Issue 101:2017 04 20:Erdogan’s uneasy triumph (Neil Tidmarsh)

20 April 2017

Erdogan’s Uneasy Triumph

Yet another crisis for Turkey.

by Neil Tidmarsh

Less than two years ago, it looked as if President Erdogan’s political life was about to come to an end.  The parliamentary election of June 2015 was a disaster for him.  The electorate understood that the vote was really about Erdogan’s plans to change the constitution from a parliamentary system to a presidential one, and the result indicted that it did not approve of them.  Erdogan’s governing AKP party lost its majority, and opposition parties (notably the pro-Kurdish HDP) made huge gains.

Erdogan was unable to form a coalition.  His minority AKP government limped on until forced into a second election a few months later.  The results of that improved his position slightly, but it seemed that his ambitions for a powerful, executive presidency would have to be scrapped.  He appeared instead to settle for ad hoc measures to empower his office, taking an aggressive attitude to opposition of all kinds: official criticism was answered by sackings and intimidation; accusations of corruption against associates and relatives were answered with removals from office; opposition newspapers and media groups were seized by courts; journalists were arrested; accusations of the hitherto little-used offence of insulting the president were enthusiastically hurled about (almost two thousand people have been charged with this offence since Erdogan came to power in 2014).  Nevertheless, it was all a long way from the fundamental constitutional change which he had been championing.

But a lot has happened to Turkey since June 2015.  Commitment to the war in Syria has seen it in armed conflict against Assad’s government, against Syrian and Iraqi Kurds, and against Isis.  Even armed conflict against Assad’s ally Russia – hitherto a friend of Turkey – looked like a possibility after Turkish fighter jets shot down a Russian fighter jet.  The insurgency by Kurdish separatists in southern and eastern Turkey has resumed. The migrant crisis has deepened, with three million refugees from Syria, Afghanistan and Iraq inside Turkey, and an obligation to stop the flow of refugees over the Aegean and the Balkans to Europe, following the deal with the EU.  Friction with the EU over the migrant crisis and human rights, and with the USA over conflict with US-backed Kurds in Syria and Iraq, has damaged Turkey’s relationships with its Western allies.  And on top of all that, there was last July’s attempted coup d’état, which almost succeeded (if some accounts are to be believed) and which was followed by massive and repressive counter-measures.

It now seems that these crises enabled President Erdogan to project himself as a powerful defender of his nation, determined to face up to and destroy the country’s internal and external enemies.  He has been seen to defy the EU and the USA, and to win the respect of President Putin, a man who many believe is Erdogan’s role model.  He has apparently succeeded in persuading his country that the many serious problems that beset it can only be tackled by a president with even more power than he has at present; and the result of last weekend’s referendum has given him that power.  An executive presidency, with the power to over-rule parliament, is at last within his grasp.

In the coming weeks, Mr Erdogan will almost certainly resume his position as official head of the AKP, which he had to abandon (at least nominally) when he was elected president in 2014.  In the coming months, laws will be passed to prepare for the transition from a parliamentary system to a presidential system.  The change of systems will take place following presidential and parliamentary elections in 2019.

What now?  Europe is bracing itself for more friction with Turkey, fearing a breakdown of the agreement to contain the migrant crisis, something which Erdogan regularly threatens.  He has shown little enthusiasm for passing the democratic and human rights reforms that the EU has insisted are necessary if Turkish citizens are to be given visa-free travel to the Schengen zone.  And now he is talking about reintroducing the death penalty, which the EU considers to be a red line.  He is certain to use his new authority to move away from Europe and towards the recovery of Eastern territorial influence which he has always coveted – a return to Ottoman power and glory.   Europe and the West will find him increasingly hard to deal with as he grows stronger.

And yet there is no guarantee that he will attain the power and authority which the referendum has apparently granted him.  He has claimed victory on the basis of an unofficial count, a count which itself gives him only 51.49%, hardly an overwhelming victory.  The result is being challenged by protesters who are rallying in their thousands, by opposition parties, and by international observers such as the OSCE (which has said that the election took place on an unlevel playing field, with the authorities inhibiting campaigning for the ‘no’ vote).  There is particular concern about a change made to the rules just minutes after the polls closed; unstamped ballot papers, which are usually excluded, were suddenly allowed.  The main opposition party the CHP says that 1.5 million unstamped papers were counted – the margin of victory was about 1.4 million votes.

The final and official result of the referendum will be announced by the electoral board next week.  The board is expected to uphold Erdogan’s victory.  But the HDP and CHP opposition parties, and even parts of the nationalist MHP (the party which Erdogan’s own AKP relies on for its governing majority) may well block the legislation necessary to prepare the way for the new presidential system.

The many crises which have wracked Turkey in the last two years have opened and deepened cracks in the nation which at times look as if they could spiral out of control and even explode into civil war.  The Kurdish insurgency has already reached levels of violence which might qualify as open warfare.  And the reaction against the failed coup d’etat has developed into an anti-Gulan purge which is beginning to look like a country consuming itself; 113,260 people have been detained (including 168 generals, 10,732 police officers and 2,575 prosecutors and judges); 125,000 people have been sacked from their jobs; over 150 media outlets have been closed; 2000 schools, universities and dormitories have been shut down; 131 journalists are in jail.  The referendum has opened up yet another division.  Half the country (largely rural, conservative and working class) now identifies as pro-Erdogan; half (largely liberal, educated, secular and urban) now identifies as anti-Erdogan.  Both sides are equally passionate and dedicated, and the temperature is rising. Could this be the division which finally breaks the country apart?

