Partnerships and service integration

The Institute for Local Government Studies at Birmingham just published a blog post of mine. You can find it HERE

Do we need the European Court of Human Rights?

The European Court of Human Rights has a talent for making decisions that rub against popular opinion. It recently decided that murderers and rapists who serve a prison sentence in Her Majesty's Prisons should be given the right to vote. Apart from the practical dilemma this poses to any electoral committee (how to grant prisoners the vote without skewing electoral balances in those constituencies where the prisons are), the main objection to the Court's decision has always been that it explicitly overruled a parliamentary vote. In other words, judges of the European Court did not take into consideration the existing and approved law of the land but decided to make law themselves.

Time to convert this into a secondary school? The ECHR at Strassbourg

This is when critics of the Court are often reminded that any type of 'international court' that is placed above national jurisdictions acts as a last resort for people who fail to get their right through the national judicial systems. The argument goes that without institutions such as the European Court of Human Rights or the International Court of Justice at Den Haag, there would be no right of redress for people who have been victims to persecutions, injustices at the hands of governments or systematic violations of human rights.

Yet, the analogy between the Court of Justice at Den Haag and the ECHR is flawed. The International Court of Justice only acts in those cases where national judicial systems cannot act. The main example would be the case of Liberia where the newly elected government granted the ICJ the right to try its former president Charles Taylor because the national judiciary was not in a position to organise an effective and fair trial following the upheaval of the civil war and the deep political polarisation in the country.

The European Court of Human Rights however receives its legitimacy from the Convention of Human Rights, which has become UK law only recently. It thus depends on an act of parliament and as such it must defer to that parliament's decision in its own work. The judges at the ECHR however seem to have scant regard to national law as its latest decision about the release of ETA prisoners in Spain demonstrates.

It may be time to call time on the legal vandalism of the ECHR. Europe can surely manage without it.

Child poverty - why solutions are so hard to find

The Observer has highlighted some truly concerning numbers about the growing child poverty in Britain today. The figures come from a report of the National Children's Bureau that tracked child poverty over the last decades. In essence, it shows that child poverty has not been declining in the UK but instead, steadily growing. This despite the enormous amount of policy attention and cash that was spent under the last Labour government. Billions of pounds were made available through tax credits for families with little palpable impact on child poverty.

Why is it so hard to reduce child poverty, let alone to eradicate it as the previous Labour government grandly announced?

For a start, there are some statistical issue with how to measure child poverty. Currently, child poverty is a relative measure which means that every household with a combined income of below 60% of the median UK household income counts as poor. Every child in such a household is then automatically categorised as growing up in poverty. This is clearly a very blunt way of measuring poverty. If everyone was a millionaire in the UK and drove two SUVs, there would still by definition be some people who fall below 60% of the median household income, no matter how well off they are.

The government recognised this and suggested recently to re-define poverty capture real poverty and its effects on children. The left leaning media uttered a howl of disapproval but it would do them good to consider the government's argument. The current way of measuring child poverty in the UK would allow the coalition government to demonstrate significant progress in reducing it, since median household income has actually decreased in the UK, hence fewer children live in the lowest income group.

This is a statistical anomalie and one that can be fixed. However the actual problem with child poverty may lie elsewhere. Effectively, children are not the object of poverty reduction programmes or policies. They cannot be since they are not recipient of state funding. Parents are. So, when we talk about child poverty and how to reduce it, we actually talk about poverty of parents and household income.

This means that any programme or re-distributive policy is not targeted at children but at their parents. It is the parents who are the determining factor that make or break poverty reduction. This makes child poverty a tricky business indeed since it assumes that any additional resources spent on children are actually consumed by them. That's usually not true. Tax credits boost the income of families, but whether or not parents then spend this money on their children is beyond government's control.

So, reducing child poverty is actually a business with many known unknowns. Re-distributive programmes aimed at reducing child poverty banks on the compliance and co-operation of parents to spend the additional family resources on their children. That often requires a fundamental shift in parental behaviour.

So, perhaps we have simply too blunt instruments for the task. It may be far more effective to target our resources at those domains over which parents have no or little influence such as schools, pre-schools and nurseries. It may be sad, but perhaps, some kids may just have to be saved from their parents.

On burglary, manslaughter and the Trayvon Martin case

The acquittal of Zimmerman in the murder trial of Trayvon Martin has aroused the suspicion that racial profiling is at the core of the death of the teenager. The jury also acquitted the neighbourhood watchman of manslaughter and it is this part of the verdict that is hard to understand from a European perspective.

The UK courts have encountered similar cases over the last couple of years, where people have defended their homes against burglars (which Martin was not, although he was trespassing on private property) with unusual force, sometimes leading to the death of trespassers. Yet, in contradistinction to the recent verdict in the Zimmerman case, justices in the UK have been guided by the notion of appropriate force in reaching their conclusions and convicted property owners who shot intruders.

