“Neoliberals on Bikes”

This is a summary of the some of the main points in an excellent article on the German Green Party - by Olivier Cyran in Le Monde Diplomatique, October 2011. The full article can be accessed here.

During the 1980s, Germany’s Green Party was seen as a radical left party with a strong social reform agenda. Things have changed! Today, having over many years taken part in coalition governments at various levels in the German government system, the Greens are a fully fledged establishment party adorned with a comforting, left-sounding veneer. They are happy to share power with the CDU (the Tory-equivalent Christian Democratic Party of Angela Merkel) or the New Labour-style SPD.

They are “Neoliberals on bikes”, according to Jutta Ditfurth – a co-founder of the Greens who left them in 1991.

In March 2011, for the first time in German history, the Party took the presidency of a regional government – Baden-Wurttemberg, the richest and most populous of Germany’s 16 states. The Green president, Winfried Kretschmann, quickly sought to reassure “the market”, “We are going to follow the path we promised within a bourgeois society”.

As avowed bourgeois politicians, they pursue promises as other bourgeois politicians. They ignore them. Last February in Hamburg, for example, the Green/CDU coalition was turfed out in favour, unfortunately, of the SPD (with large abstentions in working class ditricts). This followed the abandonement of plans supported by the Greens, for scrapping coal-fired power stations, developing a tram system of public transport, and education reforms.

Earlier, in 2005, an SPD-Green coalition in Hamburg had set up, “the harshest unemployment benefit system in Europe”. When it was conceived the previous year, the right-wing newspaper, the Frankfurter Allgemeine Zeitung, called it, “the most drastic cut in social security since 1949”. It was a merger of unemployment benefit and social security which led to rates so low in some circumstances that it was partially suspended by the Courts in Karlsruhe, in October 2010, because it was ruled that the families who received the benefit could not meet their children’s basic needs.

Hamburg’s Greens thought the level of benefit was a little low, “but we still think”, they said, “that it was a good idea to … encourage people back to work”. It was admitted by the Greens that this “reform” could only have been implemented by a Red-Green alliance because had the openly right-wing parties tried to do it (the CDU and FDP), “it would have caused a revolution”.

The new benefit system had been devised by Peter Hartz – at the time an HR director at Volkswagen and friend of SPD Chancellor Schroder. In January 2007, Hartz received a two-year suspended sentence and a fine of €576,000 for having offered bribes, travel perks and prostitutes to members of the Volkswagen works council.

Hamburg is often referred to as the tax evasion capital of Germany. Twenty six of Germany’s richest 300 people live there. Their combined wealth is around €44bn – half the city’s GDP. When a Die Linke (left party) member of the city council asked for extra tax inspectors to help tackle the problem, the Greens voted against it!

"Name and Shame the Corporate Scroungers"

This from Philip Stephens, Financial Times, 1st August 2011. Highlights are mine.

His solution to the simple thievery of the modern "robber barons" is a bit pathetic. However, the key socialist slogan - the democratic nationalisation of the commanding heights of the economy - gets easier to argue as each day passes!

David Cameron has wearied of austerity. Last summer the prime minister took a bucket-and-spade break in Cornwall to show solidarity with middle Britain. This year he has opted for the sumptuous splendour of a Tuscan estate. Mr Cameron has had a turbulent time of late. Aides say he needs the rest.

I cannot see why anyone should worry about his choice of holidays. There is something infantile about politicians pretending to feel the pain of the voter on the Clapham omnibus. People knew when they elected him that Mr Cameron hailed from wealth and privilege.

If the prime minister is to be criticised it is for pretending otherwise. Pace George Osborne, the chancellor, we have never been all in this together. Sure, ministers have taken a pay cut. They have also capped the salaries of senior officials. This is gesture politics. These are not the sort of people who will ever find themselves running short of money on a Thursday.

The problem with pay at the top in Britain is in the private sector. One group has sailed unscathed through the global financial crisis, the recession and the fiscal squeeze: the executives at the helm of UK’s big companies. The banks, still paying hefty bonuses on the back of taxpayer subsidies, provide the most egregious example. Barclays distributes a large slice of its profits to a few hundred employees. Bob Diamond and his colleagues, though, are not alone in their excesses.