 

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Issue 101: 2017 04 20: Cracking Eggs With Donald, JR Thomas

20 April 2017

Cracking Eggs With Donald

President Trump’s Easter message.

by J.R.Thomas

President Trump, clad in jeans and sweat shirt, appeared on the White House lawns to distribute Easter favours, join in the egg painting, dance with the Easter Bunny, and fling handfuls of mini eggs into the grass, crying “Take that, you suckers”…

No, you are right, he didn’t.  He and Mrs Trump, along with youngest son Barron, did appear on the steps of the White House and the Donald even risked the satirical possibilities of walking alongside the Easter Bunny, a strangely odd looking version this year.  But the President stuck to his reliable uniform of blue suit, white shirt, and red tie, walked with dignity and mostly unsmilingly to where the traditional festivities were unfurling, and waved at the crowd.  Then he gave a short speech; no Obama jokey address this year; Mr Trump said that things were going well to make America a strong nation once more and that many of those playing on the lawn would grow up to be successful in his reinvigorated United States.

Much of the media has of course had fun making the President look stiff and out of touch with his mostly young audience, but maybe Donald has a point.  He is not their eccentric uncle but their President, indeed a man old enough to be the grandfather of many of the guests, and a man who at the same time as he is entertaining children in his back yard is making momentous decisions concerning the future peace of the world.  Perhaps a more serious approach is appropriate in these times?  Certainly that is the message the Trump presidency is giving out at the moment.

It is a message which has been received in what, in the nineteenth century, were known as the chancelleries of Europe.  The one in Brussels muttered and grumbled, but in the chancelleries that Mr Trump is addressing – Moscow, Berlin and Ankara – the message was received and suddenly Mr Trump looks more serious and less far out than he did.  In Beijing too it was acknowledged that Mr Trump’s reach may be longer and swifter than almost anybody had expected.  Whether they believe that in North Korea is another matter.  If they do, how Mr Kim Jong-Un will respond to it is on the list of known unknowns.

What is causing perplexity though is that the Trump Presidency, assumed to be all about America alone, and building walls against the world, is busy examining the state of that world and in some cases reacting to it.  It is undoubtedly true that some of Mr Trump’s sweeping campaign statements have been quietly put back in the filing cabinet and that the President and his cabinet are having to deal with matters, and in ways, that they probably did not contemplate four months ago.  The operative word here may be “cabinet”.  Mr T is a businessman as we have pointed out before; he appoints the best man (sometimes woman) to the job and lets them get on with it, unless or until they mess up or turn out to be “unlucky”.  And Donald does seem to have a particular faith in the competence of military men – as people who have run businesses often do have, not least because military types tend to be very good at getting things done, on cost and on time.

Here is a good example.  He is letting his military men run the military department.  Mr Obama was not prone to engaging in warlike actions.  He did not like the political risk and he did not, we suspect, like to be a party to taking human life for any cause, even the lives of bad guys, but especially the lives of those persons who are known in military circles as “collateral damage”.  We are not suggesting that Mr Trump is bloodthirsty, far from it, but we do suggest that he is more inclined to take calculated risks and accept the damage that may result, if the actions achieve the desired results.

So if his top advisors in uniform say that they have a problem in Afghanistan but have a weapon that will deal with it directly and with minimal damage to what is around it, then The Donald may ask a couple of questions but his fundamental inclination will be to say “That’s your job, get on with it”.  If he wants to punish the Assad regime for appalling behaviour but try to prevent any fatal damage to Russian personnel, and the guys with the shoulder tabs say that they can do just that, then he will let them do just that.  And if his strategists come to him and say that North Korea is dangerously close to being able to launch a weapon that could hit Los Angeles, (even if, in fact especially if, the North K technology is so rubbish it might hit San Francisco or Tokyo by mistake) then he will ask them to evaluate with his team how to respond to that.  Maybe a “friend” of North Korea – say the President of China – will point out to Mr Kim that if he starts a nuclear war he will lose; maybe the North Korean generals will do anything to avoid living in a bunker for a couple of years with their President-for-life; maybe Google can interfere with the weapon control systems so that they can never leave Korean shores.  But Donald has only a limited belief that jaw is better than war, so if a reliable solution involves weaponry we may yet hear a bang from the South China Sea.  The reason we have not heard one so far may be that there will have to be some careful calculations as to the risk of North Korea hitting South Korea before American technology switches everything off, and as to whether, in the post bang world, the replacement government in North Korea might turn out to be even more odd than the extinguished one.

None of this means that the America First theme has left the White House.  IF American interests are at stake then America will defend itself, even pre-emptively.  That is very clearly the case with North Korea and also where American troops are still engaged, as in Afghanistan.  It is a bit harder to work out what drove the targeted bombing of a nerve gas unit in Syria – but how about a true moral imperative?  Mr Trump sounded very genuinely outraged by a politician gassing his own infant citizens, and when that outrage melds with a tidy little warning that American has the technology and the will, is happy to provide a practical demonstration to other rogues of what may happen to them, and gives a friendly warning to the Russians that the president of USA has just as strong nerves as the president of Russia, it is perhaps odd we even need to consider the question.

The message Mr Trump would like the world to hear is that we can all sleep a little more soundly in our beds with the new occupant of the White House watching over us – so long as we are not bad guys.  Time will tell whether we might be better off sleeping in our normal bedrooms – or in our cellars.

 

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Issue 101:2017 04 20:Le Dilemme des Citoyens et Citoyennes (Richard Pooley)

20 April 2017

Le Dilemme des Citoyens et Citoyennes

Game theory and the French elections.

by Richard Pooley

photo Robin Boag

Polls in France still show that around a third of citizens have not decided who they will vote for in the first round of the presidential election on Sunday.  In many cases, if my French friends and acquaintances are any guide, this is not because they dislike all eleven candidates.  Indeed, those friends have told me very clearly who impresses them and who does not; but only two have told me who will get their vote.  The problem the French face is this: if they simply vote for the candidate whose character and policies they most like, they may well end up with a president they can’t stand.