It seems to me that the UK legal system has got things right in formulating a degree of proportionality which is to be found at the base of every retaliatory action. In other words, if somebody attacks you, you may defend yourself to prevent harm coming to you or your property but only to the extent that unnecessary harm to you and the other person is avoided. Incapacitating or even killing the other person cannot and should not be a legitimate goal of preventative action.

The circumstances of Martin's death have not been resolved as the trial unfolded. It is still unclear who attacked whom, which would be a critical piece of information to build a case of self-defence for Zimmerman. Yet, even so, the outcome strikes me as implausible even if Zimmerman had been attacked first. The use of deadly force is something that should be left to police authorities in extreme cases. Something that is hardly applicable to a neighbourhood watchman challenging a teenager with an ice tea and some sweets in his hands trespassing on a gated community.

Why the West is wrong to support the Syrian rebels

The Syrian civil war has reached its nadir with rebel groups using sarin against fighters of the Syrian army. Whilst Assad's regime is also nothing short of cruel and inhumane treatment of the civilian population, given the horrendous level of brutality meted out by the rebel fighters, it is time for the West to disengage from this conflict.

The latest incidence of a Syrian rebel fighter committing gratuitous violence to a body of a Syrian soldier is just one in a long list reflecting the Islamist radicalisation of the rebel forces with strong sectarian undertones. It seems to me that Russia has been right all along to insist that arming the rebel forces is tantamount to arming the most extremist wing of Islamism. Anybody who hopes that the sectarian hatred which has become second nature to the rebel forces bodes well for a liberated Syria is mistaken.

We should remember that Syria can never be Iraq, not least because no Western country, including the US, would ever want to commit ground troops to police a post-Assad Syria. That leaves one brutalised faction of Syria against another in the current scenario. It is time Western powers pull back from the brink and cease their support for the Islamist extremist rebel forces.

What happened to Liverpool?

About three weeks ago, I moved to Liverpool. Leaving Cardiff was difficult since I have lived there for more than a decade. I only say this because my affection for Cardiff may cloud my judgement a tad. My first impression of Liverpool goes back to the year 2008, when it was European City of Culture. I visited the city and really enjoyed my stay. I don't remember much about where I stayed but the city centre seemed vibrant and clean.

My second impression couldn't be more different. When I moved here in April this year, I was genuinely shocked. The areas to the north of the city centre are mainly rows of boarded up houses or large free spaces without any urban feel to it whatsoever. I ended up taking a place in Kirkdale, just around the corner from Everton (Goodison stadium) and nothing I have seen in the UK or anywhere else in Europe in fact, prepared me for this. There is practically no community centre left in Kirkdale. The area is marked by large open spaces or newly built houses (the usual boxy, faintly bucolic style that passes as homeliness in Britain), with broad dual lane avenues running through the middle of it.

The former Police and Post Station in Kirkdale

There are hints of former glory which produce a pang of nostalgia. Some of the corners still have grand brick buildings with intricate ornate brick work, but the buildings themselves are either run down, burned out or simply left to rot. They are also typically standing alone with no adjacent buildings, adding to the feeling that this is not an urban place at all. It is devastation on a grand scale. But how did this happen? And why? What happened here? I am at a loss to explain it. I have never seen anything like this level of deprivation and devastation in an urban space in the UK. It almost seems as if this is a city in eternal decline.

On community spirits and Thatcher's legacy

With the funeral of Baroness Thatcher getting closer, the country seems to hark back to the times of division and hatred. I wont wade into the debate whether Thatcher did more good than bad (or vice versa) but instead would like to impart a brief observation. Reading the obituaries (reverent and irreverent ones) I noticed that some attributed the loss of community spirit to her policies. 

This reminded me of the nostalgia for socialism and its ‘collective spirits’ shared by many in the former communist countries where democracy and freedom have allegedly brought about the demise of the feelings of friendship and mutual support. However, I cant help but wonder about the conspicuous lack of strength in those communities if they only existed in the good times. If Thatcher wrought so much misery on these communities, wouldn’t her time in government increase the strength of those community spirits, rather than bring about their decline? 

Happy times?

It seems that, after all, those communities were not so much cultivating the spirits of mutual support, but fostering a sense of exclusivity, where individuals had to submit to the rule of the collective. In this sense, perhaps the decline of the community spirits heralded the inevitable rise of individuality and personal freedom. Clearly, as some ‘communities’ imploded under Thatcher, people had to re-forge the foundations of society anew, a laborious and challenging process. Yet the product was not atomism, as some commentators have written. It was individual liberty realised, as Hegel would have said.

