Making things matters. This is what Britain forgot

Ha-Joon Chang in The Guardian

The neglect of manufacturing and over-development of the financial sector is the cause of the economy’s decline, not fear of leaving the EU.

 

The production line at the Rolls-Royce factory in Derby. Photograph: Bloomberg via Getty Images

It’s being blamed on the Brexit jitters. But the weakness in the UK economy that the latest figures reveal is actually a symptom of a much deeper malaise. Britain has never properly recovered from the 2008 financial crisis. At the end of 2015, inflation-adjusted income per capita in the UK was only 0.2% higher than its 2007 peak. This translates into an annual growth rate of 0.025% per year. How pathetic this performance is can be put into perspective by recalling that Japan’s per capita income during its so-called “lost two decades” between 1990 and 2010 grew at 1% a year.

At the root of this inability to stage a real recovery is the serious imbalance that has developed in the past few decades – namely, the over-development of the UK financial sector and the atrophy of manufacturing. Right after the 2008 financial crisis there was a widespread recognition that the ballooning financial sector needed to be reined in. Even George Osborne talked excitedly for a while about the “march of the makers”. That march never materialised, however, and the share of the manufacturing sector has stagnated at around 10% of GDP.

This is remarkable, given that the value of sterling has fallen by around 30% since the crisis. In any other country a currency devaluation of this magnitude would have generated an export boom in manufactured goods, leading to an expansion of the sector.

Unfortunately manufacturing had been so weakened since the 1980s that it didn’t have a hope of staging any such revival. Even with a whopping 30% devaluation, the UK’s trade balance in manufacturing goods (that is, manufacturing exports minus imports) as a proportion of GDP has hardly budged. The weakness of manufacturing is the main reason for the UK’s ever-growing deficit, which stood at 5.2% of GDP in 2015.

UK trade deficit with EU hits new record



Some play down the concerns; the UK, we hear, is still the seventh or eighth biggest manufacturing nation in the world – after the US, China, Japan, Germany, South Korea, France and Italy. But it only gets this ranking because it has a large population. In terms of per capita output, it ranks somewhere between 20th and 25th in the world. In other words, saying that we need not worry about the UK’s manufacturing sector because it is still one of the largest is like saying that a poor family with lots of its members working at low wages need not worry about money because their total income is bigger than that of another family with fewer, high-earning members.

Another argument is that we now live in a post-industrial knowledge economy, in which “making things” no longer matters. The proponents of this argument wheel out Switzerland, which has more than twice the per capita income of the UK, despite – or rather because of – its reliance on finance and tourism.

However Switzerland is actually the most industrialised country in the world, measured by manufacturing output per head. In 2013, that manufacturing output was nearly twice the US’s and nearly three times the UK’s. The discourse of post-industrial knowledge economy fundamentally misunderstands the role of manufacturing in economic prosperity.

First of all, despite the relative increase in the importance of services, the manufacturing sector is still – and will always be – the main source of productivity growth and economic prosperity. It is a sector that is most open to the use of machines and chemical processes, which raises productivity. It is also where most research and development, which generates new technologies, is done. Moreover, it is a sector that produces inputs that raise productivity in other sectors. For example, the recent rise in productivity in the service sector has happened mainly because it is using more advanced inputs produced in the manufacturing sector – computers, fibre-optic cables, routers, GPS machines, more fuel-efficient cars, mechanised warehouses and so on.

Second, many knowledge-intensive services, such as research, engineering and design, that are supposed to be new have always been there. Most of them used to be conducted by manufacturing firms themselves and have become more “visible” recently largely because they have been “spun off” or “outsourced”. We should not confuse the changes in firms’ organisation with the changes in the nature of economic activities.

All of those supposedly knowledge-intensive services sell mostly to manufacturing firms, so their success depends on manufacturing success. It is not because the Americans invented superior financial techniques that the world’s financial centre moved from London to New York in the mid-20th century. It is because the US became the leading industrial nation.

