Friday, 23 May 2014

The impressive Nigel Farage

As the mainstream parties are licking their wounds after bruising local election results in England, the leader of UKIP, the ubiquitous Nigel Farage is enjoying the limelight of the media. And this is even before the results of the European elections are made public on Sunday, a set of results that are bound to make Labour, Conservatives and LibDems look like medium sized parties.

Enjoying the media frenzy - Nigel Farage

So, what is the appeal of Farage? Although disentangling the motivations of voters at elections can be a tricky business, Farage has already offered a clue. It's the language. And I think he is largely correct.

Let's first of all look at his policies (and yes, they are 'his policies' since the party is more or less a one man show). These policies range from the hard right (shut the doors to all immigrants) to the hard left (milk and honey for everyone, whilst cutting public expenditure). The fascinating thing about Farage's policies is however that there are very few indeed. Farage has been immensely talented at selling soundbites as policies.

Take immigration. Well, governments of all colour have tried to reduce immigration with little effect. Even if Farage would be residing in Number 10 tomorrow, he would still need to go through a referendum on exiting Europe, since it is Britain's membership of Europe that produces most of Britain's immigrants. He may or may not win such a referendum. The fact is, he wont be in Number 10 any time soon. So he has no way of delivering this 'policy'.

But there is also light at the end of the tunnel for the established political parties. I have argued before that it is exactly the insignificance of local and European elections that allow voters to vote UKIP without any consequences. Europe and immigration are important themes, yet neither of them are high up on the list of priorities for decision making of voters in national elections, as Michael Howard and William Hague discovered when they ran 'anti-immigration' campaigns in 2005 and 2001 respectively. Immigration and Europe are the sort of topics that make for heated debates, but not for solid votes at general elections.

So, Labour and Conservatives can take comfort from the fact that the local and European elections this week probably marked the high point for UKIP. Farage may be able to translate his newly gained council representation into one or two seats at Westminster, yet the most damage UKIP will do at the general elections in 2015 is to split the small c conservative vote in some areas. And this is provided the newly elected councillors across England are not falling over each other (as the Greens for example did in Brighton). In essence, UKIP is a movement, rather than a political party, so the loyalty of party members to their party is fairly weak.

So, what about language? This is where the real challenge lies for the mainstream parties. Farage is famous for his straight talk and it is nothing less than painful to listen to Miliband, Clegg and others to try to downplay the UKIP challenge. It is exactly this waffle that gets voters angry. So why do Miliband and others do not speak their mind?

The real reason is that there is nothing they can say about many of the topics that UKIP has broached. Mainstream politicians are very wary of discussing something in public for which they potentially have no answers. The hard truth is that there is no answer for European immigration. Geographical mobility is a cornerstone of the edifice of European Union and there is nothing any politician can do about it, short of leaving Europe.

So, instead of acknowledging this fact and talking openly about it, they waffle their way through and hope no one notices. This Thursday, about a quarter of all voters have just called their bluff.

Sunday, 11 May 2014

The undemocratic pedigree of the European Union

For some the European Union cant do anything right at the moment. From austerity to the Ukrainian crisis, it's the European Union that is to blame. That does not bode well for the European election that are taking place in a few weeks. It appears likely that voters across Europe (that is, those who can be bothered to turn up) will send a strong signal of discontent to their national governments as well as the European political elite. What has happened to Europe? Where did it all go so horribly wrong?

There are several factors that encourage voters to send a 'fail' on the report card to Brussels. For a start, and despite what UKIP tells British voters up and down the country, it is the irrelevance of the European parliament that makes this a perfect mechanism to punish national governments for national policies. Voters in European elections are usually political anoraks through and through. Those who will turn up and cast their vote must have a serious gripe about something, since usually less than a fifth of eligible voters in many UK constituencies are ever bothered to make their cross on the ballot paper. Yet, insignificance of the vote makes it a perfect weapon for the expression of discontent with all things under the sun.

But there is a wider context which motivates people to use their vote for 'protest voting'. Many are genuinely fed up (rightly or wrongly) with the way in which Europe (allegedly) operates. It is widely perceived to be un-democratic, clientelistic and run as a club of bureaucrats far away from the real issues people face in their daily lives. At best, Europe features in the day to day business of ordinary people as a nuisance, telling them to do this or that (mainly things, like, to use metric measures or not buy bananas of a particular bent). The European Union has form in this patronising attitude (exemplified by the current president of the European Parliament Martin Schulz, nicknamed the 'Kapo', who prefers to shout at people and lecture them from above) and it is its history and origin that contributed to this largely parasitic existence of its institutions on normal European life.

Martin Schulz - nicknamed 'the Kapo' for his tendency to shout and talk down to people

At the beginning of Europe lie some pretty unsavoury debates about how to transcend nationalisms that ravaged Europe. I do not mean Nazi Germany's love affair with the idea of European integration, which should be enough to make you feel slightly queasy about the European project. More importantly, the real drivers for European integration were old liberal politician who instinctively mistrusted democracy and clung to an elitist vision of modern politics. This resonated well with the founders of Europe, such as Adenauer, who conceived of the European project after the war as a gentlemen agreement between the French and German political elites. The German Chancellor was on record saying that people (in particular, Germans) could not be trusted with politics anymore after having voted Hitler into power, so the 'enlightened' elites of France and Germany had to create an institutional bulwark against democratic decision making.

