This Coalition government won’t see out 2013

The best government for decades will be brought down by the inherent pitfalls of partnership.

Friends in need: it all started so well, but the Coalition is showing the strain Photo: AP

By Peter Oborne

8:02PM GMT 07 Mar 2012

221 Comments

Just after the general election, over breakfast at St Pancras Station, I had an electrifying political conversation with Mark Oaten, the former Liberal Democrat MP and home affairs spokesman. It clarified my thinking and its details have stayed with me ever since.

Mr Oaten was the author of a rather important book, which analysed both the past British history of coalition government as well as the far more extensive contemporary experience in continental Europe and Ireland.

We were having breakfast because I wanted to ask him what lessons could be learnt from past experience that would help me understand the Conservative/Lib Dem administration, which had been formed just a few days before. First of all, said Mr Oaten, coalitions are always disastrous for the smaller party. It gets swallowed up, blamed for the failures and only rarely credited with the successes, and then not nearly enough.

In some cases, as with the hapless Progressive Democrats, who never recovered from their alliance with Fianna Fáil and were dissolved in the wake of the 2007 Irish general election, the smaller party vanishes from history. But always it suffers heavy losses.

So I asked Mr Oaten whether there was any way to avoid this disaster. He shook his head sorrowfully. The best that could be hoped, he replied, was to mitigate the scale of the setback. “It is impossible,” he said, in a remark that Nick Clegg, the Deputy Prime Minister, might do well to ponder, “to walk out of a ministerial car and into an election campaign. There must be a clear and decisive rupture between the coalition parties well before a general election, otherwise the smaller party will always be obliterated.”

And when should such a breach occur? Once again, Mr Oaten produced a precise and thought-provoking answer. “A danger moment comes approximately two years after the general election. That is when the coalition agreement tends to run out. At this point the parties often try to create a fresh coalition agreement. But such attempts normally fail.”

Just under two years have passed since our conversation, and nothing since suggests that Mr Oaten’s analysis was wrong. There has indeed been an attempt to create a new agreement to renew the Government two years in, and it has – as predicted – failed. Lib Dem support has slumped, just as Mr Oaten said it would: the party will be lucky to win more than a dozen seats next time.

Meanwhile, the original dynamism and sense of purpose has gone. It is important to remember that the Lib Dems and the Tories remain united on certain issues, above all the need to tackle the deficit. But on numerous others – Europe, tax, health, trade policy, family policy, constitutional reform – the two parties are polarised.

This week’s leaked letter from Vince Cable to David Cameron and Nick Clegg merely drives home a point that has been obvious for some time: the Coalition has two economic policies. One is being run by George Osborne at the Treasury, while the other is being articulated by Mr Cable. The letter does the Business Secretary credit. It is a mature meditation on Britain’s economic and industrial predicament. The assertion that the Coalition does not possess a vision for future growth is nothing less than God’s own truth. While the leak may be regrettable, it is thoroughly reassuring that letters of this calibre are passing between senior members of the Government.

Allies of the Chancellor are trying to diminish Mr Cable by pointing out that he has been responsible for business since the Coalition was formed, and that he is therefore highlighting his own failure. This is disingenuous. No trade policy is even remotely possible without the assent of the Treasury. Consider Mr Cable’s most concrete and thoughtful proposal: the break-up of RBS. It was Mr Osborne’s decision to leave the doomed conglomerate to its own devices, a stagnant weight on the British economic system, marooned in the hands of the investment banker Stephen Hester for the past two years. The fact is that Mr Cable has a reasonably worked-out and coherent grasp of political economy, whether one agrees with it or not, and Mr Osborne does not. A large number of Tories want Mr Cable out. They are very stupid. Few things would damage Tory re-election chances more gravely than the Business Secretary on the back benches in partnership with the increasingly impressive Labour leader, Ed Miliband.

Far more lethal to the Coalition, however, is House of Lords reform. With the Government due to unveil the shape of its Bill by the end of this month, it may well turn into the final battlefield upon which the Coalition will fail. Nick Clegg’s motives are understandable. The Deputy Prime Minister, who has suffered a series of pulverising reverses and humiliations, is a fairly intelligent man. He probably senses the scale of the impending electoral catastrophe and is desperate to extract something – anything! – from the rubble. An elected House of Lords, chosen through proportional representation, will guarantee that the Lib Dems hold the balance of power in the Upper House for the foreseeable future, and secure Mr Clegg some sort of political legacy.

