The latest news on the News International story is that the government is refusing to postpone consideration of the BSkyB takeover whilst at the same time appearing to resist calls for an inquiry to be headed by a judge. No cogent reason has been given as to why the inquiry should not be headed by a judge. Given the nature of the allegations that the inquiry will have to consider the logic of appointing a judge to head it seems irresistible. Failing to appoint a judge to head the inquiry will weaken the inquiry and diminish its impact.
The government seems also to be trying to set up two separate inquiries even though the logic of the situation clearly requires one inquiry. It is totally unclear why there should be two inquiries instead of one when any inquiry if it is to do its work properly has to look at all the facts. Having two separate inquiries not only runs the risk of the two inquiries working at cross purposes but also means that their respective reports will have diminished impact since they will each deal with only part of the matter. Frankly the attempt to set up two inquiries looks like an attempt to narrow their terms of reference and to limit the matters they are able to consider in a way that can only help News International.
After hearing this news I am sure I will not be the only person who will be wondering why the government is bending over backwards to help News International despite all the evidence of illegal and criminal activity that now exists. Nor will I be the only person to start to wonder about the reasons for the Prime Minister's behaviour as he puts his reputation on the line not just on behalf of News International but also on behalf of Rupert and James Murdoch, Andy Coulson and Rebeka Brooks, all of whom it turns out he counts as his friends.
Thursday, 7 July 2011
THE ABSURDITY OF INTERNATIONAL CREDIT RATING AGENCIES
News that Portugal's credit rating has been downgraded from "AA" to "AA minus" has provoked a storm of criticism in Europe. The downgrade will make it more difficult for Portugal to borrow on the international money markets because international banks use a country's credit rating when assessing whether to lend to that country. A country's credit rating also determines the rate of interest it pays on any loans. The decision to downgrade Portugal's credit immediately after it has received a bailout is akin to pulling the rug from under Portugal's feet. It also negates the steps the European Union is taking to try to help Portugal.
Personally as someone who has had bitter experiences with credit rating agencies I think the whole practice needs to be outlawed. Firstly there is no rhyme or reason to how credit rating agencies assess individual countries. Portugal's current rating of "AA minus" remains substantially higher than Russia's junk bond "BBB" rating notwithstanding that Russia has paid off most of its debt, has the lowest debt to GDP ratio of any G20 economy, runs a substantial trade surplus, has a balanced budget and at around $500 billion possesses the world's third biggest foreign currency reserves. Portugal's rating is only marginally lower than China's, which is "AA3", notwithstanding that China also runs a large trade surplus and at around $3 trillion possesses the world's biggest foreign currency reserves. As of 1st January 2011 Portugal's credit rating at "AA" was actually higher than China's, which was then "A1". That the credit rating agencies have assessed all three countries wrongly is shown by the fact that since the financial crisis hit in August 2007 it has been Portugal that has needed bailout support whilst Russia and China have not. In the meantime the two countries whose economies stand at the epicentre of the world financial crisis, the US and Britain, and which continue to run massive trade and budget deficits and where government and private debt has exploded to many times the level of GDP, retain an "AAA" rating.
Secondly use of credit rating agencies means that banks instead of carrying out a proper investigation of a country's fundamentals and exercising their own judgement in effect contract this function out to the credit rating agencies. The whole financial disaster the world has experienced is to a large extent a direct consequence of the way in which banks have relied on credit rating agencies to make their decisions for them.
This is bad practice at many levels. Firstly instead of making individual assessments credit rating agencies rely on mathematical formulae when deciding what ratings to set. This reflects the fallacy, especially prevalent in the US, that results drawn from mathematics are somehow "objective" and "scientific" and therefore true. In reality this results in absurd outcomes as I know from my own personal experience. When I needed urgently to borrow some money some years ago I found that banks would not lend to me because my previous avoidance of debt meant that my credit rating as assessed by the credit rating agencies was poor. The rationale was that as I had never taken on debt I had no previous credit history on which the credit agencies could assess me. The result was that I was unable to borrow from the banks even though I had never defaulted on a loan and even though I possessed assets with a far higher value than the money I needed to borrow.