As my FT colleague Brian Groom has detailed, the chief executives of FTSE 100 companies saw their pay rise last year by a median 32 per cent. That compares with 2 per cent for most workers. This was not a blip. In 1998, the average pay of these business leaders was 47 times higher than that of employees. By 2010 the multiple had soared to 120. Yet the real value of their companies hardly changed. So much for claims that pay matches performance.

The upshot has been a new plutocracy whose interests and incentives are wholly detached from the rest of society. The share of national income taken by the top 0.1 per cent has returned to the level of the 1940s. Soon we will be back in Victorian times.

The ritual response is that this is all about globalisation. Businesses compete across the world. Unless they pay the going rate, talent will go elsewhere. This is pretty much self-serving nonsense. There are some executives who, in the manner of football players or rock stars, can name their price. But anyone with a passing acquaintance with Britain’s boardrooms knows they are also stuffed with time-servers. Pay levels are set by self-sustaining cartels. Remuneration committees charged with tying rewards to outcomes are hopelessly conflicted. Shareholders cannot be bothered to offer more than token protests.

The inequality is measured not just by the gap between the top and the bottom. The boardroom elite have left behind those at the apex of the professions and entrepreneurs creating jobs and wealth in small and medium-sized businesses.

One scarcely needs to sign up to the politics of envy to believe this is deeply corrosive of the sense of fairness and shared obligation on which liberal democracies depend. It exempts the undeserving rich from the responsibilities borne by everyone else. It erodes acceptance of the role of wealth creation in raising living standards for all.

There is no quick fix. Pip-squeaking tax rates would drive the best elsewhere. Governments cannot set pay. Exhortation takes you only so far in persuading shareholders to clamp down on pay and option packages that reward failure. What’s left is the bully pulpit – a concerted effort to explain that it is as socially unacceptable for these executives to overpay themselves as it is for so-called welfare scroungers to over-claim on their benefits. Now, there’s a useful cause for the tabloid press.

The process has to start with transparency. Companies should be obliged to provide much clearer information about the relationship between performance and pay. Complex “incentive” packages should be decoded. Boardroom salaries should be consistently measured against the rest. Shaming the culprits won’t solve the problem entirely. It will do a lot more good than worrying about where politicians spend their holidays.

New Era of Stagnating Salaries and Wages! Especially the middle classes!

"Nearly three years after the start of the economic crisis, a new spectre is haunting the world’s most advanced economies: the prospect that the majority of their citizens will face years of stagnant wages."

However, "The earnings of US individuals with pre-tax income in the top 1 per cent accounted for 8 per cent of total in 1974, but rocketed to 18 per cent by 2008..."

The full article is below - by Chris Giles from the Financial Times of 27 June. You may be able to see the original article here. If not read on. (Highlights are mine)

Nearly three years after the start of the economic crisis, a new spectre is haunting the world’s most advanced economies: the prospect that the majority of their citizens will face years of stagnant wages.

In the postwar years, there was a belief in developed economies that each generation could expect to have materially better living standards than their parents. Yet the outlook for income growth has rarely looked worse than it does today.

For some middle-income groups, the idea of stationary or declining incomes is not new. Fork-lift truck drivers in Britain could expect to earn £19,068 in 2010, about 5 per cent lower than in 1978, after adjusting for inflation. Median male real US earnings have not risen since 1975. Average real Japanese household incomes after taxation fell in the decade to mid-2000s. And those in Germany have been falling in the past 10 years.

Some of this pressure on the middle income households was masked – at least temporarily – by the credit boom, which allowed families to spend more than they earned. Now, three years after the end of the cheap money era – and with developed countries struggling to get their economies growing again – middle classes around the globe are feeling the squeeze.

It is hardly the backdrop politicians would want as they are being forced to contemplate raising taxes and cutting public spending to repair public finances. And that consolidation is required before countries begin the even more difficult process of adjusting for rising longevity and ageing populations.

Two questions are raised by the trends in household wages and incomes. What exactly is happening to incomes across advanced economies? And why?