They are in a situation not unlike that faced by the two criminals in The Prisoners’ Dilemma, the most well-known example of game theory.  Each prisoner, colleagues in a violent crime for which they are awaiting trial, is in solitary confinement, unable to speak to the other.  Each is offered a choice: confess or remain silent.  Each is told that if both confess, both will be sentenced to two years in prison; if one confesses and the other remains silent, the confessor will be set free and the silent one will get five years in prison; if both remain silent, they will only be in prison for one year on a lesser charge. The rational decision for each prisoner is to confess; neither knows what their partner will decide and it is safer for each to assume that the other can’t be trusted to keep his mouth shut.  Yet, the best outcome for both would occur if they both stayed silent.

Like each prisoner, no French voter can be sure, of course, what decision their fellow citizens are going to take on Sunday.  It would not matter if, as nearly always in the past, they were certain who the two winning candidates would be. But this time only a handkerchief, as the French say, separates four of the candidates. The distance between the recent average polling figures for Emmanuel Macron and Marine Le Pen (23%) and those of François Fillon and Jean-Luc Mélenchon (19%) make it too close to call. Normally, the pollsters release their exit poll predictions at 20.00 on the evening of Election Day.  People attending election night parties count down the last few seconds to the hour and champagne corks fly a few seconds afterwards, whatever the result.  But not this time. 20.00 will pass without exit polls.

The fact of this mouchoir is the main reason why pollsters have been spending so much time and money trying to find out who voters will vote for in the second round according to three hypotheses.  Assuming Le Pen is one candidate, how would people vote if she faced Macron, Fillon or Mélenchon?  In all cases, Le Pen would lose. In fact, the pollsters initially asked how she would fare against Benoît Hamon, the Socialist Party candidate, not Mélenchon.  But Hamon has trailed off in this race and is even in danger of being overtaken by Nicolas Dupont-Aignan, a candidate who shares most of Le Pen’s views.  However, Le Pen is no longer certain of being in the second round. The permutations have now become six.

One polling organisation, IPSOS, decided to ask voters who their second choice was in the first round.  I suspect IPSOS felt that this would be a more accurate pointer to who will win, should many people vote not for who they most like but against who they most fear.  The results were revealing and have been pored over by commentators.  They also provide voters with some idea of how others might cast their ballots.

François Fillon, Republican Party candidate, is supposed to represent the centre-right. However, he has recently been shown to be flirting with Sens Commun, a tiny group of social conservatives who are against same-sex marriage, as is Fillon.  He has said more than once that if he does not get to the second round, nearly all his supporters will vote for Le Pen “less out of conviction, more out of rage.” But IPSOS has found that, in fact, only 6% of Fillon’s supporters give Le Pen as their second choice.  58% said that Macron, the centrist, ex Economy Minister in the current Socialist Government, was their second favourite (and 21% had right-wing Dupont-Aignan as their number two). This was not what any political expert seems to have expected.  But even more puzzling was the response of Macron’s supporters. 30% said that the Communist-backed Marxist, Mélenchon, was their second choice.  Only 12% would switch to Fillon.  Exactly a third of Macron’s supporters declared that they would not choose any other candidate.  What about the second choice of those currently intending to vote for the extremists?  33% of Le Pen’s people said Macron and 26% said Mélenchon. Hardly any of them would consider Fillon, the person whose policies are not too different from Le Pen’s.

What does this tell us? First, the old loyalties to simplistic labels like Right and Left have largely disappeared. Secondly, there is a yearning for change and a readiness to accept some extreme solutions to France’s problems. Thirdly, there is across-the-board contempt for the old guard, represented in this election by ex-Prime Minister Fillon.  Finally, a very large number of French people will only decide who they will vote for at the last moment.

I was in the UK two weeks ago. I found it difficult to get across how ground-breaking and strange this French presidential election is proving to be.  Imagine that in the upcoming UK general election you had to choose between these four people to be the UK’s leader: Nigel Farage, George Osborne, an early version of Tony Blair and Ken Livingstone.  Polls show them to be running neck-and-neck.  Only two can go through to the final round.  Who would you vote for?  Add in the fact that if Farage were to win, he would have, initially at least, only two UKIP MPs.  Osborne would have perhaps half of the existing Tory MPs on his side.  Blair would have no MPs at all. And Livingstone would only have those Labour MPs who find Jeremy Corbyn too far to the right for their taste.  Around 70% of existing MPs would not have backed any of the four candidates.  It is not an exact comparison with the French election.  Neither Osborne nor Blair are that close in character and political views to Fillon and Macron respectively.  However, though their backgrounds are utterly different, Farage and Le Pen share the same world view.  And Mélenchon has turned himself in a few months from someone who resembled Arthur Scargill in his heyday to a close approximation to Ken Livingstone.

It is now perfectly possible that the French will have to choose between Mélenchon and Le Pen for their president.  If so, I would expect Mélenchon to win.  Either choice would spell the end of the European Union. The Japanese would set the Euro plummeting in value overnight on Sunday. Or it could be Fillon versus Le Pen (predicted by five brave students of Télécom Paris Tech whose new-fangled polling methods have Le Pen on 24.13% and Fillon on 21.77%, just ahead of Macron; I love their confidence in going to two decimal places).  If so, everyone (including those students) expects Fillon to win.  I am not so sure.  And if he did win, would he have the moral authority or sufficiently solid support from Republican MPs to push through his painful reforms?  Best for France would be Macron against Le Pen. I think the result would be much closer than pundits currently suggest. Most importantly, two radically different futures for France would be presented to the French people.  At last, they would be able to have a proper debate, a return to a world they understand.

