Monday 11 January 2016

The role of the media since Paris

For those of you that don’t know, I live in London. I am, however, living temporarily in Brussels. Brussels was on lockdown (metro, schools & universities shut) from Saturday, 21 November – Tuesday, 24 November 2015 after the authorities received intelligence suggesting the possibility of Paris-style attacks. Living through the lockdown, and subsequent events, has given me a new perspective on the role of the media in shaping public perceptions regarding terrorism.

To be clear, this is not a Republican Presidential nominee debate-esque rant about partisanship in the ‘liberal’ media.  Instead, I seek to examine unhelpful behavior across the political spectrum – it is often most pronounced on 24hr news channels, but it is evident in publications as well.

The media

The majority of news channels, outlets and publications are commercial organizations, which have, to a greater or lesser extent, to cater to the tastes and demands of their viewers. Their answer, therefore, to suggestions that their coverage of the Paris attacks of 13 November 2015 was inappropriate, would be that they were simply catering to public demand for information. However, the truth is that news outlets both shape and are shaped by demand – dedicated 24hr news channels are an example.  If their only offering is news, interspersed perhaps with pieces of more in-depth journalism and paid-for advertising shorts, then they must do their best to make the news interesting all of the time. “Breaking incidents” are covered through repeated plays of the same footage (be it an attack or a natural disaster), interrupted only to hear the latest hearsay gathered by reporters on the ground or to consult the inevitable “expert” (with incredibly dubious credentials). This sort of reporting is a key factor behind why the public is only briefly mesmerized by certain events, such as natural disasters – this leads to public outpourings of empathy and donations but the event is forgotten by the time the local authorities need long-term, sustained help. Yes, the channel itself is not responsible for something else more interesting occurring elsewhere, but that editorial call as to when a story or event no longer ‘sells’ is a subjective decision.

Regarding, the specifics of the Paris attacks, I cannot criticize the 24hr news cycle because I wasn’t watching it (being thankfully deprived of a TV here in Brussels). I was, however, watching the coverage of the Sydney attack in December 2014 and it was exactly as described above.

Equally disingenuous are some opinion pieces being run on the life and times of ISIS. Recently, the Financial Times – an international finance oriented publication with limited political opinion (which tends to be centre-right) – ran a series of articles on ‘ISIS Inc.’, focusing on the tens of millions of dollars that the group makes through its oil marketing operations. Incredible! That a quasi-governmental organization is able to commercially exploit crude oil and sell limited amounts to individual consumers or countries not dissuaded by the sanctions makes ISIS as least as sophisticated as the government of South Sudan. The FT has also published articles on the ‘effectiveness’ of the group’s social media – in particular Twitter – presence. No doubt at least as sophisticated as @HermanVonRompuy (the little loved former European Council President) or anyone else with a working internet connection. I await the ‘South Sudan Inc.’ series with baited breath.

I can’t imagine that the typical western ISIS recruit is an FT reader, but articles such as these (which are on the less egregious end of the scale) epitomize this second media irresponsibility – that of glamourizing ISIS. Even worse, they are gifting it omnipotence. In just the same way Al-Qaeda was apparently quite successful at encouraging other similar groups to adopt its flag, ISIS has been successful at encouraging lone wolves. Just as Al-Qaeda – an organization apparently run by people in remote and mountainous areas, under constant surveillance and attack from drones, and whose leaders can’t use cell phones – never had the level of sophistication that journalists and commentators repeatedly credited to it, so does ISIS lack the reach it is credited with. Yes, it is a real threat that should not be taken seriously – and yes its sympathizers and supporters do have ways to communicate with those who reach out - but its not Jason Bourne on speed just yet.

Meritorious investigative journalism would seek a balance (both on TV and in print) that I’ve rarely seen of late.

Monday 4 May 2015

Generation Y has never had it so good

‘Generation Y will be the first generation to be worse off than their parents’ is a prediction that has been made by numerous commentators, in the UK and across the developed world – most recently by Leanne Wood in the recent UK party leaders debate. Such dramatic pronouncements make for good headlines and buy into the general sense of pessimism that has gripped the western world in the wake of the Great Recession. The pundits and politicians are riding this tide more than shaping it – they want to be seen as the solution (‘vote for me’). And therefore they come armed with statistics and charts, talking about home ownership, protected pensioner benefits and the ever elusive 'job for life'. They argue that generation Y (those born between 1980 and 2000) is to be pitied - they will never own homes, will have to work until they keel over (that is if they ever get jobs) and will have to compete for everything from school places for their children to hospital beds with endless hordes of immigrants.