Only recently have the answers begun to be clear. Starting in 1975, male US median pay has stagnated in real terms, while gross domestic product continued to rise rapidly. At first, other countries resisted this trend, leading to concerns in the US that a peculiarly American disease was afflicting its culture and labour market.

Growth in per capita national income must go somewhere. In the US, the money flowed almost exclusively to the very richest. The earnings of US individuals with pre-tax income in the top 1 per cent accounted for 8 per cent of total in 1974, but rocketed to 18 per cent by 2008, according to the world top incomes database, a resource compiled from tax return data. Even larger proportionate rises in the share of income went to the top 1 per cent of those with incomes within the 1 top per cent.

But rising inequality in recent years is far from a US phenomenon. The Organisation for Economic Co-operation and Development found increasing income inequality between the mid 1980s and late 2000s in 17 out of 22 advanced economies for which it had sufficient data. “There are signs that levels [of inequality] may be converging at a common and higher average,” the OECD said in a recent report and “countries such as Denmark, Germany and Sweden, which have traditionally had low inequality, are no longer spared from the rising inequality trend”.

Rising inequality in almost all countries is being driven by trends in the labour market. Although most OECD governments have tried to fight the rise in wage inequality by increasing in-work state benefits and trimming payroll taxes for those on lower incomes, the growth in wage inequality has exceeded the willingness to impose ever more progressive tax and benefit systems.

Exacerbating the rising income inequality has been a squeeze in the need for jobs demanding mid-range skills. Across advanced economies, the labour market is becoming polarised into “lovely jobs and lousy jobs”, says Alan Manning, a professor at the Centre for Economic Performance at the London School of Economics. Between 1993 and 2006, the proportion of jobs with middling pay fell, while high- and low-paid employment rose. This finding was common across almost all advanced economies, regardless of their economic characteristics and political culture.

The similarity of the trends suggests that forces bigger than domestic politics or labour market characteristics are at work.

While there are competing theories about what is causing the trends in inequality and labour demand, a few trends emerge.

At the top of the income distribution, the revolution in communications has allowed many star performers to expand sales and revenues from a local to a global audience. Others, particularly in the financial sector, found ways to make fortunes by gambling with other people’s money.

For many university graduates, computers and the internet complement their flexible skills, allowing them greater opportunities. Publishers can distribute content globally, accountants or architects can serve clients far from their offices and professors have a global audience for their ideas in daily blogs rather than lecturing only to those in their institution. Demand for high-skilled jobs has outweighed the growth of graduates for more than a generation, leading to rising incomes.

At the bottom of the earnings distribution, technology is still irrelevant, being little use for tasks such as cleaning and caring for the elderly. But it has severely dented the demand for routine but skilled tasks – once the backbone of employment in advanced economies – from factory workers to bank clerks or to fork-lift truck drivers.

It is no fun to be a fork-lift truck driver in a world of automated distribution warehouses. That shows in middling jobs and wages. And since the middle decides elections, it will also weigh on the minds of politicians.

"Millionaires shrug off the downturn" - FT

This from the Financial Times of 22 June.

[Link is here. You may not be able to see the full article unless you register with the paper - although you can get a few free peeks.]

Millionaires across the world are now richer than they were before the financial crisis, the latest sign that the wealthy have weathered the downturn far better than other groups.

Global wealth among individuals with $1m of investable assets or more [SA- ie, $1m surplus cash] rose to $42,700bn in 2010, up from $40,700bn in 2007, according to the Merrill Lynch Cap Gemini World Wealth Report.

[SA - for info $43,000bn is the equivalent of around $7,000 per person on the planet]

Rising equity markets and Asian growth helped expand the fortunes of the global elite, with the number of Asian millionaires now exceeding that of Europe.

There were 3.3m millionaires in Asia-Pacific at the end of 2010, compared to 3.4m in the US and just 3.1m in Europe, the report found. There were 3m millionaires in both Europe and Asia at the end of 2009.

Strong stock markets last year were a key driver of the gains, with global equities rising 18 per cent on average, according to the report. “The performance in many markets helped to contribute to the growth in wealth in 2010,” the report stated. “Equity and other asset classes rose in value, though not at the exuberant pace of 2009’s bounce-back.”

