Thoughts on the Air Strikes

In wake of the recent UK Parliamentary decision to extend the airstrikes against Daesh/IS to the region of Syria; I think it is important to share some thoughts regarding the situation. Firstly, I’d like to state that I do not have the time nor the effort to deal with the level of unnecessary abuse towards David Cameroon. Speaking from a fundamentally left position on both economics and social issues; I find it extremely disturbing and ultimately believe it to be detrimental to blame Cameroon. People who want to discuss the issue, on a serious level, should not be shoving their political preferences down the throat of the masses, this is not what the debate is about. I do not care who you vote for; this is a question of morals and pragmatism. Further, its borderline ironic that Corbynites are engaging in hate speech, when during the newly appointed Labour leader’s first Conference speech; he preached honest politics, with particular emphasis on an anti personal attack approach.

The House of Commons voted to extend airstrikes to Syria

On the issue, more fundamentally, there are several key facts that need to be appreciated. For example, the nature of the debate is, objectively, both entirely complex and yet fundamentally simple. Wherever one lies on the political spectrum in the UK; whether it be left, centre or right, we all wish the same end; the defeat of Daesh. Now, the complexity lies in the fact that there are multiple different means in which this can occur; each with varying degrees of effectiveness. When debating this issue recently, I found myself to be on the ‘anti airstrike’ team. However, the multi dimensional nature of the ‘means’ debate, coupled with its deeply emotional roots, results in myself, and I'm sure plenty of others, remaining undecided.

The recent attacks in Paris are the latest in a long list of deadly IS operations

I’d like to take this opportunity to respond to several criticisms of the airstrike operation which I deem to be both unfair and borderline absurd. Make no mistake, Daesh/IS, are a cult of death. Every single member and soldier wishes nothing less than to murder, in enormous numbers, as many western civilians as possible. Further, this organisation, terrorist network, is entirely unpredictable. We can not second guess where the next target, attack or massacre will take place; as we learnt so devastatingly through the brutality of the attacks in Paris only several weeks ago. The very nature of the operation itself; a central concentration of power dispersed around the region of Iraq/Syria, and most probably other states, communicating with individuals and groups of empathisers across the entire world is extremely complex to handle. However, for this very reason, action must be taken to contain the situation. You cannot bomb an ideology to death; but you can weaken its means of inspiring. ISIS are a threat to the way in which we live, the ideals we aspire to and the people we love and care for. This is a monster which will not show mercy. Military technological advancements mean that precise and target based operations can function in such a way that as little collateral damage as possible is caused. Although it is foolish to believe that innocent lives are not at risk; certainly, when bombs are dropped from 10s of thousands of feet. Further, it is worth pointing out that the largest thereat ISIS posses to any particular groups of people is the religion it claims to represent; Islam. 

Jihadi John epitomises the 'Cult of Death' which is Daesh

The functioning of ISIS is built around, in my opinion, two fundamental goals; to polarise and mobilise. Both of these objectives are, of course, inherently linked. The extent to which ISIS can polarise members of the Islamic community, so that they result to following extremism, will of course affect the ability of the organisation to mobilise potential followers. The Charlie Hebdo killings failed on both these grounds; the attacks caused the western world to unite, and the Paris assaults furthered this, as shown by the fact that there is unanimous agreement on the United Nations Security council, that action must be taken against ISIS. The risk, however, lies in whether or not the Islamic world, who are against ISIS, will support the airstrike policy of the West. Even if the airstrikes are a success; and we defeat Daesh, we risk antagonising and creating a vacuum whereby another organisation, perhaps an even more brutal equivalent, can rise and seize power. 

