The Two-Speed Europe

 Politics  No Responses »
Dec 112011
 

David Cameron has officially put the UK into the slow-lane of Europe with the other 26 countries all in the fast lane – including not just the 17 members of the Eurozone, but also those other countries that do not use the Euro. The excuse for doing so is to protect the banking industry – specifically the City of London from a transaction tax.

There are of course the Euro-sceptics whose mindset is stuck in the 19th century who are celebrating and suggesting that we should go further and have a referendum on leaving the EU and ‘going it alone’. Fortunately even the majority of Tories (whose instincts lie in that direction) realise this is a step too far and realise that whatever minor annoyances there are, the membership of Europe is a good thing for us.

To exaggerate the scale of things somewhat, Britain is a country playing in the playground of 900-kilo behemoths – China, the USA, and right next door to us (and we’re effectively part of it … sometimes) the giant of Europe. And it is a giant, although people often underestimate the power of Europe – all those funny Europeans, surely they can’t add up to much can they ? Actually they do – the GDP of the European Union as a whole is larger than any country in the world including the USA and China; admittedly only marginally larger than the GDP of the USA (a trifling 2 trillion dollars larger). This is because we usually rank countries in order of GDP, but miss larger blocks.

It is essentially an “accident” of history that Europe has remained a grouping of 26 independent countries whereas China became a huge land empire, and the USA became a federal union of “nation states”. The accident is of course a complex series of events throughout European history that is beyond the scope of this blog entry!

This could all be an example of short-term thinking – whilst staying out may protect the financial industry (although it is interesting to note that the Financial Times wasn’t entirely positive about this), it may well harm Britain’s prospects in the longer term. And increased regulation and taxation of the banking industry may be what the leaders of banking oppose, but it could well be that people in the UK actually would quite agree with it.

By staying out, we will have less influence over the core of Europe with less say on how Europe progresses. Whilst some people may welcome this, it does seem unwise to risk losing any amount of influence over what is our largest trading partner. And losing any influence with an organisation to which we belong seems unwise.

For some strange reason – perhaps because we seem to like bad news better than good news – the news about the European Union always seems to be bad rather than good. Some of this is merely down to how it is presented – we always hear about draconian regulation of business from Europe, but rarely stop to think that perhaps the regulation was called for by consumers because of abuses by businesses (such as international roaming charges by mobile phone operators), or that the European regulation merely harmonises regulation across Europe – would that business rather have 26 sets of regulations to work with, or 1 ?

There is also a bizarre myth that the European Union is less democratic than the national governments. That all EU power is controlled by unelected European Commissioners. That is a myth put about by politicians who are in danger of losing their cushy jobs if the people eventually device that with the EU parliament in place, there is no more need for expensive national parliaments. In fact, it is entirely possible that the EU is more democratic than national governments.

We often take the earlier accomplishments of the EU for granted – the ability to travel across Europe without visas at every turn. Who has not sailed through the fast lane at airports pitying those from outside the EU who are stuck in the slow lane ? And what about peace across Europe ?

Income Equality

 Politics  No Responses »
Nov 302011
 

First of all, take a look at the following graph …

Of course it will all mean a great deal more if I tell you about it. It’s a graph from the Wikipedia article on the GINI coefficient of income equality. For some reason, the scales are missing on the graph (at least on the browser I’m using) but as I often find myself saying, the numbers themselves don’t matter as much as the trends over time. The GINI coefficient is a measure of how equally income is distributed – how much higher the income of the wealthiest is over that of the poorest. It is a a simple measure of inequality that ranges between 0 (perfectly equal where everyone earns the same) to 1 (perfectly unequal where one person earns everything and everyone else earns nothing), but it only measures income inequality – there are many other aspects to income that can be interesting. However it is a very good  metric for income inequality.

If you look at the lines, there looks to be around 5 countries that have made a dramatic change to income distribution since World War II – France, and Mexico have become much more equal; the US, UK, and China have decided to become much less equal. China is perhaps a special case, but interestingly both the US and the UK have made this change since around about 1980 when the disciples of that poisonous messiah Ayn Rand, Reagan and Thatcher took power.

Not only that but it does not appear to be a one off adjustment but a continuing process – both the UK and the US are getting less and less equal as time goes by. Of course the US is a lot less equal than the UK … and most other places too except for banana republics and the like; it may well be that if we were to look back in time to the period between the two world wars, we would see that the US is a more equal place than the UK.

But I doubt it – the American Dream has always been a bit of a myth (I’ve cheated by linking to an article which claims that the American Dream is now a myth) in the same way that the idea that the old class-based society in the UK prevented upward mobility was a fallacy; whilst class barriers existed, there was still the possibility of upwards mobility with the acquisition of wealth and the willingness to compromise on your roots (i.e. aping the behaviour of the class you aspired to).