The countries with the most millionaires in the world remain the US, Japan and Germany respectively, with China and the UK in fourth and fifth place respectively. China now has 535,000 millionaires, according to the report, only about a sixth of those in the US.

The report also found that 83 per cent of the world’s global millionaires were over 45 years old and 73 per cent were male.

The report, one of the most comprehensive annual pieces of research into the world’s wealthiest individuals, indicates that millionaires in European countries with high levels of debt and sluggish economic growth are struggling to keep pace with their Asian peers.

Italy’s number of millionaires fell by 4.7 per cent in 2010, making it the only country in the study to record a drop. Spain fell down the league table from 12th to 14th place.

The ranks of millionaires in the UK showed an increase of only 1.4 per cent last year, compared to a 23.8 per cent rise in 2009. In contrast, the number of millionaires in the US grew by 8.3 per cent in 2010.

Adam Horowitz, head of UK, Ireland and Israel at Merrill Lynch Wealth Managers, said the contrast was likely to be due to differences between wealthy investors in the UK, where more people buy property, and the US, where people are more highly invested in equity markets.

The world’s millionaires also multiplied at a slower pace in 2010 than they did during the bounce back in equity markets in 2009, the report shows. The number of global millionaires rose by 8.3 per cent last year, down from a 17.1 per cent increase the previous year.

Arms and the Man

The UK government and arms industry sell arms to the foulest folk on earth. It seems even worse when you know exactly what kind of stuff they sell. Below is from the Financial Times - 5th April 2011. The full article is here. Do you remember "New Labour's" ethical foreign policy?

Arms Export licences Jan 2009-Sept 2010

Libya

Artillery computers, combat shotguns, teargas, military cargo vehicles, ground vehicle military communications equipment, command communications control and intelligence equipment, infrared and thermal imaging technology, crowd control ammunition and small arms ammunition

Bahrain

Assault rifles, components for combat aircraft, small arms ammunition, submachineguns, weapon sights, aircraft cannon, shotguns, rifles, sniper rifles, CS gas hand grenades, smoke hand grenades, stun grenades, smoke ammunition, smoke canisters, teargas and riot control agents

Tunisia

Parts for assault rifles and machineguns, training in small arms ammunition and components for semi-automatic pistols

Syria

Equipment employing cryptography (secret code systems) and small arms ammunition

Egypt

Training in small arms ammunition, machineguns, imaging cameras, parts for armoured personnel carriers, parts for grenade launchers, submachinegun parts, electronic warfare equipment, parts for semi-automatic pistols, unfinished products for armoured fighting vehicles and weapon night sights

Yemen

Body armour, components for body armour, night vision goggles, military camera technology and parts

“We must obtain an export license from the government before we can export any defence equipment from the UK and this approach will continue,” said BAE Systems, the UK’s largest defence group, whose Tactica armoured vehicles were used by the Saudi Arabian National Guard in their recent incursion into Bahrain. “Responsible business conduct is fundamental to the success of BAE Systems.”

[Business is business...]

Socialist MPs at Last!

This is the first speech in the new Irish Parliament of Joe Higgins - he is the Socialist Party TD (MP) for West Dublin. (I have slightly edited it for relevance here. For more info, Joe's website is here).

I oppose the nomination of Deputy Enda Kenny as Taoiseach [Prime Minister] of a Fine Gael-Labour Party coalition Government. ... the programme presented by Deputy Kenny ... proposes, almost to the letter, to continue the reactionary programme of the old order - of the late and unlamented regime of Fianna Fáil and the Green Party, a regime that was rightly reviled, rejected and sent to oblivion by the Irish people for its economic and political crimes. Given the day that it is [Ash Wednesday], I am surprised that the remnants of that Government did not return with their brows heavily stained with penitential ash to recognise the role it played.

The outgoing regime indulged the profiteering speculators and grasping bankers, imprisoning a generation of young working people in monstrous mortgages and negative equity. When that greedfest inevitably choked on its own excess, it treacherously connived with the EU, IMF and ECB to save the skins of the major European banks that had their snouts deep in the feeding trough that was the Irish property market where they slurped as frenetically as any Fianna Fáil developer or big Irish banker.