Secondly, though the fact is never admitted, there is obvious political bias in the way the credit rating agencies do their work. All three of the big credit rating agencies are American and are funded by US banks. Not surprisingly they continued to give the big Anglo American banks the highest "AAA" ratings right up to the moment when they all crashed. Similarly they continue to give the US and Britain "AAA" ratings even though the US's and Britain's exploding debt levels and systemic budget and trade deficits scarcely justify this.
In fact the true purpose of credit rating agencies is exposed by my last paragraph. It is to ensure that international capital continues to flow into the US and Britain and specifically to the US and British governments and to US and British banks. Given that this fact is so obvious it is difficult to understand why anyone else takes them seriously.
Personally as someone who has had bitter experiences with credit rating agencies I think the whole practice needs to be outlawed. Firstly there is no rhyme or reason to how credit rating agencies assess individual countries. Portugal's current rating of "AA minus" remains substantially higher than Russia's junk bond "BBB" rating notwithstanding that Russia has paid off most of its debt, has the lowest debt to GDP ratio of any G20 economy, runs a substantial trade surplus, has a balanced budget and at around $500 billion possesses the world's third biggest foreign currency reserves. Portugal's rating is only marginally lower than China's, which is "AA3", notwithstanding that China also runs a large trade surplus and at around $3 trillion possesses the world's biggest foreign currency reserves. As of 1st January 2011 Portugal's credit rating at "AA" was actually higher than China's, which was then "A1". That the credit rating agencies have assessed all three countries wrongly is shown by the fact that since the financial crisis hit in August 2007 it has been Portugal that has needed bailout support whilst Russia and China have not. In the meantime the two countries whose economies stand at the epicentre of the world financial crisis, the US and Britain, and which continue to run massive trade and budget deficits and where government and private debt has exploded to many times the level of GDP, retain an "AAA" rating.
Secondly use of credit rating agencies means that banks instead of carrying out a proper investigation of a country's fundamentals and exercising their own judgement in effect contract this function out to the credit rating agencies. The whole financial disaster the world has experienced is to a large extent a direct consequence of the way in which banks have relied on credit rating agencies to make their decisions for them.
This is bad practice at many levels. Firstly instead of making individual assessments credit rating agencies rely on mathematical formulae when deciding what ratings to set. This reflects the fallacy, especially prevalent in the US, that results drawn from mathematics are somehow "objective" and "scientific" and therefore true. In reality this results in absurd outcomes as I know from my own personal experience. When I needed urgently to borrow some money some years ago I found that banks would not lend to me because my previous avoidance of debt meant that my credit rating as assessed by the credit rating agencies was poor. The rationale was that as I had never taken on debt I had no previous credit history on which the credit agencies could assess me. The result was that I was unable to borrow from the banks even though I had never defaulted on a loan and even though I possessed assets with a far higher value than the money I needed to borrow.
Secondly, though the fact is never admitted, there is obvious political bias in the way the credit rating agencies do their work. All three of the big credit rating agencies are American and are funded by US banks. Not surprisingly they continued to give the big Anglo American banks the highest "AAA" ratings right up to the moment when they all crashed. Similarly they continue to give the US and Britain "AAA" ratings even though the US's and Britain's exploding debt levels and systemic budget and trade deficits scarcely justify this.
In fact the true purpose of credit rating agencies is exposed by my last paragraph. It is to ensure that international capital continues to flow into the US and Britain and specifically to the US and British governments and to US and British banks. Given that this fact is so obvious it is difficult to understand why anyone else takes them seriously.
BSKYB TAKEOVER
One comment that repeatedly gets said with which I must take issue is the suggestion that Ministers cannot simply block the BSkyB takeover because the process is somehow "quasi judicial".
Obviously I am not party to the legal advice but I question whether this is so. The mere fact that the decision rests with Ministers surely means that they do have discretion. If the decision was indeed "quasi judicial" then it would not be made by Ministers but by some sort of impartial "quasi judicial" body like a tribunal. Judicial Review is a mechanism whereby the High Court can review the way Ministers make a decision to ensure that the decision itself is legal and that it is made in a lawful way. I do not see why a decision to refuse News International's takeover of BSkyB would be illegal. Contrary to what is often said about judicial meddling the High Court is actually very reluctant to interfere with a Minister's exercise of discretion so provided it is all done in a lawful way I cannot see why the High Court would want to overturn it. To my mind this whole business of Ministers being supposedly "forced" to make a decision in News International's favour smacks of an excuse concocted to allow the government to do something it has decided to do, which is hand over BSkyB to News International, which it knows is controversial and unpopular.