The American Dream is such a well-sold myth that a large segment of the American population will defend lower taxes for the wealthy because they feel they might one day with hard work become one of the wealthy. Despite evidence that the overwhelming majority of them will never be rich.

The question is, how did this increase in inequality come about ? Was it a deliberate decision by governments ? Or a natural tendency on the part of a capitalist society to concentrate income and wealth in the hands of the few ? Or more likely a bit of both ?

In the UK it has certainly been the case over the last 30 years that taxation has been moved away from income tax towards direct taxation (such as VAT) – politicians compete on who will bring in the lowest income tax whilst keeping silent about increasing direct taxation. The public laps this up – who likes paying tax – without being aware of the long-term consequences.

Whilst we like paying less income tax, it is also true that the rich benefit most from income tax cuts – they may only pay the basic rate of tax on the first part of their income, but they still gain the most when that basic rate is cut because they pay the most possible at the basic rate.

Of course there is also the issue of different parts of the population being awarded different pay rises. We have all heard of the company directors getting 49% pay rises during the middle of the recession, but that is just one year. If that sort of thing is repeated year after year over a period of 30 years, is it any wonder the rich are getting richer whilst the poor don’t ?

This might all sound like sour grapes – always a problem when you start criticising the excesses of the wealthy, but actually I’m relatively well off in comparison to many. Any big change in income equality is unlikely to make that big a difference to me, and if I end up paying a little more in income tax (and less in direct taxation), then it’s no big deal – indeed making a bigger financial contribution to society is something to be proud of and not shirked!

Syria: Why Isn’t The West Making A Stand ?

 Politics  No Responses »
Nov 192011
 

The interesting thing about what has been happening in Syria over the last few months is that people are just about beginning to ask why the West (as in the UK, France, USA, Germany, etc) are not taking the lead in doing something about Syria. There seems to be an assumption that we only did something about Libya, because it was easy and somehow in our interests to do so (i.e. “oil”).

Well perhaps, although Libyan oil reserves are hardly big enough to risk that much over.

But there are plenty of other reasons why the West isn’t taking the initiative over the Syrian situation.

First, on several occasions those opposing the current Syrian regime have made it clear that they do not want foreign intervention. So intervention could risk making the situation worse.

Secondly if you accept that there would be no Libyan-style intervention, you are pretty much limited to applying for and imposing sanctions of some kind. And the West has been doing that for some time – the EU has been imposing increasingly draconian sanctions since at least May this year, and the US has been imposing sanctions for far longer although in their case this has little to do with support for democratisation and more to do with punishing Syrians for having a government that supports Hezbollah. Yet despite all the talk, the Arab League has yet to impose sanctions. So who is taking the lead here ?

Lastly, it is all very well expecting the West to take the lead in opposition to noxious regimes, but where else in life do you find a situation where nothing happens, because the one who usually takes the lead in a community of equals has nodded off? If the Arab League feels the West isn’t making a strong enough stand, there is no reason why they cannot take the lead here. The West is distracted at the moment with economic problems – in particular the Eurozone crisis; maybe it should be pushing harder for something to happen in Syria, but when it isn’t doing enough (and some people might argue that it is), the Arab League could push itself.

 

Poppies, FIFA, Remembrance Day, and Remembrance Sunday

 General, Politics  No Responses »
Nov 122011
 

The people of the UK (and indeed other places) are garlanded with poppies in remembrance of the soldiers who have lost their lives in the wars of the past and present. It is easy to get distracted by the politicians, the large ceremonies, and get confused about the purpose of the poppy and Remembrance Day. It is not about the glorification of war, or a bone thrown by the establishment – it is very much a grass roots thing better shown by local ceremonies.

Those local ceremonies in villages up and down the land involve a few old veterans laying wreathes of poppies at local war memorials built to commemorate the fallen from the local community. A few local dignitaries get involved too, but the ceremonies have little to do with them – they would take place even without them.

One of my favourite war memorials illustrates the point. Close to where my parents live is a small memorial :-

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It isn’t a grand memorial – most villages have far more dramatic ones built in stone. But it was put up after World War I by the local community in remembrance not of the local people who had died but for the millions of men that the local community had seen march through the village on the way to the port of Southampton before departing for the front-line in France.

Whilst a cursory check of the history of Remembrance Day would seem to indicate that it was all a government thing, a deeper look indicates that whilst the establishment was involved, some of the initiatives were started by what were effectively ordinary people, and it was supported by the public at large.