For this, and the crash that inevitably resulted, we see the savage attacks on the living standards of our people, which this nominee for Government intends to continue. They attack public services and steal from the disabled and the poor. ...

However, this nominee for Taoiseach proposes to confirm and reinstate the discredited programme of a discredited Government. The poisonous cocktail of austerity, concocted by the witch doctors in Brussels and Frankfurt because of the sickness of the European financial system, is to continue to be force-fed to the Irish people by this new proposed Government.

Therefore, a vote for Deputy Kenny for Taoiseach is a vote ... more of the same. It is a vote for monstrous cuts in the living standards of workers and the unemployed, ... for wholesale privatisation of public assets, notwithstanding the disastrous consequences of previous privatisations such as Team Aer Lingus and Telecom Éireann, for blatant new tax burdens on ordinary people, including a water tax and home tax a ...

It was a great Irish socialist, James Connolly, who, in opposition to that conflict [First World War], called for a torch to be lit in Ireland that would, “not burn out until the last throne and the last capitalist bond and debenture” was burned. How deeply ashamed James Connolly would be today that the Labour Party he founded marches into Dáil Éireann [Irish Parliament] to become part of a Government that will burn not the bondholders, the speculators or the grasping big bankers but the Irish people, the working class, the unemployed, the poor and the low and middle-income workers.

The Socialist Party and the United Left Alliance rejects the right wing programme proposed by Deputy Kenny. We reject the rule of the financial markets, which is causing such crisis and suffering among our people. We demand instead that they be brought to heel and brought into public ownership and democratic control in Ireland and Europe to be used instead as vehicles of major public investment to create projects that would quickly see tens of thousands of people returning to work from the tragedy of standing in the dole queue.

The incoming Government will have a crushing majority in this Dáil. It should not think from this that its economic programme of savage austerity will go unchallenged. It certainly will be challenged in this Chamber and it should be remembered that we in the united left will facilitate the mobilisation of worker power, people power and community power to defend the living standards of the vast majority of people, who are attacked by this programme, to defend their livelihood and to oppose new and unjust stealth taxes.

As Members meet today, they also should remember the magnificent movement of opposition and the sacrifices of ordinary people throughout the Arab world against their horrific dictatorships. Irish working people will wish to support them and Members will return to further discussions in this regard in the days ahead.

Governments Compete for Corporate Favour!

This is an extract from the full article in the Financial Times. Emphases are mine. [Comment in square brackets is mine]. The author's analysis is fine, but (as so often with pro-capitalist liberal would-be-reformers) their proposals are likely to be less effective than a deck chair re-arrangement on the Titanic!

Stop this race to the bottom on corporate tax

By Jeffrey Sachs

Published: March 28 2011

With a quarter of a million people on the streets of London protesting against the UK budget cuts, and with the US government days away from a potential shutdown, the social divisions over fiscal policy are deepening. It is not hard to see why. Both the US and UK have experienced a profound shift of income distribution from the poor and the middle-class to the rich in the past 30 years yet the fiscal adjustments are dominated by sharp cuts on public services combined with reductions on corporate tax rates. The social contract is under threat. Only international co-operation can now solve what is becoming a runaway social crisis in many high-income countries.

The underlying political and economic forces tearing our societies apart are very powerful. The rise of globalisation, and especially the entry of China and India into the world markets, has put extreme downward pressure on wages of low-skilled workers while giving new opportunities for financial and business investments. The pre-tax income of the top 1 per cent of households has soared, from 10 per cent of household income in 1979 to 21 per cent in 2008 in the US, and from 6 per cent in 1979 to 14 per cent in 2005 in the UK. [This is an income-only comparison. The disparity is much worse if capital ownership is taken into account.]

With capital globally mobile, moreover, governments are now in a race to the bottom with regard to corporate taxation and loopholes for personal taxation of high incomes. Each government aims to attract mobile capital by cutting taxes relative to others. Governments like Ireland have created tax havens that drain revenues from the rest and act as conduits to tax-free Caribbean hideaways such as the Cayman Islands. The rich are doubly benefited: by the underlying market forces of globalisation and by their governments’ policy response.