Obviously I am not party to the legal advice but I question whether this is so. The mere fact that the decision rests with Ministers surely means that they do have discretion. If the decision was indeed "quasi judicial" then it would not be made by Ministers but by some sort of impartial "quasi judicial" body like a tribunal. Judicial Review is a mechanism whereby the High Court can review the way Ministers make a decision to ensure that the decision itself is legal and that it is made in a lawful way. I do not see why a decision to refuse News International's takeover of BSkyB would be illegal. Contrary to what is often said about judicial meddling the High Court is actually very reluctant to interfere with a Minister's exercise of discretion so provided it is all done in a lawful way I cannot see why the High Court would want to overturn it. To my mind this whole business of Ministers being supposedly "forced" to make a decision in News International's favour smacks of an excuse concocted to allow the government to do something it has decided to do, which is hand over BSkyB to News International, which it knows is controversial and unpopular.
Wednesday, 6 July 2011
PHONE HACKING SCANDAL
The media today is dominated by stories of the phone hacking scandal with news that private detectives employed by News International hacked the telephones of various famous murder victims. It seems that the police have been provided with copies of emails by News International's Andy Coulson authorising payments of tens of thousands of pounds to individual police officers. This is incendiary. It means corruption on the part of the police and a system of organised bribery by News International. If News International has been in the habit of bribing police officers whether for information or for some other purpose this may explain why the police have proved so reluctant up to now to investigate its affairs. Buying information and protection from corrupt police officers is the sort of activity one associates with the likes of Al Capone, not with a reputable news organisation and is enough by itself to justify a public enquiry.
Saturday, 2 July 2011
LABOUR WINS INVERCLYDE BYE ELECTION
To the general surprise of most political commentators and to the disappointment of quite a few the Scottish Nationalist Party not only failed to obtain an upset victory at the Inverclyde bye election but came a distant second to Labour. Though the SNP vote increased considerably this was at the expense of the Liberal Democrats whose vote collapsed. The Labour vote held firm.
Followers of this blog will find nothing surprising about this result. It exactly repeats the results of the Scottish Assembly elections in May. Those elections have been misreported and misunderstood as a disaster for Labour whereas in reality the Labour vote held firm. What the Scottish Assembly elections and the Inverclyde bye election both show is a collapse in the Liberal Democrat vote in Scotland as Scottish voters who formerly voted Liberal Democrat react extremely negatively to the Liberal Democrat Party's coalition with the Conservatives in Westminster. What the Scottish Assembly elections and the Inverclyde elections also show is that these former Liberal Democrat voters for the moment overwhelmingly prefer the SNP to Labour so that the increase in the SNP vote is almost exactly proportional to the collapse of the Liberal Democrat vote.
Since what these voters at the moment are doing is registering a protest vote this is not surprising. The reason many of these voters voted Liberal Democrat in the first place was because they are anti Labour. The SNP provides them with the perfect vehicle to register their protest vote without voting Labour. This does not mean that these voters necessarily support independence. Nor does it mean that the SNP will win a general election in Scotland given that as I said in a previous post in such a general election when Scottish voters will be voting for a government in Westminster and not registering a protest vote or voting for an Assembly in Scotland the dynamics of the contest will be completely different.
Followers of this blog will find nothing surprising about this result. It exactly repeats the results of the Scottish Assembly elections in May. Those elections have been misreported and misunderstood as a disaster for Labour whereas in reality the Labour vote held firm. What the Scottish Assembly elections and the Inverclyde bye election both show is a collapse in the Liberal Democrat vote in Scotland as Scottish voters who formerly voted Liberal Democrat react extremely negatively to the Liberal Democrat Party's coalition with the Conservatives in Westminster. What the Scottish Assembly elections and the Inverclyde elections also show is that these former Liberal Democrat voters for the moment overwhelmingly prefer the SNP to Labour so that the increase in the SNP vote is almost exactly proportional to the collapse of the Liberal Democrat vote.
