Recession

First it was Club Med that experienced a relapse of sluggish economic growth with Spain and Greece slipping back into negative growth. The reasons outlined by the 'experts' who caused the original depression were, "The currency wasn't flexible", "There was no devaluation", "Governments couldn't deploy monetary measures", all because such powers had been centralised to the ECB.

Then the UK recently slipped back into recession. Yet it has consistantly devalued, it has consistantly printed more money relative to other Western nations and it's Government has deployed uber loose monetary policies to try and "solve" the growth issue. However the UK has still come a cropper too. 

UK pay in real terms has fallen more then anywhere, inflation is higher relative to other countries, the country is still running a large budget defecit (just as  Keynsians claim this is whats needed), it has printed hundreds of billions, nationalised industry, had historically low interest rates that are very negative when taking into account the current inflation rate and the currency has been  devalued considerably. All of the above are always touted by Keynsians as the solution however it has done the UK no good what so ever. None of this suprises me, nor should it suprise the reader of this blog.

A lot of claims have been made that the UK has fallen back into recession due to the austerity measures. However all of the above does not indicate austerity but reckless government spending, as bad as under the previous Labour government. Cameron and the Conservatives are performing exactly as I thought they would, no spine and all sound-bites. Indeed it is worth repeating:

The Tories may be historically comfortable in this setting but how many grass root Lib Dem supporters are going to swallow the medicine? Defection of many to Labour is inevitable. And remember - "things were going 'well' under Brown". This could cast the Tories in the wilderness for a decade if they practice what they preach. There's only so long you came blame the previous government for the mess. Give it a year and people won't be seeing Labour mess but will instead switch their view to Tory mess. Just like Thatcher. People forgot the Labour mess in the 70's, they just remember the early eighties.

It seems the recent local elections have also reflected this mood (I realise some of the votes will be on local issues, but more commonly its used if people support current policies). Labour regained a number of councils and increased its share of the vote. Cameron is the latest scapegoat, the problem being unlike Thatcher he's not fixing anything and has to contend with stronger opposition with his Government having no ruling majority like Thatcher had. He's reliant on money printing, negative interest rates and a huge Government deficit. There's nothing austere about his politics. Ed Milliband keeps moving towards the center ground, refusing to trip up on left wing questions, such as questions on Union strikes, and maintains a consistent view with Ed Balls re-iterating the need for growth, ie more money printing and fiscal deficits. 

Public opinion in the UK is changing towards running deficits to support growth, a dangerous combination. Individual freedom, free markets and liberty create growth. When a Government tries to create growth it does the complete opposite over the long term. Running deficits, spending money on public works, creating inefficient and wasteful entities, removing entrepreneurship - all this does is stifle societies economic fabric. Socialism will always collapse for that reason. If I was a politician I could campaign for growth. I could promise that I would create employment, create public works projects, hand out subsidies, tax the rich. It's incredibly easy to do but this will never create the prosperity we all desire. 

Unfortunately the UK is slipping into this mindset where Government needs to increase spending once more. So far we have only endured mild stagflation but it will intensify going forward as people once more seem to be seeking for state intervention. Growth is peddled as a solution, but sustainable growth can only ever come from the free market, not Government Spending.

Its not only the UK that has lurched towards the left and away from 'Austerity'. The recent French elections have opted for a Socialist leader, Hollande, who like all Socialists has promised the earth but like any politician has no means to deliver. France already spends beyond its means yet has opted to spend, well, more. Policies will be watered down as market reality hits. 


Greece continues to be rudderless with the elections bringing no clear decision. Extreme parties such as the far left and right have gained at the expense of the  usual popular moderate parties.


I detailed the problems with PR in a previous post and Greece is a classic example of the problems caused. As a student of history it reminds me of many European Countries during the 1930's, similar to Germany, when Hitler rose to power. When crisis hits, people seek radical alternatives. The Greek people went for the extreme right and left, just like what happened in Germany 80 years ago. No one could form a Government, so Coalitions were formed, in Germany's case the moderate right aligned with Hitler's Fascist party believing they could moderate his views and was seen as the only option against the communists to uphold the status quo and form some sort of Government. Well what a mistake that turned out to be.


Times have changed, so I think the Greeks will see sense on the second election (although I may be wrong), but PR gives extremes platforms to perform on. Under first past the post systems that we have in the UK, it means people stick with moderate conventional politicians as extremes struggle to field candidates in all seats. People therefore vote for a party that will likely get the local seat. With PR, there is no such check and people can vote for extremes knowing full well there is not a number of seats to win, its a percentage of votes which gain seats, this in turn makes extremes more appealing. Extremes always offer people simple solutions. Problem is that whether its the far right or left, they always endorse catastrophic policies resulting in a complete erosion in individual liberties. Both ends of the spectrum believe its my way or the highway, and persecute anyone who gets in their way.


