governments did, and now there is a deficit as a consequence. In short; the deficit saved states from entering depression. A comparable deficit, at least in the UK, is the 1945 post-war from which the welfare state, including the NHS, was built. The austerity which followed included drastic measures such as rationing, but growth and more importantly high employment were created by the building of heavy industry and an export boom. This raises questions about the bigger picture; the service based economy is not stable, Europe must move back into industry and move from consumption to production, from import to export, from relying on foreign trade based on unethical practise and cheap labour to introducing tariffs and creating jobs in Europe. I may be accused of proposing “fortress Europe”, but it is creating a strong, productive and working Europe. Ultimately, politics is all about people; to keep man out of poverty and happy one must provide jobs, and where the private sector is lacking because of cheaper labour elsewhere and their drive for profit above all other considerations, the state must step in. We will always have boom and bust; the bigger the boom the bigger the bust. Ergo, regulate and limit the boom and make the bust manageable, thus less devastating to the citizen.

Governments are not totally blameless for the economic situation. Although the recession caused by the private sector and saved by governments is at fault for a large proportion of the debt, governments were acting irresponsible. In Greece, a parliamentary secretary was earning more than a university lecturer and getting bonuses for turning up to work on time.

But Europe’s economic woes have been exacerbated by unelected, feckless and profit seeking ventures called rating agencies. One by one they target states; first Greece, then Ireland, Portugal, the Baltic states, Spain, Cyprus and now Italy. How many more jobs need to be lost, how deep must the cuts go before someone steps in to step out these agencies?

But what is the solution? We face radical times, allegedly. As a result, radical measures are needed. There is one radical solution; Europe must stand together and flat out refuse to pay the debt. Why are the interests of a few banks greater than the wellbeing of millions of citizens? Why must hospitals and schools close, millions lose jobs for the sake of a few bankers and on the whim of some faceless agency?

Whatever system rises from the ashes, whether that be a unified currency under a federal economic model (ABC 11/08/2011) or the disintegration of the Eurozone back into national currencies (The Guardian, 22/07/2011), the new economic order needs to either control or abandon rating agencies. One fundamental shift in economic thinking is the shift in focus from “growth” to employment. It is employment that eliminates poverty and makes man independent, not “growth” – particularly when that growth only happens at the top yet decline is felt at the bottom. We are potentially at the footsteps of a new world, but we need our politicians to be braver to make it a brave new world, or a return to the serfdom of the markets. The first step is the rating agencies. Under this economic order, there is no room for speculation or cavalier ratings. There is a scourge over Europe; we can, we must eliminate it and until we do, there can be no safe future.

Immigration: The Modern Taboo

Labour has never been a party to shy away from taboo. It was Labour who supported votes for women (a claim refuted by Martin Pugh), who opposed nuclear armament in the 1950’s, who brought in social reform of the 1960’s legalising homosexuality and abortion, and who stood against apartheid. Our strength has come from our diversity and openness to discuss any topic. But there remains one taboo, a topic that is never raised in political circles; immigration.

The explosive topic in Europe at the moment currently occupies the front pages. This is the topic every canvasser fears. This is the topic that for years politicians have been avoiding in fear of being branded “racist” or “intolerant”. Anyone who stands against immigration, particularly on the left, are chastised – just look at the recent case of Maurice Glasman who suggested a temporary cap on immigration. The case is painted black and white; anyone opposed to immigration is nasty, racist and staunchly right wing. In which case it is often best to keep silent.

But this silence has cost us. Immigration was one of the most common topics raised at the doorstep. By not answering the questions, by calling people like Gillian Duffy a “bigot” and walking away, we have allowed populist anti-immigration parties, or the BNP and EDF, to flourish. There needs to be an open and mature discussion about immigration and Labour’s policy towards it.

With this in mind, I am about to commit political suicide and come out of the closet – I oppose immigration. And already I can see my political career sailing over the horizon. Perhaps I should elaborate; I am opposed to non-EU immigration. Which doesn’t make my case a whole lot better.

