The Euro crisis drags on and on. If the British press are to be believed then the problem is that the Euro Zone wont face up to its problems and bail out the weak economies. Specifically, Germany has the economic power to sort things out but wont put its hand in its pocket. Here are four reasons why the Germans should bail out Europe.
1 The Irish have already helped bail out German savers
The Germans make out that they have been prudent and none of the current crisis is down to them. This may be true of the German people who save a large proportion of their earnings. But the German people put their money in German banks and the banks had to invest the money somewhere. From what I hear the German banks lent a lot of money to Irish banks.
The Irish banks became insolvent and, if there was any justice, they should have gone bust. If they had then the German people would have lost their money but because Ireland thought it could not allow its banking system to fail the Irish tax payer bailed out the Irish banks. The upshot is that many German people have the Irish tax payers to thank that they did not lose their savings.
2 The Germans should get over their phobia for inflation
After the first world war the German economy went down the drain and there was massive inflation which brought about the catastrophe of Nazism and this is still etched on the German national consciousness in the form of a phobia for inflation.
One thing I read often about economics is that after a catastrophe everyone runs around making rules so that the catastrophe cannot happen again. But the same type of catastrophe is not a likely threat. Similarly with Germany, the catastrophe that looms is not massive inflation but collapse of the Euro. The Germans should wake up and see the threat of today not worry about the mistakes of the past.
3 Germany should recognise their national interest and their role as the largest European power
Germany is a big power. Not on the same scale as the United States or China but it has the 4th largest GDP in the world and by far the largest GDP in the EU. The Greek economy is tiny by comparison. The German public debt is about 81.2% of German GDP. If you added in the Greek public debt then the German public debt would be about 95% of German GDP.
Yet Germany still lives in the shadow of the Holocaust. There is still an attitude that Germany should keep its head down. That was right and understandable for a while but Germany has faced up to its crimes. The people who ran Nazi Germany are mostly all dead and they have a new generation with sound democratic credentials.
After World War 2 the European economies collapsed but thankfully, the United States stepped in with the Marshall Plan. No doubt the U.S. acted in its own interests and realised that rebuilding Europe would benefit the U.S. but that is the point If the Germans do nothing the Euro will collapse and they will lose. If they step in and bail out the Greeks they could save the Euro and thereby help themselves.
4 Germany should get over its hypocrisy
The Germans have a very naïve and hypocritical addiction to rules. They are conservative and like the appearance of correctness but under the surface they are fudging and fiddling as much as any nation (and possibly more because of their obsession with appearances). Recall that it was the Germans (with The French) who first broke the rule that deficits should not go above 3 per cent of GDP? This hypocrisy makes it difficult for them to justify helping the Greeks who lied to get into the Euro in the first place.
The Germans are as complicit in current economic crisis as anyone else and need to wake up to current threats rather than dwelling on the past. They should step out of the shadow of the second world war and accept their power and responsibility. Also they should grow up and forgive the Greeks. Didn’t the world forgive Germany? Sometimes, in order to help yourself, you have to help people who don’t deserver it.
Germany should use its power to save Greece, the Euro and the European economy.
The Guardian is reporting that Tony Blair is keen to ‘re-engage’ with UK politics and has apparently hired a spin doctor as part of an attempt to raise his domestic profile.
You couldn’t make it up. Blair always played his role as if he were an actor, making loud speeches while leaving the scripting and the work to someone else. Now this delusional narcissist thinks that he can make a come back. Like some ageing movie star surrounded by sycophants he thinks he will make one last movie.
Even after the New Labour years have been shown to be a drunken binge funded by borrowing from the next generation; even after the Iraqis have been shown not to have had weapons of mass destruction; even after the MPs have been shown to have had their fingers in the till; even after his Director of Communications and Strategy (Alistair Campell) has revealed that he was suffering from alcoholism and depression during the Blair years; even after the press that supported Blair have been shown to be breaking laws and lying and the police conniving with the press and the bankers have been shown to have been funding lavish lifestyles by taking huge risks with investors money; even after Brown ran a deficit during boom years, sold half the UK gold reserves at the bottom of the market and shafted everyone’s pensions this scurrilous shit still thinks that everything was fine and Britain just needs another dose of New Labour bullshit.