I seek to make a different case – that Generation Y has never had it so good. Yes, house prices have risen dramatically this century; yes, pensioner incomes have been rising whilst the numbers have stagnated for other groups; and yes, youth unemployment has increased. But despite all of this we are the luckiest generation yet – a fact that is often lost in the mire of figures. I have two main points: firstly, that the pundits’ statistics prove very little because they rarely focus on what I believe is the most important metric – quality of life. Secondly, there have been other improvements in certain aspects of private life in recent decades that can’t be quantified, but which make Generation Y – which has the youth and vision to exploit these advancements – immeasurably better off than preceding generations.

Firstly, I believe that statistics comparing the portion of national income held by different age groups are unhelpful because they are metrics measuring our relative share of wealth, not our quality of life. Generation Y might have a smaller piece of it, but the figurative pie is much bigger. One popular tactic is to compare discrete aspects of life today with, say, the 1960s – such as home ownership amongst people under 30. Unfortunately dramatic overall improvements in the quality of life make such comparisons unhelpful. For example, my dad, growing up in 1960s Derby, had an outdoor toilet, no washing machine and a basic refrigerator. Generation Y might have to rent more, but life is clearly better overall. There are a variety of appliances that make household life easier. We like to tell ourselves otherwise, but we have far more leisure time than ever before – mainly because cooking, cleaning, ironing, paying our bills and even household shopping (now done online) take far less time. There have also been vast improvements in the choice, relative price and quality of consumer goods. Smaller comparative real wages, compared to the 60s or 70s, don’t factor in the extent to which the relative price (how much something costs as a percentage of income) and range of goods has improved. We can buy an immeasurably bigger and better basket of goods with our paychecks. Did they have Cadburys filled with Turkish delight in the 1960s? No! Chocolate was a luxury and cost a bigger part of peoples’ disposable income. The efficient operation of the market has also made many of the other luxuries of yesterday almost universally available. Think of travel – flights to certain destinations abroad are now cheaper than a train ticket from London to Manchester. The explosion of destinations globally, married with the ever-strong pound, has driven relative prices down dramatically.

Secondly, there have been continuous – indeed exponential – improvements in the quality and accessibility of information technology in the 21st century. Generation X (those born between1960 and1980) arguably has benefited from this, but they’re the followers whilst we are the shapers. This is partly because Generation Y doesn’t know an alternative to hyper-connectivity because it’s always been there. That is a powerful thing – taking something for granted makes it a right not a privilege. We are constantly redefining not just human interaction, but methods of consumption, medical diagnosis and leisure. Various surveys put mobile phone ownership among young adults well above 80%, the vast majority of which are smartphones. Hand-held devices are here to stay – you’d probably have more luck separating a Texan from their gun than the average teenager from their smartphone. 

None of this is to say that successive governments are justified in screwing young people in order to bribe grey voters. That pensions are being uprated in the UK by the highest measure of inflation and the winter fuel allowance is universal are flagrant breaches of the social contract. However, this is a structural flaw in our democracy, not a constraint of our age, which is as much the fault of those young people who fail to vote as it is of the politicians.

Generation Y is navigating a brave new world where knowledge is at the end of our fingertips, where we are redefining human interaction at a startling pace – it’s a privilege to be a part of it. The impact of technology on government is, as ever, dramatically behind the private sector – but recent technological advancements will allow us to completely re-invent society and the way it is governed. There are challenges ahead and we have work to do, but for Generation Y the sky is truly the limit.