During the 2010 leader’s debate, the difference between the parties policy on immigration was clearly bore out. The Liberal Democrats wanted an amnesty to all migrants, including illegal ones. A badly thought out policy that sends a clear and worrying message. The Conservatives wanted a limit on the number of immigrants, which is fair enough but failed to take into consideration migrants from the EU, who are a different set of migrants. And then there was Labour’s point based system; in short, it failed. For every skilled worker that came in the country there came also his unskilled wife (in the culture of most migrants the wife is unskilled). Further, the bar was set too low; by “skilled” it was meant cooks and waiters, people to work on trains and selling Big Issues. Since then, Labour has not looked back. Ed’s admitted Labour did not listen to people concerned about immigration, but no actual policy has come about and no one dare speak against immigration. Although the party needs to discuss immigration, it needs to be cautious as this is an issue that can easily split the party, much like the EU and Conservatives.

The first thing that needs to be done is to face up to the reality. Immigration is not only an issue – it is a problem, both for Europe and the nation the migrants come from. There is only so much that Europe can sustain before there is no more resources or before it becomes overstretched. Just look at Italy and the Tunisian immigrants; Italy could not sustain the sudden influx – no job, no resources, no basic provisions.

There are two pragmatic objections to immigration. First, immigration contributes towards a brain drain. Every skilled worker Britain or the western world takes is a skilled worker taken from a poorer nation. This leaves LEDC’s in a damning cycle; they need skilled workers for infrastructure, but all the skilled workers emigrate thus leaving them in need. Mid-90’s Eastern Europe suffered because most the democrats, the people fighting most vigorously against oppressive regimes, the intellectuals all fled west thus their infrastructure, particularly amongst the political classes, remained weak. All too often people focus on the effect of immigration to the host nation while forgetting its effect in poor countries. There are no skilled workers there because they emigrate.

The other pragmatic objection is simply that Europe cannot sustain itself. Immigration is one way traffic, it is the burden of great nations; people are risking it all to come and live here, that’s surely a sign of how relatively great we are. But there comes a point where we have to say ‘no more’. Housing, jobs, school places, burdens on hospitals, resources; these things are limited. If ten million Africans living in poverty decided to move to Britain, at some point the state will have to say “no”. We reached that point a while back. We hear individual stories of people, children, being deported back to poverty or even to face execution, and campaigns are set up against the immigration services with accusations of – but we have to be pragmatic about it. Although politics is fundamentally about people, it cannot get caught up in the individual tragedies or else there would be no rules or order. We have finite resources; that is inescapable.

What I propose is to stop all non-EU immigration to Europe; to set up “Fortress Europe” which encompasses the EU and EU “green zone” (Norway, Iceland, Switzerland, Balkans, Ukraine, Russia and Turkey). Cut unemployment within Europe by reindustrialising and becoming producers instead of consumers, maybe even have a population decrease, while helping other nations develop their infrastructures.

Small social points should be amended; to live in Britain one must work here, to work one must speak English. It reminds me of a tragedy where a child choked to death because his mother could not speak English and so could not call for help. No welfare payments until five years of residency (The point about welfare is interesting, as only £1.5billion is lost to welfare fraud (contrary to Osborne’s £5billion tag – surely more careless than callous) while £45billion is lost to tax evasion, with £5billion alone lost to public enemy number one Philip Green (scum)). Again, to be controversial, our schools and hospitals are not free – we pay for them through life long taxation. Immigrants haven’t, yet they use the services which they have not paid their dues for. These are rather Draconian measures, but at times one must be stolid.

Whatever our solution is to be, it needs to be a united European solution. The PES and S&D favour an open border while opposing “fortress Europe”; pure utopian. As long as immigration is one way traffic it will be a hindrance to any developing nation and a problem to European nations. The paradox for Europe is that it needs to curb immigration, and yet due to an aging population it needs immigrants.

This raises the question of why population decrease is such an undesirable thing. We have to face to the fact that the human race as a whole is over-populated. Thomas Malthus first suggested this; he stipulated that human growth outgrows food production. Malthus did not, however, count upon the industrial revolution making higher crop yields possible. If all our food was organically grown, we could feed four billion people; unfortunately our population is about seven billion. We are heading towards catastrophe; particularly as diseases are being eradicated and wars prevented (callous, I know, but they are natural checks to human growth). At the same time, there needs to be a more philosophical shift in our attitudes towards death. A tragedy, yes, but we all have to go sometime. But we have developed an irrational fear of death and now preserving people until they’re 100 is the aim. Better a short and happy life than a long and distraught one. Our preservation of the elderly and sanctity of life is not stable.