By the way, in the course of this election I have hardly mentioned the French parliamentary elections which are coming up on 11 and 18 June (yes, two rounds again).  The general election campaign does not end late on Sunday 7 May.  France will then have a president but the political party which he or she heads may have no or very few MPs.  Yet another battle will start: to fill 577 parliamentary seats.  Expect a complete change to the names and nature of France’s political parties.

See you on the other side.

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Issue 101:2017 04 20:Mental Health (Lynda Goetz)

20 April 2017

Mental Health

An important issue but over-reacting will not be helpful.

by Lynda Goetz

Until the front pages were hijacked by Theresa May’s decision to hold a snap election on 8th June, the Princes and mental health were very much amongst the top stories of the last few days.  The Mail highlighted the fact that Prince William had been in touch with Lady Gaga over the issue.  The Guardian ran a story about Princes William and Harry breaking the mental health taboos for a new generation;  The Express speculates that it may be his relationship with Meghan Markle which has helped Prince Harry speak out and The Telegraph’s Bryony Gordon was expressing amazement and delight in Tuesday’s issue that her podcast interview with Prince Harry in ‘Mad World’ should have provoked so much interest and discussion.

It is fantastic that not only the Royals, but many other high-profile characters are speaking out on a subject which for a long time was not considered appropriate for discussion.  It is brilliant that we are a very long way from the world described in Ken Kesey’s 1962 novel, One Flew Over the Cuckoo’s Nest; a world where mental health conditions were treated with the highly damaging electro-convulsive therapy (ECT) or even by cutting away part of the brain (lobotomy).  I can still remember vividly the beginning of that winter term at university in the early 70s, when we were told by our head of department that one of the lecturers would not be coming back.  He had committed suicide on Christmas Eve, following years of ECT treatment, which he was convinced was gradually reducing his intellectual abilities.  This barbaric treatment was supposedly given to ‘cure’ his depression.  Thank goodness that attitudes and treatments have changed.  It is right that they should have done so and that medical professionals and the public now view such things very differently.

Prince Harry’s involvement with veterans has been particularly important.  As one able to identify with what members of the armed forces have to go through and the mental as well as physical effects this can have on them, particularly those who have been involved in combat, he has done a great deal to raise the profile of the myriad issues frequently lumped together under the label of PTSD (post-traumatic stress disorder). Many in the past have endured these conditions without being able to discuss them, in a world where discussion of war and its impacts on individuals was taboo.  Prince Harry’s concern for those affected by war in all its aspects has gained him a respect and affection which spreads far beyond those closely or immediately concerned.  By now speaking out about the impact of an unexpected bereavement he has reached out to more people, many of whom want to say ‘Yes!  That is how I felt too.’

However, in all this ecstasy of release and relief at the liberation of minds and speech, we must tread a little carefully.  How the mind works remains an area in which we and the health professionals are still stumbling toddlers.  Different conditions have been given different labels . The labels change.  What used to be called ‘manic depression’ is now known as ‘bipolar’.  It is not the same as depression.  Then there are the many and varied anxiety disorders from agoraphobia to OCD (obsessive compulsive disorder); Borderline Personality Disorder (BPD), also called Emotionally Unstable Personality Disorder (EUPD), psychosis and schizophrenia.  Many of these co-exist; some are treatable with medication; others such as BPD, are not and can only be treated by various therapies, many of which are not available on the NHS.  The seriousness and extent of disability which arises from any of these conditions varies massively and it is often extremely difficult for the layman to understand or to know how to be of any help to family members or friends who are suffering.

What we must not allow to happen is for the pendulum to swing too far the other way and to see mental illness where there are only variations of normal human behaviours and reactions to unavoidable events.  Of course we will be distressed when a family member dies or goes missing or is seriously ill.  Clearly events such as the breakdown of a relationship or a divorce are traumatic.  Being made redundant or being sacked will affect our feelings of self-worth and sense of self-esteem.  A teenager who has failed to find friends at school will understandably not be happy.   Feeling sad however is not depression.  Our responses to experiences of this sort will vary depending on our own personalities and situations.  They are all normal.   Normal varies.  What we must avoid is labelling too many as mentally ill without perhaps recognising that much of modern ‘depression’ or personality disorders can perhaps be attributed to the less healthy aspects of modern Western society itself.

In an interesting article in The New Internationalist Magazine in April last year, (https://newint.org/columns/essays/2016/04/01/psycho-spiritual-crisis/) , John F. Schumaker points out that three decades ago the average age for the first onset of depression was 30.  It is now apparently 14.  The rate of depression in Western societies is doubling with each generation (Stephen Izard Duke University, North Carolina).  The logical extrapolation would be that before long almost everyone will suffer.  Conversely, in traditional societies there is frequently no depression and not even a word to describe it.  Mr Schumaker takes the view that part of the problem is that although depression clearly exists in modern society, it is also often confused with what he calls ‘demoralization’, something he attributes to the modern lifestyle and obsession with empty consumerism and pointless consumption.  This, he feels, leaves many people feeling dehumanised, demoralised and disappointed with their lives.  So, the question is perhaps not how to treat sick individuals, but how to treat a sick society?  That of course would require a massive culture shift.  In the meantime we must be grateful that our young Royals have taken a lead in speaking out in a way that would not have been acceptable or possible even a few decades ago.

