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14 january 2012, over yonder

Although there's no particular special birthday coming up, mine being either some way away or a few years under my belt, I'm feeling a bit melancholy. It might be that my other half is coming to the end of her degree, that my eldest is making the jump to secondary school, or my youngest having a very strong mind of his own, or maybe it's that I've almost reached the 4-year maximum I've ever spent in one job. I'm watching the sun rise as I write this, a subtle red over the icy white on the ground, with the green across the canvas slowly emerging. The red perhaps is the fire of my ability to thaw the white of that melancholy, and get me to the infinite possibility of the green of the future that stretches to the horizon that even in these moments has become sharper. It's warm in here though, and looks cold in that unfamiliar outside where angels, and perhaps I, fear to tread. No palace was built in a bedroom though, or by someone afraid to take a risk. An armchair's no good to anyone, except as somewhere to sit comfortably, and I'm not sure I'm ready for that, just yet.

5 january 2012, keeping the lights burning

Far-sighted and intellectually excellent european commissioners seem fewer and far between these days (though see 10 november 2011) but the slovenian with environment, janez potocnik, is shaping up well, and making the most of a portfolio where the eu has more relevance than most. Having managed to goad london's mayor into action to avoid a £300 million fine, his latest foray is more philosophical, taking the traditional malthusian fear that the natural resources at mankind's disposal are finite and identifying something of a contemporary tipping point which melds with the current economic crisis and propels it. In fact, his call for greater energy efficiency is essential, and his argument about how greater resource efficiency can make europe more competitive (by it costing us less to be more productive) right, but the sad truth is that because we are so incredibly unproductive compared to the growth economies, we'll be little more than starting to catch up. Whilst each of the 300m us citizens uses about 57 barrels of oil a year (some 22% of the world's total energy consumption), each of india's 1132m people use around 3 (5%). As global population and industrialisation, and so demand, continues to rise, so will price, meaning janez is right that our current dependence on such high levels of energy consumption are going to become crippling. However the politics of increasing the price of electricity in europe or of petrol in america, or of carbon taxes in either, are impossible. The real tipping point is when we stop playing with carbon trading and price production and people out of excessive energy use to radically change behaviour and spark real innovation from desperation. We're still a million kilowatts away from that.

1 january 2012, another bric in the wall

Will 2012 (like 2011 and 2010, see 14 january) be the year of brazil, russia, china, india & the rest ? Yes. China alone is still creating an economy the size of turkey (23 november 2011) each year, and while the brics' clip is slowing, as the western world and especially europe (that's the uk too) dive towards contraction, the differential growth rates will widen. The big question is whether decoupling has yet taken place. Many thought it had in 2008, only to be proved sort-of wrong when their economies dipped in parallel to ours, but then they recovered quicker and faster; since then the processes of stronger domestic demand, and so less reliance on exports to the west, have only accelerated. Though I managed a whole radio interview (1:51) without mentioning this favourite theme, history's largest population shift is probably unstoppable, as more asians, africans, middle easterners and south americans than ever move from rural subsistence to urban agglomerations. Their massively increased productivity is whittling away at the "great divergence" that saw the west leap ahead a couple of centuries ago, not least in places like manchester, through the new technologies of the industrial revolution. Now it is the brics and their acolytes who through adopting techniques and knowledge are converging and indeed overtaking, restoring the old order in the process. The old moniker now belongs to the debt-ridden west, the new to the high-saving growth markets. We are living through the time when demography is reasserting itself and the ability of a couple of dozen mainly small countries to rule the world's economy is passing. Just the us and japan of oecd countries are in the world's top ten, just 5 of the top 20, 11 of the top 50. I suspect therefore that 2012 is the year we'll see more pronounced uncoupling generally, and in particular acceleration of the predictions for when china will become the world's largest economy, timed now for something like 2016, but getting closer by the month.

25 december 2011, it was sixteen years ago today...

...I was in bethlehem, following through on an impulsive decision to visit the city just a day after the israeli army pulled out of what at least to the western world is the most iconic palestinian city. The oslo two agreement, implemented after rabin was assassinated, saw the army of occupation pull out from the biggest west bank population centres and the establishment of the palestinian authority. I was living in tel aviv at the time (working at its most excellent museum) and my colleagues thought the trip totally mad, but actually I had a spellbinding day in an amazing place on literally the first day of the rest of its life. Though hard to imagine now, those were heady times, with even the prime minister's assassination seemingly unable to stop the peace process juggernaut careering towards a two-state solution for one of the world's most contested small spaces. You can read the whole story here (christmas in bethlehem) but my abiding memories are of smiles, good cheer, crowds everywhere and the smell of freedom in the air. Not victory, but relief, belief and optimism, captured well by the last person I saw that day. Sixteen years later, it's terribly sad to reflect how, far from a new beginning, that period was the briefest of false dawns, as hopes were dashed so soon afterwards and there's never quite been a plan since. If I had one wish for 2012, it would be for peace in that corner of the world, and justice and freedom for all its inhabitants.

