three elections - three stories - little reason

So in the past week or so there have been four elections which have had greater or lesser coverage in the international media.  What are the key lessons from them all?

1.  The all involve people choosing politicians, which is the worst form of government ever devised (except for the alternatives).  Nearly a million people think Ken Livingstone, a warm supporter of Fidel Castro, is a fit and proper person to spend billions of pounds on a city.  More than half of French voters think a man who has never created a job in his life, should run Europe's third largest economy.  A majority of Greek voters want to be told what to do by authoritarian Marxists and fascists.

2.  Boris Johnson is a funny engaging man who woos women and is intelligent and entertaining.  Moreso than Ken Livingstone.  He won because he captures people's imagination, and he didn't pretend to be offering that much.  He offered frugality, a 10% cut in the Council Tax levied by the Greater London Authority, but also didn't pretend to not be a private educated, Oxbridge, upper class chap.  In an age where being a celebrity and a character is more valued than most things, it worked.

3. Ken Livingstone is a bitter nasty old socialist who plays class warfare politics, who blamed the riots on austerity, who says one thing and does another, who plays fast and loose with comments about rich Jews and says one thing about gay rights whilst giving succour to Islamists.  He's a politician of the past, and cost Labour victory.

4. Beyond the London mayoral elections, Labour did well because over 60% of voters didn't bother at all.   The core opposition to the government was motivated, the core support was not.  The Liberal Democrats continue to erode into what looks like fourth party status.  The Greens, despite some efforts in doing well, have barely lifted their support as the environmental arguments don't wash well in a recession.  The socialist fascist BNP lost every council seat it defended, including losing what had been its single seat on the London Assembly.  UKIP gained some votes but not seats.   People are fed up with politicians, don't trust them and given the gaffes around the last UK budget, it's hardly surprising the UK coalition is uninspiring.

5. The French have always voted for socialism, it has long been a matter of degree.  Now they have voted for a hardened socialist rather than a softened champagne socialist who preaches austerity, but really lives it up large at the cost of future taxpayers and who preaches suspicion of foreigners when he himself is the son of a Hungarian migrant.  Now they can pretend that they can stop trying to live within their means, get taxed more and just borrow to prop up their socialist economy where, despite the mythology, manufacturing is no bigger a part of the economy than it is in Britain.  Bear in mind a fifth of the French are warm towards a fascist and another 15% are warm towards communists, then you see that liberte isn't as big as equalite in France.

6. The Greeks have voted in protest.  The two formely major parties responsible for decades of overspending, lying about debt, a culture of corruption and rent seeking, have been decimated.  The "centre-right" New Democracy party has the greatest number of seats, but 108 in a Parliament of 308 is far from enough to govern.  The "centre-left" PASOK party which led the last government is third with 41 seats.  Second is the Marxist "Coalition of the Radical Left" with 52 seats - a party of communists, Trotskyites, environmentalists and Maoists.  It promises to reject spending cuts, reject austerity and somehow magically produce a socialist motherland where money can pay for the big warm maternal state that makes everything happy again.   Fourth is the new Independent Greeks party, with 33 seats, which is an odd nationalist party wanting the Germans to pay war reparations, rejecting loan agreements with the EU and wanting politicians and officials responsible for the crisis to be prosecuted - well I can agree on the last one, but I think the Germans have done Greece enough good by lending to it when nobody else would!  Fifth is the Communist Party of Greece, which picked up to get 26 seats.  The party that is Marxist-Leninist and would have run Greece like a totalitarian twin of Bulgaria had the Greek Civil War gone differently, not that anyone noticed. However, everyone noticed that  Sixth is the fascist Golden Dawn Party with 21 seats.  It rejects the Enlightenment and the industrial revolution, is radical Greek Orthodox, and wants removal of foreigners.  Greeks almost certainly will face no stable government that will enable their bloated state to be funded - indeed, the future looks bleaker now than ever before.

So for London?  Business as usual - nothing to see here.

For France?  A little man (shorter than Sarkozy) is going to fight austerity - that hasn't even happened- but will inevitably bow to reality, because he is, at the heart of it all, a man who will listen to the grand French statist bureaucracy.   Expect little change, although there are reports that real estate agents in South Kensington in London are facing record queries from wealthy Parisians seeking to flee punitive taxes Hollande has promised.