But he must surely have been told that his proposals are doomed. They may well bite the dust in the Commons, where the ablest young Tories, led by the outstanding Jesse Norman, have already destroyed, with frightening ease, their intellectual basis. But they have no chance whatever in the House of Lords, where my inquiries have discovered that appointed peers will refuse point blank to countenance their own extinction.

Some weeks ago, Lord Steel, a former Liberal leader, suggested a solution to this problem: peers should receive lump sums as a way of easing the prospect of retirement. The logic behind this sordid and grossly improper proposal is faultless. Many of the peers who now occupy the Lords benches paid good money to get in: they would doubtless be swayed by a generous tip on the way out. But it is surely wholly unacceptable, even by today’s debased standards of public conduct, that legislators should have a financial interest in the outcome of such an important vote.

The failure of Mr Clegg’s House of Lords reforms will have major consequences. Furious Lib Dems are already plotting their revenge in the shape of pulling the plug on planned constituency boundary changes, seen by Conservative Party strategists as essential to a Tory victory at the next general election.

I write all this with sadness. Plenty of mistakes have been made since 2010, but this has nevertheless been the best government for a generation, led by men and women for the most part of decency and goodwill. Important steps have been taken towards addressing the financial deficit, while the reforms to welfare and education are essential to the health of Britain as a nation and will soon be irreversible.
It is only thanks to the skill and admirable personal forbearance of Mr Clegg and Mr Cameron that the project has lasted as long as it has. But the odds against its long-term survival are lengthening.
Expect the Coalition to break apart by 2013 at the latest, though a minority Conservative administration may linger on for a while longer. And expect that five-year fixed parliament, like Lords reform, to turn out to be another of Nick Clegg’s charming constitutional delusions.

Blood pressure drug 'reduces in-built racism'

A common heart disease drug may have the unusual side-effect of combating racism, a new study suggests.

Despite the study's small size and limitations, the researchers believe it raises important ethical and philosophical questions. Photo: ALAMY

By Stephen Adams, Medical Correspondent

3:34PM GMT 07 Mar 2012

120 Comments

 

The beta-blocker drug can reduce 'subconscious' racism, the Oxford University study found.

Researchers found that people who took propranolol scored significantly lower on a standard test used to detect subconscious racial attitudes, than those who took a placebo.

Propranolol is most often used to reduce high blood pressure by lowering the heart rate, as well as angina and irregular heartbeat. It is also used to manage the physical symptoms of anxiety, and control migraine.

It is thought to work by blocking activation of the peripheral 'automatic' nervous system, and in areas of the brain involved with formulating emotional responses, including fear, called the amygdalae.

The researchers believe propranolol reduces racial bias because such subconscious thoughts are triggered by that automatic nervous system.

  

Their small study took 36 white student volunteers, gave half a single 40mg dose of propranolol and half a placebo, and asked them all to undertake the Implicit Association Test - designed to test "subtle and spontaneous biased behaviour" - two hours later.

The test requires participants to visually sort particular words like 'joy' ,'evil', 'happy' and 'glorious', as well as black and white faces, into the correct categories.

Sylvia Terbeck, lead author of the study, published in the journal Psychopharmacology, said: "Our results offer new evidence about the processes in the brain that shape implicit racial bias.
"Implicit racial bias can occur even in people with a sincere belief in equality.

"Given the key role that such implicit attitudes appear to play in discrimination against other ethnic groups, and the widespread use of propranolol for medical purposes, our findings are also of considerable ethical interest."

Professor Julian Savulescu, of the university's Faculty of Philosophy, and a co-author of the study, said: "Such research raises the tantalising possibility that our unconscious racial attitudes could be modulated using drugs, a possibility that requires careful ethical analysis.

"Biological research aiming to make people morally better has a dark history. And propranolol is not a pill to cure racism. But given that many people are already using drugs like propranolol which have 'moral' side effects, we at least need to better understand what these effects are."

But Dr Chris Chambers, from Cardiff University's School of Psychology, said the results should be treated with "extreme caution".

He said: "We don't know whether the drug influenced racial attitudes only or whether it altered implicit brain systems more generally. And we can't rule out the possibility that the effects were due to the drug incidentally reducing heart rate.