My biggest fear, about the entire situation, is the potential alienating of large groups of innocent peoples; i.e. followers of Islam across the world. ISIS is an extremist group, proclaiming to operate under the guidance of Islam. But, they couldn't be less similar. In the same way that the Klu Klux Klan ought not be associated with any values held by regular followers of Christianity; we must understand the enormous disparity between the values that IS hold and general practicers of the Islamic faith. Fear politics is in danger of corrupting the minds and conscience of all in the West. The people fleeing from Syria, including many children, are innocent; they do not need to be made victims in this situation, it’s bad enough that they have had to flee the comfort of their own home. Aside from there being powerful economic arguments for encouraging refugees to live in Britain, we are obliged, morally, to welcome as many of these peoples as we can possibly handle.. Myself, and the majority of others, are fortunate enough to live our daily lives with little or no concern about our security and well being. The average ‘man’ on the street is not hostile; we appear to live in a largely hospitable country. The values we proclaim to live by; liberte, egalite, fraternite, ought to guide us into welcoming our arms. Further, by embracing many of these refugees we are, perhaps, instilling a policy which is likely to be more effective in countering IS. We need not polarise and alienate these people so that they turn to desperate extremes; we must offer a helping hand. 

The attacks in Paris have united the Western front

Ultimately, as demonstrated by the above rhetoric, I am entirely undecided. On the one hand, I want the complete destruction of ISIS, but the risks of potentially doing ISIS’ job for them, alienating large sectors of the Islamic community terrifies me. This debate appears to split people, in many ways. But one noticeable cleavage it creates is the so called Idealists v. practitioners of pragmatic politics. On the one side, the idealist believes that we can handle the situation created by IS through entirely peaceful means; working with the people on the ground, understanding the demands of the innocent, who are most at risk, in all Syria, Iraq and the entire region. The practical political points towards several different facts however. The West, including Britain, prior to the Commons vote on Wednesday, were already bombing IS strongholds in Iraq. In this sense, the real politic perspective might ask; why not increase the bombing? Further, the fact that we are dealing with an inherently facist group, which wishes to disposes us of everything we cherish so dearly, forces us to be aggressive. Over all, this is a debate which will not go away, and will continue to be at the forefront of not just British politics, but the international political arena, for many a time to come. 

Thoughts on the General Election - April 9th, 2015

Thoughts on the UK General Election - April 9th, 2015

The race is hotting and the contest is getting tighter. At this stage; we’ve had a televised interview/debate between Labour leader Ed Miliband and Prime Minister David Cameron of the Conservative Party. Last week, 7 of the major leaders came together to debate and discuss topics ranging from the future of the National Health Service, the British economy and potential changes in British immigration policy. The aim of this piece is not to attempt to second guess the outcome of the election, but more to offer a personal perspective on the issues at hand. In that sense, it is not written with the aim to try to imagine or estimate potential effects of certain parties and their policies. It is more a collection of thoughts and feelings on the current situation. 

For reasons varying from my current physical position, writing this in Buenos Aires, and also my fortunate economic and social position of belonging to the most fortunate 10% of the economy; the heart of this election feels very distant. Discussions of University fees, Immigration reform, the future of the National Health Service and employment don't necessarily affect my wellbeing in the same way that they have a major impact on the wellbeing of others. For this reason I feel a very non personal connection to the topics at the very heart of this election. Take, for example, the current issue of immigration in Britain. Luckily for me, no immigrant arriving in the UK is a threat to the employment of my parent. Being a respected, credited and specialised teacher, it is highly unlikely that the wage competitiveness of an immigrant offers enough incentive for students of my parent to switch their demand. Furthermore, the wage competitiveness of most working immigrants who arrive in the UK results in cheaper labour when our family requires it. In this sense, immigration is not only not a threat, but actually an advantage. However, I am conflicted. This election has torn me, in one sense, creating a paradox between my personal feelings and my academic beliefs. As a student of politics and economics it is extremely difficult to create a synthesise between my personal beliefs and my political ideas. The issue of Mansion Tax offers an interesting example of this. Politically and economically I am inclined to believe that progressive taxation and the subsequent redistribution of wealth from the rich to the poor is a good thing. Social inequality poses one of the greatest threats to our current socio-economic harmony; it can tear us apart and divide us. In an economics essay I am more than likely to argue heavily in favour of Mansion Tax. However, the realisation that a vote for Labour might  cause a percentage of my friends having to relocate and experience drastic changes to their lives creates a personal dilemma. It is not as easy, perhaps, as merely voting for who your head tells you. 