Another reason for the lavish attention to tax cuts at the top is of course the tawdry role of big money in political campaigns. No country tops the US in shamelessness. US national campaigns cost several billion dollars every two years, and fundraising is relentless. The main difference between the two parties is that Big Oil tends to finance the Republicans while Wall Street tends to finance the Democrats. Otherwise, both parties are in the hand of big-money interests that exacerbate the dangerous inequalities opened by globalisation.

... both the US and UK are aiming to do the impossible: run a modern, high-technology, prosperous 21st-century knowledge economy without the requisite tax base, largely to satisfy the upper classes and multinational companies, which threaten to decamp to milder tax regimes, or direct their campaign contributions elsewhere, if they do not get the tax cuts they obsessively crave.

... The Obama White House and Republicans agreed just last December to a $900bn two-year tax cut (extending the expiring Bush-era cuts) and then turned around to cut domestic spending programmes that protect the poorest communities. The White House has also come out in favour of a further cut to the corporate tax rate to be negotiated. In Canada, the Conservative government, brought down in a no-confidence on Friday after being found in contempt of parliament, had just proposed a new budget with a further cut to the corporate tax rate, while Ireland has clung to its irresponsible tax-haven status in the middle of a crippling turn to austerity.

For too long, fiscal politics between the left and right has been debated on false premises. Left-of-centre politics has tended to play down the importance of closing the budget deficit, arguing against spending cuts on the basis that deficits do not matter. Right-of-centre politics has tended to play down the importance of taxing higher incomes, arguing that only spending cuts can reduce the budget deficit. A more responsible position [responsible to whom?] takes a note from both sides. We surely need to reduce the deficits but in a fair, efficient, and sustainable manner, by levying higher taxation on the rich, who are enjoying a boom in living standards and a share of the national income unprecedented in modern history.

... The political defences [of the liberal hand-wringers] in the US and the UK against the power of the rich are crumbling. Multinational companies and their disproportionately wealthy owners are successfully playing governments against each other. The game is clear, and it is working fiercely well.

As a starting point, the Organisation for Economic Co-operation and Development countries should urgently convene a meeting [but urgently!] of finance ministers to enunciate basic principles of budget fairness [surely this is going too far!]: that fiscal adjustments towards budget balance are needed for medium-term solvency but must be carried out in a fair way; that the basic needs of citizens need to be protected in this period of fiscal stringency; that recent trends towards unprecedented inequalities of wealth and income require increased, not decreased, taxation of higher incomes, including corporate profits; and that tax and regulatory co-ordination across countries are vital to prevent a ruinous fiscal race to the bottom.

50P Tax Rate to go in 2013

This is a slightly shortened article from the Financial Times, 24th March. The emphases, are mine.

Osborne looks at scrapping 50p rate in 2013

George Osborne is looking at scrapping the 50p top rate of tax in his 2013 Budget, as evidence mounted on Thursday that individuals are going to great lengths to avoid the levy, undermining revenues for the exchequer.

The Office for Budget Responsibility said it had assumed £2bn of tax revenues for the 2009-10 tax year would not be collected in 2010-11 because of evidence that companies had paid bonuses just before the 50p rate was introduced and business owners paid themselves large dividends to avoid the tax.

Mr Osborne’s team insist there is no timetable for scrapping the 50p rate but all the political signals from the Treasury and senior coalition figures suggest that top earners have just two more years to endure the “temporary” levy.

The chancellor said in his Budget that it would be wrong to cut taxes on people earning more than £150,000 while others on much lower incomes were making “sacrifices” but gave a strong signal that reform was on the way.

“I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent,” he said. “That is why I regard it as a temporary measure.”

The Liberal Democrats have signalled that they have no ideological objections to the move.

Stephen Herring, a tax partner at BDO, an accountancy firm, said numerous owner-managed companies decided to accelerate up to five years’ worth of dividends, before the rise in the dividend tax rate from 25 per cent to 36.11 per cent last April. “It happened on a very substantial scale.”