23 december 2011, cut pay or headcount ?

The pay of the seven million or so people that work in the public sector is a big issue in the uk, as elsewhere, but it is not just pensions that represent an effective uplift (worth perhaps 15%) but also time worked (up to 25%) and, until recently at least, job security (and redundancy brings generous compensation). Length of service as a basis of pay rather than performance also hobbles outcomes. It was once the case that these less visible benefits counterbalanced salaries lower than in the private sector, but no more: equivalent public sector wages are now some 12% higher than private ones, although the question of formal qualifications needed, which private employers tend to be more flexible about, can obscure this. Nor is the gap entirely in higher grades: workers 4% less well paid than their private sector equivalents 15 years ago (nhs versus private healthcare nurses, for example) are now 25% better paid. A key question that arises from all this (now being asked by the government in its autumn statement) is whether the current system of national pay setting is optimal either for those workers in higher-cost areas (like the south east) who are effectively paid considerably less (given a higher cost of living) or for those lower cost areas who in a liberalised market ought to attract many more of those jobs. There is of course fiendish politics in this, but there may be a way to sell the unhooking of public pay in a local labour market with a simultaneous announcement of the 10, 000 new jobs that would arrive with the relocation of say parts of the department for business, whose central purpose today is after all supposed to be "rebalancing the economy" by creating more jobs outside london. Cutting public sector jobs is at the moment the only way being pursued to balance the books, but varying pay, which would do more to sustain and even create jobs where they are most needed, must surely appear on the radar at some point.

18 december 2011, every loser bins

Brits have something of an obsession with bins, a symbol of schizophrenia between localism and rule by stalinist decree. When I moved to germany ten years ago, I was stunned both by the efficiency of domestic recycling, and that everybody, rich or poor, divided absolutely everything into the allotted four bins. Back in stockport, things have moved on. We also now have 3 recycling bins, and a black one, half the size, for everything else. The latter, to whitehall consternation, only gets emptied fortnightly. Central government's sensitivity to bins dates back to the winter of discontent in 1979, with its iconic images of the unburied dead and unemptied bins that did in what was left of the labour government, and spurred margaret thatcher's era-defining election. Unnoticed by the mass media, there were echoes of those scenes on the streets of heald green this week. By unhappy coincidence the recent national public sector strike fell on black bin day. So a week later, the black bins, full at the best of times, were overflowing, and a great many people presumed the rota would be changed and put them out with the rest. It wasn't, and that night was very windy, and so the week after that saw the desolate scenes, of bins in the road, rubbish swirling and litter the likes I haven't seen for years piling up in corners and against kerbs. It was though, an amazing contrast. I live on a pristine cul-de-sac of mainly well-to-do bungalows. At the end of the road is a narrow cut-through (I think they call it a ginnel), at the other end of which is what was a council estate. Before 1974 our side was cheshire, the other was manchester. It's now a few low-rise tenements and ex-council houses, done up over time with new porches, doors and drives. On this side, the bins were wheeled back in on the wednesday night, to patiently wait another week; where an animal (a cat, or maybe a fox) had ripped an overflowing black bag, it was neatly tidied up. It was on the other side, that I cycle through every day, I saw the echoes of desolation and concert aftermath. In fairness, it peaked after a few days, and when the bins were finally emptied it quickly got back to its also-pristine norm, but I did find those few days telling, something I think about personal responsibility diluted both by reliance on public services and sharing amenities. My children don't notice any difference at all between the two ends of the alley, but I do wonder if they will one day soon.

10 december 2011, exit, stage right ?

The real question of the latest "make or break" euro summit is whether it was enough; to which paul krugman's answer is no; while mine is, yes - until the next step is needed. All the news though in the uk is about david cameron's "thatcher moment", although even the iron lady never actually wielded her veto, although she bitterly regretted it after signing the single european act of 1986. Years ago, when I started this website, I wrote that the uk's "sustained ability to punch above its weight, economically and diplomatically, is finally ebbing." This weekend may well turn out to be a step in that direction, as however much we invoke some magical realism about the special relationship with washington, or why asians invest here, or why london is an international banking centre, today that is all directly leveraged from our role as bridge to the heart of europe. It is a remarkable feat of diplomacy that we have maintained that despite not joining the euro, but that stretched elastic may just have snapped. It was foolish of merkozy to ever have imagined a cameron absent from the centre right caucus in marseilles (having pulled out of the european people's party), was ever going to agree to the deal cooked up there; or maybe they didn't. It was equally foolish of cameron to ever think he could successfully blackmail them with a switch on the politically-toxic topic of financial regulation from majority voting to unanimity; or maybe he didn't. None of the trio are foolish, and so the more likely explanation is weariness, above all from a european mainstream that had been prepared to allow a semi-detached britain access all areas, as long it seemed to be bending over backwards to play the game. Cameron needed to avoid at all cost any treaty at all, as despite any legal niceties that could be cooked up, the momentum towards a referendum would have become irresistible. The save our financial markets manoeuvre was just a cause to go down fighting for, but despite the oddity of risking all to save probably the most unpopular group of people and institutions in the land, the battle of britain pose is a domestic political plus. There will though be many more scenes before the epilogue is actually written. Talk of a treaty by march may be the line, but the last treaty took ten years from start to finish. Fiscal rules may sound wonkish, but tax and spend is the heart of government and neither narrow nor technocratic, and so it may be the right thing to do, but it isn't going to get done without a whole lot of debate. A referendum in ireland has never been avoided before, and it's not going to be avoided now; and they'll be twenty other battles too in the long months ahead. All that gives time for the uk to reflect, and perhaps even find a way to help, because ironically nothing is actually being asked of london at all, just to let the others move ahead. If we deny them that, they'll never forgive us - and nor would we deserve it.