The weakness of manufacturing is at the heart of the UK’s economic problems. Reversing three and a half decades of neglect will not be easy but, unless the country provides its industrial sector with more capital, stronger public support for R&D and better-trained workers, it will not be able to build the balanced and sustainable economy that it so desperately needs.

Balochistan Independence is Responsibility of India

Tarek Fatah - The Hindu is not my Enemy - Part 1

Part - 2 Tarek Fatah on how India should deal with Pakistan and Balochistan

The leftwing case for Brexit (one day)

Paul Mason in The Guardian

There are many good reasons for the UK to leave the EU. But exiting now would allow Johnson and Gove to turn Britain into a neoliberal fantasy island.

 

Jobbik on the march … all over Europe, the EU’s economic failure is fuelling racism and the ultra right. Photograph: Janek Skarżyński/AFP/Getty Images


 The leftwing case for Brexit is strategic and clear. The EU is not – and cannot become – a democracy. Instead, it provides the most hospitable ecosystem in the developed world for rentier monopoly corporations, tax-dodging elites and organised crime. It has an executive so powerful it could crush the leftwing government of Greece; a legislature so weak that it cannot effectively determine laws or control its own civil service. A judiciary that, in the Laval and Viking judgments, subordinated workers’ right to strike to an employer’s right do business freely.

Its central bank is committed, by treaty, to favour deflation and stagnation over growth. State aid to stricken industries is prohibited. The austerity we deride in Britain as a political choice is, in fact, written into the EU treaty as a non-negotiable obligation. So are the economic principles of the Thatcher era. A Corbyn-led Labour government would have to implement its manifesto in defiance of EU law.

And the situation is getting worse. Europe’s leaders still do not know whether they will let Greece go bankrupt in June; they still have no workable plan to distribute the refugees Germany accepted last summer, and having signed amorally bankrupt deal with Turkey to return the refugees, there is now the prospect of that deal’s collapse. That means, if the reported demand by an unnamed Belgian minister to “push back or sink” migrant boats in the Aegean is activated, the hands of every citizen of the EU will be metaphorically on the tiller of the ship that does it. You may argue that Britain treats migrants just as badly. The difference is that in Britain I can replace the government, whereas in the EU, I cannot.

That’s the principled leftwing case for Brexit.

Now here’s the practical reason to ignore it. In two words: Boris Johnson. The conservative right could have conducted the leave campaign on the issues of democracy, rule of law and UK sovereignty, leaving the economics to the outcome of a subsequent election. Instead, Johnson and the Tory right are seeking a mandate via the referendum for a return to full-blown Thatcherism: less employment regulation, lower wages, fewer constraints on business. If Britain votes Brexit, then Johnson and Gove stand ready to seize control of the Tory party and turn Britain into a neoliberal fantasy island.

Dutch far-right leader Geert Wilders goes on trial for inciting hatred



They will have two years in which to shape the post-Brexit economy. Worse, the Tories will be free to use the sudden disappearance of our rights as EU citizens to reshape the UK’s de facto constitution. The man who destroyed state control of education and the man who shovelled acres of free land into the hands of London developers will get to determine the new balance of power between the citizen and the state. So even for those who support the leftwing case for Brexit, it is sensible to argue: not now. The time to confront Europe over a leftwing agenda is when you have a Labour government, and the EU is resisting it.

This is why I have refused to campaign for Brexit, and may even abstain on the day. I also want to see the final offer. As with the Scottish referendum I expect, if the polls show a lead for remain of less than 7%, there will be a politically orchestrated run on sterling; a string of CEOs paraded on to the BBC promising to quit Britain; then a a surprise “final offer” from either Jean-Claude Juncker or an influential group of heads of government. If this offer includes the suspension ofthe social chapter, or further opt-outs that favour the rich over the poor in Britain, then there would be little point in staying in for tactical reasons.

Already, thanks to David Cameron’s Brussels deal, the choice is between out and half-out. I do not think the concessions Cameron achieved in March were negligible. Though the emergency brake on in-work benefits for migrants was reactionary showmanship, the opt-out from “ever closer union” he gained was real. It means there will probably never be another 28-member treaty.

