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Archive for the ‘British economy’ Category

Cameron fails to get veto on EU financial regulation

Posted by seumasach on February 20, 2016

David Cameron’s EU deal: what he wanted and what he got

Guardian

19th February, 2016

In a surprising win for Cameron, only one euro ‘out’ will be able to force a debate among EU leaders about ‘problem’ eurozone laws. Other EU leaders agreed to this because neither the UK, nor any other country, would have a veto. The tactic can be used to delay, but not to stop eurozone laws.

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World yuan-ization thanks to the City of London

Posted by seumasach on November 5, 2015

Voltairenet

5th November, 2015

The Government of China promotes the internationalization of «the people’s currency» (‘renminbi’) through a policy of alliances that does not take ideological barriers into account. In a first moment the diplomatic forces of the yuan were concentrated in Pacific-Asia, but in a second moment, it became necessary to gain the support of the West. After the President Xi Jinping visited London, between the 19th and the 23rd of October, the bases of the «golden age» between China and the United Kingdom were established, with which both countries looked to push the yuan-ization of the world economy.

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The left on the horns of a Chinese dilemma

Posted by seumasach on October 4, 2015

Cailean Bochanan

4th October, 2015

I had the impression that Osborne’s recent and startling announcement of various deals with China, including the integration of our financial markets, no less, had been met by a stunned silence. But John McDonnell, the new Shadow Chancellor made this reference to them in his speech to the Labour Party Conference:

“I found the Conservatives’ rant against Jeremy’s proposal to bring rail back into public ownership ironic when George Osborne was touring China selling off to the Chinese state bank any British asset he could lay his hands on.”

“Ironic” is putting it mildly: The Chancellor has essentially admitted the failure of the Thatcher revolution and called in the state to rescue Britain. Only it’s not the British state, which no longer knows how to run anything unless it’s into the ground. You might have thought the left would be enjoying this “irony” a bit more than they appear to be. More, for example, than William Keegan writing in the Guardian who is dismayed that Osborne is “kowtowing to a communist Chinese government” and denounces his “cloying approach to a regime notorious for its abuse of human rights”. Keegan is something of a soft left neo-keynesian and , therefore, those criticisms could be largely expected. What about the hard left?
In an article in Socialist Worker Alex Callinicos gives us the line. He is, of course, scrupulously politically correct:

“The problem here isn’t that the companies are foreign-owned.”

Why shouldn’t foreign companies take the place over? Don’t they have rights too? The problem lies elsewhere. Callinicos points out that Chinese companies are “still subject to considerable state control” and that capital “is still not allowed to flow freely in and out of the country” However, Callinicos insinuates this is changing and China is embracing the free movement of capital.
So we have two major threads in this leftist discourse: on the one hand, dealing with China is wrong because China is communist and , on the other , it is wrong because China is no longer communist.
Callinicos goes on to denounce the fact that Chinese investment will be centered on the the City of London at the expense of the “national base of companies operating in Britain.” Callinicos’ thinking in all this is particularly fuzzy. Capital exported from China can still be and is controlled by the Chinese leadership for all their rhetoric about free markets. This is particularly true of the banks. As Dend Xaoping himself used to say:”Whatever you do keep control of the financial system!” In addition, I don’t believe the behavior of Chinese banks will merely replicate that of our own: riding high on bubbles and carry trades, manipulating rates and prices and laundering funds of dubious origin. If they did China certainly wouldn’t be in the position it is today. Anyway, as Osborne announced, there is already large scale Chinese investment in the real economy, largely in infrastructure and housing. There is every reason to believe that this would increase with funding available from Chinese banks operating in the City. The principles of Chinese finance contradict completely those the City of London. We are, therefore, looking at systemic change in the British financial system.
The British left desperately need to get to grips with this issue and quickly. This is because they have essentially abandoned their neo-Keynesian perspectives and accepted the need to balance budgets. But how can they reconcile this with their claim to be anti-austerity. Balanced budgets imply genocidal austerity unless there is some countervailing tendency. That tendency is incoming investment something which, seemingly unbeknown to the left, we have been beneficiaries of for decades. All that is happening,as Osborne’s policy shows, is that the form this investment takes is changing.
For a long time China was obliged to accept fiat pounds to cover its massive trade surplus with Britain and reinvest these pounds in UK government bonds. This was win/win for Britain and largely explains the surprising prosperity of post-Thatcherite Britain. The bankruptcy of the City and its subsequent bailout changed all that. China ceased to buy new UK government bonds (note that, in addition to its massive trade deficit, Britain no longer has a current account surplus not including trade) although they agreed not to divest from existing bonds, sinking sterling. Instead, they wanted to reinvest the surplus funds in the UK. So, on the one hand, we can no longer fund our deficit with Chinese bond purchases and on the other we have the prospect of hundreds of billions worth of inward investment. So balanced budgets and Osborne’s policy are two sides of the same coin. It would be truly reckless to embrace balanced budgets without wholeheartedly welcoming the incoming investment which will render the outcome far less austere. The left are caught in a dilemma which they must resolve if they don’t want to be outflanked by the Tories.