8 december 2011, and then there were eight

I spent the day in leeds today speaking not once but twice at a conference, in the illustrious company of the deputy prime minister nick clegg (14 september 2011; 5 february 2011), greg clarke, the almost-cabinet minister for decentralisation and planning (22 january 2011) and chuka umunna, a major league up & coming mp who is trying to fight off the "english obama" tag, though he's rather good. The conference, on northern cities, was another launch pad for another stage of another government drive for devolution, or "localism", or control shift perhaps, this time for the core cities, which of course includes manchester. Unfortunately, only the yorkshire post seems to have noticed. Many more noticed the night's football results, which rather doomed my opening line about no other city in the whole of europe having two teams in the european cup. I was quite challenging, as my few years here have taught me talk is cheap, and its not for nothing the uk is the most centralised state in the western world: 19% of public spend is determined by central government in germany, 32% in france, and no less that 72% in the uk, and change really does mean a major shift of control, and this all still feels rather too much like stakeholder management than policy implementation, but we live in hope.

Attached File: clegg conference.pdf

3 december 2011, the european province of belgium

It's almost 18 months since belgium had a government (19 september 2010), but it finally looks like negotiations are about to conclude. Somewhat remarkably given that the elections saw immigrants cast in a rather negative light, the prime minister looks set to be a half-orphan of poor italian workers: the american dream in belgium. He's also openly gay (not the first pm, a distinction that went to iceland's johanna sigurdardottir) and even more remarkable, a french speaker, the first since 1974. That's a bit of a blow for the richer flanders half of the country, which still looks ever closer to becoming an independent state, kosovo being the model. If brits think scotland is on the verge of independence, it's worth reflecting belgium already has separate newspapers, tv stations and even foreign aid budgets. The markets will no doubt be positive about a government's formation, especially as the agreement has a commitment to a 2.8% deficit, but the ups and down on belgian bond yields can hardly be said to track the coalition negotaiations. For all the talk about the enormity of the steps to fiscal union angela merkel has begun to explicitly talk about now, belgian is a case study of how far down the line the euro area already is in terms of the whole endeavour carrying its component countries, or at least the smaller ones. As a sign of how far down the line many things already are, it is surely possible to see a positive in that perhaps there's a bit less massive upheaval to get to the nirvana of stability and normality than everyone expects.

27 november 2011, merkozy

I wrote my second-ever new europe column on germany, and seven years ago it was quite insightful to flag that "everything about the eu rests on germany". Then, it was still understated: no-one coined the "kohl consensus". Gerhard shroeder ended that culture of restraint, bringing a rather more muscular germany, its capital now berlin, its whole economy yoked to the deep sacrifice of rebuilding east germany, which brought lower wages and sent jobs abroad, lowering germany's unit labour costs by some 20%, one of the causes of the euro's current problems (15 october 2011). It also brought angela merkel to power. And in that time too it turned around its trade: in 1999 german exports to portugal, ireland, spain and greece were €30bn, 5x the €6bn to china; by 2010, it exported €53bn to china, more than the pigs combined. Now germany is bigger and better by quite a way than anyone else, especially france, which has lost the battle central to its whole european policy of maintaining parity with germany. Having built the eu and played its first decades brilliantly, france has long since seen it slip beyond control, the main reason for the 2005 "no" referendum vote. Competition, english and new member states were not made in paris. Whilst brussels was built on the french civil service model, the newer ecb is thoroughly bundesbank. Thus, as the economist said (excellent article), france needs germany now because it's so weak, and germany needs france because it is so strong. Merkozy, despite the fact that they really don't like each other, very much has the wheel of the 17, and by default the 27, even if the new italian premier was ceremoniously invited along to the last "g2" summit. Behind that though, it is clearer than ever that it is germany more than ever that is the new european superpower, finally no longer economic giant but political dwarf. That mantle instead seems to have been inherited by europe itself.

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