Thursday 19 February 2015

The HSBC affair

On the Wednesday 19 February, Swiss authorities belatedly raided the Geneva offices of HSBC, accusing the bank of money laundering in what clearly was a face-saving exercise. If Switzerland's long history of providing banking services to nasties teaches us anything, its that the Swiss don't really care where the money is coming from so long as its flowing into their coffers.  Scenting positive headlines and an easy target, ten different national authorities are now investigating HSBC and its clients (mostly for tax-evasion). Some of these authorities - such as the Danish - have failed to request the incriminating data (detailing individuals holding bank accounts in the Swiss branch of HBSC) off the French during the seven years it had been available. Yet the most worrying probe from HSBC's standpoint is probably the Department of Justice investigation; it has previous in the US - HSBC settled DoJ money laundering charges in 2012 for a record $1.9bn - and is no doubt also fearful of being banned from clearing dollar transactions (as BNP Paribas was following a guilty plea to DoJ charges in 2014).

In a global sense, the HSBC affair is an example of the increased scrutiny of practices that were tolerated in the boom times or of the difficulty for national authorities to chase sophisticated, footloose and wealthy tax evaders across international boundaries - unless they get caught with their pants down, as in this instance. Unfortunately, in the UK at least, the HSBC affair has become ludicrously polemical and binary.

The basis of the affair is a list of bank accounts taken by a former employee of HSBC's Swiss branch in 2007, which was given to the French tax authorities in 2008 and to the UK authorities in 2010. It is alleged that HSBC actively aided tax evasion and also turned a blind eye to money laundering. The the UK Tax Authority (Her Majesty's Revenue and Customs) has recovered £135 million pounds in tax, but has only prosecuted one measly individual out of 1000 alleged British tax evaders. And here begins the supposed tale of deceit, corruption and intrigue. Ed Miliband, leader of the Labour opposition in the UK, has had one of his rare successes in catching the public mood - shaming implicated Conservative Party donors and questioning the government's decision to appoint HSBC's former chair as a minister shortly after the allegations were received. Chris Bryant, Labour MP, has implied that HMRC is in cahoots with shadowy rich and powerful interests. And, predictably, Lin Homer, head of HMRC, was hauled in front of Margaret Hodge's Public Accounts Parliamentary Select Committee - the kangaroo court over which she presides with populist panache -  to be accused of incompetency and nepotism.

The HSBC affair, in the UK has elsewhere, has been characterised as just another incident in a long history of banker abuses dating back to before the Great Recession. Unfortunately, as politicians probably grasp, but are too caught up in the anti-banker whirlwind that they have helped to create, the facts are (one shade of) grey. There are several pertinent reasons why HMRC hasn't prosecuted more individuals:

1. The difficulty of achieving the criminal threshold - the criminal burden of proof generally requires the judge/jury to be sure beyond 'reasonable doubt' that the suspect perpetrated the crime (99.9% sure they did it). Add to this fact that the offences themselves are often incredibly complex, whilst UK prosecutors lack the various tools used by US authorities to imply guilt without having to prove it in open court (such as deferred prosecution agreements - due to be introduced in the UK later this year). Therefore, civil settlements - where the defendant does not admit guilt - are often more cost-efficient. It appears that the majority of these cases were settled using the Lichenstein disclosure facility - which involves HMRC taking only a 10% penalty as opposed to 100% of the tax due (or more). This was despite the fact that the facility was set up for individuals to volunteer information that HMRC didn't otherwise know about (clearly not the case here).

2. A lack of resources - HMRC has seen some of the most brutal cuts of any department (25% since 2010) for quite a while (its budget has been falling steadily since 2005). Whilst it has beefed up its enforcement team in recent years, the department is clearly under-resourced.

3. Pick on someone smaller than you - HMRC is under pressure to increase the number of tax-evasion convictions it achieves (more than doubling the 2011/12 figure of 365 to approximately 800 in 2013/14). In practice this means that they are just pursuing criminal charges in relatively straightforward cases where otherwise a civil remedy is sought. With such pressure for successful prosecutions combined with falling resources, investigators have little choice but to ignore the HSBC list of sophisticated individuals with their well-paid and combative lawyers.