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Osborne blazes the Deng Xiaoping trail

Posted by seumasach on September 28, 2015

Cailean Bochanan

28th September, 2015

Once again I have been proved to be wrong. I had interpreted the decentralization of the British state as the key development linked to inward, especially Chinese, investment and predicted that a Tory/SNP duopoly would dominate Britain in the coming years. But Osborne’s barnstorming performance in China, following on from Corbyn’s election as Labour leader, opens up completely different perspectives. His idea of integrating our financial markets with those of China suggests nothing less than a Chinese takeover of the City of London rather than piecemeal investment in Britain’s devolved regions/nations. This chimes in too with Corbyn’s plan for a National Development Bank which is tantamount to central planning, hitherto an absolute taboo. It is not difficult to see that the kind of infrastructure overhaul that Britain requires cannot be done merely through devolved assemblies and combined councils but must be Britain wide and centrally planned. It also makes much more sense for China to finance the whole thing through the banks which can issue credits for projects as required just as they would do in China. And so we go from the Panarin-type post-imperial scenario of fragmentation to one of systemic transformation of Britain as a whole.

Such a radical revolution is inconceivable without opposition. It is striking that as Osborne blazes the trail down China way, the knives are out for Cameron back home. Cameron has been until recently vociferous in his claim that Assad must go. He obviously had an intuition that someone must go: but it has turned out to be himself. He has called it a stab in the back but the blows are coming from all sides, decisively from Michael Ancram, et tu Ancram, who has raised the specter of Libya, hitherto the politically correct war, ominously drawing the parallel between Cameron and Libya and Blair and Iraq. This is deadly and given the reality of what was done to that once thriving country and its catastrophic consequences for Africa and Europe this just won’t go away. Of course, just about all of us were implicated, but all the more need for a scapegoat.

An excellent analysis of recent events in Australia by WSWS focuses on a conflict between the ardently pro-Chinese Malcolm Turnbull and “powerful sections of the Australian military and intelligence apparatus as well as the media and political establishment, not least within the Liberal-National Coalition”This presumably parallels tensions here and it looks like Cameron has found himself on the wrong side of this argument. In other words, the proposed financial merger with China will go ahead over the dead bodies of assorted dead-enders, security state and MIC interests and neocons. In these historic September days the Blairites and the Cameronites have commenced their exit from the British political scene.

Is this another Glorious Revolution? In 1688 certain Dutch financial interests were invited to take over Britain to establish a financial system orientated towards war and empire. This time we have invited a foreign power in the to rebuild an economy gutted by a failed hegemonic project. We have come a full circle since this marks decisively the end of empire and a new historical époque in which war will no longer be the normal state of affairs

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George Osborne: We should embrace China, not fear its rise

Posted by seumasach on September 20, 2015

“The Chinese Communist Party, the biggest communist party in the world and , in my opinion, one of the best.”

Father Ted Crilly

“Recent volatility should not and will not put us off. It should drive us forward, so that we integrate China’s new financial markets with our own so they are deeper and better able to absorb shocks.”

