Tuesday, 29 September 2009

Obama's 9/11

What arguably secured a second term for George W. Bush was the way in which he dealt with 9/11. The strong, hardline response was just what the American people expected from their President. Now, eight years later, Bush's successor faces his own 9/11 which provides an opportunity for another term in the White House and furthermore the chance to secure his legacy.

Many economists agree that unemployment rates in the U.S. could persist around the 9-11% mark for years to come with the global recession pushing whole communities onto the backfoot. One only has to look at Detroit with it's jobless rate of 17.7% to see the effect of the collapse of the automobile industry though this has affected towns and cities across America. And of course it isn't just transport manufacturing that has suffered with unemployment in furniture manufacturing at 22.5% and the construction industry is suffering with 16.5% unemployment.

At least it's a good time to be an economist with theories being thrown at the crisis left, right and centre. What is perhaps most interesting is that Okun's law seems to be faltering. The principle basically states that as the economy shrinks it sheds job at a similar rate and vice versa. On this basis, unemployment in America at the moment should be at around 8.5%; not the substantially greater 9.7% it is suffering.

What does all this mean? Well for some economists such as the renowned labour theorist Larry Summers, this could well signify a hysteresis in the economy and this seems to be backed up by the Peterson Institutes's Jacob Kirkegaard who recently stated that "a lot of the jobs that have been lost will never come back".

So if economic growth alone won't re-employ America, what can Obama do? The way to create a job stimulus seems to come in two parts and suits a Democrat President. Firstly, people have to be able retrain and learn new skills whilst out of work but the thing that stands in the way is a lack of economic freedom to do so. A sort of Medicare bill but for skills education would perhaps give mature students a right to healthcare or subsidised mentoring so that they could, for instance, learn a useful skill without worrying as much about their family. Secondly, more support must be given to new companies; the future economy. This can be done through tax breaks or even direct loans but unless new companies receive initial help they will not survive for long in this time of economic hardship.

These policy ideas aren't exactly in line with my normal Randian way of thinking, but as George W. Bush said a year ago; I am abandoning free-market principles in order to save the free-market.

Friday, 25 September 2009

Snubgate?! More Like Snoregate!

Yesterday Downing Street was forced to deny rumours that U.S. President Barack Obama turned down offers of 'one-to-one' talks with Gordon Brown during the Prime Minister's trip to New York. The story is being played out in the mainstream press as a breakdown in the special relationship between the US and the UK but to me this seems more than a little melodramatic.

In the worst case scenario the White House may have considered that it wasn't worth talking to Brown; a leader that will more than likely be out of power in a matter of months. Even then this comes nowhere near to signifying the end of a relationship that has endured for decades between these two countries, one only has to look at the speeches given by the two leaders at the UN General Assembly to see how in sync the two nations are.

The more likely reasoning behind Obama's 'snubbing' is that he was far too busy to meet with Brown at this busy time on the international political calendar. Japan has a new Prime Minister with whom Obama would like to meet and of course countries like China and Russia are key allies when it comes to dealing with Iran. I have no doubt that Brown would like to have met with Obama but just because practicality says no doesn't mean we should jump to irrational conclusions; after all the President didn't meet with any other EU leaders either.

It certainly seems that neither Gordon Brown nor the Labour government can do anything right at the moment with most political stories ending up all over their face. Take the Baroness Scotland story for example. A clerical error by the Attorney General could cost her her job. Never mind the brilliant legal work that she has done with the Crown Prosecution Service, she too has been dragged into the Labour mire as part of yet more petty political point scoring.

Don't get me wrong I am always happy to see the demise of a Labour government, it's just I would rather see them fall because of their policy, not because they forgot to photocopy something.

Wednesday, 23 September 2009

#ldconf providing the real alternative?

So it's conference season already and all the party machines are gearing up for their event of the year. For me, this year is already more exciting than previous years with twitter allowing the public a backstage pass and generating it's own public debate. Of course when I say 'more exciting' this is a step up from the political equivalent of a school assembly. In this non-literal game of 'follow the leader' the parties use the now highly publicised conferences to big themselves up. A couple of new policies might be announced but long gone are the days when heated discussion arose in those conference rooms.

Nevertheless with a summer that, in Britain at least, tends to generate very little political intrigue, us self-confessed anoraks take what we can get. With this surely in the back of their minds it is the Liberal Democrats who headline this years conference season and have already attracted much press attention. One does have to question if there would me this much interest if the conferences took place in say February but that is beside the point.

The Lib Dems seem to have gone on the offensive from what I have seen so far. Vince Cable in particular has challenged the Tories economic plans even referring to them as "ill-equipped politically, morally and intellectually for the challenges ahead" and stating in no uncertain terms that the shadow chancellor George Osbourne is too inexperienced to run the national economy.