Clearly HMRC is not entirely to blame here; the fault lies with the myriad of actors and politicians who, over decades, have drawn up the legal and regulatory framework within which UK plc operates. The pre-2007 onus was on a 'light touch' regulation and supervision and - dare I say(!) - it was with good reason. For, after all, up until 2007, and even to this day, the financial services industry generates an enormous amount of revenue - in 2010-11 the banking sector alone contributed £21.0 billion to UK tax receipts in corporation tax, income tax and national insurance. In the UK since 2008 investment banking has been stigmatised to a detrimental extent. Whilst it is great that politicians rail against retail deposits being used to collateralise trading and underwriting activities, the tie-ups have long since happened and look very difficult to undo - as underlined by the delaying of plans to ring fence retail deposits from investment banking activities. Meanwhile, endless political intervention at the Royal Bank of Scotland and other banks is harming lending to small businesses and destroying the value of the state's large shareholding.

It is very convenient to place the blame for the Great Recession at the door of the bankers; in fact fault lies more broadly. Central bankers, funds/private equity, consumers and governments all played their part. Bearing in mind the delicacy of the UK's economic recovery, it might finally be time to stop bashing the banks.

Monday 26 January 2015

I am Charlie (’s neighbour)

The 11th of January saw more than 50 leaders from across the world join more than a million French in a march through Paris as a show of solidarity following the 'Charlie Hebdo' terrorist attacks that killed 17. It was the largest exercise in collective national self-expression since the liberation of Paris from the Nazis. The beleaguered French leader Francois Hollande looked presidential; Paris was the capital of the world. And the French are once again united in fraternity? Well, not quite.

A CNN correspondent, reporting on the eve of the attacks, said that France's large Muslim population represented '5 million problems'. He clearly misspoke, but at least his analysis was clear - no one else can agree on what exactly the problem is, let alone alight on a solution. Predictably, when asking why so many young citizens (in both the UK and France) seek to fight in Syria or kill their fellow citizens, the two poles of opinion have lined up against each other in their usual order.

On one side the liberally-minded, with Nick Clegg (the deputy Prime Minister of the UK) as their spokesperson, decry a 'perversion of Islam' and maintain that 'many, many British Muslims feel fervently British but also are very proud of their Muslim faith'. Topping that, the Financial Times decided this weekend to interview five different French Muslims about their views on discrimination and racism in French society - they all feel 'French' but are not accepted as such. Whilst this is a fair indictment of French society, the FT clearly isn't really interested in their views. Their not-so-subtle point is that the French are to blame for the attacks - they (kind of) deserved it because they weren't/aren't particularly tolerant.

And on the other side are the socially conservative; Nigel Farage, the leader of the UK Independence Party, called certain British Muslims a 'fifth column' and raised questions about the 'gross policy of multiculturalism'. On both sides of the channel, such individuals have used the incident as a podium to, not-so-subtly, brand Islam as fundamentally incompatible with "western" values.

The French and British government responses have been equally predictable - they are endeavouring to pass more anti-terrorist legislation and crackdown on 'extremism'. In the UK, through legislation to force internet companies to store content, they prescribe a slightly updated form of the remedy offered in 1914, 1939 and during the Troubles in Northern Ireland - to protect our liberty we need to give greater powers to the security services. If that sounds like a paradox - ceding our freedoms to protect our liberty - its because it is. The basic bargain is that we should trust the security services to use their extra power responsibly because they're the good guys; this doesn't quite stand up in the post-Snowden era. Even worse, there is no appetite to update the confusing plethora of hate and anti-terrorism laws, restricting freedom of speech, which are hopelessly out of date, selectively enforced and hypocritical in places. Somewhat bizarrely, controversial French comedian Dieudonn√© M’Bala M’bala was arrested the week after France marched in defence of freedom of speech for saying that he felt like he was Charlie Coulibaly (one of the attackers); apparently he was 'apologising for terrorism'. Why should the French state defend the rights of the Charlie Hebdo cartoonists to publish what they wish - thereby tacitly justifying the magazine publishing its latest cartoon of the Prophet Muhammad - but crack down on Dieudonn√©'s less-popular, but equally legitimate view?

If the debate and analysis is stale, media coverage of such incidents is even worse. It is the same, tired post 9/11 narrative that the UK and US governments used to justify costly and largely pointless wars in Afghanistan and Iraq - society itself is being targeted by shadowy 'radicals', who are given orders by mysterious organisations in Yemen or Afghanistan; places that don't have internet or mobile phone signals. Al-Qaeda may well run training camps, but is it really co-ordinating a global network of operatives, with sophisticated cells in London and Paris? Or could this possibly be a home grown phenomenon? Not everyone has to be 'radicalised' by 'extremist' online preachers - perhaps multiple loyalties and identities, long encouraged by liberal approaches to integration and cultural heritage, have reached a logical conclusion? In most places around the world (from Ukraine to Egypt), 'extremist' and 'terrorist' have become bywords for people governments don't like - we're rapidly approaching a similar situation in the UK and France.