Baroness Margaret Thatcher - RIP

The death of Baroness Margaret Thatcher has just been announced. She will undoubtedly leave an enormous gap in British public life. Her contribution to British politics has been huge. She also worked tirelessly to bring down the Iron Wall in Europe. Her efforts to defeat socialism in Eastern Europe will never be forgotten.

Coming from a humble family she fought British establishment, even and especially in her own party, radiating a confident belief in herself and her powers. She changed the face of Britain for the better and will be missed.

The Afghan dilemma

In less than a year, US combat troops will draw down their engagement in Afghanistan for good. By then, Western military forces will have been in the country for more than a dozen years. With mixed results. As a documentary by the BBC revealed last night, law enforcement is riddled with corruption and police commanders of the Western trained Afghan forces stand accused of serious human rights violations. While the picture varies considerably across the country, the despair about the humanitarian dilemma was clearly written into the expression of the US commander who talked about the ongoing corruption and criminal behaviour amongst his Afghan colleagues.

So, the question is: what should the West do? Is it really time to leave, or may a premature withdrawal risk creating more suffering in a corner of the world that surely had more than its share of human misery?

Tony Blair often said that policies should be guided by principles, so let us try to find out if principles can assist us to identify a solution for the Afghan issue.

There are essentially two broad guiding principles that divide the field of argument about the Western engagement in Afghanistan. Interestingly, they cut across the ideological divide between left and right.

First, there are those who argue that humanitarian interventionism remains the overriding tenet which should define foreign policy of the US and the Western allies in Afghanistan. Any hasty withdrawal jeopardises the gains in security for the local population, and the limited progress there may have been. Humanitarian interventionism is paradoxically sustained not only by principles of international justice and a globalised vision of human rights, trumping as it were the rights of national governments, but also finds some support from neo-conservatives who argue to fight terrorism at the source and thereby protect national interests. George W. Bush's policy in Afghanistan and Iraq therefore paradoxically coincided with some of the more left-leaning rhetoric about humanitarian interventionism (and tainted its application in the view of some).

The other side of the argument is populated by those who take a realist position coupled with more libertarian instincts. Troop withdrawal from Afghanistan appears justified in their eyes because the world resembles a continuous fight of all against all, which Western governments are incapable of doing much about. The best we can hope for is an increase in security for Western populations and laying the foundations for the Afghan people to solve their own problems with reason and mutual respect.

It seems to be that neither of these principles offer much guidance in the case of Afghanistan. While the humanitarian instinct recognises the need to protect civilians from their own national government, advocates of this position do not tell us much about why Western soldiers should lay down their lives in far flung countries in order to prevent humanitarian disasters. Whilst it appeals to a deep seated moral desire to prevent atrocities or systematically perpetrated injustices, humanitarians seem to fail to factor in the loss of the lives of soldiers or the civilian costs of military engagement of Western countries. Military engagements to stop humanitarian disasters are portrayed as added sum games in which everybody wins.

Libertarian (or laissez faire) isolationism on the other hand fails to tells us much about the global costs of not intervening. The focus of utilitarian calculation is narrower here, concentrating on the gain for Western populations only. Global implications of humanitarian disasters are outside the scope of this argument.

If neither of these, admittedly rather crude, arguments assists us any further, perhaps we should look more deeply at what both principles lack. Both care very little about the perspective of the Afghan population itself. In essence, both arguments are myopic by focusing on Western benefits, be it a gain in moral standing or in narrow, nationally defined utility.

What remains excluded from the picture is the decision making capacity and will of those we are supposedly helping (or failing to help). The biggest barrier to factoring in the will of the Afghan people is of course the lack of a functioning democracy. Yet, is this a reason to dismiss it? If we do, we may end up in a deeply patronising position, where either our help or our refrain from assistance neglects the importance of the views of those we want to engage. Clearly, even amongst Afghans there will always be a multitude of views about when the West should militarily disengage. Yet, adopting a solely Western perspective leaves us open to the charge of pursuing self-interested policies.

A plea for more courage in British theatre productions

Although I have lived in the UK since 1996 and frequently go to the theatre I have rarely seen exciting plays here. One reason seems to be that the country lacks brave directors who are trying out new things. There is no shortage of writers who produce fascinating scripts on topical issues. Yet, directors in the UK tend to either favour conventional set ups or a hotchpotch of disparate ideas which struggle to congeal into a consistently riveting production.

It is also not a problem with set designers. Although most sets I have seen are again more on the conventional side, it appears more a case of being restrained by directors rather than a lack of ideas. One recent play I have seen was typical for British directing. Although featuring extraordinary performances, 'Medea' at the Sherman Theatre lacked the explosive mix of spoken word and acting that is characteristic for great production. In a way, it seems to be a problem of giving actors too much space. Several times during the show, the stage was wide open without the actor actually able to 'fill' it with their acting. They were floating, or swimming in too large a bowl, as it were.