 

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Issue 101: 2017 04 20: Libor-ed into lowballing (Frank O’Nomics)

20 April 2017

Libor-ed Into Lowballing

Time for the Bank of England to celebrate its role in saving our financial system?

by Frank O’Nomics

The BBC Panorama programme last week featured recordings of telephone conversations that suggest that in 2008 the Bank of England took steps to encourage traders to set an artificial level of Libor.  The revelations have led to a number of people, not least the Shadow Chancellor, John McDonnell, to call for an inquiry into its role.  However, accusations that the process led to financial loss for schools, the NHS and local councils would seem, on analysis, to be somewhat wide of the mark and, while there are good grounds to criticize the Bank for not clarifying its behaviour before now, there are some justifications for what they may, or may not, have done.  The Bank of England argues: “Libor and other global benchmarks were not regulated in the UK or elsewhere during the period in question”.  However, this is not the same as saying that they were not monitoring the process as part of their role of ensuring the proper conduct of financial markets.

Consider two questions.  How much would you lend to someone that you thought was in danger of going bankrupt?  If you really had to lend them money, what rate would you demand, particularly when similar entities had become insolvent?  The answer to the first question, for most of us, would be nothing – and for the second the rate would be a very high number that reflected the risk of default.  This was the situation in which many banks found themselves in 2008.  The London Inter-Bank Offered Rate, commonly known as Libor, is supposed to reflect the rate at which banks will lend to each other, but if there is no business taking place (and it was clear that Lloyds and RBS were struggling to find anyone that would lend to them other than the government), due to a widespread lack of confidence, the level at which to set Libor is not straightforward.  With the banking system on the brink of collapse an acknowledgement of the extent of this crisis of confidence could have pushed the UK financial system over the edge.

Given this backdrop, for the Bank of England to recommend that banks published what was effectively a hypothetical rate, and for them to encourage those banks to “low-ball” the level, might reasonably suggest two things. First, that the Bank was fully aware of what was going on in the UK financial system, and was effectively fulfilling its duty of close monitoring. Secondly, that it was acting to ease fears and pressures in the system while it made efforts to step in where action was most needed, thereby buying time to introduce reforms to ensure that a new, more robust, environment was created.  By doing this, they could also ensure that the costs of support – which at its peak meant the authorities pledging over £1 trillion, including the bailing out of Northern Rock, Lloyds and RBS – remained at a level which did not put too heavy a burden on the UK taxpayer.

The alternative possibility is that the Bank had no idea of what was going on and genuinely thought that traders were submitting interst levels at which they were prepared to lend each other money.  This stretches credulity, and ignores the daily interaction that the Bank has had with the money markets for centuries.  Following the evidence produced by the Panorama team, which seems to show the Bank actively encouraging UK clearers to “low-ball” their Libor submissions, it might be time for the Bank to come clean about its actions. If it had done so earlier it might reasonably have claimed to have covertly acted to save the fate of our financial system, arguing that desperate times demand desperate measures.

While clarity as to its actions in 2008 would undoubtedly lead to calls to review the convictions of some Libor-riggers, the Bank does not have to condone the activities of traders who, for some years prior to 2008, had been acting where they could to artificially adjust the level of Libor (both up and down) to suit their trading positions. That is very different to submitting low rates to calm a very unsettled and vulnerable market to give a breathing space to some very large domestic institutions. This is where John McDonnell’s assertion that the Bank of England’s action disadvantaged the likes of the NHS and local councils is wrong. Those whose loans were linked to Libor were saved from the worst excesses of the banking crisis by the low-balling process. Those who suffered were those who bought products which ostensibly gave protection against rising rates, but which had an added element to reduce the costs of that protection.  This involved a significant exposure to a fall in rates, which proved very costly and led to the bankruptcy of many. However that was, arguably, the result of their being miss-sold an interest rate swap product, rather than the result of any manipulation of the Libor rate

Those who wish to criticize the Bank of England should decide whether it is because they were blind to events of which most market participants were fully aware, or because they were secretly acting to keep the severity of the situation in check to allow the bank bailout.  On the one hand they are incompetent; on the other they are arguably heroic.  Which is it to be?

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Issue 101: 2017 04 20: Draining the swamp (John Watson)

20 April 2017

Draining The Swamp

Mrs May’s appeal to the people.

by John Watson

Gosh, for a political magazine like the Shaw Sheet, the year 2017 has cherries on it. We were looking forward to the French and German elections, popcorn at the ready, sauvignon blanc in the fridge, avidly reading Richard Pooley’s articles on the former and searching for a German columnist to provide commentary on the latter, when in an extraordinary political turnaround we got one all of our very own.

The government’s volte face should, perhaps, not have come as a surprise. Sure, Mrs May is known to have considered a general election as an unnecessary distraction from the serious business of negotiating Brexit, but it had begun to look less of a distraction than some of the parliamentary manoeuvring. The thrust of her announcement lies in two paragraphs:

“In recent weeks Labour has threatened to vote against the final agreement we reach with the European Union.  The Liberal Democrats have said they want to grind the business of government to a standstill.”

“The Scottish National Party say they will vote against the legislation that formally repeals Britain’s membership of the European Union.  And unelected members of the House of Lords have vowed to fight us every step of the way.

These are the pressures which have driven the Government’s decision and they are of course augmented by the danger that some of its own MPs, having either not yet embraced the inevitability of Brexit or being head bangers who would really like to exit without a deal, may be tempted to do a little wrecking of their own. With a majority of only 12 this is a big risk.

If the reasoning which drives the government to seek a fresh mandate is fairly obvious, the position of the other parties is more complicated and could result in a shift in the tectonic plates of British politics. For example, those who regard Brexit as a catastrophic mistake and still hope that Britain will remain in the single market are likely to embrace the Liberal Democrats.