FIFA

As anyone who has been watching the news the last week knows, FIFA initially prohibited the England and Wales football teams from wearing the poppy during this weekend’s international fixtures but later backtracked from this under pressure from a variety of sources.

FIFAs initial ban on the poppy looks like gross foolishness, and indeed to a certain extent it is. But any organisation like FIFA is likely to be conservative and slow-moving in relation to making decisions about their rules, and you do have to wonder why the people wanting to start wearing poppies on their team strips during a football game left it until the last minute to query whether wearing poppies was ok.

FIFAs rules on emblems of a political or religious nature are probably quite sensible, and whilst the poppy is neither it would be sensible to allow for plenty of time to persuade FIFA that it should be allowed. A year would not be an unreasonable amount of time. Yet the England and Wales football teams only recently decided that they wanted to wear poppies on the field – this is a new thing and not something traditional.

You do have to think that FIFA has been treated a little unkindly over the last week.

Remembrance Day And Remembrance Sunday

It is strange how things change over time. When Remembrance Day was new, it was the main day for remembrance although not a public holiday. When I was growing up, the closest Sunday to Remembrance Day was called Remembrance Sunday and that was the main day for remembrance with Remembrance Day itself being a much quieter affair.

Today, the pendulum seems to be swinging back in favour of Remembrance Day rather than Remembrance Sunday. Of course the Sunday events are still far bigger, but Remembrance Day seems to be getting more and more attention every year. It is time to consider making Remembrance Day a public holiday so we can remember the dead on the real anniversary.

Greedy Pigs In The Boardroom

 General, Politics  No Responses »
Oct 292011
 

Yesterday we learned that UK company directors managed to screw the public, the shareholders, and the people working in the companies they direct by getting awarded pay rises amounting to 50%. Chief executives (who do a little bit more work) managed to grow their pay by 43%.

Of course the unions were up in arms, but this is bad enough that even the Tories are a little uncomfortable with the repugnant greed, and David Cameron has called for “transparency” in the boardroom. Whatever that means – after all we know that these guys are greedy pigs, what do they need to be more transparent about?

The likelihood of any company board paying the least bit of attention to a polite request to act with restraint is about the same as the chance of a snowball in hell lasting more than a minute. After all these people are quite happy to be known as greedy pigs … they have spent years and sometimes decades working themselves into a position where they can make themselves repeatedly sick eating from the trough of the economy.

The CBI on the other hand has trotted out the tired old excuse of having to pay salaries sufficient to attract the best in the world.

Which is true to a certain extent (although I doubt that every company director – many of whom do not work full time – deserves quite as much as they get), but is not quite the whole story.

Every year it seems that the top-level executives see at least double-digit income growth, whilst people who actually do real work see far less than that. Over time it leads to an increasing gap between the income of the richest and the rest of us. This is normally phrased as a gap between rich and poor, but that is just as wrong as ridiculously high salaries. It isn’t a gap between rich and poor, but a gap between the richest 1% and the rest of us.

Conventionally we accept these sort of things because superior company directors are supposed to ensure that companies become healthier and more profitable, causing the economy as a whole to become healthier with more resources to spread around. In other words the rich get richer, and so do the rest of us. But this doesn’t seem to be the case.

Sometimes we forget what an economy is for. It isn’t to make the rich richer, but to ensure that all the population get a share of the wealth so they have enough to eat, a place to live in, etc. If there are people who do not have enough to eat, have trouble affording energy bills to heat their homes, have inadequate homes, or lots of other “issues”, then the economy isn’t working properly.

I do not know of an easy fix for this, but we do need to start looking into fixing things so that we all benefit from the wealth created by the economy. And in such a way that the wealth isn’t frittered away. It doesn’t mean total equality – those who contribute more should get more out of the system, but we have a broken system at the moment that doesn’t actually reward those who contribute more properly – it only rewards the wealth creators.

Now genuine wealth creators do deserve to be rewarded more than those who do not contribute so much. But they should not be rewarded excessively when everyone else is suffering (to a greater or lesser extent).

One thing that might help is a way of taxing bonuses and golden parachutes in a way that takes away money from those who just manage to get good contracts, but leaves more money with those who really increase wealth. If for example, we start with a base rate of 50% tax on all bonuses and golden parachutes greater than the average yearly salary. That percentage goes up to penalise those who have not increased profits and have lost jobs, over the last 10 years, and the percentage goes down to those who have created jobs and increased profits over the last 10 years.

Oh! And one last thing. Not all rich people are greedy pigs. On a day when Jimmy Saville has died, it is well to remember that he gave away 9/10ths of his pretty large income.

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