What is the ‘social democrat’ answer to immigration? We put priority on employment and welfare, so as long as there are jobs and enough to go around then we can justify immigration. But once those pools dry out, then what basis is there? We fall to the emotional. Everyone has a story, but we have to draw a line. You show me a petition to keep a migrant facing deportation back to poverty; I say there’s thousands like him, it is his bad luck. We cannot focus on individual tragedies.  If we ran by emotion then we would not cope, resources would run out, no housing or jobs; in immigration, reason prevails. Cold reason runs on the nib of a pen.

What social democrats and socialists, mostly internationalist by nature, should advocate is the improvement of LEDC’s and corporate responsibility. That means we should be fighting for the rights of poorer nations, not taking their skilled workers. Pressuring the free market to become the fair market and offer a minimum wage to workers in India and China, to improve conditions worldwide so that there is no need for people to migrate. We should improve the conditions of nations, not people.

It has become heresy to suggest anything remotely anti-immigration amongst Labour. Why? When did we become the pro-immigration party? We are not a party of an issue, nor an ideology, nor a “wing”; we are a party of the people and if immigration is detrimental to the wellbeing of the working people and society then we should not support it.

What I am arguing is not the Labour should become anti-immigration or adopt my views but that there should be a discussion about it and that we should not hide from this issue which is perceived as fairly serious. How many heads must roll before we have an open and mature discussion about immigration? We must face this modern taboo, not like David Starkey or Enoch Powell but like Glasman or Jack Straw. We need a grown up debate on this issue; it will be painful and at times controversial. But if we do not discuss it then extreme parties profit, as they have on the continent.

Economic Terrorism

Terrorism is a notoriously difficult term to define. Our friends at Wikipedia (only proper research is good enough for the Fabians) suggest ‘violent acts which are intended to create fear, are perpetrated for a...ideological goal...disregard the safety of non-combatants and are committed by non-government agencies’. The part to highlight is ‘unlawful acts that bring terror’.

Terrorists, for lack of better terminology, bring terror to citizens; they are largely invisible and can strike at any moment. That is one way to describe Al-Qaida. It also describes Moody’s, the credit rating agency also known as "speculator".

This news may have missed the British press for obvious reasons (a blog is in the work, but that story keeps evolving), but Moody’s has recently downgraded Irish and Italian bonds to “junk” while also downgrading Portuguese, Spanish and Greek bonds further. 

Perhaps not directly violent, but by calling Irish, Greek and Portuguese bonds “junk” and threatening Spain and Italy they are creating an atmosphere of fear for an ideological goal, namely neo-liberalism. No one buys PIGS (Portugal, Italy, Greece, Spain) or Irish bonds because someone on Wall Street feels uncomfortable. It’s time to get out the red flag, we got a fight on our hands. To take a page from the euro-sceptics book; they are stealing our sovereignty. Government is no longer creating policy, the IMF and other economic bodies are.

US based Moody’s, and other agencies, are spreading American neo-liberalist ideology on Europe; roll back the state, privatise, trust the unaccountable markets because democratically accountable government cannot be trusted, deregulate and so forth. The market never fails except for the periodic recessions in the US since 1790, about every fifty years, and the risk of depression in case of too much deregulation. Ireland during the 90’s was a neo-liberals dream, Ireland during 2010’s is the reality. There’s a host of reasons why Europe including Britain cannot adopt American ideology and why we must fight it; the cold war has been replaced by an invisible struggle which Europe, welfarism and social democracy is losing. This is our chance to fight back.

What do Moody’s stand to gain? Profit. They will make money from downgrading the status of nations and sending millions into poverty. On May 9^th they even started spreading rumours that Greece had defaulted (Liberation, 09/05/11). The simple question is, why? Because they would have gained. The profits of rating agencies has tripled since 2006 (El Periodico, 14/07/11) at the cost of austerity and riots across Europe. This is literally a policy of “f*** the people”.

Not seething yet?