That will bring Tim Farron some new support, although it is unclear whether his much vaunted resistance to hard Brexit is a real differentiator. Is the Government really in favour of hard Brexit either? Surely not. It just has to say that it would be content with a treaty-free exit to give itself a negotiating position.

One of the government’s difficulties at the hustings will be that it cannot make this plain without jeopardising its position across the Channel. It will have to rely on political commentators to do it instead.

No wonder Mrs May does not wish to take part in a televised debate!

Labour’s slightly ambiguous approach to Brexit seems likely to come back to bite them. Those of their supporters who believe in it will be tempted to go Tory while the Remainers may be attracted to the Liberal Democrats. Still, great parties have strong core votes and it may be that if Mr Corbyn produces a radical manifesto he will gain some support among the millennials.

Not since Macbeth has the position in Scotland been so dramatic. Is Ms Sturgeon on a roll towards Brexit fuelled independence or has her support peaked? Ruth Davidson, her opposite number, is certainly hoping for an increase in the number of Conservative seats and it is possible that Mrs May, who could run Andy Murray close in a taciturnity competition, has made some ground north of the border. Certainly Nicola Sturgeon’s reaction that there need to be TV debates and that Mrs May should be “empty chaired” if she does not attend, seems a strangely lightweight response to the issues. Presumably she will campaign alongside the Liberal Democrats in the “stay in the single market” camp, although she must secretly hope that a failure to achieve this will push Scotland towards independence.

At the level of Conservative MPs, it is more difficult still. Suppose you have a keen Remainer, what should he or she do? Is the answer to line up behind the government’s position and simply declare confidence in Mrs May or is it to make a play about how one will hold the government to account and try to prevent “hard Brexit”? The latter approach could lead to deselection in a Brexit constituency: the former, if the local association is Remain. Nominations are open until 11 May so there is plenty of time for very hard talking with constituency officers. Are we going to see Conservative election addresses which are not wholly behind the Government? Or deselections? Or both? No doubt Mr Hammond has a spreadsheet which works it all through.

If the position is confusing to us in Britain, it must be doubly so across the Channel.  Why does Mr Corbyn apparently support the call for an election when he is so far behind in the polls?  Will the Conservatives’ nuttier Brexiteers stay with the party or revive UKIP?  Why would a bigger majority in the Commons give Mrs May more leverage with the House of Lords?  Those of us who have been complaining that the two-stage French presidential election, with its four slightly improbable candidates, is hard to read, have now been well answered.  The election here will be highly unpredictable as voters identify their loyalties by new criteria.

The announcement of the election resulted in an immediate fall in the FTSE 100.  In more traditional times that would have been taken as a loss of confidence in the government but nowadays we know better.  The fall was, as usual, simply the consequence of a strengthening pound, the link being that the companies which make up the index generate their profits internationally so that if the pound rises their earnings become less valuable in sterling terms.  Hence a drop in share price.  In this topsy-turvy world that makes the drop in the FTSE a sign of confidence.  Whether that is because a General Election raises the possibility that we will stay in the EU after all or whether it is simply that the City believes that the government needs strengthening for the Brexit negotiations to proceed sensibly, it is hard to say.  Probably the latter but, for all that, it would be unwise to take a Government victory too much for granted.  History has not always been kind to those who have gone back to the electorate to increase their mandates.  Remember Mr Heath going to the country for authority to take on the miners?  If only for the sake of good order, let’s hope it works better this time round.

Still, there is one place that Mrs May’s reasoning will be well understood.  Perhaps it all began like this:

“Well Donald, the people have decided but the parliamentary in-fighting is getting in the way.”

“Gee, that’s too bad Teresa.  Isn’t there some way that you can drain the swamp, bypass them all, appeal straight to the people?  What about doing more on Twitter?”

“Twitter isn’t really my thing, Donald, but I suppose there might be another way…”

It is all very 2016/17.

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Issue 100:2017 04 13: 100 up (John Watson)

13 April 2017

100 up!

A message to our readers

by John Watson

As you will see from the contents page, this is the 100th edition of Shaw Sheet.  That means that we have published well over 1 million words and produced several hundred cartoons and photographs.  We have enjoyed it and we hope that you have too.  Still, it is a time to reflect on the formula and you will notice a number of changes over the next few weeks.  For example we hope to include more reviews and interviews.  We will also be increasing the prominence of the weekly news cover to emphasise its usefulness to those who have not had the opportunity to keep up with the daily press.

From you, our readers, we ask two things.  The first is that, if you have not done so, you register as a reader using the red panel at the bottom of the contents page.  It does not involve making any payment or any form of commitment.  It does, however, mean that you will receive a weekly email announcing publication and setting out the contents.  In addition we are proposing to begin a series of editorial pub lunches (sorry, everyone pays for their own) and we will use the register as a basis for invitations.  Registration also gives us a good way of measuring readership

Second we are always looking for contributors, whether of articles or of letters.  Online comments are switched off because of the need for continuous monitoring for defamation.  We do, however, welcome comments emailed to johnW@shawsheet.com and neilT@shawsheet.com.

We wish you all, including those members of foreign security services who have the job of monitoring blogs and online magazines and whose readership we appreciate, a very enjoyable Easter break.

 

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Issue 100: 2017 04 13: The Luck of Mrs May (Robert Kilconner)

13 April 2017

The Luck Of Mrs May

A fairy tale.