Since what these voters at the moment are doing is registering a protest vote this is not surprising. The reason many of these voters voted Liberal Democrat in the first place was because they are anti Labour. The SNP provides them with the perfect vehicle to register their protest vote without voting Labour. This does not mean that these voters necessarily support independence. Nor does it mean that the SNP will win a general election in Scotland given that as I said in a previous post in such a general election when Scottish voters will be voting for a government in Westminster and not registering a protest vote or voting for an Assembly in Scotland the dynamics of the contest will be completely different.
Thursday, 30 June 2011
LIBYA - BREAKING THE ARMS EMBARGO
Recent revelations from France that the French military has been supplying small arms to the anti Gaddafi rebels has triggered discussion about whether this action breaches the terms of the arms embargo imposed on Libya by Security Council Resolutions 1970 and 1973. Supporters of arming the rebels say it does not allegedly because Security Council Resolution 1973 allows "all necessary measures" to protect civilians. Purportedly "all necessary measures" can extend to arming civilians if this is necessary for their protection.
This line of reasoning is absurd. The arms embargo is imposed by Security Council Resolution 1970. This forbids any and all shipments of arms to Libya without distinguishing between the government forces or the rebels. Security Council Resolution 1973 reaffirms this embargo and contains further provisions for its enforcement. Neither Resolution 1970 nor Resolution 1973 say that the rebels are excluded from the embargo. Had this been the intention the Resolutions would have said as much. To suggest that the expression "all necessary measures" in one part of Resolution 1973 somehow invalidates or qualifies the arms embargo in another part of Resolution 1973, thereby rendering the Resolution self contradictory and void on one of its most important points, is nonsensical.
I would add that both Resolutions 1970 and 1973 end with the expression that the "Security Council remains seized of the matter". In other words the Security Council has ownership of the Resolutions. This means that it is for the Security Council and not for the French or the British or anyone else by themselves to decide what steps are "necessary" to protect civilians and whether the arms embargo imposed by the Resolutions should be relaxed or set aside. If the French, the British or anyone else feel that arming the rebels is "necessary" to protect civilians then according to the text of the Resolutions they have to seek permission to do this from the Security Council, which is the only body that has the power to decide the matter. If the Security Council decides that such a step is needed then it can relax the arms embargo by amending Resolutions 1970 and 1973.
In other words the French arming of the rebels is simply another in a long list of breaches of the two Resolutions. It is not even the most flagrant. The bombing and killing of civilians in Tripoli and elsewhere is.
An at least equally serious breach of the Resolutions arises from the presence of military or paramilitary personnel in Libya to provide training and advice to the rebels and to provide guidance to NATO's bombers. Claims that this does not breach Resolution 1973 because these personnel are supposedly not an "occupation force" again ignores the simple wording of Resolution 1973, which clearly forbids an occupation force "in any form" and "on any part" (ie even the smallest part) of Libyan territory. This clearly forbids the deployment of so much as a single soldier. To argue otherwise is ridiculous.
In reality any foreign armed presence on the territory of a state without the permission or agreement of the government of that state is an "occupation force" and it is absurd to argue otherwise. As for the claim I have seen, that the soldiers who have been seen in Libya are not an occupation force because they are retired rather than serving soldiers, those who make this claim are obviously unaware that paragraph 9 of Resolution 1970 (expressly reaffirmed by Resolution 1973) also prohibits the entry of mercenaries into Libya and calls on UN Member States to act to prevent the deployment there of mercenaries when they are their own nationals.
The simple reality is that the operation against Libya is now so far in breach of Resolutions 1970 and 1973 that there is no point in trying to relate it to those Resolutions. In truth the Resolutions were never more than a figleaf for military action, which would surely have happened anyway whether the Resolutions were passed or not.