What I actually find most interesting about the General Election this year is how contested it is. It is a credit to the pluralist nature of the British political system that seven parties; the UK Independence Party, the Green Party, the Labour Party, the Conservative Party, the Liberal Democrat Party, the Scottish National Party and Plaid Cymru all stand a reasonable chance of featuring heavily in the leadership of the next British parliament. It is becoming almost certain that the result in May will be that of a Hung Parliament; no outright winner. The hotly contested nature of the race has encouraged the British people to become further involved in the issues. Personally, I don’t resent UKIP, to nearly the same degree as others for the sole reason being that their controversial policies have not only tested the strength of the other parties on their policies and leadership but it has also brought lots of attention to the General Election. Of course, I have academic issues with UKIP, notably the potential alienation and scapegoating of economically and socially beneficial members of our society; immigrants. This causes social unrest and divisions which are not healthy for economic progression and also for the security of the British people. However, there is no denial that UKIP have offered a threat to the potential domination of Labour and the Conservatives following the poor support for Nick Clegg and the Liberal Democrats. Surely it is an inevitable result of a truly pluralist democracy for their to be multiple and varying beliefs and ideas on policies? In that sense, blind criticism of some parties’ beliefs is hypocritical; assuming that those objecting also do not wish a more elitist democracy. In the United States; a voter chooses between the lesser of two evils, at least in the UK there is more choice of evils. 

The Scottish Referendum of 2014 was a crucial turning point in the sense that it proved that the British people do indeed care about politics. The criticism that people were apathetic, uninvolved and disinterested was dramatically refuted. Voter turnout for the Scottish Referendum was around 84.5%, a new record, and a total of 80% of young people voted. I hope that this positive trend continues and that the UK General Election will boast a high voter turnout. The coverage of the election, not just by news outlets and analysts, but also on social media imply that British politics is not necessarily as dead and buried as previously thought. The British people want to take matters into their own hands, which is only a positive thing. 

QE to the rescue?

With the economy of the European Union becoming more and more stagnant, Mario Draghi, the Head of the European Central Bank, has announced intentions to introduce Quantitative Easing. The plan includes injections worth up to €1.1 trillion, with € 60bn per month until the end of 2016. Before attempting to understand whether or not this policy will be effective, it is necessary to define QE. The theory is as follows: the Central Bank, in this case the European Central Bank, creates money in order to buy bonds from financial institutions. As a result of this, long term interest rates are reduced which therefore leads to a decrease in the cost of borrowing for businesses and individuals. This increase in borrowing allows more money to be spent and also more investment to occur which results in economic growth. Furthermore, there are two distinct types of economic growth which need to be considered; firstly, short term aggregate demand growth which is any change in the following - Consumption, Investment, Government Expenditure, or the extent to which export revenues exceed import costs. Secondly, growth can occur following an improvement in aggregate supply, a term which is harder to define. Aggregate supply can be described as; the total supply of goods and services produced within an economy at a given price level. However, it is perhaps more easily understood as the combination of human, physical and social capital. Human capital measures the skill level and health of all individuals and their ability to reach their productive maximum; physical capital is the totality of factories, transportation systems and machinery which produces more consumer products and, lastly, social capital is the consideration of the ability of institutions to counter corruption and lead to the productive potential of the economy. 