By Robert Kilconner

“I feel sorry for Mrs May”.  The speaker was a wise friend who is usually right and to whom I always listen.  Naturally, I nodded in agreement and felt sorry for Mrs May too.  It must be awful, when you think about it.  Difficult problems on every side, friends and enemies to control and never really knowing which is which, traitors in Scotland with daggers in their socks, Remoaners prowling the streets of Westminster clutching weighted prosecco bottles, headbangers calling for “no deal” without any idea of the implications, and this is before you have even crossed the Channel to wrestle with the ungodly on the other side.  The fate of nations hangs in the balance.  You are surrounded by impossible people taking implausable positions for sordid personal reasons, and all you can do is to plough on and try to sort it all out sensibly.  Yes, that is “uneasy lies the head that wears the crown”, with a vengeance.   Poor woman.  I wept into my beer with the pity of the thing.

It wasn’t until I woke up that I realised what piffle we had both been talking.  Look at where Mrs May was 12 months ago.  She had a good record as Home Secretary but there was no real prospect of her going further, her dry and cautious approach being out of sync with the national mood.  There she would end up, a minor footnote known only to history buffs, a lesser figure than Rab Butler, Roy Jenkins or even Henry Brooke (yes, Home Secretary 1962 – 1964, see what I mean).  And then suddenly, poof, the transformation.  Enter the good fairy in the unlikely shape of Nigel Farage.  “You shall go to the ball Theresa,” he said, and he turned out to be as good as his word.  A short ride in a gilded coach to Downing Street where fame, or if she fails, notoriety, waited.

Of course it is all very daunting but Mrs May is a professional politician and, as such, she must always have longed to have the opportunity to test her talents at the highest level.  Top card players do not want easy hands.  They want difficult and complicated ones which will show what they’re made of.  Top chess players do not want easy matches.  They want to play against the world’s best.  Not many of us get the opportunity to live our dream in this way.  Churchill did, of course.  The role of war leader, drafted in when all looked bleak, suited him to a T.  Others too from different walks of life get the opportunity to test their talents at the top table.  How much more fulfilling, how much more exciting, than to descend into old age with that terrible word “if” still hovering over your head.

Who knows whether Mrs May will succeed or fail, whether she will be regarded as the saviour of her country or as someone who was simply not good enough to rescue it from the imbroglio in which it had become enmeshed?  History will tell us that one day, and it may not tell us until years after she and we are all dead.  From her point of view, however, that is not the real point.  She has been given the opportunity to apply her abilities in the most difficult circumstances and where it really matters.  Not many politicians get that chance, certainly not at this level.  For better or for worse she will have her place in the history books.  Whatever the final verdicts on her efforts, one thing is sure.  Mrs May is a very lucky woman.

 

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Issue 100: 2017 04 17 Bojo Misses the Party (John Watson)

13 April 2017

Bojo misses the party

He is right not to go to Moscow.

by John Watson

It is always wise to be careful what you wish for and the reason normally given is that you might just get it. In the bowels of the Kremlin they must be pondering that at the moment as they wonder whether their support for Mr Trump assisted him to power and reflect on how quickly it has all blown up in their faces.

Trump loosing the Tomahawks to avenge the appalling chemical massacre at Khan Sheikhoun makes many people nervous, including both friends and foes of the US.  It isn’t so much concern at the raid itself, which seems to have been carried out with surgical precision, but rather concern as to whether the consequences have been fully thought through.  How will Russia react to the attack on its proxy?  Has Assad become too hot to handle and if so, and if he goes, what will replace him?  The difficulty with bringing down a regime is that unless you have something to replace it with, all you create is a void, a playground in which a new generation of warlords can operate.  That is a pattern we have seen over and over again, most recently and tragically in Libya.

Perhaps though, the thinking is that the US reaction will curb Assad rather than bring him down.  Perhaps his Russian friends will rein him in.  That would be a good result but to achieve it requires careful thinking through of political strategy.  Has that been done?  The raid was launched very quickly.  Was it spontaneous, like a particularly deadly form of tweet?  Or, had the whole thing been gamed carefully in Washington by people who knew what they were doing?

We may never know the answer to all this and indeed the truth may be somewhere down the middle.  Still we are where we are and the question has to be what happens next.

Rex Tillerson, the US Secretary of State, is now in Moscow and it would be hard to imagine a diplomatic mission more important than that on which he is engaged.  The fate of the fight against Islamic State sits on his shoulders.  So too does the need to end the appalling suffering engendered by the Syrian civil war.  He needs to use power backed diplomacy to come to a new understanding with the Kremlin.  It will be eyeball to eyeball stuff.

It is a well-known rule of marketing that the effectiveness of teams making presentations is generally proportional to the inverse of their size.  Suppose a number of people make a pitch to a client.  They will have rehearsed it beforehand and planned who will make which points and when; then they will pass the lead around as if it was a hot potato.  Result?  They may all be very good at their specialisms, and of course there are exceptions, but it is usually a dog’s breakfast.  Far better to have one well briefed individual go into the room like a gunslinger entering a bar in a Western and sell the proposal himself.  If he needs support, it can sit behind him but there should be no doubt whose presentation it is.

Carry this across to diplomacy and you will quickly see why it would not have been helpful to have Boris Johnson delivering his own message in Moscow separately.  He would either parrot the US line, in which case what is the point of having him there at all, or he would come out with a slightly different version, the only result of which would be to muddy the message.  In view of the uncertainty with which the UK has handled involvement in Syria to date there is nothing useful that he could add.  All he could do was to queer Rex Tillerson’s pitch.  He was right not to go.