I was surprised when the guy who brought war to the Middle East was made the UN Peace Envoy but I was not surprised that he went into banking after he left politics. And I am not surprised now that he wants to make a come back. When he was PM I was astonished at the gall of the man. I recall one time when he ran out of arguments he justified what he’d done by saying he had to do what he thought was right as if he had some special religious powers to tell us what was right. Remember that ghastly self riotous and patronising grin? – “Ah, OK Tony, as long as you think it’s right”.
The fact that he thinks he can return is ample proof of the delusional and narcissistic nature of the man. He thinks that his unending claims to be “passionate” about everything is sufficient substitue for practical policies. He thinks that it was him that held power and he forgets the lackeys and spin doctors that really held him in place and are now scrambling around trying to get power for themselves.
Get the old team back together…..we’ll make a comeback……it will be like the old days……yeh right! Only this time the economie is in a mess and everyone will remember how they all shafted each other last time around.
If Blair comes back then his admirers may support him thus splitting the vote for the next leader between Blair, Milliband 1 & Milliband 2. Hopefully this will finally drive a stake through the comatose, stinking remains of New Labour and that can only be a good thing. It’s almost worth getting him back just to see the fragile reputation which he retains amongst the stupid torn to shreds and the fact that he doesn’t see this coming is more proof of his tenuous grasp on reality which will only add spice to the spectacle.
I hear that Ed Miliband has warned that the young generation have been betrayed by spending cuts. Mr. Miliband is TALKING BOLLOCKS! It is right to be concerned that cuts to education could damage the potential of the next generation but it is absolute hypocrisy for Mr. Miliband to pretend that Labour policies are more friendly to the next generation than those of the coalition government.
It was on Labour’s watch that the UK ran up massive debt and Labour are now opposing every effort to bring the deficit down and repay the debt. The real betrayal of our children would be for us to escape cuts now by borrowing more money to service the debt and just pass the burden on to the next generation.
I also take issue with Mr. Miliband’s idea of a “British promise” that every generation will do better than the last. There has never been such a promise and we should not believe any politician stupid and arrogant enough to make such a promise. Indeed the driving hyper-industrialisation which lays behind this sort of thinking is unsustainable and deceitful. It is deceitful because while it pushes pointless trinkets into our hands it erodes our quality of life by depriving us of space, by driving us to work ever harder and by standardising and commercialisation our environment.
I saw a cartoon in The Independent yesterday which implied that The Tory/Lib Dem coalition are using scare tactics to introduce spending cuts. I’ve also heard the Labour cabinet condemning all the cuts but giving no guide as to how the deficit (and the debt) which New Labour ran up should be brought under control. For those not steeped in financial jargon the debt is how much we owe and the deficit is the shortfall in our annual spending. So by running a deficit we increase the national debt. The talk by the new coalition government so far has concentrated on getting the deficit under control but bare in mind that Gordon Brown ran a deficit even during the boom years as the UK was spending more than the government gained in taxes!
Depressingly but, perhaps predictably, all we hear from everyone who has been asked to make cuts is justification for why their particular budget should not be cut. There was an education official on the radio recently “explaining” that the national debt is not like a credit card and that we can simply roll over the debt. Easy! We’re in debt, no problem, borrow more. It is this daft logic that has lead to the UK national debt of nearly 70% of GDP in 2009.
During the 18th and 19th centuries the United Kingdom became wealthy through empire and the industrial revolution and used that wealth to provide comfy lives for the British elite. Note that the majority of the British people had lives worse than many of those in India or elsewhere in the Empire mainly because of the cold British climate and the appalling working conditions during the industrial revolution. The British elite, however, did very well.
During the two world wars the European powers smashed each other to bits and America and the USSR stepped in as world leaders. The U.S. had ensured that the UK paid for aid during the war but the Marshall Plan got the UK and Western Europe back on their feat. The UK then hung on to it’s place in the world for a while. Our industry and trained workforce gave us “comparative advantage” compared to “developing countries” and so the UK and other European countries remained fairly wealthy and fairly secure. Sure Japan, Taiwan and others developed their own industry but most of the world remained pre-industrial.
Post World War 2 a Labour government came to power and, dazzled by the apparent success of Socialism in the USSR, started looking after the working class. For the first time ordinary people gained access to clean water, health care and pensions.
We developed a world view roughly as follows: The West leads the world, developing technology and operating industry, the far east copies the West and and performs some production and the “third world” supplies the raw materials but remains poor and dependent on aid.