Head of the ECB - Mario Draghi

Now that terms are understood, let us consider some effects of heightened QE in the EU. Quantitive Easing was first used by the Bank of Japan in the early 2000s and resulted in extreme depreciation of the currency. This is when when the value of one currency falls relative to the value of other international currencies. In other words, a currency becomes cheaper and therefore export volumes tend to augment because foreign buyers now have higher purchasing power. Following currency depreciation, an economy’s balance of trade tends to improve and therefore economic growth occurs. Following the financial crisis in 2007/8, the United States and the UK began to adopt QE policies. It is important to note that Quantitive Easing is a form of monetary policy. QE tends to be considered a last resort to stimulate spending if interest rates are so low that they can not be brought down any further. Economist, John Maynard Keynes described this process as ‘pushing on a piece of string’. By late November 2008, the US Federal Reserve began to purchase $600 billion in mortgage backed securities and by March 2009 the Reserve held $1.75 trillion of bank debt. It was not until the 19th June 2013 that Ben Bernanke, the head of the US Federal Reserve, decided to begin the process of tapering QE. It is difficult to evaluate whether or not QE has been successful in the US. Firstly, there is no debate that the American economy is performing very well. 2014 closed with unemployment figures down to 5.6% compared to a high 9.6% in 2010. However, the extent to which high levels of QE has caused this recent strong economic performance is questionable, as there are many other factors to be considered that may have contributed. Furthermore, the extent to which the success of QE is to replicated in Europe offers further thought and debate. 

Former Head of the US Federal Reserve - Ben Bernanke

In the context of the European Union QE could potentially cause several economic problems. Firstly, and perhaps most obvious, is the issue of inflationary pressures. When the money supply increases in any economy, so do inflation pressures. Inflation creates its own problems, notably that it causes both negative expectations and low confidence from both internal and external economic agents. For example, if inflationary pressures occur in the EU, in countries such as Greece, this is likely to cause foreign investors to withdraw their money. Politically, the introduction of QE and the resulting inflation is a very sensitive issue in Germany. Hyperinflation in Germany during the years of the 1920s has resulted in an entrenched fear of the economic phenomena. Given Germany’s strong influence on all political and economic matters in the EU, the introduction of QE might be an indication of a shift in power. Furthermore, poor economic performance in Germany over the last year has perhaps resulted in a political willingness from Merkel to work together with the EU members. There appears no doubt that most member countries of the EU desperately need a ‘kick start’ to their economy which QE might offer. 

The relationship between economic inequality and QE must be analysed. The theory states that lower interest rates will result in higher borrowing and therefore an increase in consumption and investment. However, there are several assumptions. Firstly, individuals and businesses lack confidence due to the shock of the economic recession in 2007/8 and the resulting austerity. Workers are more fearful for their job security and therefore any increase in their borrowing will be towards keeping a healthy savings level rather than merely purchasing. More importantly, businesses also lack confidence to take risks with their investments. Further, there is currently a lack of investment opportunities for large corporations. As a result of this, they may not spend the money they receive as a result of QE. This refusal to spend and instead merely ‘hoard’ the additional money results in a further rise in inequality. Inequality causes several problems; social, political and economical. 

Lastly, the difference between QE in the US and the EU is as follows; in America people are willing to help each other out and there is both factor and labour mobility. Factor and labour mobility means that resources can be easily moved to where needed. For instance, if there was a shortage of jobs in Kentucky, people could easily move to a state where there were job opportunities. Whilst Californians are more likely to agree to help their fellow Americans in the state of New York, members of different EU nations are not. Deep political boundaries exist; due to the recent history of the continent, for instance Germany and Poland do not see eye to eye on most political values. This fact becomes more significant when one appreciates the lack of convergence and similarity in economic progress between different nations in the EU. For instance, policies which will help the current problem in Greece, a debt ridden nation, will not necessarily enhance economic performance in France or Germany. Whilst there is also dissimilarity in economies between states in the US, the willingness of the people to help each other and be mobile counter acts this. Until the EU is united on more than merely monetary policy; and agrees on fundamental political, social and economic principles than any policy will find it difficult to improve the current poor economic performance.

Additional Reading: 

http://www.economist.com/blogs/buttonwood/2015/01/ecb-and-qe?zid=295&ah=0bca374e65f2354d553956ea65f756e0 

http://www.newstatesman.com/politics/2014/03/osborne-audit-what-have-we-learned