It gets worse. These agencies are holding our governments, the de jure tools of the people, to ransom. In an ideal setting, the Greek government would act on behalf of its people. Whether or not it does is a different matter (Greek politics is dominated by family lines and Athens-centric approach), but it cannot because these rating agencies alongside the IMF, WTO and the World Bank have tied the government’s hands and forced them into cuts.

What do these rating agencies actually do? Nurses, policemen, managers, they actually do something productive and meaningful. Speculators – I have no idea. They speculate? They downgrade? They make money? They seem to wake up in the morning, if they’re a bit queasy they’ll downgrade Spain, if they had Weatabix for breakfast they might feel more comfortable and keep things stable. They don’t even do a good job seeing as they failed to predict previous economic crises. So how’s this for a policy, Mr Miliband and Mr Schultz, ‘if you see a spectator, punch him. Hard’.

From the ashes, there will be a new economic order in Europe. Trichet predicts closer union, which is of course needed. I personally do not know what will emerge, but whatever it is needs to be guarded against speculators. We need an economic system not dictated by Wall Street, not tied to US ideology, and not incentivised through profit.

The EU is the body that can intervene. It is a damning assessment of the EU that the Charter of Human Rights refers to the “consumer” as much as the “citizen”. The hydra has 27 heads, which is a positive check on EU power, but it needs one voice. What happens in PIGS and the Eurozone affects us here in Britain. We need to rally against such agencies, kick them out of our system, build solidarity in Europe – solidarity that only social democracy and social democratic parties understand.

We need three things; regulation, protection and solidarity. Regulation, the anathema of neo-liberalism, is essential; the markets are as self-regulating as a child in a sweet store. There needs to be basic rules, and there are a few such as anti-monopoly rules, but we need more regulation. Regulation against irresponsibility, regulation to favour European workers and goods, regulation against unethical practises. Again, it is a mix of state intervention and market freedom; the European middle way.

Protectionism is not a dirty word except in neo-liberal circles. Protectionism is protection of jobs (as long as there is a concomitant encouragement and protection of home grown entrepreneurship), protection from foreign markets (the USA would not be in its dominant position without the tariffs of the early 20^th Century), protection from speculation and rampant markets (commercial terrorists). It is the protection of liberty – the freedom from fear – not the reduction of it as is often claimed. It is a governments duty to protect its citizens from harm, whether that be from direct assault such as suicide bombs or from the economic woe instigated by commercial terrorists. But no country can go it alone, which is why there needs to be a middle way between the free market and protectionism; that middle way for Britain is Continentalism – a European free market protected from exterior sources. Together, in solidarity, we can create jobs, eliminate poverty within Europe, protect our citizens.

The European hydra says many different things if anything at all. Crisis unites, call it the “moral equivalent of war” (William James). Europe has had many tests. The first was the Iraq War, then the financial fiasco, now Libya and the continuing economic crisis. They are the big ones. And time and again the EU has been split if not silent. That is not a bad thing; it is important for power not to be concentrated in one area. But at times of crisis we need clarity, not one voice but 27 voices saying something similar and working for the common good, the common endeavour, namely getting out of the mess. But no one has heeded the call; Barosso remains silent, Van Rumpoy is president of a council not of a people or continent, the rotating presidency sets agenda more than anything else, Buzek is effectively speaker of parliament. Democracy means splintering power, it means inefficiency and frustration. Unity need not be institutional or constitutional, rather solidarity must be a path chosen by member states. The EU is more a network of states than a state itself (thank you Mark Leonard for that idea), Labour needs to strengthen S&D (the social democrat group) and its network. Then together we can fight US ideology, rating agencies, international markets, terrorists both Islamic and commercial.

In a nutshell; problem – the rating agencies; threat – economic downgrading creating austerity, unemployment, social inequality, crime and poverty; solution – a stronger European network, a real direction and voice (welfarism), kick out ratings agencies, turn back US ideology.

The vultures are circling once again, the Euro crisis will not go away until we shoot them and until we do the pound is not safe. Europe will get out of this mess, but it must ensure the result is a new system, and one without commercial terrorists. These regulators are pointless, dangerous, careless and are of no benefit to society. If we are serious about our message of social democracy and equality, stability and solidarity, we must strike these parasites hard and fast. We cannot rest until we do.

Поднимите красный флаг