John Bruton

Opinions & Ideas

Category: Book Review

1917 TO 1923… YEARS THAT MADE EUROPE WHAT IT IS TODAY

I strongly recommend “The Vanquished, Why the First World War failed to end 1917-1923” by Robert Gerwarth .

The book deals with the last year of the Great War, and with the many small wars it generated  that continued for another five years, including  one in Ireland.

Before the Great War, multi ethnic Empires operated relatively peacefully. While the Imperial  idea,  and  multi ethnicity, clashed with the ethnic nationalism that flourished in intellectual circles, the political arrangements worked and were adaptable.

Austro Hungary had a multi ethnic Parliament with representation from the minorities present. 23% of the Emperors subjects spoke German, 20% Hungarian, 16% Czech or Slovak, 10% Polish, 9% Serbo Croat,  8% Ukrainian, 6% Romanian and so on. All coexisted.

The Ottoman Empire, though Muslim, tolerated Christian and Jewish minorities.

The United Kingdom of Great Britain and Ireland may have been dominated by the English, but its Parliament had large Irish and Scottish representation.

The Russian Empire contained minorities too numerous to list.

The permissive consensus, that allowed these entities like these to resolve their internal differences by generally peaceful methods, was shattered by the sacrifices and brutality of the War.

It was a war that lasted far longer, and took far more lives, than anyone expected when it started.

It is a global tragedy that the gross over reaction of Austro Hungary to the assassination of Archduke Ferdinand in July 1914, started a conflict, with whose  consequences we still live today.

100 years later, the Brexit negotiations, the refugee crisis and the hangover of the financial crisis in Greece, Italy and some other countries will put immense stress on the bonds of tolerance that hold the European Union together.

They will from time to time bring to the surface buried tensions and resentments between European nations that date back to events of the 1917-1923 period which are so brilliantly described in this book.

Ministers and diplomats, attending fraught European meetings over the next few years, who want to understand where some of their colleagues from the other 26 countries are coming from, could profit from reading this book . It will help them understand where the, often unarticulated historical assumptions and fears come from, that may help explain behaviour that might otherwise seem unreasonable or disproportionate.

For example, the  present day fears in the Baltic States, of both Russia and Germany, date from events between 1917 to 1923.

So do the tensions between Poland and Ukraine, between Poland and Russia, between Greece and Turkey, between Turkey and the western powers, and between Bulgaria and both Romania and Greece.

So also can Russian fears of encirclement be traced back to the humiliating peace imposed on it by Germany in 1918, and to the subsequent western interventions in its Civil War in the early 1920’s.

The authoritarian and nationalistic trends in Hungarian politics can be explained by the fact that the post War settlement was much harder on Hungary, even than it was on Imperial Germany. Large Hungarian speaking populations remain in neighbouring Serbia, Slovakia and Romania to this day.

In 1919,the First World War had left much of Europe starving and desolated. Order had  broke down. States were too weak to exercise their proper monopoly on the use of force.

Resentments abounded about the supposed injustice of the imposed peace settlements. Demobilised soldiers know no other trade than war.  Minorities, particularly the Jews, were scapegoated all over central Europe, for misfortunes for which they had no responsibility at all.  Bolshevism was seen as an imminent threat.

States and populations turned to paramilitary organisations to restore order, in these frightening circumstances,  and out of that understandable desire for order grew Fascism and the Nazis.

This is a well written book which deserves a wide readership.

The Euro,  and its threat to the future of Europe

 

euroThe Nobel Prize winning author of “Globalisation and its Discontents” has set his sights on the euro in his latest economic polemic.

He sees the euro as a product of what he calls “neo liberal economics”, which he believes was in the intellectual ascendant in 1992, when the detailed design of the single currency was put in place.

Given that the idea of an Economic and Monetary Union in Europe goes back to the late 1960’s, and that one of the central drivers of the project was a French Socialist, Jacques Delors, this claim is contestable.