For Greece?   Hardly anyone has been telling people in Greece the only solutions to their problems are:
-  Accept the government has failed them, make their own arrangements for retirement, healthcare and education.
-  Move all their money into foreign bank accounts, preferably not in Euros, or buy precious metals.
-  Hunker down and accept that the next 5-10 years will be very hard for those who can't or wont make provision for themselves.

Greece's tragedy should be lesson to all

Greece's radical leftwing party, Syriza, has one policy I agree with - the prosecution of the politicians and bureaucrats who are the architects of Greece's current tragedy.

That is all though - the policies to "reject austerity" are so demonstrably absurd, that they will demonstrate the simple failure to learn the lessons of the past couple of decades of Greek reality evasion.

As much as Syriza, the Communist Party (truly communist, in the Marxist-Leninist - Soviet model was the way to go sense) and the fascists want to paint it, Greece is not in an economic crisis because of foreign bankers or even the European Commission.

It is in a crisis because perpetual budget deficits are unsustainable.

This will continue, even if Greece exits a fiat currency supported by large economies for one supported by its own incompetent government.  For let's be clear, Greece is no more likely to be able to reject austerity with a currency that will be as trusted as the Zimbabwean dollar than one trusted like the Deutschmark.

There is literally no alternative to austerity in one form or another.

So what are the options?

1.  Greece follows the deal previously done with it.  That means reducing its budget deficit to ultimately balance spending with revenue within the next few years.  Bear in mind this deal already includes 80% of its debt being written off by the creditors.  Not exactly wealthy bankers demanding their pound of flesh when most of what they loaned Greek governments is being written off.   Of course what this means is shrinking the Greek state, less welfare, pensions at ages similar to other EU countries,  less subsidies, privatising trading enterprises (e.g. railways, broadcasting, postal services), cutting the public sector and streamlining the tax system so that it is at a level people may be prepared to pay.    If Greece accepts a public sector that it is willing to pay for, it can stay in the Euro and live within its means.

2.  Greece rejects the deal and defaults.  That means simply being unable to pay its way.  The state can't overspend because it can't borrow (who will lend to it outside some German led guarantee?), so it stops paying wages to public servants, stop paying other bills and essentially shuts down.  It becomes interesting if the military can't get paid. In effect it is instant austerity.  Instead of the Eurozone deal lending, lending ends, so the budget deficit is wiped out - instantly - because you can't spend beyond your income if you have no credit.   In this context, the Euro takes an enormous hit because of perceptions that Eurozone sovereign debt is no longer "safe", so it devalues somewhat.   The Syriza party effectively thinks that Germany will be forced to lend to Greece to cover it - in other words that the Eurozone becomes like the United States - with the richer parts transferring money to the poorer parts.   However, if Germany refuses (why should German taxpayers prop up an ungrateful, previously fraudulent Eurozone country that doesn't think the rules apply to it), then Greece truly faces a hard time, and will be tempted to take the next step...

3. Greece rejects the deal, defaults and announces a new sovereign currency.  As easy as some commentators think this is, it is almost inconceivable.  It is option 2, but with the printing presses coming out to issue a New Drachma which would be the new state currency to pay public servants and pay bills, and new debt is issued in the new currency.  The effect will be collapse of Greek banks as Euro deposits are withdrawn en masse, and millions of Greeks open up new Euro accounts in non-Greek banks.  All Greek businesses and citizens with debts in Euro face default, but suddenly Greek exports and tourism to Greece becomes remarkably cheap because of the new dud currency.   Yet without austerity, Greece will rapidly face hyper-inflation from the government printing money to cover its deficits, plus a massive increase in the prices of imports, such as oil.  In short, Greece turns into the stereotypical tinpot third world country, with a non-convertible currency that makes the Bulgarian Lev look like a safe bet.   

4. Greece rejects the deal and gets a German led bailout with surrender of sovereignty.  It isn't far removed from what was previously agreed, but this time it will be more thorough.  The deal to keep Greece in the Euro includes direct government to government lending, but with surrender of Greek sovereignty in the meantime.  You can just guess the attitude of the Marxists and fascists in Greece to the spectre of this.