On balance, it does seem that the lot of British and French Muslims has been worsened by the actions of a few bad apples. The insipid debate that has followed hasn't really proposed any interesting or helpful solutions. Perhaps its because we know that the real, long-term antidotes to (all) religious fervour are iPhones, Starbucks coffee and Burberry jeans. It is abundantly clear that people are more fervently religious in the tribal areas of Pakistan than in the upmarket cafes of Oslo. In the UK, not much will change in the short run - there might be more attacks; there will certainly be more hysterical media coverage. The security services will probably be given more power and use it unwisely. And in the long run, as in 1914, 1939 and during the Troubles, Britain will endure - she always has, she always will.

Saturday 27 December 2014

Sony was right to cancel 'The Interview' (and other thoughts)

'The Interview'

Even if the morality of ‘giving in to terrorists’ is debatable, Sony’s directors have every right to make commercial decisions based on what they consider to be in the best interests of their company. Following Sony’s decision not to screen ‘The Interview’ (a film about an assassination attempt on the North Korean leader Kim Jong-un) on the 17th of December, following a hack by the ‘Guardians of Peace’, Barack Obama’s intervention last week to demand that the film be shown was as dramatic as it was self-righteous. The leader of the free world stood up for the right of free peoples to speak their mind. However, the Christmas Day hack on Sony’s Playstation network - perhaps in retaliation for their decision to release the film - shows that the company remains very vulnerable to cyber attacks. Obama spied a universally popular headline and jumped at it; he offered a lecture on ethics and principles - he didn’t, however, offer Sony any advice, expertise or hardware to help beef up their cyber defences.The cost of the first hack may well be over $100m, whilst the second caused huge reputational damage as thousands of consumers were unable to use their new Christmas presents. This is all against a film which was never likely to earn much more than its $44m production cost. Having been coerced into cancelling ‘The Interview’ and then prodded into releasing it, the Sony directors and shareholders are no doubt rueing being caught between a shady state actor (North Korea) on the one hand and a sanctimonious headline-grabber (Barack Obama) on the other.

An unbundling for Christmas

Google makes my life easier: it handles my emails, runs my calendar and hosts this very blog. However, I did feel a little uncomfortable (whenever it was - they seem to change their interface all the time) when they decided to give me one account for all their various services. I can now access all their products at a click; indeed I get cross-selling emails all the time. It is slightly irritating, but something that I am happy to tolerate to access the services that I use. 

Now, the European parliament is doing something about that very problem. ‘European parliament votes yes on Google breakup motion' ran one headline in late November. In actual fact parliamentarians were calling for tougher regulation of the internet search market in Europe - where Google hosts 90% of search traffic - as opposed to an actual break-up. Such a motion appears to the pundits as European Union vs US tech round two (round one being the ‘right to be forgotten’ saga). It is easy to portray it as the EU once again attempting to stand Canute-like against the tide of history and progress. European parliamentarians, when they are noticed in their home countries, appear as a collection of faceless, uncharistmatic and irrelevant technocrats (hands up anyone who can name their European parliament representative).

Yet the EU apparatus has authored a whole range of useful consumer protection legislation, from giving customers the ability to challenge unfair terms in template online contracts to capping roaming costs. In this instance they aren’t seeking to break-up Google, or to foist home-grown alternatives on the peoples of Europe; they are simply investigating a slightly irritating monopoly.