A recent play I saw at the Schaubuehne in Berlin demonstrated what I mean by 'too much space'. The director and set designer of Tolstoi's Power of Darkness filled the entire stage with a wooden board into which only narrow tunnels had been carved. The resulting impression was one of a cut-through a living quarter to monitor the inhabitants. It instantly shaped the relationship between the audience and the actors. The actors were 'watched' in their daily routines, a bit like guinea pigs. In addition, it restricted their space for movements to long stretched tunnels where they would bump into each other, and two small 'living quarters' in the centre. The effect was one of compression, forcing the actors to act within narrow confines.

Tolstoi's 'Macht der Finsternis' at Schaubuehne in Berlin

Whether this worked for other members of the audience I don't know but I did notice that it prevented the actors from 'just standing around on the stage' and hoping to garner some energy from the next line of text.

It is this tight control of the acting space that can instil life into a moribund show. In this sense wish British directors and producers would show a bit more courage sometimes. It may just make for more exciting viewing.

What's wrong with Wales?

The Welsh economy has been in decline for the last 4 years. Not only that Wales has been hit hard by the recession since 2008, it also seems to be caught in a vicious cycle. Since inward investment is difficult to come by, economic activity in general is low in Wales which makes it an unattractive place for any investor to be. On top of that, the economic policy of the Welsh Government does not help. The Labour government under Carwin Jones has mainly one objective: to keep the public sector as large as possible since it is public sector jobs that form the main electoral pool for his party, and because public sector employment is often the only mechanism to address structural unemployment in some areas with low economic activity.

The result of this devastating policy and the long term structural problems of the Welsh economy are reflected in the economic figures. In almost all indices of economic activity Wales lags behind all other regions, whilst it leads the four home nations in almost all statistics of government expenditure. Government spending in Wales as a share of GDP has been 57.4% in 2007/8. The comparable figure for London (with plenty of government activity!) was 37%. That's a 20 percentage point gap between the two areas.

But look more closely and the figures reveal an even more shocking picture. Wales also lags behind in terms of productivity. The gross added value in Wales compared to the whole of the UK (100) is 74, leaving Wales way behind any other region as one of the least productive of the UK.

How difficult it is to break out of this vicious cycle of enormous government expenditure and low economic activity has sparked a lively discussion amongst economists and policy makers. The only person who seems to show little interest in tackling the deep seated problems of Wales is the First Minister himself, Carwin Jones, who explained in a recent interview with the BBC that, I paraphrase, everything is just peachy and, once Wales will have internet broadband in 2015, she will pull ahead of the other home nations (at 43 mins into the interview).

The poor performance of Carwin Jones as a First Minister and his government is widely acknowledged amongst commentators and reveals one fact above all. They still have no strategy how to pull Wales out of this mess which they have permitted to develop over the last 12 years in power. There are plenty of possible solutions. None of them however appeal to Labour politicians since they would damage their long term electoral strategy in Wales. The most attractive way out of the situation would of course be to shrink the public sector and to free up governmental expenditure to invest in the upgrading of infrastructure in Wales. There can be no doubt that the current ratio of governmental spending stifles private investment and economic activity. The state in Wales has become the Leviathan that devours all else.

The other way to improve Wales' economic future would be to stop introducing petty legislation through the Welsh Assembly. Since the Labour dominated Welsh Assembly has been created it has either idled its way through the decade or engaged in matters, at best, peripheral to the state of the economy, at worst, detrimental to its growth prospects. Part of the explanation is that Welsh Assembly members of all parties are of fairly low calibre. Any politician with political talent tries to get a Welsh seat for the House of Commons rather than wasting their time in the Welsh Assembly. With a severely restricted talent tool for the Welsh Assembly, debates are often either painfully partisan and tribal, or focussed on politicians' pet projects such as the organ donor legislation or legislation to make it compulsory to install sprinkler systems in newly built houses. Needless to say that neither of those are of any consequence to the Welsh economy.

The main response of the Welsh Government so far has been to blame others for the state of Wales. Carwin Jones and his Labour ministers are habitually pointing the finger at Westminster when they are criticised for their poor performance. It is London, so their story goes, who should shoulder the blame. The statistics however belie this argument as a cheap attempt to avoid taking responsibility for their own actions. Wales receives much more from the treasury than it puts into the coffers of the chancellor. In 2006/7, according to official figures, £19.3 billion were raised in taxes and duties in Wales, whilst governmental spending reached £28.2 bn in the same year. Which makes Wales a net recipient of public money.

It seems that as long as the Welsh Government is in denial about its own responsibility for the devastating economic situation in Wales and as long as the Labour party clings to the mirage that public sector employment is the only way to tackle socio-economic deprivation, little will change in the land of Glyndwr.

First Group extends its poor service to the Westcoast line

The government has awarded First Group the contract for the Westcoast line, which is currently run by Virgin. I have little experience of Virgin trains but I do have plenty of first hand experience of the line FirstGreatWestern runs from London to Bristol and on to South Wales.