The flaws in the design of the euro derive more from poorly thought out compromises between France and Germany, and from wishful thinking, than they do from ideology.

Wishful thinking lay behind the decision to have a single Europe wide money, but to leave the supervision of banks, who create the money in the form of credit, to 17 different national authorities. This happened because Germany wanted a German authority to supervise German banks, and not a Europe wide one.  And it was these poorly supervised German banks who led the way in the mistaken cross border lending to Greece, Spain, Ireland and Portugal.

It is easy to see that mistake now, but the problem at the time was persuading Germany to give up its beloved DM at all, in favour of the euro. The mistake arose from national pride rather than economic ideology.

Obviously, if there was to be a single currency, there had to be common rules for preventing any one country issuing too much of it, and thereby creating inflation and devaluing everyone else’s money. In this case, the mistake was made of assuming that the only risk of this happening was through governments borrowing and spending too much. This lay behind the 3% of GDP limit on government borrowing in the Maastricht Treaty.

But no similar, centrally supervised, limit was placed on private sector money creation through the banks. As we now know, it was cross border private sector credit creation, through banks, that created the problems in Ireland, Spain and Portugal, whereas it was only in Greece that government borrowing was primarily to blame.  Stiglitz argues that this focus on controlling government borrowing, and ignoring private sector banking activity, arose from an ideological bias in favour of the private sector. He has a point.

He also points out that imbalances arising from trade deficits and surpluses within the euro zone were ignored in the original Maastricht rules. Before the crisis, the Irish and Spanish balance of payments deficits, and their counterpart German balance of payments surplus, were signals of the same underlying problem. The excessive private sector borrowing in Ireland and Spain was stimulated by the excess of German savings. Germans were earning more than they were spending, so they sought a return on their money by lending it to the Irish and the Spaniards. The persistence of this imbalance was a warning signal that was ignored. The new EU macroeconomic imbalance procedure belatedly attempts to deal with this, but it remains to be seen whether it will be implemented properly.

More profoundly, Stiglitz argues that, for the euro to work well, there must be a consensus among policy makers in all euro zone countries of what makes an economy grow. That consensus is missing. German and French economic views differ as much now, as they did when the euro was launched.  Germany does not believe that governments should provide fiscal stimulus when there is a down turn, whereas, in France, the political consensus would favour stimulus in almost all affordable circumstances.

Stiglitz, like the French, believes that reducing deficits should not be a priority, when the economy is slowing.  This may be good advice in theory, but there are two difficulties with it.

The first difficulty is that it presupposes that governments will pay for what they spend in bad times, by cutting back in good times. But that is usually politically impossible. This is a practical flaw in Keynesian economics.

The second difficulty concerns a fundamental fact that is not mentioned once in Stigltz’s 350 pages. This is the ageing of the population of all EU countries over the next 40 years. This reduces the ability of EU states to borrow and spend for other things.  The extra costs of pensions and health care for Europe’s ageing population will, if policies remain as they are, mean that the debts of EU governments will rise from around 90% of GDP today, to 400% by 2060. That prospect leaves little room for stimulative borrowing today.

In the 1990’s it was different. Then Europe had a younger population, there was an annual growth rate in world trade that was twice the present one.  There were growth promoting options then that do not exist now, and are not likely to exist in the near future. This limitation is ignored by Stiglitz, who blames everything on the euro.

He argues convincingly that the EU needs greater political integration, if the euro is to be a success. But some of the ideas he canvasses lack political realism, for example a tax on German trade surpluses, and a 15% EU wide income tax on incomes above €250,000 (on top of national income taxes)!

He argues that the euro is, to some extent, now being held together by fear. A currency break up would be so unpredictable that no one wants to try it. But fear is not a healthy basis for European integration. Ultimately a shared European patriotism, and a greater degree mutual trust between euro zone electorates, are needed if these electorates are willingly to put their savings at risk to insure one another against unexpected shocks.