It is clear that Clegg an the rest are on the hunt for votes but it is this really the best way to do it? The Lib Dems reputation as the 'nice guys' of Parliament is being challenged on a daily basis and isn't doing them any favour anyway but picking such petty squabbles will only generate hatred. In the same way, having poor excuses for having no policy is just as bad. Surely even the Lib Dems have to accept that they aren't going to beat the Conservatives at the next general election so surely their best bet is to attack the outgoing party and not completely alienate the incoming government?

Following my advice may mean the Lib Dems need to become even more authoritarian in their style and annoy me further but if it wins them votes I'm sure they won't mind too much about little ol' me.

Tuesday, 15 September 2009

Lehman Brothers: An Obituary

As we pass the one year anniversary of the collapse of Lehman Brothers a lot of media sources and politicians are looking back and asking how and why this happened. It is the latter query though which is both more interesting yet worrying for libertarians.

It doesn't need me to spell it out for you that a a lack of regulation and more generally, capitalism, has taken the brunt of the blame. In his speech from Wall Street, Barack Obama stated “We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses".

To me this seems like a rather over-zealous argument, how can you realistically blame capitalism for the expensive mistakes of various CEOs such as Richard Fuld? Running a high-risk business would pay-off with some massive bonuses in the short-term but when it all goes down the proverbial gutter, people can't be too surprised.

The real problem lies in government bailouts and in this sense the American government did the right thing by refusing to help out Lehman Brothers though this rule should apply right across the board. I understand that the likes of Goldman Sachs have now paid back what they borrowed with interest but the very knowledge that this safety net will be there only promotes greater and greater risk. Only when it is made clear that companies are responsible for their own actions will they be able to make a healthy profit without jeopardising the public purse.

Wednesday, 9 September 2009

A New Era for Parliament?

This summer of politics may be remembered for many reasons: the MP's expenses scandal, the G20 summit in London and the continuing demise of Gordon Brown to name but a few. But what may turn out to most affect the UK parliament is the scandal involving the Speaker of the House of Commons.

As Michael Martin failed to acknowledge his responsibility, MPs on the floor of the Commons had to directly challenge the Speaker; something rarely done. Although this successfully led to Martin's resignation, like it or not, a new culture has been bred that holds the Speaker to greater accountability. Possibly more than his remit deserves.

All this has led to UKIP leader Nigel Farage challenging the new speaker John Bercow in the next general election by fighting the Buckingham constituency and early reports suggest he will do well.

Traditionally, parties do not challenge the speaker but this has already been somewhat quashed as a tradition in the past two general elections where the Scottish National Party (SNP) challenged 'The Speaker seeking re-election'.

There are certainly a lot of good arguments out there for Farage as a Speaker and the idea of having a Speaker who is independent of all the main parties is appealing. It could be said that the UKIP leader would show antipathy towards those on the left but from what I've heard from Farage I would suggest he has just as much hatred for much of the Conservative Party!

In spite of all this I hope Farage doesn't get elected. Not because I dislike the UK Independence Party but because Bercow hasn't done anything wrong in the role so far. In fact, I believe the MP for Buckingham has done a pretty good job keeping the House in order from what I saw before the summer recess. Farage's argument seems to be that Bercow himself cannot be trusted because he was embroiled in the expenses scandal but then again who wasn't. Do you think Farage would have been as white as snow?

Tuesday, 1 September 2009

A Step Forward or a 'Tragic Surrender'

Mexico this week took what is arguably an important step forward for building a liberal society. A new law decriminalises the possession of marijuana, cocaine and other drugs in amounts small enough "for personal and immediate use". The law has been passed by President Felipe Calderon in order to "regulate the issue" and to free resources and prison places.

The most telling part of this story though has probably been the reaction from Washington. One only has to look back to 2006 for American opposition to this policy in Mexico as pressure from the George W. Bush administration forced then President Vicente Fox to veto the bill. Guarded comment from the White House this time around suggests that the Obama administration is beginning to realise that the confrontational 'war on drugs' is not the best approach. American drug czar Gil Kerlikowske even said he would "wait and see".

But unsurprisingly there has been opposition to the new law on both sides of the border. Mexican officials fear that their country will become plagued by 'Latin Amsterdams' whilst others fear that the law sends out the wrong message as the Mexican government struggles to win their own war on drug trafficking. Meanwhile some in the southern states of America are concerned that the new law will inflict "a serious setback" to the battle against drugs. Barrett Duke, vice president for public policy and research for the Ethics & Religious Liberty Commission, is worried that "We now have an entire country on our southern border that is a haven for drug abuse".

Personally, I believe that fully developed states should not worry about legalising drugs. Once this is done it takes it out of the hands of drug dealers and can enter the free market where each individual is responsible for their own actions. This may be different in Mexico that famously suffers from an inherent drugs problem (only a couple of months ago many high-powered officials including mayors and judges were arrested on drug conspiracy charges) but America has probably done the right thing by patiently awaiting how successful this small step towards legalisation is. If such a policy can make a difference in Mexico then it will mean other countries will have to start taking the possibility of legalising drugs seriously.