To put it nicely, that experience is anything but 'first' class. The trains are usually hideously filthy and the main line from London to the West of England is operating with carriages from the 1980s. Doors are still manually opened and closed, and windows in the doors often do not shut while the train is moving.

As modern as you get with FIRST Group trains! 

First Group also seems to have pulled the wool over the government's eyes (once again) by backloading the franchise payments over the next 14 years. Since it is only in the last three years that they will pay the main bulk of the franchise money (about £2 billion) they will do what they have done before: pay average returns on the franchise in the first 11 years and then return the franchise to the government three years early which will incur a contractual fee which is far smaller than the £2 billion which they are projected to pay in the last three years.

If you think this is pure conjecture look at the markets today. First Group plc dropped by about 7% at the stock exchange and experts are unanimous that they have overbid and wont be able to deliver the sums they promise. The loser of this is of course the treasury whose officials seemed to have been swayed by the enormous franchise payments First promised to make when they awarded the contract but will probably go empty handed when First hits the buffers.

It seems that 'maximisation of returns' is not a good policy when making decisions, whether in investment or government franchising.

The riots of 2011

With Britain feeling the Olympic wind under her wings, there is currently little appetite to remember the darker sides of last years. One of the low points of public life has been the riots in London and other British cities in 2011. The BBC has now released a documentary on the riots which presents the view of those who took part. The words are spoken by actors but the content originates in interviews that were conducted as part of research commissioned by The Guardian and the LSE. 

The documentary is revealing, if only in its conclusion that there was indeed no single cause why the riots happened. This corroborates social research which points to some evidence that collective action is rarely driven by singular motifs that apply to all participants. In fact, just as with so many other social action, individuals bring their own reasons and motivations to the event. 

There is however a clear reason why the riots spread the way they did. After a demonstration and an initial wave of battles with the police in Tottenham, the riots then spread and lasted full four days and nights. This was unprecedented and the documentary throws some light on why they lasted so long. Law enforcement was mainly absent and the police were standing back rather than confidently tackling the widespread violence. We will have to wait for the next episode of the BBC documentary to hear the police side of the story, but one thing appears to be clear already: as one of the young people said, most rioters looted 'because they can'.

The virtues of First-Past-The-Post

As the expenses crisis hit the political system in Britain, the new speaker of the House of Commons, John Bercow said his main objective was to strengthen the role of the backbench politician. Less than a year later, the British public voted to retain the first past the post voting system with an overwhelming majority. About two years into the new parliament, parliamentarians and observers agree that Speaker Bercow, though hardly liked by his colleagues, has delivered. Backbenchers have been allowed to call debates at short notice and the speaking time granted to them, to the chagrin of the party whips, has increased significantly.

Contrast this with the recent developments in the German parliament where a spat between the speaker of the lower house (Bundestagspresident) Lammert and the chief whips of the main parties threaten to lead to new rules for parliamentary debates, potentially removing the right of the speaker to call backbenchers for debate at his own discretion and curtailing their speaking time to 3 minutes. 

The German and British parliaments differ in many things but probably nowhere more so than in the power of the party whips. While disenchantment with the main political parties is rife amongst the publics in both countries, the responses of the political classes has been markedly different. In Britain, it has led to a silent revolution in the distribution of power between backbenchers and parties, with the chief whips losing much of their say over who speaks in parliament at which debate. Coupled with the retention of the first past the post voting system, this seems to have strengthened the role of individual parliamentarians with backbench revolts against government backed legislation at an all time high. 

The story in Germany could be more different. Although Germany does elect a substantial number of parliamentarians through the first past the post system, overall it operates a mixed electoral system which puts the political parties firmly in charge of candidate selection. Smaller parties like the Greens and the Left party which traditionally have few parliamentarians elected with outright majorities in their constituencies, have only tenuous links with their voters, something that solidifies the power of the party whips. 

The spat between Lammert and the party whips reveals this trend of strengthening political parties over parliamentarians voting with their consciousness. In a recent debate, Lammert allowed some parliamentarians to articulate their misgivings about legislation brought by the government. The chief whips of the main parties, the Social Democrats, the Liberals and the Christian Democrats, took that as an assault on their god-given right to determine who speaks in which debate. Consequently they now propose new rules which curtailed the discretion of the speaker to call individual members of the parties in any debate. In effect, through the new rules, party whips put themselves in charge of deciding who can speak in parliament and who cannot. 

The response of the party whips is telling in the wake of some devastating defeats in recent state wide elections in Germany. The Pirate Party, a motley crew of individuals who either reject parliamentary politics altogether or party politics in particular, has enjoyed some phenomenal success in Germany over the last year, seriously threatening the dominance of established political parties. You would think that the message of voters would have been clear: conventional parties are losing their connection with the concerns of ordinary voters. Yet the reaction is one of tightening the grip of political parties on their members rather than permitting more diversity of opinion to be reflected in parliamentary debate. 