Unless taxpayers of wealthier Eurozone countries let their government bail Greece out (which I doubt they will do), Greece faces living within its means.  It will have to do so within the Eurozone or without it.  At the very worst, Greece will put its head in the sand, default, be unable to pay for the army and it will stage a coup - seeing Greece kicked out of the EU and NATO and become the new laughing stock of Europe.  Then the people of the former Yugoslav Republic of Macedonia, the people of Cyprus (especially northern Cyprus) and other neighbours might fear what a new militarised Greece will be like.   

The lesson from all this is astonishingly simple.   

Government's cannot evade reality forever.  

They cannot borrow endlessly from creditors, especially ones that have already written off many of their past debts as bad debts.

They cannot borrow from other governments, accountable to taxpayers who want to know why their money is being loaned to a government that no one else will lend to, because its taxpayers refuse to pay for the state they demand.

They are not better off if they can just print money to cover spending - because people are not so stupid to believe there is real value in a currency manufactured by the government because nobody else will lend to it.

Austerity is not a policy choice on a whim, it is, as I have said before, just living within your means.

The tragedy in Greece is that the lives of millions are now being hit because past governments pretended this was not necessary, facilitated by public servants and facilitated by past creditors.  They have been hit by the fraud of the profligate deficit spending state.   They gained a welfare state more generous than most of western Europe, and state health and education systems they didn't have to pay for - and now face losing much of it all.

The real insanity is from the hard left, who believe that bankers should be forced to lend the Greek government other people's money, or the German government should force German taxpayers to do so.    They have bemoaned profligate lending by banks that needed bailing out, but now want the same banks to lend to a feckless government that can't control its spending.   They are deluded and use language that claim those demanding Greece face reality as "murderers", when it was their own welfare state philosophy that has brought Greece to its needs.

It is the peculiar brand of statist politics that has ruined Greece - the idea that government can offer more and more without producing more, without getting more money to pay for it.  The idea that better healthcare, education and more generous pensions can just be given, not saved for and earned.

The big question is not whether Greece has austerity or not - it will have it, whether it comes from choosing to cut spending, being forced to cut spending or cutting spending in real terms by shifting to a new nearly worthless fiat currency.

Hard working productive people in other countries are not going to pay for Greece's bloated state sector, and they wont do it whether it is as it is now, or some Marxist or fascist version of the same.   Greek citizens either have to hunker down and work within their incomes today, or leave.  If they choose the chimeras offered by the far left, whether they be Marxists or nationalists, then the austerity deals of today will look like paradise compared to the ostracism their country will face.

UPDATE (since I'm in NZ for now):  Idiot Savant still doesn't get it either.  How can it be a bailout for German banks when it is the Greek government that needs borrowed money to function?  This rhetoric is not dissimilar to the banker bashing that the Greek far-right/far-left is employing.  What do the reality evading statists think will pay for the massive gap between what Greek governments spend and what they collect in revenue? There is NO repayment of debt under the bailout, just a government guarantee for deficit financing.  The gap in understanding is palpable.  The willingness to excuse rampant deficit spending is surreal.   The belief in flat earth economics is expected though, because it's how Greece has been run for the last three decades.

London mayoral elections - Back Boris to kick Ken

Whilst not as dire as the French elections, it is clear that there is no candidate for the London mayoralty who supports local government doing less and getting out of the way of people.  

The line up ranges from a Uruguayan candidate for the fascist BNP, to a former public servant standing as an independent, an anti-car Green, gay former cop Liberal Democrat and then of course the two main candidates - the Marxist Islamophile Ken Livingstone (George Galloway-lite) and the bumbling Tory toff Boris Johnson.

UKIP has a candidate who is campaigning on having a tax for visitors to London, a cap on immigration, free parking and other policies that the Mayor has no legal power to implement.   All this is a plain insult to my intelligence.

What I WANT in a Mayor is some fairly clear policies based on what the Mayor can actually do.  The role has some clear powers in transport, housing, policing, economic development and emergency planning.  