The right honourable Russell Brand

British comedian, actor, radio host and activist Russell Brand - perhaps best known as being singer Katy Perry’s former spouse - is a colourful character in every way. He appeared recently on BBC Question Time, a current affairs program, where he passionately railed against the anti-immigration United Kingdom Independence Party (UKIP), bankers and the political class in general. In his 2014 manifesto, ‘Revolution’, Brand called for a fairer society and has continued to build his political profile since - refusing to comment on rumours about his possible candidacy in the London 2016 Mayoral election. He doesn’t, however, appear to have any plans to stand for a seat in the 2015 UK parliamentary elections. This is a shame - although his generally hard-left views are not particularly revolutionary, it is patently obvious that he cares deeply about inequality and improving society. No doubt the establishment machinery would turn on him if he did run as a candidate, much in the same way that the Tory and Labour machines dig up and circulate every piece of dirt that they can find on UKIP, but it would surely boost the profile of UK politics to have a genuinely popular (8.8m twitter followers) figure rubbing shoulders with all those career politicians in Westminster.

Tuesday 18 November 2014

The Iraq war was not about oil

How many times have you been told that the Iraq war was all about oil? Perhaps an article you have read on the subject also contained extracts from ‘leaked’ State Department documents setting out in detail post-war plans for the Iraqi oil industry? The number of otherwise well-informed people who have regurgitated this line since 2003 is worrying. People in the US and UK distrust their governments: they are uncomfortable about the extent of government surveillance and interference, and they feel that the Iraq war should never really have happened. The suggestion that the Iraq war was all about oil fits conveniently into this narrative. Yet such an interpretation is symptomatic of what is wrong with political engagement in our times: we all have our opinions, but we often form them on the basis of sentiment alone. Saying ‘all politicians are corrupt and in the pockets of big oil companies' is a way to justify our disinterest, our apathy.

This misinterpretation is of course not helped by apparently definitive statements from several establishment figures: "of course it's about oil; we can't really deny that," said Gen. John Abizaid, former head of US Central Command and Military Operations in Iraq, in 2007. According to then Senator and now Defense Secretary Chuck Hagel in 2007, "People say we're not fighting for oil. Of course we are." Convenient as both of those statements are, neither of those two appear to have had any involvement in the decision to invade.

The argument that Iraq was all about oil is still in need of correction years on from the invasion. The media, at those moments (such as anniversaries) when it remembers its disgust at the event, shows little appetite for revisionism – correspondents have continued with the same interpretation (see Guardian articles by Glenn Greenwald and Nafeez Ahmed for example). I hope that at the very least this post will convince you to consider the strength of whatever stance you hold.

The argument that oil was the main reason for the Iraq war is based on: anecdotes from figures involved; heavy suppositions about geopolitical power; and interpretations of the unfortunately small cache of declassified documents on the subject. The argument goes something like this - Bush, or in particular Vice President Dick Cheney, sought to invade Iraq because:

1. The US imported over 10 million barrels/day ("b/d") of oil in 2003 and both demand and prices were set to rise;

2. The Gulf supplied a quarter of the world’s oil and Saddam’s Iraq had become an erratic producer and a threat to the safe passage of oil through the Gulf;

3. With production constrained in Russia and in Africa, Iraq – the Gulf was believed in 2003 to hold 60% of global oil reserves – was a good place to look to ramp up production whilst also undermining the OPEC cartel and the Saudis; and

4. The installation of Western oil majors in Iraq and the lifting of UN imposed quotas would dramatically increase Iraqi oil output.

It all sounds very plausible. I cannot absolutely discount this argument, in the absence of comprehensive proof either way, but consider an alternative arrangement of the facts:

1. Every petroleum price spike in the post-WW2 era has been caused by war or geopolitical instability in the Middle East (e.g. the 1973 Arab OPEC embargo following the Yom Kippur war or in 1979 following the Iranian Revolution) and so politicians were aware that a war would raise prices;

2. Any attempt to invade Iraq would reduce Iraqi oil output from its 2002 average of 1.5 million b/d and it would take years to increase it (Iraq only reached 3 million b/d in 2012);

3. Even before the US became a net oil exporter in 2013, in the post-war period China has been the main purchaser of Iraqi oil, importing about 600,000 b/d so far this year; and

4. The Iraq war has cost the US $1.7 trillion so far (although the Bush administration couldn’t have known that at the time) as against annual oil import costs (to the economy as a whole) of approximately $120 billion in 2003.