The Russian Embassy in London has reacted with mockery.  One should not grudge them their jokes because someone who jokes is less likely to press the red button than someone who does not.  Still their comments are designed to expose the reduced significance of the UK and its dependence on the US.  On both counts they have substance but the right reaction to that is to accept that substance and then see how it affects the strategy.  Let’s try some of the criticisms of Mr Johnson’s decision not to go against that reality.  What about Mr Corbyn’s suggestion of going to have a “robust conversation” with the Russians?  What would that achieve?  It is hard to imagine that it would add anything.  Or what about going ahead with the visit to show that the foreign secretary can be trusted and is not a mini-me of the US, as Alex Salmond seems to have suggested?  That may be good for Johnson politically or indeed for Britain’s status in the world but the issues here dwarf such considerations.  In the end the focus has to be exclusively on the success of the talks and the best prospect for anything constructive to emerge from them is for the Americans and the Russians to talk on their own. If they succeed in reaching an understanding, well and good: but if they fail, all the king’s horses and all the king’s men will have the devil’s own job picking up the pieces.  With stakes at this level it was right to withdraw and not to complicate matters further.

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Issue 100: 2017 4 13: When Gove and Corbyn agree: VAT on school fees (Frank O’Nomics)

13 April 2017

When Gove and Corbyn agree: VAT on school fees

Have proponents really considered the consequences?

  by Frank O’Nomics

What would the fate of Harry Potter have been if the Dursley’s could not have afforded the school fees?  Would Billy Bunter have been as entertaining if, not only had the postal order not turned up, but also the school fees could not be found and he turned up at the local grammar?  The proposal to extend VAT to private school fees is making some strange bedfellows and when an issue unites the likes of Michael Gove with Jeremy Corbyn there would seem to be just cause for proper consideration.  Beyond their agreement that such a measure is merited, the two diverge in their views as to what should be done with the resultant revenue.  This too should be carefully considered, given that the proposal could potentially raise a sum of the order of £1 billion.

On the face of it the lack of VAT on school fees seems strange.  Why should the wealthiest be given a tax advantage in buying a service which, based on evidence of university attendance and top jobs, seems to give them a further advantage in society? Private schools are effectively state subsidized and, put like this, most of the tax-paying electorate is likely to have some objections.  Over a 13-year period, the cost of educating a child at a private day school costs around £160,000, with boarding schools costing much more.  Clearly these numbers go way beyond the incomes of most people, so why should those that can afford it be given a tax subsidy?

This however, is too simplistic; it overlooks key arguments for the support of private schools, as well as the consequences of forcing many families, who could not cope with the increase in costs, to take their children out of private education. While it may be true that the parental incomes of private school children are well above average, many two-income families are working very hard to find the fees to educate their children privately.  Further, the data on fee levels overstates what the schools actually get, with one third of pupils on reduced fees.  In 2015 bursaries and scholarships of over £850 million were offered to parents, with £700 million coming directly from schools fund.  These sums are not dissimilar to the monies that could be raised from the VAT measure (the Labour Party estimates that £1.5 billion per annum would be raised, although the Fabian Society last had the number at £1 billion) particularly if you bear in mind the number of children that would leave for the state sector.  Quite simply, the private school system is making efforts to pay back the effective subsidy, keen to ensure that they retain their charitable status.

The payback from private schools goes beyond pupil subsidy.  There is also a great deal of collaboration with local state schools to offer support, particularly with languages and sciences, but also with university access, sport and music. Take for example, the City of London School for Girls (fees around £15,000 per annum), which has 25-30% of its pupils receiving a reduction in fees of anything from 25-100%.  CLSG helped to form the East London Consortium of both independent and maintained schools to promote the exchange of good practice and give opportunities for curriculum enrichment.  The school will also open a new primary academy, which will be free, non-selective and fully inclusive.  If such schools can demonstrate that they are using their position for the greater benefit of the local community, shouldn’t they be incentivised to do so via the tax system?

Perhaps the biggest concern about the effect of putting VAT on private school fees is the consequences for the state system.  The Independent Schools Council has said that many smaller schools would have to close, and even some of the larger ones would be likely to see a great many pupils leave for the state sector.  This could potentially result in an additional 600,000 pupils having to be accommodated, very quickly, into our already exceptionally overstretched system. Even if the VAT revenue was allocated directly to trying to create greater space and the recruitment of more teachers, the pace with which this could be done would be too slow to prevent a great many from suffering a sub-standard service. Further, the money raised would not, if we adopt Mr Corbyn’s policy, be put into increasing capacity.

Jeremy Corbyn has said that a Labour Government would put the VAT revenue into providing free school meals for all primary school children.  It is not rocket science to suggest that healthy eating would contribute to better outcomes, but the studies that Mr Corbyn cites (based on pilot schemes on Newham and Durham) stop short of drawing a strong correlation between free meals and attainment – the effects, they say, are slight and would need further examination.  If these effects are not significant, they may struggle to counter the negative results of larger class sizes. The cost of rolling out a free school meals policy would be of the order of £1 billion, and would finish up benefiting a great many pupils from families that can easily afford to feed their children. In fact, it seems likely that Mr Corbyn’s policy would finish up giving a subsidy to many more of the middle classes than those who currently benefit from the VAT schools fees exemption.

Michael Gove’s arguments as to what to do with the money raised by the VAT have greater credibility.  He suggests that the money goes towards helping the more vulnerable children by increasing the pupil premium, or to expanding Frontline, the scheme that recruits talented students into social work.

He also thinks that the money could be used to fund the abolition of employer national insurance contributions for care givers.  All of these suggestions are laudable, but it may be much better to fund them another way.  If private schools can demonstrate that they are working for the common good, spreading a culture of excellence and allowing state school class sizes to remain manageable, there seems little benefit in undermining them.

 

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