For emergency planning and policing, I want competence, commitment to accountability and with policing in particular a focus on real crimes, crimes against people and property, and to promote a culture that respects the public's right to go about its business in peace, but which takes a firm line defending people from the initiation of force.  This includes assisting with national agencies against terrorist threats.   It means not letting people riot day after day, it means not letting people "occupy" private property in mobs as a "protest", it also means being accountable when members of the police assault innocent members of the public.

Beyond that, I don't see a long term role for the Mayor.  Economic development should be about getting out of the way, lobbying central government and local boroughs to get out of the way.   The Mayor should be an advocate and promoter of the city, but not be trying to plan it.   For starters the Mayor shouldn't be opposed to expansion of Heathrow (or any of London's airports if the airport owners can fund it privately).

Housing?  Well the one thing London does need is a Mayor to get out of the way and eliminate urban development limits within Greater London, and set free land for private development.   Local government housing schemes have long been breeding grounds for anti-social behaviour, attracting desperation and criminality rather than aspiration and community.  The ridiculous overly prescriptive planning rules that stifle development and inflate housing prices must be scrapped.

Then there is transport.  You'll know I could write a post about this on itself, but that needs a wholesale shift.  The tube should be privatised, bus companies should receive the fare revenue paid on buses, the congestion charge should be expanded and made more sophisticated to replace council tax funding of roads and to fund a programme of major pavement renewals, the backlog of sign and line maintenance and targeted intersection and corridor improvements.  All traffic light controlled intersections should have pedestrian crossing lights.  Finally, private enterprise should be asked to investigate new road corridors to be toll funded, for both new Thames Crossings and new arterial routes to open up south London.  

Finally, I want a Mayor who will reduce council tax, who will shrink his role to policing, emergency services and advocacy.  For whom planning means property rights and transport means getting from central government enough of the share of motoring taxes paid from using London roads to pay for their maintenance and to maintain spending commitments to public transport upgrades.

Nobody comes near any of that.  Given the UKIP candidate doesn't even remotely dabble in any of this, it comes down to whether there is a qualitative difference between the two leading candidates.

Boris Johnson is the incumbent.  His mayoralty has been characterised by pet projects for bikes, buses, a cable car, giving everyone over 60 free public transport and building "affordable homes". 

On the plus side he has taken a tough line on crime which has achieved some results, even though early management of the riots was disastrous.  He's improved management of utilities digging up roads and put some money into improving traffic management more generally.  He cut wasteful spending on media, froze council tax and gave up first class air travel (Ken liked a first class trip to Cuba when he was Mayor).  Finally, he is proposing a 10% cut in council tax over the next four years, it's not much, but it is in the right direction.

Ken Livingstone is trying to regain the Mayoralty from Boris, having had it from 2000-2008.  Livingstone is promising a public transport fare cut to be funded from the surplus in the Transport for London accounts that has resulted from deferred capital spending on new tube trains.  A surplus that will disappear in one year, but he insists it can be afforded.  He is promising to resell electricity bought by the Greater London Authority to Londoners at a huge discount, as if running a massive retail utility is without cost.  He wants to set up a government real estate agency, and even introduce a welfare benefit for young people who stay at school.   Ken loves being the big man for outside politics he is nothing.

Ken is an expert at spending other people's money.  He spent £10,000 a year on subscriptions to the communist newspaper the "Morning Star" and spent money on first class junkets to Havana and Caracas to visit Marxist dictators.  He is warm towards both regimes, ignoring the Castro brothers' use of mental hospitals to incarcerate political prisoners or Hugo Chavez's bullying of media and supporters of the opposition.  His use of the London Development Agency as Ken's "bank" to back causes he supported, his support for Lee "black people can't be racist" Jasper, who also said Anders Breivik has similarities to Boris.

I couldn't care less about the allegations of Ken using a company to reduce his tax liability, except of course it proves his hypocrisy, as does his continued use of private healthcare whilst being a strong advocate of the NHS.  I do care about his embrace of Islamist hate preachers and wanting London to be a "beacon of Islam".  If Boris wanted London to be a beacon of Christianity wanting all non-Christians to understand the religion, he'd be laughed at for being some US Republican style religious zealot.