As the Eurozone consolidates, around banking union and cross-border transfers, the Lisbon treaty will be superseded by new, core-country agreements. If that happens, it is likely the UK will be able to legally retreat from some Lisbon commitments. Thus, even without a catastrophic disintegration, it is likely that the UK’s relationship with both the Eurozone and European law will remain negotiable.

All this suggests that those of us who want Brexit in order to reimpose democracy, promote social justice and subordinate companies to the rule of law should bide our time. But here’s the price we will pay. Hungary is one electoral accident away from going fascist; the French conservative elite is one false move away from handing the presidency to the Front National; in Austria the far-right FPÖ swept the first round of the presidential polls. Geert Wilders’s virulently Islamophobic PVV is leading the Dutch opinion polls.

Hungarian camera operator apologises for kicking refugees



The EU’s economic failure is fuelling racism and the ultra right. Boris Johnson’s comparison of the EU with the Third Reich was facile. The more accurate comparison is with the Weimar Republic: a flawed democracy whose failures fuelled the rise of fascism. And this swing to the far right prompts the more basic dilemma: do I even want to be part of the same electorate as millions of closet Nazis in mainland Europe?

The EU, politically, begins to look more and more like a gerrymandered state, where the politically immature electorates of eastern Europe can be used – as Louis Napoleon used the French peasantry – as a permanent obstacle to liberalism and social justice. If so – even though the political conditions for a left Brexit are absent today – I will want out soon.

How Little do Experts Know- On Ranieri and Leicester, One Media Expert Apologises

In July of last year I may have written an article suggesting that the Italian was likely to get Leicester City relegated from the Premier League

 

Leicester City manager Claudio Ranieri lifts the Premier League trophy. Photograph: Carl Recine/Reuters


Marcus Christenson in The Guardian


No one likes to be wrong. It is much nicer to be right. In life, however, it is not possible to be right all the time. We all try our best but there are times when things go horribly wrong.
I should know. In July last year I sat down to write an article about Claudio Ranieri. The 63-year-old had just been appointed the new manager of Leicester City and I decided, in the capacity of being the football editor at the Guardian, that I was the right person to write that piece.

Claudio Ranieri: the anti-Pearson … and the wrong man for Leicester City?



I made that decision based on the following: I have lived and worked as a journalist in Italy and have followed Ranieri’s career fairly closely since his early days in management. I also made sure that I spoke to several people in Greece, where Ranieri’s last job before replacing Nigel Pearson at Leicester, had ended in disaster with the team losing against the Faroe Islands and the manager getting sacked.

It was quite clear to me that this was a huge gamble by Leicester and that it was unlikely to end well. And I was hardly the only one to be sceptical. Gary Lineker, the former Leicester striker and now Match of the Day presenter, tweeted “Claudio Ranieri? Really?” and followed it up with by saying: “Claudio Ranieri is clearly experienced, but this is an uninspired choice by Leicester. It’s amazing how the same old names keep getting a go on the managerial merry-go-round.”

I started my article by explaining what had gone wrong in Greece (which was several things) before moving on to talk about the rest of his long managerial career, pointing out that he had never won a league title in any country and nor had he stayed at any club for more than two seasons since being charge at Chelsea at the beginning of the 2000s.

I threw in some light-hearted “lines”, such as the fact that he was the manager in charge of Juventus when they signed Christian Poulsen (not really a Juventus kind of player) and proclaimed that the appointment was “baffling”.

I added: “In some ways, it seems as if the Leicester owners went looking for the anti-Nigel Pearson. Ranieri is not going to call a journalist an ostrich. He is not going to throttle a player during a match. He is not going to tell a supporter to ‘fuck off and die’, no matter how bad the abuse gets.”