Understandably, as an American and an economist, Stiglitz does not address how this might be done.  That is a task for Europe’s politicians, and so far they have failed to come up with many original ideas.

But if that task is successfully undertaken, the economic rewards for Europe of having its own global currency, and its own system of mutual financial protection for its member states and its banks, could be very great indeed. There are opportunities here, as well as threats, but this book unfortunately only looks at the latter.

Stiglitz might also have given greater weight to the improvements that have been made in the management of the euro in the past three years-in the form of better banking supervision, new bailout funds for states and for banks, and more subtle economic rules.

But this is not enough.

Some of Joseph Stiglitz’s other suggestions- a common bank deposit insurance system, a write off of some Greek debt, and a partial sharing of unemployment insurance costs- should be acted upon. They are needed to ensure that the euro is able to withstand the next economic shock, and should not be postponed until after the German, or any other, General Election.

Book Review for the “Irish Times” Author; Joseph E Stiglitz  Publisher; Allen Lane

JAMES THE SECOND

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I have just finished reading a book that I bought many years ago, “James the Second” by Maurice Ashley (published by JM Dent)

James is remembered in Ireland as the King who supposedly displayed a lack of courage and thereby lost the fateful battle of the Boyne in 1690.

 In England he is seen as the King who had to be overthrown in 1688 to preserve his subjects “religion and liberties”, as the banner of his opponent King William claimed.

Neither view is fair or accurate.

 James became a Catholic as a young man, as did his brother King Charles the Second. But, whereas Charles kept this a secret until he was on his death bed, James was open about it.

 Charles tried half heartedly, and without success, to remove the disabilities suffered in England by Catholics and by Protestants who did not belong to the Church of England. Oliver Plunkett was put to death during the reign of Charles the Second in 1681.

 James, on the other hand sought to make toleration and freedom of religious worship the central goal of his reign when he succeeded Charles in February 1685.

 He  also made it clear that he wanted this to happen while preserving the position, as the State Church, of the Church of England. Ashley, who has studied all the documents, including those from before James became King, is adamant that this was the case. He was for all round religious toleration.

As to his prowess as a soldier, Ashley shows that, in his earlier career, James had been a brave and resourceful military commander

Against advice from his French military advisors to retreat across the Shannon when William arrived with his army in Ireland in 1690, James, although outgunned and outnumbered 3 to 2, decided to make a stand at the Boyne.

 He rightly understood that his volunteer army would melt away if he was not willing to put up a fight.

 James is criticised for leaving his army after the battle and going back to France rather than staying on to fight in Ireland. His departure is partially explained by the fact that he was hoping to get French help for an invasion of England, and by the fact that his enemies controlled the sea lanes and he could not easily be resupplied, if he retreated and reassembled his army west of the Shannon.

This book does not, however, absolve him of criticism.

 He was extremely tactless in his handling of the Church of England Bishops. His attempts to introduce sweeping religious toleration, by use of royal prerogative without parliamentary approval, showed that he had learned nothing from recent history and from the fate of his father, Charles the First.

He was overthrown in 1688 because he was deserted by his closest Lieutenants, and by his two daughters, both of whom were in turn to replace him on the throne. Perhaps the most justifiable criticism of him is that he did stand and fight against William in England in 1688, where he might have been able to rally support in much of middle England against the Dutch invader. Then he might never have had to take a stand at the Boyne.

Although he was a strongly religious man, he was also a serial philandered who had a succession of mistresses.

This book brings to light the flawed humanity of this sincere, but tactless and unlucky, man.

JEREMY THORPE

41S4Lg8J1+L._SX333_BO1,204,203,200_I recently read a biography of the former leader of the British Liberal Party, Jeremy Thorpe, written by Michael Bloch and first published in 2014.