This line of reasoning is absurd. The arms embargo is imposed by Security Council Resolution 1970. This forbids any and all shipments of arms to Libya without distinguishing between the government forces or the rebels. Security Council Resolution 1973 reaffirms this embargo and contains further provisions for its enforcement. Neither Resolution 1970 nor Resolution 1973 say that the rebels are excluded from the embargo. Had this been the intention the Resolutions would have said as much. To suggest that the expression "all necessary measures" in one part of Resolution 1973 somehow invalidates or qualifies the arms embargo in another part of Resolution 1973, thereby rendering the Resolution self contradictory and void on one of its most important points, is nonsensical.
I would add that both Resolutions 1970 and 1973 end with the expression that the "Security Council remains seized of the matter". In other words the Security Council has ownership of the Resolutions. This means that it is for the Security Council and not for the French or the British or anyone else by themselves to decide what steps are "necessary" to protect civilians and whether the arms embargo imposed by the Resolutions should be relaxed or set aside. If the French, the British or anyone else feel that arming the rebels is "necessary" to protect civilians then according to the text of the Resolutions they have to seek permission to do this from the Security Council, which is the only body that has the power to decide the matter. If the Security Council decides that such a step is needed then it can relax the arms embargo by amending Resolutions 1970 and 1973.
In other words the French arming of the rebels is simply another in a long list of breaches of the two Resolutions. It is not even the most flagrant. The bombing and killing of civilians in Tripoli and elsewhere is.
An at least equally serious breach of the Resolutions arises from the presence of military or paramilitary personnel in Libya to provide training and advice to the rebels and to provide guidance to NATO's bombers. Claims that this does not breach Resolution 1973 because these personnel are supposedly not an "occupation force" again ignores the simple wording of Resolution 1973, which clearly forbids an occupation force "in any form" and "on any part" (ie even the smallest part) of Libyan territory. This clearly forbids the deployment of so much as a single soldier. To argue otherwise is ridiculous.
In reality any foreign armed presence on the territory of a state without the permission or agreement of the government of that state is an "occupation force" and it is absurd to argue otherwise. As for the claim I have seen, that the soldiers who have been seen in Libya are not an occupation force because they are retired rather than serving soldiers, those who make this claim are obviously unaware that paragraph 9 of Resolution 1970 (expressly reaffirmed by Resolution 1973) also prohibits the entry of mercenaries into Libya and calls on UN Member States to act to prevent the deployment there of mercenaries when they are their own nationals.
The simple reality is that the operation against Libya is now so far in breach of Resolutions 1970 and 1973 that there is no point in trying to relate it to those Resolutions. In truth the Resolutions were never more than a figleaf for military action, which would surely have happened anyway whether the Resolutions were passed or not.
PUBLIC SECTOR STRIKE
In disussing the public sector strike today the British newspapers have divided into two camps. One is a large group of right wing newspapers (the Times, The Daily Telegraph, the Financial Times, the Daily Mail, the Daily Express and the Sun). This group unequivocally condemns the strike often in the harshest terms. The other is a much smaller group of left and centrist newspapers (the Guardian, the Independent and the Mirror), whose editorial pages have to accommodate the fact that many of their readers support the strike. These too oppose the strike whilst expressing some pallid words of sympathy for the strikers.
It needs to be said clearly that whether the strike succeeds or fails the strikers deserve sympathy and support. As someone who has worked in the same field in both the public and the private sector I can unequivocally say that workers in the public sector have to work harder for far longer hours and for much lower pay than equivalent workers in the private sector. This is so despite the fact that the work the great majority of public sector workers do is more difficult and more important for society than most of the work done in the private sector. This reality has over the last thirty years been clouded by the exponential growth within the public sector of an overpaid and inefficient managerial class. The point that is rarely made or admitted is that this managerial class is the product of the unending "reforms" of the public sector which since the 1980s have sought to introduce into the public sector the cultural mores and practices of the private sector. Despite this development my underlying point about the greater necessity and importance of the work the public sector still holds true. That this is so can be easily illustrated by the fact that though it is difficult to imagine any class or group of private sector workers so indispensable that modern society could not function without them it is absolutely impossible to imagine a modern industrialised society without such public sector workers as teachers, health workers or policemen and women.