Claudio Ranieri instructs his players during Greece’s defeat by the Faroe Islands, the Italian’s last game in charge of the Euro 2004 winners. Photograph: Thanassis Stavrakis/AP

Rather pleased with myself – thinking that I was giving the readers a good insight to the man and the manager – I also put a headline on the piece, which read: “Claudio Ranieri: the anti-Pearson … and the wrong man for Leicester City?”

I did not think much more of the piece until a few months later when Leicester were top of the league and showing all the signs of being capable of staying there.

After a while, the tweets started to appear from people pointing out that I may not have called this one right. As the season wore on, these tweets became more and more frequent, and they have been sent to me after every Leicester win since the turn of the year.

At some point in February I decided to go back and look at the piece again. It made for uncomfortable reading. I had said that describing his spell in charge of Greece as “poor” would be an understatement. I wrote that 11 years after being given the nickname “Tinkerman” because he changed his starting XI so often when in charge of Chelsea, he was still an incorrigible “Tinkerman”.

It gets worse. “Few will back him to succeed but one thing is for sure: he will conduct himself in an honourable and humble way, as he always has done,” the articles said. “If Leicester wanted someone nice, they’ve got him. If they wanted someone to keep them in the Premier League, then they may have gone for the wrong guy.”

Ouch. Reading it back again I was faced with a couple of uncomfortable questions, the key one being “who do you think you are, writing such an snobbish piece about a dignified man and a good manager?”

The second question was a bit easier to answer. Was this as bad as the “In defence of Nicklas Bendtner” article I wrote a couple of years ago? (The answer is “no”, by the way, few things come close to an error of judgment of that scale).

I would like to point out a few things though. I did get – as a very kind colleague pointed out – 50% of that last paragraph right. He clearly is a wonderful human being and when Paolo Bandini spoke to several of his former players recently one thing stood out: the incredible affection they still feel for this gentle 64-year-old.

All in all, though, there is no point defending the indefensible: I could not have got it more wrong.


At the start of this piece I said that no one likes to be wrong. Well, I was wrong about that too. I’ve enjoyed every minute of being embarrassingly wrong this season. Leicester is the best story that could have happened to football in this country, their triumph giving hope to all of us who want to start a season dreaming that something unthinkable might happen.

So thank you Leicester and thank you Claudio, it’s been quite wonderful.

Subramanian Swamy: A cat among the pigeons

Lakshmi Iyer in The Times of India

Modi's Arab steed? Or Congress' Trojan horse? Subramanian Swamy's entry into the Rajya Sabha has Lutyens' Delhi aflutter with theories.

For someone who has straddled the Indian political scene for over four decades, Dr Subramanian Swamy has always been an important figure in Lutyens' Delhi. A mover and a shaker, he has dominated events and determined their outcome through dogged courtroom battles. Yet his nomination to the Rajya Sabha last month by the Modi Government is seen as something that will alter power equations, not just across the Parliament but within the BJP itself. Swamy's entry into a Congress-dominated Rajya Sabha is being seen as a natural step forward after his resounding success in the National Herald litigation in December 2015, when he managed to force both Sonia and Rahul Gandhi to secure bail in his case against the Congress-controlled newspaper in a Delhi court.

------Interview with Karan Thapar

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BJP managers point out that Swamy had to be in the RS just to rile the Gandhis and disturb Congress benches to push government business. In fact opposition leader, Ghulam Nabi Azad, described him as a "new gift of the BJP to us". However, with his new-found status, the one-time Harvard professor is the most sought-after VVIP in political circles. As ex-Delhi BJP MLA, Vijay Jolly of the Delhi Study Group, who is organising a public felicitation for Swamy on May16 at the Constitution Club, offers, "Envoys from 25 countries — such as China, US, Taiwan, Vietnam — have all confirmed participation just to hear Swamy speak. Swamy's appointment diary is apparently full for next two months."

The BJP leader's entry into the Parliament is making waves, not just outside Raisina Hills but even among MPs. "Now everyone is taking a keen interest in the Rajya Sabha proceedings, more so than the Lok Sabha," said a first-term BJP MP from Rajasthan. Online viewership of RSTV reportedly went up by 900 per cent when Swamy spoke on the Agusta (aka Choppergate) scam. Even within the Parliament, there was tremendous curiosity to hear him firsthand, with members rushing back to the House from the Central Hall.