Thorpe was an old Etonian and a member of a circle of friends who were used to having enormous influence in the political, legal, and economic destiny of Britain. He was a barrister.

The Thorp family were originally from Wexford, where they had settled as part of the Cromwellian conquest of Ireland.

His great grandfather, William, joined the Dublin Metropolitan Police in 1856, as a constable. He rose through the ranks to become a Superintendant by the time of his retirement in 1890.

He had nineteen children, one of whom, Jeremy’s grandfather, became a clergyman in the Church of Ireland. Later he moved to England where he rose to become an archdeacon in the Church of England .

One of the clergyman’s sons, Jeremy’s father,  John Henry Thorpe, became (briefly) a Tory MP in 1919, before Jeremy was born.

Jeremy’s parents were close friends of the Lloyd George family, and it was through that connection that Jeremy, who always saw himself as a future Prime Minister, gravitated towards the Liberal Party and a political career.

He became involved with the Liberals at a time when the Party was in a very weak condition, where all but one of the seats  were held, only because the Conservatives did not contest the constituency at all, and allowed the Liberal MP a free run against Labour.

Jeremy was a flamboyant campaigner and had a knack for attracting publicity. He employed this to good effect put the Liberal Party back on the political map. He won several by elections.

He came close to power when Edward Heath contemplated coalition with Liberals, led by Thorpe, as a way of staying on a Prime Minister after an Election in which the Conservatives had lost seats.

Thorpe, although a married man, was apparently being blackmailed, through a good part of his political career, by a former homosexual lover. This was at a time when homosexual acts were illegal. He was later accused of conspiring with others to have his blackmailer murdered.

He was acquitted but never recovered politically from this scandal, which provides the most interesting material in this biography of an otherwise shallow and insubstantial political figure.

TED HEATH

book“Edward Heath, the authorised biography” by Philip Ziegler was published by  Harper Press in  2011, but it is even more relevant today, as the UK contemplates whether it should undo the major work of Ted Heath’s career, that of bringing the UK into membership of the European Common Market, now the European Union.

I only met Ted Heath once, in 1997 in the European Parliament, when we both received the Schumann Medal from the European People’s Party.  In my case, it was in recognition of the success of the Irish EU Presidency of 1996.

In his case, it was for something much more significant, and more difficult, reversing the post war isolation of the UK from the task of building an economic base for a peaceful Europe.

In fact Ted Heath had made his maiden speech in the House of Commons in 1950 in the Schuman Plan for unifying Europe’s Coal and Steel industries, in which the then UK Labour Government had refused to take part. He wanted the UK to take part.

I was delighted to meet him, as I had long admired him, not only because of his stance on Europe, but for his pragmatic and non ideological approach to politics.

As Prime Minister, while he favoured competition and trade union law reform, Ted Heath attempted to reach understandings on incomes policy with trades unions and employers, an approach that was reversed by his successor Margaret Thatcher.

She relied on reducing the money supply to bring down inflation, while he hoped it could be achieved by agreement. Her policy worked, but the social cost was high. His policy did not work because some key Unions, notably the miners, refused to cooperate, and the TUC was unable or unwilling to get them to change their minds.

Unlike Margaret Thatcher and all his other successors as Prime Minister, Ted Heath had served as a soldier in World War Two. This direct experience of war, and a pre war visit to Nazi Germany, led him to put great emphasis on the need for Britain to positively contribute to the building of a structure of peace in Europe, as a participant not just as a bystander.

This biography reveals that, when in 1970 he eventually succeeded in overcoming the French veto on UK membership of the Common Market, Heath expected to be pressed to join the proposed common currency as soon as it could be set up. He was for the idea himself, but felt it would not be popular in the UK. By the time the UK eventually joined in 1973, the volatility caused by the oil crisis and the fragility of sterling would have precluded the UK from joining the single currency, if it had in fact been launched then.

This biography explores Ted Heath’s difficult and solitary personality. While he had some very close friends, he never married, and was not gregarious.