"So although interesting, in my view these preliminary results are a long way from suggesting that propranolol specifically influences racial attitudes."

*Propranolol reduces implicit negative racial bias, Psychopharmacology DOI 10.1007/s00213-012-2657-5

Viv Richards is 60

Sir Viv Richards: the personification of grace and menace combined

Happy 60th birthday, Sir Viv Richards – one of the finest postwar batsmen of them all who could reduce an attack to rubble

• 
• • Mike Selvey
  • guardian.co.uk, Wednesday 7 March 2012 11.59 GMT 
  • 
    

Sir Viv Richards on his way to 138 not out as West Indies retained the Prudential World Cup at Lord's in 1979 after beating England by 92 runs. Photograph: Hulton Archive/Getty Images

This I can see as clearly now as if it were only yesterday: pitch at Lord's, under covers for a week and more and as green as Paddy's Day, me with a new ball, and the start of a much-delayed, postponed and greatly reduced domestic limited-overs semi-final. The first delivery was spot-on, bang on length and line and, on pitching, it jagged back sharply off the seam and sank into the unprotected inside of the thigh of the batsman pushing forward.

The next was all but identical (the pitch marks, scarred on the grass, were within six inches of one another) and again the batsman came forward at it. Only this time he changed his mind midway, shifted his weight on to the back foot, and, clean as you like, thumped it with a vertical bat and high elbow not just over mid-off, or even the boundary rope, but over the corner of what is now the Compton stand and on to the Nursery. It remains the single most devastating shot I have ever seen. And Vivian Richards played a few in his time. What would he be worth today?

It is more than a year since last I saw him. Or rather he saw me, across an airport transit lounge, me en route to the Ashes, he for a tour of King and I shows with Rodney Hogg. "Hey Selve, what's happening, man?" He looked dapper, a porkpie hat perched rakishly in place of the familiar maroon cap, a little thicker round the face but still that Big Bad John "kinda broad at the shoulder and narrow at the hip" appearance that made him look as much like a top middleweight as the greatest batsman of the modern era. Even as he reaches three score years on Wednesday, he looks fighting fit.

So, from Singapore to Sydney, we supped a little and chewed the fat. There were things I wanted to ask him that I never had. Which of all the great West Indies fast bowlers of his time would he pick for his dream quartet? Andy Roberts, he said, his fellow Antiguan with an astounding cricket brain who was there at the start of it all; and the brilliant, much-lamented Malcolm Marshall. Then came Mikey, the great svelte Holding. And finally not the rumbling faithful Big Bird Joel Garner, but instead the brooding stringbean Curtly Ambrose. But, Richards admitted further, if he wanted someone to blast him a wicket, without fear, favour or consequence, there was none more chilling than Colin Croft.

Now tell me, I asked him, since it's a long time over, how do you think that bowlers – or specifically, me – should have approached the task of bowling to you. I had successes, but generally they would have been early on in an innings as he sought the upper hand and took calculated risks. Hard graft after that. You had to be aggressive, he said with some passion, aggressive. It mattered not if fast, slow or medium, spin, swing or seam, you had to demonstrate positive intent or you were shot from the start.

When, after he took guard, he wandered down the pitch, tilted his head back and, looking down his aquiline nose to eyeball the bowler, it was almost as if he was sniffing the air through his flared nostrils for the scent of fear. He wanted to feel the ball "sweet" off the bat from the off, and then he knew it was his day. Yeah aggressive, he repeated, he respected that.

But this was always easier said than done because of the way he set it up. There is an analogy with the buzz in a theatre before the curtain goes up on a great thespian. The wicket falls, but he allowed things to settle, waiting for the arena to clear, the celebrations (more muted in those days) to die down. The theatre lights dimmed and expectation became electricity. Everyone knew who was coming. And when he finally made his entrance, swaggering down the steps, cudding his gum, and windmilling his bat gently, first one arm then the other, it was a personification of grace and menace combined, the walk as unmistakable as had been that of Garry Sobers, to my mind his only rival as the finest postwar batsman of them all.