Democracy is back - how awkward

This is from the FT, Gideon Rachman, on 31 January 2011. Words in italics, square brackets and bold emphases, are mine. Apologies to the FT for "pinching" this.

Movements for democracy, as the press would have it, are very embarrassing. The supporters of capitalist democracy worry that the revolutionary movements may go "too far" and threaten property relations! (by which they would mean possible nationalisations of big industry etc). They are also embarrassed that they have been caught supporting the regimes they now decry. This article captures that embarrassment quite well.


It has taken just six weeks for the arrest of a fruit-and-vegetable seller in Tunisia to spark a chain of events that now threatens to topple the government of Egypt. Watching the revolt against autocracy spread across the Arab world is exciting, uplifting – and also deeply alarming for the world’s major powers, all of which are, in different ways, fond of the status quo.The discomfort of the US is obvious and much remarked upon. As the world’s only superpower and President Hosni Mubarak’s main outside sponsor, it is the US that everybody is looking to. But the turmoil in Egypt will also be a source of anxiety for European and even Chinese leaders.

Europeans have long been acutely aware that theirs is an ageing continent, separated by a narrow sea from a much poorer, much younger north African and Arab world. They have wrung their hands about the economic and political stagnation in countries such as Tunisia and Egypt – while co-operating closely with those countries’ leaderships, in an effort to combat everything from terrorism to illegal immigration. Now, Europeans are left cringing at the old photos of their leaders embracing the likes of President Zein al-Abidine Ben Ali of Tunisia.

In the long run, the emergence of more dynamic and freer societies on the other side of the Mediterranean could be a huge boost to Europe. In the short run, the fear of social and political turmoil is uppermost.

Why should the Chinese leadership, many thousands of miles away, care about what is happening on the streets of Cairo? Because the sight of pro-democracy demonstrators occupying Tahrir Square in Cairo is uncomfortably reminiscent of events in Tiananmen Square in 1989. Of course, the Chinese economy is infinitely more dynamic than that of sclerotic Egypt. But there are some elements in the Egyptian uprising that might ring a few bells in Beijing: popular fury at corruption, the destabilising effect of rising food prices, youth unemployment, the ability of the internet to mobilise popular protest, the gap between a ruling elite and the people they are trying to govern.

Of course, it is highly unlikely that the political contagion that has spread from Tunisia to Egypt will leap across continents to Asia. But the battle of ideas between democracy and authoritarianism is shifting once again.

It is ironic that the democratic movements in the Arab world broke out just as autocracy seemed to be coming back into fashion. Francis Fukuyama, whose “end of history” thesis epitomised the democratic triumphalism of 1989, recently wrote an article for this newspaper that lauded China’s ability to “make large complex decisions quickly, and to make them relatively well”, while lamenting that American democracy “will not be much of a model to anyone if the government is divided against itself and cannot govern”. This month has also seen the publication of Dambisa Moyo’s much-discussed How The West Was Lost, which laments the “economic folly” of western democracies and lauds the dynamism of China.

Placed in the context of the wider debate between democracy and authoritarianism, the sight of demonstrators on the streets of Cairo demanding freedom should be immensely cheering to the west. The neoconservatives who always argued that the Arab world could not forever be an exception to the global spread of democracy may be tempted to claim vindication.

But, of course, things are more complicated than that. If democracy comes to Egypt, it will not be on the back of an American tank – as was tried in Iraq. Indeed in Cairo, the American weaponry is mostly aimed at the demonstrators. The Mubarak government gets more than $1bn in military aid from the US every year. Last year’s Pew Global Attitudes survey suggested that only 17 per cent of Egyptians had a favourable view of the US, with 82 per cent unfavourable. It was the worst rating for America in any of the countries surveyed. Those figures suggest that a democratic Egypt may well be much more hostile to the US.

The prospect of renewed turmoil in the Middle East is also the last thing that President Barack Obama will want now, just as he tries to focus on reviving the US economy and on the historic challenges posed by the rise of Asia. As China has roared ahead over the past decade, the US has wasted lives, money and attention on the Middle East. Yet efforts to concentrate on new challenges may be thwarted by the outbreak of a fresh crisis in the region. As Michael Corleone lamented in The Godfather: “Just when I thought I was out, they pull me back in.”