George Osborne

This must be the most neglected and most surprising aspect of this Tory government’s policy. Not only have they signed a Comprehensive Strategic Partnership with China, begun to issue UK government bonds in Yuan and broken ranks with the USA in becoming the first Western country to sign up for the AIIB: they are now also about to “integrate our financial markets” with those of China (completely mind-boggling!). Since the nature of China’s financial system, with its orientation to productive imvestment, is the complete opposite of our own this can only be seen as a totally revolutionary step: something which chimes in with Corbyn’s proposal for a National Investment Bank. But while Corbyn comes across as an unreconstructed Bennite, Osborne is more a born again follower of Deng Xaoping. The left are now taking control of both major parties in Britain! Watch out for a wave of interest in things Chinese and a politically-correct campaign against Chinaphobes.

Guardian

19th September, 2015

The United Kingdom must strive to become China’s “best partner in the west” by forging ever closer economic ties that will bring benefits to all parts of the country, George Osborne has said.

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Jeremy Corbyn wins economists’ backing for anti-austerity policies

Posted by seumasach on August 23, 2015

We see the new centre emerging before our eyes and the term “strategic state” may soon be a all our lips.

See also: Jeremy Corbyn and the new political centre

Guardian

22nd August, 2015

More than 40 leading economists, including a former adviser to the Bank of England, have made public their support for Jeremy Corbyn’s policies, dismissing claims that they are extreme, in a major boost to the leftwinger’s campaign to be leader.

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Jeremy Corbyn and the new political centre

Posted by seumasach on August 15, 2015

Cailean Bochanan

15th August, 2015

The Blairites may be right in claiming that a Labour Party under Jeremy Corbyn won’t win the 2020 general election. But they are missing the point : by that time we can expect the most pressing issues in British politics to have been resolved. The next five years are crucial in setting the direction for a new, post-imperial Britain and Corbyn as Labour leader buoyed up by the mass movement that will put him there will play a crucial role. The Blairites have misread this badly denouncing Corbyn as throwback to the past when, in fact, it is they who hold that position.

British politics is in a state of flux and it will be become more and more evident that things cannot be understood within the framework of the old left/right divide. The significance of the recent developments in Greece has been missed : pragmatism prevailed over ideology. The contradiction is that ideological rigidity and sectarianism  seems more entrenched than ever, at least, in certain quarters.

Last night’s Corbyn  rally in Glasgow bore out that point : it was very much a rally of the faithful in an atmosphere of revivalist enthusiasm. All the leftist shibboleths new and old were itemized: global warming, identity politics, even the old warhorse “class”, nationalization, socialism and so on. Of course, Corbyn has to press all the right buttons but I maintain despite that that he will prove to be a pragmatist. Otherwise, what was someone like myself who has long dissociated himself from the left doing there?

I was there because I anticipate Corbyn playing a strong hand concerning the most pressing issues we face and because I don’t expect these issues to be resolved by the victory of either the left or the right. I expect them to define a new center ground in British politics which can draw support from left or right or neither.

The first of these is the renewal of Trident. Corbyn will oppose it vehemently and hopefully the British people will take tp the streets in their millions to the same end. The left have always opposed it on moral grounds and have claimed, to counter the right, that it is not effective as a deterrent. Actually, it is very effective as a deterrent : would Russia still exist as a unitary state without it? The left’s longstanding opposition is, however, no longer the point. What clinches the argument is that the Cold War is over and Jeremy Corbyn seeks constructive cooperative relations with Russia. He does this as a pragmatist despite his ideological difficulty with what he chooses to see as a homophobic government. The simple fact is that Russia has no aggressive intent towards Britain, quite the contrary, and since there is no other nuclear threat in sight there is no need to cough up 100 billion for Trident. Apparently, many in leading military circles also hold this view and not many of them will be Corbyn supporters.

The cost of Trident is anyway prohibitive for a country in the kind of financial state we’re in. The left has developed a complacent view on the debt since there has been no run on UK bonds or on sterling despite QE. They fail to see that this because the Chinese have agreed not to ditch sterling assets. The Chinese have instead sought a deal with the UK government evidence for which can be found in the rarely noted Comprehensive Geostategic Partnership we have signed with China and the fact that we are issuing UK government bonds in RMB. To Corbyn’s credit he does not share the prevailing left view that the debt doesn’t matter and that we can simply go on for ever borrowing money from people who don’t want to lend to us or simply go on devaluing the currency to monetize the debt and then force feed it to China and others in exchange for their exports. Without actually explaining this he admits that the budget has to be balanced. Actually, the principle is also a problem since interest payments are only manageable due to negligible interest rates. Anyway, Corbyn shares with the SNP and the Tories the new consensus view that the debt is a problem and, given that, the ridiculous costs of Trident are also a problem – to be overcome simply by canceling it.