Although this was rarely discussed when Britain voted in the referendum last year, it seems that the first past the post system is still the better system to guard against the overbearing power of political parties. Or perhaps, thank God for Speaker John Bercow. 

How to curb binge-drinking...

There have been discussions about the minimum pricing of alcohol for years in the UK. In 2010, the Scottish government brought forward legislation but it didn’t find a majority in the Scottish Parliament. Alex Salmond’s administration has recently resuscitated it and this time it may get on the statute book in Scotland. 

While the Westminster government (which legislates for England and Wales in this area) has been reluctant to stride into this field of social engineering, yesterday it proposed legislation to the effect of forcing retailers to price every unit of alcohol at 40 pence or more. 

The government says that it has been persuaded by a close examination of the harm and the social costs that binge drinking causes in the UK. However not even the coalition government can deny that minimum pricing of alcohol is a measure targeted at preventing poor people from drinking. The reason is simple: at 40 pence per unit of alcohol, no up market drinks which are usually consumed by middle class people such as wine and expensive spirits are affected. Retailers would only be obligated to increase the price of alcohol in the lowest category of prices, which are traditionally cider and cheap beer. Many of those come as ‘special offers’ in six packs or larger.

While the argument about harm reduction is widely accepted, there are serious flaws with this proposal. One is of course that it targets a particular population group, which smacks of a revival of patronising ‘temperance’ ideas. 

The temperance movement was animated by the belief that alcoholism is a problem of the poor, which has always run counter to any evidence. Consumption of wine amongst the well-off contributes to significant health risks and NHS costs every year as previous campaigns of the government targeting this group testify. 

But there are other questionable assumptions that inspire this legislation. An important aspect seems to be that governments and scientists are not agreed on the causes of drunken behaviour. If, as often claimed, it is the amount of alcohol consumed then the evidence is contradictory. On average Germans consume more alcohol than Brits but German cities are not (generally) blighted by the sort of conduct we see in British city centres every weekend. So if it is not the amount of alcohol consumed that causes this problem, what is it? 

There is one observation that is often made by foreigners in Britain which may be a clue. People coming to the UK and enter a pub often note that punters in this country have to stand when drinking. I don’t remember a single pub in Berlin in which people would stand. 

Drinking alcohol while standing has several effects. First, it pressures people to drink up quick. But second it fosters an atmosphere of restlessness as the alcohol rushes into the blood stream. Forcing pubs to provide seating for every customer may sound like a small step but may be far more effective to enforce civility in the UK’s drinking culture than to ‘force’ the drinks industry to make more profit, which incidentally this new legislation does. 

In this context, it may come as no surprise that any increase in the price of alcohol has another beneficiary: the treasury which will gain through increased duty. Changing the drinking culture by forcing pubs to provide sufficient space for seats may be difficult, asking it to raise prices to make more money may just be the fortunate confluence of interests policy makers have been looking for in this area. Yet as so often, the easy things is not the necessarily the best thing to do. So if the government will get this legislation through binge drinking will remain a deplorable feature of British inner cities. I bet you a guinness!

Should the state get involved in entrepreneurial risk sharing?

The economic crisis engendered a vibrant discussion about the best model of capitalism. British observers in particular find much at fault at the moment with the Anglo-American model of laissez-faire. Although I doubt that these purist models make much sense in the real world, there may be some milage in distinguishing between different approaches to do business. I have previously argued here that boosting manufacturing output requires a holistic approach that involves reform of the apprenticeship and vocational system, bringing Britain closer to the dual German system of vocational training in company placements. 

Will Hutton has once again contributed to this debate and spelled out some interesting thoughts about how to create a sustainable economy in the wake of the crisis of 2008. While his article makes a whole series of observations, the main point seems to be that in the UK investment risks are not sufficiently shared. Hutton argues that individual companies cannot shoulder the burden of risks anymore given the complexities of international industrial interconnectedness and volatility of financial markets.

There is much to be said for this point of view. Research and development costs have rocketed in some industries. Yet Hutton's suggestion that the state should adopt a critical role in accepting risks in the industrial and development cycle of products strikes me a odd given the latest crisis. Even 4 years after the collapse of the world economy, governments all across the world are still trying to extricate themselves from a string of disastrous involvements in the economy. 


Wasn't the indemnity that the US government provided for sub-prime mortgages peddled through firms such as Fannie Mae and Freddie Mac the cause of the problem? And what about the issue of moral hazard? Taking away from businesses the risks of investing in new solutions and techniques looks a lot like reducing the moral hazard in the banking sector by underwriting their debts. 