Yet within the BJP, Swamy is held in awe and the party is exploring ways to cope with him. For someone who has wielded tremendous power before — he has been a Union Minister and run a Government (Chandrashekhar, 1990-91), been part of one (Narasimha Rao, 1991-96) and remorselessly destroyed another just after a year in office (Vajpayee Government, 1998-1999), the party is walking on eggshells when it comes to Swamy.

For some BJP/Sangh leaders, Swamy has been made an MP by the Modi Government only to break the myth that this Government has done nothing about the Gandhis. "It wants to fight the image. There was a need to send a message to the cadres," said a Sangh leader. Officially, the Sangh denied it had any role to play in the RS berth for Swamy. "It is better you ask the Government," said RSS spokesman Manmohan Vaidya.

Off the record, however, Sangh sources acknowledged that Swamy had been close to late VHP leader Ashok Singhal. "He has vigourously pursued Hindu causes such as Ram Setu, Ayodhya, and the Sangh top brass will always be proud of him," said Rajiv Tuli of Delhi RSS.

Significantly, Union Transport Minister Nitin Gadkari — someone close to RSS chief Mohan Bhagwat — hosted a dinner in honour of Swamy soon after he became MP. It is quite possible that Swamy could be used by the Government to build legal support for the Ram temple at Ayodhya at a later juncture.

Bringing Swamy into the House has brought a lot of pep and vigour into the rank and file of the BJP. It has also boosted the image of the PM. It was felt that Modi was not keen to take on the Gandhis directly, but now, he is being seen as a man of action.

A signal to Jaitley

To a section within the BJP, Swamy's RS entry has come as a surprise. Many believe that the new MP could be a signal from the RSS/party leadership to undermine the Leader of the House, Arun Jaitley. BJP sources admit Swamy's problem with Jaitley runs deep. Old-timers recall that he had targeted the FM during NDA-I too — between 1998 and 2004. Swamy's latest ruse against the Finance Minister is denying him a New Delhi Lok Sabha seat in 2014 — that too after consulting Modi about it. Jaitley ensured that the seat went to his friend Meenakshi Lekhi instead. BJP sources say the PM won't compromise with Jaitley's authority. "There is no possibility of letting down Jaitley, though it will require management skills to maintain an equivalence between Jaitley and Swamy," said a BJP leader.

RSS sources admit that in the past two years Swamy was in a limbo. "It is better to have Swamy on your side than against you," said a RSS sympathiser. On the face of it, Congress leaders dismiss the idea that by bringing in Swamy, the PM has played a master stroke — he got a Gandhi family-baiter into the House — to put a lot of pressure on the opposition. It was Swamy's petition in the National Herald case that has made the Congress chief Sonia Gandhi and Rahul appear in a trial court in December 2015 to secure bail.

"Frankly, we are not worried about Swamy. It does not matter to us. In fact, his presence in the treasury benches should worry the BJP more. His becoming MP has more to do with Leader of the House, Arun Jaitley, than the Congress — it is purely an internal matter of the BJP," said senior Congress MP Satyavrat Chaturvedi.

The Digvijay of BJP

He went on to describe Swamy as the "Digvijay Singh of the BJP — a master at self-goals". Why should we worry about him — whose utterances were expunged for three consecutive days?" He goes on to add, "Swamy was expelled from the Rajya Sabha for misconduct. So why should the Congress be scared of Swamy? It is odd that a Congress leader should cite his record during the Emergency. He was expelled from the RS in 1976 during the Emergency for fleeing the country on an impounded passport. A Jan Sangh member then, he's remembered for making an appearance in the Parliament for a day in August 1975 and subsequently slipping out of the country to launch a campaign against Emergency abroad."