He never accepted his ejection from the Conservative Party leadership and this meant that he never regained much positive political influence, despite remaining in the House of Commons until he was 80 years of age.

AN INTERESTING CRITIQUE….BUT HOW VIABLE IS THE ALTERNATIVE?

paul mason bookPaul Mason, the economics editor of Channel  4 News, has written “Post Capitalism , a guide to our future “, which  offers a critique of the existing global capitalist system.
 
He points out that capitalism is only 200 years old and has gone through many changes. Economic systems do not last forever and can sometimes collapse suddenly and painfully.
 
In its present phase, global capitalism is, he says, “driven by network technology, mobile communications, a truly global marketplace and information goods”. He says this model is now stalling.
He argues that many of the innovations now emerging are ones that derive from discoveries that produce services that are(or should be) intrinsically free, in the sense that, once invented, they can be reproduced indefinitely, almost without  extra cost. 
 
New software applications, and new pharmaceuticals are, for example,  profitable only so long as they are protected by patent or copyright exclusivity. That is a fragile enough protection, it  is arbitrary, and is dependent on a continuing global consensus.
 
As their societies age, he also believes the debts of many developed country governments are un payable, without drastic cutbacks in services to the elderly. Debt default by a major country could blow the whole global financial system apart.
 
He argues that the capitalist system has only kept itself going, by bringing into the for profit sector, services that previously were provided free, like childcare and care for the elderly. Rapid urbanisation has made family care, outside the market, impractical for many thus creating new” for profit” markets in care services of all kinds
 
Meanwhile the market is incapable of finding solutions to global threats like climate change. There are so many players. With contradictory interests, that no one is in charge, and capable of imposing a solution.
 
Inequality in incomes and wealth are reaching what he regards as unsustainable levels. This is driven by technological change. Work that requires only a high school level of education is harder and harder to find. 
 
Education is becoming as much a means of sorting out job applicants as it is a method of releasing a student’s potential.
 
Those who control technology and finance, and have key skills, qualifications, and intellectual property, are commanding an undue share of the flow of wealth. States are too weak to curb this activity. 
 
Underutilised capital is being accumulated in the financial sector because of a lack of good investment opportunities.  This is driving down interest rates, and creating conditions for another speculative bubble. Mason  blames lack of spending power among workers for the lack of investment opportunities.
 
His solutions are not as well worked out as his critique.
 
He wants everyone paid a basic income by the state, whether they work or not (notwithstanding the fact that admits that the same states are already horrendously in debt).
 
He wants the state to intervene to promote the provision of more goods and services for free, like the free service provided by Wikipedia. He also wants the state to use the criminal law to penalise rent seeking behaviour in business and to strengthen the role of trade unions. 
 
Given that that people and businesses, who want to avoid doing what one country wants them to do, can easily move to another country, his model could not be implemented without reintroducing capital controls, and reversing the benefits of globalisation.
 
Most of his proffered solutions are thus impracticable for one country, acting on its own. They would require some form of, self sufficient, global government and the author offers no clue as to how that might be achieved.
 
He wants the un payable debts of states to be gradually reduced through inflation, which he accurately describes as financial repression.
 
He believes this financial repression should be engineered by the central banks.  This would destroy people’s savings, pensions, and insurance policies, which are underwritten by the very debts he wants to write off or devalue. As he puts it, his policy would “reduce the value of assets in pension funds, and thus of the material wealth of the middle classes and the old”.
 
People would never vote for solutions along those lines, and nothing in this book will persuade them to do so. The only way they could be introduced would be by stealth.
 
The book is useful in that it offers an insight into the logical outcome of the policies espoused by left wing anti capitalist protest parties.
 
It also portrays the risks that lie ahead for the world, if the defects in the present system, which the author correctly identifies, are not tackled properly.
 

COPYRIGHT JOHN BRUTON & CONTENT

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