Corbyn’s realism about Britain’s financial plight also extend to the realization that simply cutting the budget won’t work. Whether we like it or not the survival of millions of people and Britain’s social cohesion depends on welfare spending and that isn’t likely to change soon. We need to look at the other side of the equation; income. There isn’t any: we lose massive amounts every month running up our monster trade deficit. Almost everything we consume we import and our exports are limited by a depleted industrial base. We must therefore, reinvest in that base both to boost exports and to substitute for imports. Corby proposes a financial system orientated to this end, some form of national investment bank. How can anyone disagree with this even if the modalities remain to be determined?

Whatever form it takes it is clear that foreign investment will play a major role in the recapitalization of Britain. The deal with China probably concerns this and ,in fact, it’s already happening. However, were Britain to withdraw from Europe this investment would be threatened. The recent Greek crisis saw a surge of anti-European and anti-German feeling and, most notably, a shift on the radical left towards a eurosceptic position. Corbyn has already come out for the EU in principle and has thus provided something of a corrective to left’s Little Englander drift. The fact that born-again eurosceptic Owen Jones is sharing his platforms illustrates this. The anti-European left and right will then hopefully be marginalized by the time of the referendum and they will have been by a new pragmatic consensus.

Corbyn’s promise to renationalize the railways looks highly ideological but he certainly knows what he;s talking about on this question. Privatization has been a disaster which has seen a natural monopoly milked and undermined by private interests. Adam Smith wouldn’t have any problem with nationalization in this case. In the end it may just come down to a form of words : the mess has to be sorted out by the state in the interests of the nation. Is that or isn’t it nationalization? How many London commuters find the remedy just as sweet by any other name. One could say the same regarding the disarray in the utilities or the education system. Does any state simply leave these things to hobble along anyhow or assume that the market will for some obscure reason sort everything out? Only, Britain it would seem. The utilities only work at all because they’re being run by people like EDF, a state run company – although the state ,of course, isn’t Britain. But maybe the British state can have at least some say. After all, we’re British!

The simple reality is that the required program for Britain is fairly obvious and we can expect to find it insinuating its way into the manifestos or discourse of the most unlikely bedfellows. We’ve understood that we don’t want any more wars and must now turn our attention to the mess on the home front.(Does that mean it has to be like Dad’s Army?) Ideology, however, still reigns and it’s only right and fair that the most passionate adherents of the various secular faiths should have one last chance to insult each other in a frenzy of self-righteous indignation before going quiet in the face, hopefully,  of the  concurrence of the mainstream on simple pragmatism.

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The left’s anti-European turn

Posted by seumasach on July 19, 2015

Cailean Bochanan

19th July, 2015

Just before the Greek referendum George Galloway tweeted:

“Greek Partisans will vote NO in Sunday’s referendum. There is European life after the Euro. No more bail-outs for bankers. Go for growth!”
Galloway would , of course, have been equally vehement in his opposition to the bail-out of the City of London in 2008. Well, actually, no. In statement made at the time he said:

“In the midst of this financial crisis which threatens us all, at last the government is taking action which may begin to shore up the banking system. I hope that it is not, as many in the City are saying, “too little, too late”. “It was essential the government propped up the banks’ capital base, it had to provide lending to banks that can’t borrow money from others to pay their debts. And we had to have a guarantee of bank debts, if we were not to see a full-scale financial panic and the collapse of the whole debit and credit system. But having put the money in, the government now needs to force the banks to pay the public back in return.”

Leaving aside the piety at the end this was simply a full endorsement of the bail-out. In an extraordinary but characteristic bit of sophistry Galloway was able to spin the bailout as a break from neoliberalism, as a break “from the outdated dogmas of free market economics.”

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