I put on a performance, he told me, it was part of my act. He wanted to dominate and the genesis of that process happened even before he closed the dressing-room door behind him. His reputation preceded him like an advance guard. It continued with the languid wicketwards saunter, the slow precision with which he took guard, the way he ambled down the pitch to tap down an imaginary mark, all the while looking for, and not always finding, eye contact with his adversary. Then he would smack the end of his bat handle with the palm of his right hand, a final intimidatory gesture.
There have been giants of the game contemporary and since, batsmen of vast pedigree and achievement: Greg Chappell, Lara, Tendulkar, Ponting, Dravid, Kallis, Sangakkara, Hayden and others. Each on his day could reduce an attack to rubble. But Richards had an aura given to no other. Truly he was scary. Happy birthday, Viv.

It's David Cameron that's anti-business

Campaigners against business abuse believe in wealth creation, not corporate abuse of so-called free markets

• 
• • Richard Murphy for Tax Research UK, part of the Guardian Comment Network
  • guardian.co.uk, Thursday 23 February 2012 13.06 GMT

David Cameron has condemned 'anti-business snobbery'. Photograph: Pool/Reuters

David Cameron will use today's speech to the Business in the Community charity to warn that "we've heard some dangerous rhetoric creep into our national debate that wealth creation is somehow antisocial, that people in business are out for themselves".

Cameron's on dodgy ground here. First, he's flip-flopping, which is amusing to see when Labour has opened a clear lead on this issue. But more important, he's completely missing the point.
The problems that those of us who campaign against business abuse have are that there aren't free markets, and as such wealth creation is not taking place but has been replaced by corporate abuse and that is not socially progressive and has instead proved to be massively socially destructive.

Let me explain. When Cameron refers to business leaders he's invariably talking about the leaders of big business. All, just about without exception, are monopolists or oligopolists. They exploit markets to make excessive profits at cost to consumers. They use those excessive profits to pay themselves vastly inflated sums. That's not wealth creation – that's rent-seeking behaviour that is straightforwardly abusive.

In fact, it's just an act of redistribution, but from the 99% to the 1%. We object to that. We demand information so we can appraise what's going on so it can be stopped. That's one of the reasons for demanding country-by-country reporting – which Cameron and the Tories have been cool about. Cameron has shown himself to be on the side of abuse as a result.

And those big business leaders exploit their position to avoid tax using tax havens. Cameron and the Tories are encouraging that. First they're doing it by passing new legislation that is going to positively encourage large companies (and only large companies, mind: smaller ones are excluded) to set up their treasury functions outside the UK in future and pay just 5.75% tax on them as a result.

Second, while Labour strongly supported country-by-country reporting that would require companies to disclose just what profits they made in tax havens and other countries, and where they do or don't pay their tax, the Tories have gone out of their way to support proposals from big accountants like PWC that do just the opposite because their proposals would ignore all places where no tax was paid – like tax havens. To break monopoly power and rent-seeking behaviour that exploits tax loopholes by exposing it would support wealth creation rather than wealth abuse, but Cameron isn't taking the steps to support that wealth creation. He seems to prefer the continuing secrecy that has supported the abuse.

And there are also aren't free markets because government won't provide the regulation to make sure all businesses comply with regulation or pay their taxes, as I've shown. So there's an unlevel playing field. That's a profoundly anti-business policy on the part of the Tories.

The result is that Cameron's policies encourage shifting of profits to the greedy, the monopolist, the abuser of the consumer, those who ignore regulation and those who are fraudulent. That's not socially progressive. That's socially harmful.

That's why we object to his policies. And whatever the story, while he does not walk the walk, those campaigners like the Tax Justice Network – who believe that being pro-business means being pro-transparency and accountability, being pro-everyone paying their tax and being anti-market abuse measures like tax havens and opacity – will continue to pursue their arguments. Because they're the real pro-wealth creators and real pro-free marketeers, when free means people have the information they need to make proper decisions freely available to them – which is the pre-condition of free markets as anyone who has done some training in economics knows.

How Ayn Rand became the new right's version of Marx

Her psychopathic ideas made billionaires feel like victims and turned millions of followers into their doormats

• 
• • George Monbiot
  • guardian.co.uk, Monday 5 March 2012 20.30 GMT

Illustration by Daniel Pudles

 

It has a fair claim to be the ugliest philosophy the postwar world has produced. Selfishness, it contends, is good, altruism evil, empathy and compassion are irrational and destructive. The poor deserve to die; the rich deserve unmediated power. It has already been tested, and has failed spectacularly and catastrophically. Yet the belief system constructed by Ayn Rand, who died 30 years ago today, has never been more popular or influential.