Ken Livingstone seeks to court the votes of gay and lesbian Londoners, and claims to care for the rights of women and the oppressed, but then worked for Press TV - the overseas propaganda TV channel of the Islamic Republic of Iran -  a regime that executes homosexuals and rape victims.  Even Labour stalwarts like Sir Alan Sugar are opposing him, following Livingstone saying he didn't expect rich Jews to vote for him.

Ken cites "achievements" of his time leading London in the early 1980s - when he called capitalists "filthy" as recently as 1992.  

He makes it too easy.  Vote for Boris to keep this vile little man out of power.  Boris is no libertarian and far from perfect, but he is promising less local government and he wont be appeasing Islamists, communists or funding his radical racist mates.  Finally, Ken has said he wont stand again if he loses this time - let's hope that's a promise he can keep.  Besides, who wouldn't prefer Boris at the Olympic opening ceremony quoting Latin and bumbling his way informally through it all, over the nasal whiny forked tongue envy peddling friend of George Galloway.

Anzac Day 2012

Not PC's take on it

My past post's here, here and here

France in denial on its long path of stagnation

The Economist got it right when it had its cover page with the very title “France in denial” and today City AM’s Allister Heath said it more clearly about the French Presidential election:

“The useless Nicolas Sarkozy was given a bloody nose; the awful, economically illiterate Francois Hollande is in the lead...there is no pro-capitalist, pro-globalisation, low-tax, Eurosceptic, outward looking party in France... what passes for the centre-right in France is social democratic and fanatically pro-EU”. 

 Quite. A look at the candidates for President says it all. If I was French I couldn’t stomach any of them. Of the ten candidates, three are communists (Melenchon, Poutou and Arthaud), one is fascist (Le Pen), another a conspiracy theorist/quasi-fascist (Cheminade), two are liberal socialists (Hollande and Joly), one is a soft "moderate" socialist (Bayrou) and the other two are conservative "Gaullist" socialists (Sarkozy and Dupont-Aignan). What a choice! It's about "how would you like your more government sir, with a red flag, black shirt, green banner or just some more tax and protectionism?" 

Whether they embrace the EU or reject it (and there are plenty in that group rejecting it, because they see the EU as a free market capitalist project), they all support an economic nationalist fortress France, they all support more taxes (Sarkozy’s “austerity” programme has been mostly about tax increases and he embraces financial transactions tax), they all reject free trade - the free movement of goods, services, capital and people. They all, to a greater or lesser extent, paint the bogeyman not overspending governments that can’t keep their fingers off of the credit cards to bribe voters with borrowed money, but the new scapegoat “the bankers”. They all paint any alternative involving less government as “failed Anglo-Saxon” policies, despite the fact that manufacturing as a share of GDP is the same in the UK as in France, it is just the UK industries are more numerous and smaller than the grand state owned or subsidised industries that are national champions. 

The French story is one of despising capitalism, but as the Economist points out, it is rather contradictory:  

The French live with this national contradiction—enjoying the wealth and jobs that global companies have brought, while denouncing the system that created them—because the governing elite and the media convince them that they are victims of global markets. Trade unionists get far more air-time than businessmen. The French have consistently been told that they are the largely innocent victims of reckless bankers who lent foolishly, or wanton financial speculators, or “Anglo-Saxon” credit-ratings agencies. Mr Sarkozy has called for capitalism to become “moral” so as to curb such abuse. Mr Hollande has declared that his “main opponent is the world of finance”. Few politicians care to point out that a big part of the problem is the debt that successive French governments themselves have built up over the decades.  

The forthcoming contest between Sarkozy and Hollande is really a matter of how much more socialism do you want for France? Bearing in mind that part of France’s socialism, its molly-coddled rural sector, is actually funded by German, British and Dutch taxpayers through the EU. If Sarkozy wins, and he unilaterally implements a financial transactions tax, he will chase the financial sector from Paris to London and Zurich tout suite. If Hollande wins, he will do that and more, with a new 75% top tax rate (at 1 million Euro) just to make sure the message is clear – France doesn’t want really successful entrepreneurs (which of course, the 250,000 or so French expats in London already know), and he is looking to lower the pension age, just when it is clear how big a demographic problem France has in paying state pensions in the future. 