In sum, no one in possession of the facts could have thought that invading Iraq would lower prices or that it was a cost-efficient way of increasing the supply of oil. The key drivers of price drops in oil in the post-Iraq war era have, unsurprisingly, been the massive falls in global demand in 2008 and in recent months. One can point to meetings between Cheney’s energy taskforce and the heads of US oil companies before the war, or post-war contracts that went to Haliburton (of which Cheney was formerly CEO), but that is not conclusive proof. Until clear evidence emerges, the Iraq war will continue to defy simplistic analysis. Its causes were multi-faceted: neo-conservative ideology; the importance of war to the post-WW2 US economy; the climate of fear following 9/11; and a genuinely held, if somewhat bizarre, analysis of threats to the West (think "axis of evil"). Over a decade on from the event, the fact that there isn't an accepted explanation suggests that the Iraq war will remain an event that defies simplistic explanation.

People are right in thinking that powerful interests wield a great deal of influence in the US and elsewhere, and that the interaction between government and corporate donors is opaque and occasionally shady. However that doesn’t mean that the directors of JP Morgan, Exxon Mobil, Lockheed Martin and Goldman Sachs meet with the President in Benedictine robes to determine the future direction of world affairs. Intelligent people are rightly disillusioned by the fact that they have little hope of influencing such processes or penetrating the halls of power, but that doesn’t make it all one big conspiracy. Often events have a momentum of their own

Sunday 19 October 2014

Is America's decline a self-fulfilling prophecy?

National decline always manifests itself in the mind of a nation's citizens before it shows itself in any practical way. Perceptions often then shape the reality - much like in economics, these expectations define behaviour to such an extent that they become self-fulfilling prophecies. Pew centre research last year indicated that 70% of Americans believe that their nation’s influence around the world is declining. Perhaps more significantly, 48% of respondents believed that China was the world’s largest economy. This is well wide of the mark. Whilst Chinese GDP, in purchasing power parity (PPP) terms, is set to overtake the USA by the end of this year, PPP is little more than an indicator of relative prices – in dollar terms Chinese GDP is still $5-6 trillion less than the US figure of $17 trillion. Of course it is hard not to see China, with its population of 1.2bn, one day consuming an equal number of goods and services as the USA (population 300 million), but this is not an imminent event. There is clearly a deep sense of unease amongst Americans about how their nation's global standing has changed since 2007; it is indistinct and difficult to pin down, but two of the elements are as follows:

The first way in which perception has started to alter the national psyche is the attitude of Americans towards China. In many ways China has replaced the USSR as the necessary ‘other’ in the American national psyche. Like the USSR it is seen as authoritarian, a threat to the American way of life, mysterious and powerful. However, this time it is different. China – through trade – is seen as already having infiltrated the USA more successfully than Soviet spies ever did. I have had a series of increasingly bizarre conversations with American friends and relatives about China; the crux of these is ‘I don’t trust the Chinese but I don’t know why’. They then promptly pop along to Walmart to stock up on cheap, well-made Chinese goods. Like the USSR, China is seen as capable of surpassing the USA in the areas in which it prides itself (global influence, power and productive might). Essentially, they think Chinese strength will come at the expense of American weakness; that China will win this one. Americans are viewing the US-China relationship through cold war lenses partly because of a fickle and increasingly balkanized media. The American public has rarely been kept well-informed by its media, but the current media landscape is absurdly partisan. The truth is that no two nations have been so economically entwined in history as the US and China. Despite the barely credible headline growth figures, the truth is that China has struggled since 2008 to plug the gap created by weakness in its main export market and has resorted to a historically unprecedented fiscal and monetary binge in response. Essentially, a prosperous China = a prosperous America. Of course the relationship is far from plain sailing – bumps have been caused by cyber hacking and spying - but it is a great trading partner. Americans shouldn’t feel guilty when buying Chinese-made goods, but nor should they be jumping for joy at the prospect. It is a reality to be accepted like queues at airport security or the person in lectures who won’t stop asking questions. 

Secondly, there is a recognition that US political institutions, which were once the envy of the world, are in a deep malaise. Congressional deadlock is nothing new, but it is believed to be worse than ever - this is borne out by the facts. According to the Brookings Institute, during the 80th Congress (1947-8) fewer than 30% of significant issues were left unlegislated as contrasted to 70% in the 112th Congress (2011-12). There is a strong anti-political narrative that holds that all politicians are corrupt, selfish and in the pockets of donors. This is often an excuse for people to justify their disengagement and intellectual laziness. However, it is fair to say that the money and backing required to run for office does place an enormous strain on any legislator’s independence. Whatever the facts, people are clearly discontented with national politics.