Rand was a Russian from a prosperous family who emigrated to the United States. Through her novels (such as Atlas Shrugged) and her nonfiction (such as The Virtue of Selfishness) she explained a philosophy she called Objectivism. This holds that the only moral course is pure self-interest. We owe nothing, she insists, to anyone, even to members of our own families. She described the poor and weak as "refuse" and "parasites", and excoriated anyone seeking to assist them. Apart from the police, the courts and the armed forces, there should be no role for government: no social security, no public health or education, no public infrastructure or transport, no fire service, no regulations, no income tax.

Atlas Shrugged, published in 1957, depicts a United States crippled by government intervention in which heroic millionaires struggle against a nation of spongers. The millionaires, whom she portrays as Atlas holding the world aloft, withdraw their labour, with the result that the nation collapses. It is rescued, through unregulated greed and selfishness, by one of the heroic plutocrats, John Galt.
The poor die like flies as a result of government programmes and their own sloth and fecklessness. Those who try to help them are gassed. In a notorious passage, she argues that all the passengers in a train filled with poisoned fumes deserved their fate. One, for instance, was a teacher who taught children to be team players; one was a mother married to a civil servant, who cared for her children; one was a housewife "who believed that she had the right to elect politicians, of whom she knew nothing".

Rand's is the philosophy of the psychopath, a misanthropic fantasy of cruelty, revenge and greed. Yet, as Gary Weiss shows in his new book, Ayn Rand Nation, she has become to the new right what Karl Marx once was to the left: a demigod at the head of a chiliastic cult. Almost one third of Americans, according to a recent poll, have read Atlas Shrugged, and it now sells hundreds of thousands of copies every year.

Ignoring Rand's evangelical atheism, the Tea Party movement has taken her to its heart. No rally of theirs is complete without placards reading "Who is John Galt?" and "Rand was right". Rand, Weiss argues, provides the unifying ideology which has "distilled vague anger and unhappiness into a sense of purpose". She is energetically promoted by the broadcasters Glenn Beck, Rush Limbaugh and Rick Santelli. She is the guiding spirit of the Republicans in Congress.

Like all philosophies, Objectivism is absorbed, secondhand, by people who have never read it. I believe it is making itself felt on this side of the Atlantic: in the clamorous new demands to remove the 50p tax band for the very rich, for instance; or among the sneering, jeering bloggers who write for the Telegraph and the Spectator, mocking compassion and empathy, attacking efforts to make the word a kinder place.

It is not hard to see why Rand appeals to billionaires. She offers them something that is crucial to every successful political movement: a sense of victimhood. She tells them that they are parasitised by the ungrateful poor and oppressed by intrusive, controlling governments.

It is harder to see what it gives the ordinary teabaggers, who would suffer grievously from a withdrawal of government. But such is the degree of misinformation which saturates this movement and so prevalent in the US is Willy Loman syndrome (the gulf between reality and expectations) that millions blithely volunteer themselves as billionaires' doormats. I wonder how many would continue to worship at the shrine of Ayn Rand if they knew that towards the end of her life she signed on for both Medicare and social security. She had railed furiously against both programmes, as they represented everything she despised about the intrusive state. Her belief system was no match for the realities of age and ill health.

But they have a still more powerful reason to reject her philosophy: as Adam Curtis's BBC documentary showed last year, the most devoted member of her inner circle was Alan Greenspan, former head of the US Federal Reserve. Among the essays he wrote for Rand were those published in a book he co-edited with her called Capitalism: the Unknown Ideal. Here, starkly explained, you'll find the philosophy he brought into government. There is no need for the regulation of business – even builders or Big Pharma – he argued, as "the 'greed' of the businessman or, more appropriately, his profit-seeking … is the unexcelled protector of the consumer". As for bankers, their need to win the trust of their clients guarantees that they will act with honour and integrity. Unregulated capitalism, he maintains, is a "superlatively moral system".

Once in government, Greenspan applied his guru's philosophy to the letter, cutting taxes for the rich, repealing the laws constraining banks, refusing to regulate the predatory lending and the derivatives trading which eventually brought the system down. Much of this is already documented, but Weiss shows that in the US, Greenspan has successfully airbrushed history.