But the UK was complacent., we became convinced that all our wealth was a natural state of affairs and that it could all be paid for by creative accounting. While we were naval gazing the Soviet Union collapsed, open markets became the vogue, China joined the World Trade Organisation and the rest of the world adopted capitalism and found that they were pretty good at it. Not only were they good at it they were unencumbered by a mature democracy or legislation to protect workers.
Global leadership, industry and power is now shifting from the democratic Western nations to nations who are either dictatorships or corrupt token democracies. As a quick preamble to my next bit of ranting I should explain, for the uninitiated, that the a common measure of a countries wealth is Gross Domestic Product (GDP). This is a measure of the total value of goods and services produced by a country. Because countries vary in populations another common measure is to divide GDP by the population and derive a figure known as GDP per capita. This gives a measure of how much each person, on average, produces.
Time for some figures.
UK GDP is sixth in the world, just above Brazil at 8 and India at 11 and below China at 3.
National debt is at 68% of GDP, higher than Ghana at 67.5% or Uganda at 19.3%
The UK’s budget deficit (how much more we spend than we earn) is at 14.2% of GDP, above Sierra Leone at 12.35% and Vietnam at 9.3%
And yet
The UK’s defence budget is 2.5% of GDP, that’s more than above China at 2% and Germany at 1.3%.
The UK’s Education spending is the same as South Africa and Mexico at 5.3% of GDP. That’s above Bhutan at 5.2% but below Fiji at 5.6% and Bolivia at 6.3% and Yemen at 9.5%!
It’s also worth considering that other countries do not have debt, they have surplus! They have saved money and built up substantial wealth in Sovereign Wealth Funds. For example:
United Arab Emirates 627 $Billion
Norway 443 $Billion
China 288.8 $Billion
The UK still has some cards up it sleeve. In 2008 we were the sixth biggest manufacturer after Italy but Russia was at 7 and Brazil at 8.
In recent history the UK has relied on North Sea oil to top up our income. I cannot find any figures on what percentage of our GDP is made up from Oil and Gas but I recall reading that the tax take on Oil and Gas was the largest contributor to the British exchequer followed by Finance. I believe that was before the financial crisis.
All this is not to say that the United Kingdom is doomed, just that the world is changing and we can’t rely on the UK remaining wealthy by default. British policies today dictate the future of this country and if we continue to run up a debt our nation will decline. It not rocket science. There are younger and fitter countries in the world.
Just today I heard a British politician talking about maintaining British leadership. Our political elite have not yet caught up with the 21st century. Why should Brazil, Taiwan or China be interested in being lead by a mid size debtor nation on the other side of the world?
No nation or empire lasts for ever. Nations and Empires rise and fall. The British Empire has fallen and one day the UK will fall and I suggest that, if we are not careful, people will look back and see that the obvious start was the 21st century due to complacency, vested interests and the inability of a people to make tough decisions..
We are no longer one of the few great industrialised powers in a world populated by uneducated and illiterate farmers. The UK is now just one of many educated and industrialised countries. It is true that we have a more mature system of law and democracy but undemocratic and corrupt governments around the world see this as an encumbrance and not as something to emulate.
We are in massive debt, the oil money is running out. New Labour’s policies of spend and hope have failed. I support the current government’s prescription of large scale cuts but this should be supplemented by informed strategic planning.
We should also reconsider our commitment to allowing foreign entities to buy British assets and industry. Sovereign Wealth Funds referred to above often buy industry and assets from the developed world and this is acceptable if everyone plays by the same rules. However some of the largest of these funds are owned by nations who play by very few rules. Specifically we should be wary of allowing SWFs of single party dictatorships or corrupt regimes owning large stakes in the UK.
Globalisation is all very well while the foreign money is pouring in and funding industry and jobs but once these foreign owners have their feet under the table they often find that it is more efficient to centralise production and transfer the industry abroad. This would be fair enough were it possible for British companies to buy up industry in China, Germany or Japan in the same way but other countries are not as open as the UK.
Last Sunday night there was a TV program enthusing about one industry in the UK which remains cutting edge and world leading. This was British Aerospace and it’s production of Rolls Royce Trent aircraft engines in Derby.
The company was very impressive. What is less impressive are rumours that in order to gain access to the larger and more lucrative U.S. military business British Aerospace is trying to morph into a United States company. Once this is achieved how long will it be able to justify dispersing it’s business over two continents?
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