Yet, in contrast to the widely believed narrative that the US has been in decline since 2007, in some ways it has actually increased its global dominance over the last five years. In recent years, the USA has strengthened its hold over the financial markets. Since November 2010 the Fed has added almost $2.9 trillion to its balance sheet; it is an interesting point in itself that this hasn’t been hugely inflationary, but significant also for the dependence on dollar liquidity that this has engendered. One only needs to remember the stock market crashes in Asian markets during the summer of 2013, the so-called ‘taper tantrums’, when the Fed first threatened to slow its monetary injections. Furthermore, the US has maintained its ability to police the financial markets. For those unversed in international finance, it is truly startling that US District Judge Thomas Griesa has been able to stop the payment of interest on non-US law denominated Argentinian sovereign debt from a New York courtroom. In fact the explanation is simple - because of the continuing dominance of US domiciled investors and the abject fear of commercial banks that their ability to clear dollar transactions might be suspended, US courts effectively exercise a worldwide jurisdiction. And, finally, it remains the world’s pre-eminent military power by quite a distance. Even if Chinese military spending exceeds its officially reported level, which it almost certainly does, they are several hundred billion dollars behind the US’ 2014 budget of $801.3bn. It speaks volumes for US power projection that the F-22 Raptor – developed in 2007 – was seen by military chiefs as too powerful for use until its recent debut in Syria. Of course there are pressing issues for the US military to address – such as its inability to close military bases or the cosy relationship between the Pentagon and arms manufacturers - but the perceived loss of US military might has much more to do with the choices of its Commander-in-Chief than any change on the ground.

That said, the picture has not been uniformly positive. The US has seen a marked decline in its soft power in recent years. Where once only words were needed to influence, cajole and prohibit, actions are now required.  Take the UN Security Council: although the USSR was by far the most common user of the veto, since its fall the Russian Federation has used the power very sparingly – however its recent persistence in blocking resolutions on Syria and Ukraine has been notable. Unsurprisingly, these are the two crises over which Obama has drawn red lines or made threats about consequences without any desire to back up his threats with military deployments. Furthermore, institutions crafted by the US at the Bretton Woods conference in 1944 have largely failed to reform and are rightly viewed with distrust in many parts of the world. The position of managing director of the IMF is still, somewhat bizarrely, reserved for a European, whilst European countries retain a massively disproportionate influence through the quota system – which determines votes and contributions. Both the IMF and the World Bank are seen as rigid adherents to austerity and fiscal discipline when it comes to third world nations, but far more willing to accept laxity in the developed world. In the face of Congress’ refusal to reform the IMF, efforts by Brazil, Russia, India, China and South Africa to create an alternative development bank should be applauded. If soft power has at its basis respect for cultural, political, governmental and societal systems, then dysfunctional Bretton Woods era institutions deserve their slide into irrelevance. 

In sum, the prescription is clear: the US must use hard power sparingly but more wisely and regain some of the moral credibility lost in Iraq. This must begin with extricating itself from what is shaping up to be a brutal war between Shias and Sunnis across the Middle East. Whatever their limited involvement might be in airstrikes against ISIS, Qatar and Saudi Arabia continue to fund ISIS as a bulwark against Shia Iran. Western countries can only further play into the narrative that they are against Islam by their participation. The comparisons between the Nazis and ISIS continue to pile in: whilst the massacring of innocents is always a justification for humanitarian intervention, the US has felt no great need to stop the Lords Resistance Army – which continues to kill with abandon in eastern Congo – or numerous other thugs around the world; why is this any different? On the domestic front, the separation of powers between the judiciary, legislature and executive needs re-examining in light of the partisan environment. However, in a land where the constitution is sacrosanct and rarely amended, such a fundamental change looks impossible.  Thankfully the vitality of the economy is largely out of politicians' hands and instead spread across 300 million shoulders. 

The world is moving towards an era with no clear global hegemon, but the US looks set to remain a first among equals for a while yet.