Greece now has the problem of no effective Government. Just like 1930's Germany, the moderates have to seek help from extreme parties in order to try and form a Government. The anti-austerity parties seem like they will get their way.


Recession. More Government Chaos and no real solutions. Some things never change.

Hung Parliaments

The British people have spoken electing a hung parliament. Negotiations began. Speculation was rife. Media groups with 24 hour coverage. It was 36 years since the UK had the last hung parliament the same time we last entered a period of stagflation. This time a coalition government was the outcome, a marriage between the Conservatives and Liberals. Labours bubble has burst with the 'no more Tory boom and bust' happening on their watch, ending the Utopian mirage the general public believed the party had delivered them. Despite the election defeat the party is still in good condition for the next leader with a sizeable number of seats and share of the vote. I said that if we got a Conservative Government the UK was in trouble (and not under the conventional wisdom), well we got two of the parties so my bets are for a Labour Landslide victory at the next election. David Milliband has put his hat in the ring for the leadership contest, another possible Blair but I get the sense he has more political beliefs than the later PM. Speaking of Prime Ministers, Gordon Brown had a dramatic exit on Tuesday evening. Despite having all the wrong polices I liked Brown. I think he genuinely believed in what he did, was obviously a highly intelligent person and had a strong work ethic who believes he is doing the right thing. There's not many like him in any more in Parliament that is a real politician not a PR Guru such as the other two leaders.

While all the electioneering has taken place we've barely even noticed the carnage in the markets. The DOW crashing 9% at one point. Major stock indices all around the world looking shaky. Markets continue to worry about Greece, Spain, Portugal the UK. A bailout was announced but they can't kid the market who is playing the game but knows that the Government have set up the next disaster. Reports of relative safe 'havens' such as the US is like telling someone the boat they are in is safer than the next one because they've only sprung half as many leaks. Over the long term all boats are sinking just at different rates.

As the wheeling and dealing of the parties took place a hot topic was electoral reform, with the liberals trying to move towards proportional representation. In my view it will be a dark day if the UK was to loose the first past the post system, especially in these choppy waters the world finds itself in now. Its the political system that ensured Britain has historically maintained one of the most liberal and open societies in the world.

The end of the First World War sparked great political upheaval. The old empires - Habsburg, Ottoman, 2nd Reich - all collapsed and with it a scramble for the power vacuums they left behind. Democracy was imposed on many European nations, nations that were not acquainted with democracy. Not only did they get democracy but many got it in the form of proportional representation. The newly drawn boarders of the continent further exacerbated the issue of trying to dictate common policy. History views Fascism in rightly a dark context, however people in such countries didn't vote for the perverse beliefs such parties were associated with as the Second World War drew to an end, such extreme views had evolved during their time in power. Such extreme parties were formed from coalition governments that aligned themselves with traditional pillars of society.

Many European nations contained fragmented parliaments during the interwar period. Governments would come and go in months, for example the Reichstag in Germany had 16 parties all contradicting one another making laws almost impossible to pass. Many parliamentary members were radicals compounding the lack of common ground to be found giving huge variance towards policy. When the 'Crisis in Capitalism' struck in 1929, so did the crisis in democracy within many such European countries. The public began to believe that democracy was too ineffective to solve their problems thus seeking more radical alternatives. As extremes were given platforms in the context detailed above, nation after nation succumbed to the far right. All the above never occurred in Britain, the most mature democracy in the world. We had our share Fascism, but the first past the post never favoured Oswald Mosley.

Italian Fascism began like this, opportunities created by PR and the alliances they were able to obtain. Over time it gradually morphed into the political party it became infamous for. Hitler rose to power under exactly the same circumstances, again aligning himself with traditional pillars of society that could agree on some aspects of common policy but ignored other more radical views, believing these could be controlled. As Hitler and others increased their grip on power, they also abolished democracy and so began the dictatorships that they have become synonymous with.

Now I'm not saying that PR means we are going to elect a Fascist government, times have changed and I think the majority of Europe is a far more tolerant place. But PR gives rise to radical groups and fragmented weak governments. When the economies ticking over and everything seems fine this isn't so much of an issue, but when we have a persistent crisis then things can get messy.

I realise that our current first past the post system has produced a hung parliament, however the majority of seats are held by mainstream progressive parties. If we had PR then the Fascist BNP would have gained around 12 seats. Our current system ensures no such political base for them. UKIP would have around 18, the Greens 6. I understand what people say when parties get a greater share of the vote but don't get a proportional amount of seats, but first past the post generally ensures a moderate parliament. First past the post has its flaws but I would prefer it to other suggested alternatives out there.

With the new policy of fixed term parliaments I currently can't see the current Government lasting the five years. Splits are already emerging and when tough choices are to be made, finger pointing will begin, deals and U-turns will take place, garnishing further support for the opposition. Another Labour Government within five years? I think so and with it, further relative decline for the UK.