What both offer is a different speed of the process that Portugal, Spain, Italy and Greece followed for the past couple of decades, of growing the state, growing spending, growing taxation and pretending that this works. France’s GDP per capita ranking in Europe has slipped in recent years, now between the UK and Spain/Italy. It hasn’t run a budget surplus for nearly 40 years, and its visibility in the international marketplace for services is low, despite it being the largest component of the economy. Public debt is 90% of GDP, it has the largest state sector in the Eurozone at 56%. It has banks chronically exposed to bad debts in the Eurozone periphery which are grossly undercapitalised. Its labour costs are 10% higher than Germany’s, but French unemployment is 10%, Germany’s is 5.8%. France hasn’t had unemployment less than 7% for 30 years – putting a lie to the socialist myth of how caring a big state is with strong labour rights. The Economist suggests neither of the two leading candidates will address these structural problems: 

 “If Mr Hollande wins in May (and his party wins again at legislative elections in June), he may find he has weeks, not years, before investors start to flee France’s bond market. The numbers of well-off and young French people who hop across to Britain (and its 45% top income tax) could quickly increase. Even if Mr Sarkozy is re-elected, the risks will not disappear. He may not propose anything as daft as a 75% tax, but neither is he offering the radical reforms or the structural downsizing of spending that France needs.” 

 Furthermore, if France embraces an agenda of protectionism, closing borders, higher taxes and more subsidies within the EU, it will clash with the German, British, Dutch and Danish visions of what the EU should be. It will, fundamentally reveal what has long been the underlying tension in the EU – those who want to use it as a shelter and as a super-government to fund their own national rent-seekers, and those who see it as part of a project to break down borders of trade and travel (a third group see it as a source of money to milk while their economies are relatively poor - yet French farmers get three times the subsidy per capita as Polish farmers, as part of a compromise because expanding the Common Agricultural Policy to pay for 12 new states would have bankrupted the EU).

Germany calls the shots in the EU today and can be expected to block such nonsense, but what is next for France? 

Five years of Hollande chasing away business, with more stagnation, more credit rating drops and disappointment that he can’t mould the EU in the image of nationalist socialism? 

Or five years of Sarkozy fiddling enough to stop things sliding too fast, playing lip service to his own nationalist rhetoric, but by and large representing the status quo or slow progressive decline? 

What’s most repulsive is how popular fascism remains, seen now when Sarkozy – son of a Hungarian immigrant – talks of “too many foreigners” in France to woo voters from the seductively dangerous Marine Le Pen, despite he himself having spent five years embracing the political union that facilitates open migration among 27 countries. 

Or indeed the popularity of communism, with a sixth of voters choosing options that have been tried, tested and delivered misery and poverty across half of Europe. What does it say about the desperation of French voters who are swamped by the miasma of stagnation that they blame foreigners or businesspeople, and think a strong authoritarian leader will save the day? Where have we seen this before?  Fortunately, most French voters will never embrace fascism or communism proper, but they are almost infantalised to think politicians, with advice from those educated at the closed shop École nationale d'administration (Civil service school), can fix their problems with more laws, more spending and more taxe.  (Perhaps it is the philosophy behind THAT school that needs to be investigated)

Whatever does happen, one thing is abundantly clear, the future French President and forthcoming government will not be friends of capitalism, free trade or open markets. They will continue to seek protectionism at the price of French consumers and taxpayers, the unemployed and those who fund the EU. France will be the most strident force in international trade against free trade, less subsidies, more transparency and smaller transnational government. More strident indeed than even China. The question is to what extent it gets ignored and sidelined as it embarks on its continued process of relative economic delay, or if it ends up slowing the Western world down with it, given its prominent role in Europe. Given how central France is to supporting the growth of the EU project, and how it is the single loudest opponent of liberalisation of trade in agriculture, it is fair to say that, for those of us in New Zealand (and indeed in all efficient agricultural exporting economies), France will continue to represent the biggest stumbling block to getting progress in opening up international trade in agricultural produce and services.  For those of us in the UK, it remains the fervent cheerleader of a Federal Europe, and opponent of the UK vision of the EU as an open area for trade and business, rather than a protectionist fortress.