It seems to me that we should be skeptical about the long term benefits of sharing risks between business and governments in the economy. The last two decades do not provide us with the best record for governmental involvement in market economies.

Why banking bonuses are only a sideshow for ordinary people

The bonus season is almost upon us and the politicians are sharpening their rhetorical tools. It sometimes seems that they cant wait to criticise the bankers, as if all the ills this country suffers from would magically disappear as soon as bankers accepted smaller pay packages. 

I argued before that this represents a curious distortion of reality and that it borders on irresponsibility by the political class to maintain the illusion that banker’s bonuses are the root of all evil. 

While you may think it immoral to give away millions of pounds to a director of a company which teeters on the brink of bankruptcy or to an investment banker, it is hardly something that makes a difference to the lives of the poorest in this country. 

Looking at the banking sector, what affects people’s lives is not whether or not a banker goes home with obscene bonuses, but rather what fees and charges banks levy on ordinary people when they go over their overdraft or use a temporary loan facility. 

Just think about the numbers: Barclays Bank charges £22 per 5 working days for any amount above the agreed overdraft. If you have paid for a package of chewing gum in the store, which may cost you less than a quid, and it pushes you over your overdraft, you may face a bill of up to £88 per month. 

If I am not mistaken, that could easily be more than a 4,000% interest! While politicians think they have to respond to the (justifiably) outraged public about high board room pay and bankers’ bonuses, they have consistently neglected the real issues that would make a difference to ordinary people: charging structure of banks for ordinary customers! 

Anyone heard anything constructive about this issue recently from our political class? I didn’t think so. After all, bank charges only hit the poorest of the poor who cannot make their monthly wages stretch to the next pay day. But as politician know very well, they are rarely the ones who shout loudest. 

Cameron's almighty gamble

After the party comes the hangover. Only it’s not been a party. More to the point, it was a car crash with the fatality of Britain’s role in Europe and the post mortem is in full swing in the British press. Of course, I am talking about David Cameron’s decision to veto the Merkel-Sarkozy plan for fiscal union, something that would have led to a new European Treaty. 

There has been plenty of navel gazing in the media, mainly about whether or not Cameron’s move will damage Britain. What received less attention is the question why on earth he did it in the first place. Yet the question about his motifs is an important one. Cameron himself points out that he had to protect the City of London and its financial services from a financial tax that would have come with the treaty. Louise Cooper agrees with Cameron in the Guardian today (you can read her piece HERE). 

Yet two questions remain. First, does Cameron’s veto mean that the city is now safer than it would have been with a new treaty? And, second, was this the only reason Cameron reached for the nuclear button? 

The first claim is questionable. The rest of Europe will now come together to design new rules and regulations for financial transactions which will affect London one way or another. Remember that any future rules will apply to all banks that are based in one of the treaty member states, hence to all but Britain. Politically, protecting British banks from sensible regulations which are being applied across Europe sounds tricky to me, to say the least. Is Cameron really going to block a financial transaction tax repeatedly over the next years that has broad popular support in Britain? This does not sound like a plausible strategy for which the voters will richly reward him in 2015. 

The second question however goes to the heart of the relationship between domestic and foreign policy for Cameron’s government. If his veto will not safeguard the City from future regulations, the question arises why he used it in the first place? Critics may point to a previous decision on European affairs that was less than surefooted: his withdrawal from the Conservative party bloc in the European parliament. Some may say Cameron simply does not care much about Europe. A more likely explanation however may be that his policy is mainly determined by preventing Europe to tear his party apart. 

After all, his veto stopped a new treaty for which he would have needed to campaign in a referendum; the new treaty ‘referendum lock’ would have been triggered by any new treaty. Seen from this perspective, Cameron’s veto looks more like a desperate attempt to prevent a referendum on Europe which may have jeopardised the unity of his party. By exercising his veto he may have saved Britain an early exit from the EU, at the cost of marginalising it. 

Time will tell if this almighty gamble will come off. Some of his Eurosceptic backbenchers are already calling for re-negotiating Britain’s relationship with Europe. Some political scientists call it the law of unintended consequences in politics: you aim to do one thing yet get another. Cameron may find it just as difficult to extricate himself from this iron law in politics as any of his predecessors in Number 10. 

The only way is up?

There has been plenty of debate in the media about the economic woes of the country. Commentators warn us that living standards will continue to fall for the foreseeable future and that families struggle to make ends meet. Wages have already come down, and, more significantly, the British economy has actually shrunk since 2008 and, by 2015, is likely to be smaller than in the year 2007 by 14%. This is indeed unprecedented and means that the long upward move of Western economies has finally come to an end. 