Once upon a time this fact was well understood. In the heyday of British power Victorian public servants were well regarded and well paid. Victorian civil service salaries were much higher than equivalent salaries today and Victorian civil servants enjoyed lifestyles of a sort that no equivalent civil servant today could even dream of. Thus William Michael Rossetti, brother of the painter and poet Dante Gabriel Rossetti and of the poetess Christina Rossetti, could maintain a large family in some style by working full time as Senior Assistant Secretary of the Inland Revenue whilst still having the time to be a founder member of the Pre Raphaelite Brotherhood, a member of the Shelley Society, a prolific literary editor and critic and the person who introduced Walt Whitman to a British readership.
Lest anyone suggest that this difference in attitude applied only to the upper tiers of the Victorian civil service, let me say that on the contrary it extended all the way down to the lowliest public sector worker or clerk. There is simply no comparison between the high regard in which the Victorians held such supposedly lowly officials as police and postal workers and the barely concealed contempt in which they are held today. The modern practice of scapegoating such workers as the cause of the country's problems would have struck the Victorians as counterproductive and absurd.
This scapegoating has now reached the point where public sector workers though comparatively low paid and overworked are expected to make the biggest sacrifices in order to get the country out of an economic crisis which they have in no way caused. This demand goes hand in hand with overblown and ridiculous claims about "gold plated pensions" in the public sector, which are typically made by right wing journalists and commentators whose rates of pay and pensions are many times higher and who can of course be counted on to resist any suggestion that they make sacrifices for example by paying more in taxes. In the meantime those who are actually responsible for the crisis, the millionaires in the City with their multi million pound bonuses, walk off free.
It needs to be said clearly that whether the strike succeeds or fails the strikers deserve sympathy and support. As someone who has worked in the same field in both the public and the private sector I can unequivocally say that workers in the public sector have to work harder for far longer hours and for much lower pay than equivalent workers in the private sector. This is so despite the fact that the work the great majority of public sector workers do is more difficult and more important for society than most of the work done in the private sector. This reality has over the last thirty years been clouded by the exponential growth within the public sector of an overpaid and inefficient managerial class. The point that is rarely made or admitted is that this managerial class is the product of the unending "reforms" of the public sector which since the 1980s have sought to introduce into the public sector the cultural mores and practices of the private sector. Despite this development my underlying point about the greater necessity and importance of the work the public sector still holds true. That this is so can be easily illustrated by the fact that though it is difficult to imagine any class or group of private sector workers so indispensable that modern society could not function without them it is absolutely impossible to imagine a modern industrialised society without such public sector workers as teachers, health workers or policemen and women.
Once upon a time this fact was well understood. In the heyday of British power Victorian public servants were well regarded and well paid. Victorian civil service salaries were much higher than equivalent salaries today and Victorian civil servants enjoyed lifestyles of a sort that no equivalent civil servant today could even dream of. Thus William Michael Rossetti, brother of the painter and poet Dante Gabriel Rossetti and of the poetess Christina Rossetti, could maintain a large family in some style by working full time as Senior Assistant Secretary of the Inland Revenue whilst still having the time to be a founder member of the Pre Raphaelite Brotherhood, a member of the Shelley Society, a prolific literary editor and critic and the person who introduced Walt Whitman to a British readership.
Lest anyone suggest that this difference in attitude applied only to the upper tiers of the Victorian civil service, let me say that on the contrary it extended all the way down to the lowliest public sector worker or clerk. There is simply no comparison between the high regard in which the Victorians held such supposedly lowly officials as police and postal workers and the barely concealed contempt in which they are held today. The modern practice of scapegoating such workers as the cause of the country's problems would have struck the Victorians as counterproductive and absurd.
This scapegoating has now reached the point where public sector workers though comparatively low paid and overworked are expected to make the biggest sacrifices in order to get the country out of an economic crisis which they have in no way caused. This demand goes hand in hand with overblown and ridiculous claims about "gold plated pensions" in the public sector, which are typically made by right wing journalists and commentators whose rates of pay and pensions are many times higher and who can of course be counted on to resist any suggestion that they make sacrifices for example by paying more in taxes. In the meantime those who are actually responsible for the crisis, the millionaires in the City with their multi million pound bonuses, walk off free.
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