Despite the many years he spent at her side, despite his previous admission that it was Rand who persuaded him that "capitalism is not only efficient and practical but also moral", he mentioned her in his memoirs only to suggest that it was a youthful indiscretion – and this, it seems, is now the official version. Weiss presents powerful evidence that even today Greenspan remains her loyal disciple, having renounced his partial admission of failure to Congress.

Saturated in her philosophy, the new right on both sides of the Atlantic continues to demand the rollback of the state, even as the wreckage of that policy lies all around. The poor go down, the ultra-rich survive and prosper. Ayn Rand would have approved.

Unemployment matters more than GDP or inflation

Jobless figures are the one major economic indicator that measures people. And they demonstrate the toll in misery across Europe

• 
• • Mehdi Hasan
  • guardian.co.uk, Sunday 4 March 2012 21.00 GMT

Illustration by Andrzej Krauze

 

There is a spectre haunting Europe – the spectre of mass unemployment. On Thursday it was announced that the eurozone's unemployment rate had risen to a record high of 10.7% in January. That's 16.9 million people out of work across the 17-nation euro area.

Across the 27-member European Union unemployment is also topping 10% for the first time: a jaw-dropping 24.3 million jobless. The sheer size of the continent's growing army of unemployed workers is difficult to comprehend.

Spain holds the EU record, with unemployment at 23.3%, or 5.3 million people – and rising. "This is the terrible cancer of our society," said Rafael Zornoza Boy, the bishop of Cadiz, last week. Yet prime minister Mariano Rajoy's new (and conservative) government's pleas to give Madrid some leeway on spending cuts fell on deaf ears at Friday's EU summit of fiscal self-flagellists in Brussels. Then there is poor Greece, where EU-imposed cuts have left one in five unemployed and have driven up the suicide rate by 40%. Austerity is, literally, killing Europeans.

Poll after poll shows voters across the EU care much more about the jobs deficit than they do about the budget deficit. Nonetheless, the proverbial Martian, landing in Brussels last week, would have been stunned to witness the complacency and indifference of the continent's political elites to the crisis of spiralling joblessness. EU leaders continue to fiddle – over borrowing limits, fiscal compacts, treaty changes – as their economies crash and burn. The austerity gamble hasn't paid off. Fiscal consolidation has failed to spur growth or boost employment.

Fiscal stimulus, on the other hand, works. The US has had 23 consecutive months of private-sector job growth, with 3.7m new jobs created over the past two years thanks to Barack Obama's American Recovery and Reinvestment Act. US unemployment benefit claims are now at a four-year low.
But Europe's political and financial elites – led by austerity junkies such as "Merkozy", the European Central Bank's Mario Draghi and, of course, our very own David Cameron – pretend not to notice. Here on the jobless side of the Atlantic, the only solution to austerity-induced unemployment, it seems, is more austerity. In Brussels, eurozone finance ministers threatened to impose swingeing fines on those member states, such as Spain and the Netherlands, that may miss their budget deficit targets. If insanity, as Albert Einstein is said to have once remarked, is doing the same thing over and over again and expecting different results, then our leaders have gone mad.

The irony is that mass unemployment itself is the biggest barrier to deficit reduction. Basic economics teaches us that the best way to cut borrowing levels is to get people back to work and paying taxes. Or as John Maynard Keynes put it: "Look after unemployment and the budget will look after itself."

But Europe's crisis isn't just about economics. Unlike GDP or inflation, unemployment is the only major economic indicator that measures real human beings, rather than growth or prices.

Having a job isn't just about earning a living or paying taxes; it's about human dignity and self-worth. The human and social costs of unemployment are well-documented: financial hardship, emotional stress, depression, lethargy, loss of morale and status, shame, sickness and premature death. Then there is the hopelessness that often leads to rising crime, disorder and social unrest. We can probably expect a new wave of riots and violence in the continent's city centres.

The tragedy is that there is nothing unavoidable about Europe's unemployment crisis. The US is proof that even the most modest of fiscal stimuli can create jobs. But politicians in Germany, where mass unemployment in the 1930s helped the Nazis seize power, refuse to countenance any loosening of the fiscal purse strings inside the EU, arguing that such a move would increase borrowing costs and might panic the bond markets. Yet, as the Nobel-prizewinning economist Christopher Pissarides has written, "a small rise in gilt interest rates is a small price to pay for more jobs".