I have described the challenges for the British economy and society as a perfect storm in a previous posting and said that what makes the present situation so explosive is that several factors are coming together: a mis-adjusted educational system that is poorly linked with training and workplace skill development; the shift of the manufacturing sector to China and other developing countries with low wages; the slow but steady rise in production costs in China for those goods that we imported since the late 1990s and that had previously ensured low prices for us, fomenting a consumer boom financed by personal and national debt that is now coming to an end. 

An interesting aspect of our recent travails however would be what historians make of it. There is little as yet in terms of a unifying narrative emerging from historical studies, but I did come across something truly amazing recently. Listen to this: 

‘The institutions [of the West] were designed and modified to meet the needs of a booming society. If this [is] true, then the whole modern age would appear to be an abnormal one. By its very nature a boom is a temporal thing, something out of the ordinary run of life, an abnormal state of affairs which is destined to end when the forces that caused it cease to operate. Though this truth is obvious, people do not bear it in mind, even in the briefest periods of unusual prosperity. They act as if the ‘good times’ are permanent, as if the abnormal activity is the normal thing. It seems that their whole psychology is quickly affected, leading them to extravagances they would not ordinarily think of indulging. In short, ideas and institutions begin to form themselves around the boom conditions; the boom itself begins to make history, institutions, ideas, to form a culture complex.’ 

This was written by Walter Prescott Webb in 1951 in his seminal study: The Great Frontier. His argument was that the West (loosely defined as West European and North American societies) had enjoyed a four hundred years boom because of the unprecedented injection of resources through the opening up landmass in America (North and South) and its subsequent colonisation. 

I do not know whether or not he is right. What I do know however is that his words are eerily resonant of the conditions we are experiencing at the moment. Perhaps we are standing at a similar junction in history when we in the UK have to learn to live with less while the people in other countries and continents are catching up. As Webb reminds us: we should never assume that the only way is up. 

Not fit for the future

In 2008, Mervyn King, the governor of the Bank of England, warned that the UK is about to enter a ‘time of decreasing living standards’. The last figures from the Office for Budget Responsibility seem to reveal the staggering extent of the disaster that is unfolding in front of our eyes: stagnating wages, missed inflation targets and high youth unemployment. Given that there are few signals in the UK and Eurozone economies indicating imminent growth, this is as close to a perfect storm as it can get. 

There are however economies in Europe that still enjoy healthy growth rates. The German economy is one of them. Having reformed the employment regulations under the Social Democrat Gerhard Schroeder, and retaining a functioning apprenticeship system which brings companies and educational institutions together, Germany has been well placed to weather the storm. In fact, it did even better than that. It enjoyed unprecedented growth rates and its unemployment figures are down again this month. So what’s wrong with the UK? 

The public debate focusses much on pay differentials between CEOs and employees in the FTSE 500 companies, a dysfunctional banking sector failing to lend to businesses and whether or not the deficit should be reduced in four or eight years. These may all be important topics for politicians slugging it out in the ring of public opinion. However, the underlying factors for growth in the long term may be found elsewhere. The deficit will come down sooner or later, regardless of whether Labour or the Conservatives’s plan will prevail. 

What is less clear is whether Britain will be ready for business once growth returns. To be ready it must tackle the deep inefficiencies that obstruct this economy from being competitive. What are those inefficiencies? There have been two large trends in the last two decades which allowed Britain to enjoy boom years but may now come haunt her. First, manufacturing has relocated to China and other developing countries ensuring that British people could consume goods at record low prices. 

This came at a price for domestic manufacturing though and it will be difficult to reverse the trend. Looking at China and labour wages there, things are moving fast: Chinese labour is becoming more expensive yet this may not mean that British labour is becoming more competitive. British wages are still much higher than Chinese wages. So, in the long run, what would get Britain back into the picture is not cheap labour but skilled labour. This leads to the second large trend in modern economies, the disappearance of low skilled jobs.

On the face of it, German manufacturing cannot compete with Chinese production facilities either. Yet, they have managed to retain their manufacturing capacity by fostering highly skilled labour forces through workplace apprenticeships paid for by companies and colleges. German educators call it the dual system of education: two weeks in a company, two weeks in college. At the end of the training, most apprentices are integrated into the workplace and familiar with work routines in a given company, a critical advantage for gaining a job. 

In Britain nothing of this sort has happened. The Blair government pushed hard to increase university attendance to 50%. Although it failed to achieve this number, the consequence was a highly educated student body with low levels of practical skills. Thanks to the expansion of university education under Blair, colleges and university put on thousands of nonsense degrees which failed to provide practical training, and led nowhere near a job. British students, with the exception of some professions, are overeducated if judged by their degrees, but have little work experience or employable skills. 

Britain may enter very choppy waters over the next years, but if it wants to re-emerge as a competitive manufacturing centre at the other end, it needs to radically reform its educational sector and the way in which companies train young people. The chasm between the educational system and companies must be bridged. Otherwise the government’s aspirations to be open for business will not ring true for thousands of young people for decades to come.