Europe as a project of integration between nation-states never recovered from this un-democratic impetus and retained its elitist thrust right up to now. Watch, as the 'European' elites fall over themselves to condemn those who vote for the 'wrong' parties in a few weeks' time. As political parties largely critical of further European integration may capture about 25 percent of the vote across Europe, the easy way out of this 'distraction' emerging from democratic decision making will be to stifle democracy even further. If only people could be so enlightened as their political leaders, the world would be perfect, wouldn't it.

Sunday, 4 May 2014

On rent control

Ed Miliband is clearly determined to be the Robin Hood of modern times. His policy proposals on energy, housing and the railways for a future Labour government have one word in common: price control. That makes him the darling of the much battered middle classes (although there has been some dispute recently about how badly the middle classes have actually fared during the recession).

Miliband thinks that the answer to imbalances between supply and demand is state regulation through the control of prices. Fix the price of bread and butter and people will be able to buy these goods aplenty for a fair price, so the logic goes. Miliband's critics have not been shy either with colourful descriptions of this policy approach. Simon Jenkins from The Guardian called the latest proposals for control of rents 'economically illiterate'. So who is right?

There are two reasons why I believe Jenkins is the proverbial voice of reason. First, controlling prices never has the effects those introducing price controls want them to have. Take the example of price controls for food following the war. Germany, just like any other European country suffered severe food shortages between 1945 and 1948. There was ample evidence however that sufficient food was being produced. The Adenauer government, under its Minister for Economics Erhard, abruptly abolished food price controls in 1948. There was much dismay at this move in all political quarters. The fear was that prices would spin out of control. In fact, the opposite happened. Within weeks, shops started to fill with food products and prices started to drop. By the end of the year, food supplies to the German population had stabilised amid record low prices.

Not quite the capitalist - Ludwig Erhard abolished price control and created the German economic miracle

Britain took the opposite way. The British government decided to continue with food price controls and, consequently, rationing and serious food shortages were a constant feature of family life in Britain well into the 1950s. In the meantime, the British government understood food shortages as a problem of insufficient state regulation and control, railing against 'food hoarding' and tightening its bureaucratic planning grip on food stuffs that had previously traded on the open village market for times immemorial. The lesson: the more you try control the supply of a product by setting prices, the less people will want to sell it, hoping for a better price soon. In essence, price controls exacerbate supply side problems, rather than solve it.

This leads to the second reason why Miliband is wrong to call for rent controls. His proposal assumes that rents are a problem for all and everyone in the country. Yet that is clearly not the case. If there is one feature of British economic and social reality that mitigates against central control from Westminster then it is the shocking imbalance between the South East (and South West to some extent) and the rest of the country. Talking of exorbitant rents in the South East and London makes sense. But the same proposition is non-sensical for someone living in Liverpool or Leeds where you can rent a spacious 2 bedroom property for about £450 per month.

Capping rents would mean that fewer people would like to provide rental properties (or repairing existing ones) which would only have the effect of limiting the already tight supply in London and the South East, whilst producing a similar tightening of the yet ample market supply in other areas. In other words, controlling rents would make things worse for everyone involved.

What sounds like a good idea for you if you have ambitions to be Robin Hood is certain to backfire. As the example of food rationing shows we have been here before. But perhaps collective memory is just too short. Who remembers British food rationing after the war?

On Co-op, modern management and mutualism

One of the most difficult questions in organising capitalism is what types of management would be best for society. The conventional answer is that one involving citizens and communities to a large degree in decision making also benefit them most. This ‘empowerment’ ideology dominates much of the current discourse on economic equality (austerity driven by narrow shareholder values versus public service largesse underpinned by public interests). 

Yet the crisis at the Co-op clearly undermines this simple binary narrative. As the former (Labour) City Minister Myners has expressed his desperation with existing governance structures at the Co-op (loosely based on mutualism) that make the company close to ‘ungovernable’ due to the cacophony of voices on its management board, the Co-op should be a paragon of community virtue if the conventional narrative is anything to go by. 

The Observer today reports, however, that this does not even come close to the truth. Instead of considering community interests during its latest offloading of company segments to the wider market, those organising the sale of Co-op farms at the Co-op management board have made it clear that they are not interested in community buy outs. They, so The Observer reports, are keen to see a hedge fund or a Chinese investor to take over the farms, including the 44,000 acres of land attached. 

If this was a public service, the outcry on the left would be noisy and sustained. After all, the farms have been financed by Co-op members throughout their existence and their profits have been re-invested rather than creamed off by the members in line with the principles of mutualism, the Co-ops founding tenet. Now, the board is likely to offload those very farms to the very financial behemoths they were supposed to resist. 

What does it tell us about the relationship between management and community interests? It appears that there is little direct linkage between how effectively community interests can be served through specific management structures, in particular through mutualism. As the Co-op fights for its survival, modern highly leveraged capitalism appears to be the only guide for action.