Here in the UK, where unemployment stands at a 17-year high of 2.7 million (or a staggering 6.3 million if the "underemployed" are included), our own do-nothing chancellor, George Osborne, continues to proclaim that "the British government has run out of money". Really? Perhaps he should have a word with Mervyn King. Over the past three years, the Bank of England governor has, with a mere tap on his keyboard, authorised the creation of £325bn of new money, out of thin air, through a process of "quantitative easing" (QE). This, however, has so far been used only to bail out the bankers. Why not use it to bail out millions of jobless Britons?

If we assume it would cost £26,000 (the median salary for UK workers) to create each new job, the cost to the government of putting a million people back to work would be £26bn – or around half of the latest £50bn tranche of QE released by the Bank last month.

How many more of Europe's jobs will be sacrificed at the altar of deficit reduction? How many more lives ruined, families impoverished and communities destroyed in pursuit of growth-choking, job-killing, self-defeating austerity? It is unacceptable for governments to stand by as dole queues lengthen. Unemployment is not a price worth paying. Nor is it a price that has to be paid.

The first politician to face charges over 2008 financial crisis

• Rupert Neate and agencies
• guardian.co.uk, Monday 5 March 2012 18.30 GMT

Former Icelandic prime minister Geir Haarde (right), and his lawyer Andri Arnason, appear at his trial in Reykjavik. Photograph: S Olafs/EPA

 

The former prime minister of Iceland has become the first politician in the world to stand trial over the 2008 financial crisis.

Geir Haarde, who was ousted after Iceland's three biggest banks collapsed and the country's economy went into meltdown, could be jailed for two years if found guilty of gross negligence in failing to prepare for the impending disaster. He denied the charges and claimed that "only in hindsight is it evident that not everything was as it should have been".

Haarde was instrumental in transforming Iceland from a fishing and whaling backwater into an international financial powerhouse before the credit crunch caused the economy to crash almost overnight.

The Icelandic parliament's "truth report" into the causes of the crisis that forced the country to borrow $10bn (£6.3bn) to prop up its economy, accused him of "gross negligence". He is also accused of failing to rein in the country's fast-growing banks, whose paper value before the crash had ballooned to 10 times the gross domestic product of the island state of 320,000 people. And he is alleged to have withheld information that indicated the state was headed for financial disaster.

The country's three biggest banks – Glitnir, Kaupthing and Landsbanki – went bust within weeks of each other after the collapse of Lehman Brothers in the US sparked the credit crunch in 2008.
"None of us realised at the time that there was something fishy within the banking system itself, as now appears to have been the case," Haarde told the court in the capital of Reykjavik on Monday. "I think it's illogical to think that I or anyone else in the government could have reduced the size of the
banks to a greater extent than was done at the time."

He is accused of failing to prevent the contagion from spreading to the UK by not insisting that Icelandic banks ringfence their overseas operations. The crisis sparked a diplomatic row with the UK as the demise of Landsbanki brought down its British internet banking arm, Icesave, leaving British councils, universities and hospitals more than £1bn out of pocket.

Gordon Brown, who was British prime minister at the time of the collapse, accused Haarde of "unacceptable" and illegal" behaviour over its failure to guarantee to reimburse UK customers of the bank. The British government stepped in to protect most savers, at a cost of £3.2bn but it is continuing to demand compensation from Iceland to cover the cost.

The crisis also led to the demise of Baugur, the British retail investor which owned stakes in House of Fraser, Debenhams and Woolworths.

Haarde, who led the right-leaning Independence party and was prime minister from 2006 to 2009, rejected all the charges as "political persecution" from the country's left-leaning government, and said he would be vindicated by the trial. He said Icelanders' interests were his "guiding light" and insisted that his conscience was clear.

The trial is expected to last until mid-March, with the court taking another four to six weeks to deliver its verdict.

Haarde has become the first person to ever stand trial at the country's Landsdómur criminal court, which was created in 1905 to hear charges brought against ministers. He was one of four former Icelandic ministers blamed by the "truth report" for causing the crisis, but parliament voted last year that he should be the only person to stand trial.

The others named in the report were the former finance minister Árni Mathiesen and former minister of commerce Björgvin Sigurdsson, and Davíd Oddsson, a former prime minister who was running the country's central bank at the time.