American thinking about the prospects for Egypt is, of course, haunted by memories of the Iranian revolution. Liberals in the west welcomed the overthrow of the Shah in 1979 – only to see him replaced by something worse. [Bad though the Iranian regime is, it is a long way short of the Savak-supported lunatic dictatorship of the Shah - installed with the support and direction of western "democracy"!]. The one regime in the Middle East that would be unequivocally pleased by the fall of the Mubarak government is the government of Iran.

And yet, Iran is not the only example of a successful popular revolt against autocracy in the Islamic world. Indonesia offers a more inspiring alternative. In 1998, the Suharto regime – which had lasted 32 years – was overthrown. Today, Indonesia is a functioning and increasingly prosperous democracy. It can happen. [This is surely a joke - look up Indonesia on Wikipedia!]

The uprising in Egypt is undoubtedly a dangerous moment. It is also the most hopeful event in the Arab world for decades.

"Big Society" - blowback!

Article from FT of 27th January. Words in square brackets are mine.


Labour and the Conservatives are vying to create armies of community organisers in a contest to be seen as the true “Big Society” party of grassroots campaigning.

There is concern within the coalition that the Big Society is failing to gain traction with a public [No!] that widely sees the concept as a cover for the deepest cuts to public spending for decades.

The government wants the public to buy up disused pubs or failing post offices, to take over services now provided by councils, or to push forward community housing schemes.

Yet some critics now say the Big Society’s most vivid manifestation is the way communities are uniting to fight proposed closures to libraries and other public services due to the cuts. [my emphasis]

Phillip Blond, head of the ResPublica think-tank, admitted this week that he had held crisis talks in December with Steve Hilton, head of policy at Downing Street and a fellow architect of the policy.

“The drive for cuts and deficit reduction is perhaps running too fast to give people the chance to take over the state and create conditions for a civic economy,” said Mr Blond. “The Big Society agenda is still not widely grasped or shared across all departments.” A “Big Society roadshow” to sell the idea was cancelled last autumn after the first event in Stockport was derailed by hecklers.

Labour has confirmed that in March the Miliband brothers will make their first joint appearance since Ed beat David to the leadership of the Labour party last autumn, in an attempt to clear the air after the fratricidal contest.

The pair, flanked by Arnie Graff, a US community organiser who inspired Barack Obama in the 1980s, will relaunch the “Movement for Change” originally set up by David Miliband last summer.

The movement will train up to 10,000 activists to co-ordinate community campaigns, using £250,000 from Labour donor Lord Sainsbury of Turville. The plan is markedly similar to that envisaged by David Cameron, who has promised to train a “neighbourhood army” of 5,000 community organisers in an attempt to install Big Society values in Britain. “The leftwing don’t have a monopoly on this kind of idea,” said one government insider. [No, but we are better at it...]

Meanwhile, ministers are starting to take the blame for many of the local decisions which they had hoped to avoid by delegating powers downwards via their “localism” agenda.

This was starkly illustrated last week when an international summit at Downing Street was disrupted by questions about Riven Vincent, the mother of a disabled child in south Gloucestershire who may have to be taken into care.

The story resonated not only because Mr Cameron had a disabled son, who died in 2009, but as he had reassured Ms Vincent that he would protect the welfare of disabled children. Charities have warned there will be more such consequences of the coalition’s decision to slash councils’ main grant by 28 per cent while cutting funds formerly ring-fenced.

While Mr Cameron has not intervened in the Vincent case, there have been several examples of ministers trying to prod councils to behave in a certain way despite their “localism” rhetoric; for example, by trying to stop them printing news freesheets.

Concerns are growing in Whitehall. Sir Gus O’Donnell, head of the civil service, has appointed Sir Bob Kerslake, a senior mandarin, to set up a “localism group” of other mandarins to “look at the accountabilities issue”. [Policy elite view of "democracy" - only to be celebrated if it produces the right result - unlike Gaza for example].