Congress sources admit Swamy's entry can't be taken lightly. "With Swamy on the other side, we will need both Kapil Sibal and P Chidambaram to face up to him," said a Congress MP, pointing out how Swamy defeated Abhishek Singhvi's arguments in the Agusta debate. In the upcoming months, if political parties are to pick legal luminaries to fight their political battle, Rajya Sabha could soon resemble proceedings in the Supreme Court.

The wars of Pakistan over India

The Tragedy of 1971 - explained in Urdu by Hamid Bhashani

The story behind the Kargil war - explained in Urdu by Hamid Bhashani

The 1965 War - explained in Urdu by Hamid Bhashani

The 1948 War - explained in Urdu by Hamid Bhashani

Corrupt elites will fight hard to stop the dismantling of the looting machines from which they draw their vast wealth

States that get all their revenues from selling their oil, gas and minerals could easily turn into kleptocracies where the majority stay poor

Patrick Cockburn in The Independent

A shooper at the Olaya mall in the Saudi capital of Riyadh. Ordinary citizens may be hit by efforts to tackle global corruption and patronageGetty


Can corruption be controlled by reform or is it so much the essential fuel sustaining political elites that it will only be ended – if it ends at all – by revolutionary change?

The answer varies according to which countries one is talking about, but in many - particularly those relying on the sale of natural resources like oil or minerals - it is surely too late to expect any incremental change for the better. Anti-corruption drives are a show to impress the outside world or to target political rivals.

The anti-corruption summit in London this week may improve transparency and disclosure, but it can scarcely be very effective against politically well-connected racketeers, busily transmuting political power into great personal wealth.

This is peculiarly easy to do in those countries in the Middle East and Africa which suffer from what economists call “the resource curse”, where states draw their revenues directly from foreign buyers of their natural resources. The process is described in compelling detail by Tom Burgis in his book, The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth. He quotes the World Bank as saying that 68 per cent of people in Nigeria and 43 per cent in Angola, respectively the first and second largest oil and gas producers in Africa, live in extreme poverty, or on less than $1.25 a day. The politically powerful live parasitically off the state’s revenues and are not accountable to anybody.

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Burgis explains the devastating outcome of a government acquiring such great wealth without doing more than license foreign companies to pump oil or excavate minerals. This “creates a pot of money at the disposal of those who control the state. At extreme levels the contract between rulers and the ruled breaks down because the ruling class does not need to tax the people – so it has no need for their consent.”

He writes primarily about Africa south of the Sahara, but his remarks apply equally to the oil states of the Middle East. He rightly concludes that “the resource industry is hardwired for corruption. Kleptocracy, or government by theft, thrives. Once in power, there is little incentive to depart.” Autocracy flourishes, often same ruler staying for decades.

Most, but not all, of this is true of the Middle East oil producers. A difference is that most of these have patronage and client systems through which oil wealth funds millions of jobs. This goes a certain way in distributing oil revenues among the general population, though the benefits are unfairly skewed towards political parties or dominant sectarian and ethnic groups.

In Iraq there are seven million state employees and pensioners out of a population of 33 million who are paid $4bn a month or a big chunk of total oil income. Often these employees don’t do much or, on occasion, anything at all, but it is an exaggeration to imagine that Iraq’s oil money is all syphoned off by the ruling elite.

I remember in one poor Shia province in south Iraq talking to local officials who said that they had just persuaded the central government to pay for another 50,000 jobs, though they admitted that they had no idea what these new employees would be doing.

Reformers frequently demand that patronage be cut back in the interests of efficiency, but a more likely outcome of such a change is that a smaller proportion of the population would benefit from the state income.

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This could be the result of Deputy Crown Prince Mohammed bin Salman’s radical plans to transform the way Saudi Arabia is run and end its reliance on oil by 2030. He may well find that the way Saudi society works has long gelled and face strong resistance to changing a system in which ordinary Saudis feel entitled to some sort of job and salary.

The “resource curse” is not readily reversible, because it eliminates other forms of economic activity. The price of everything produced in an oil state is too expensive to compete with the same goods made elsewhere so oil becomes the only export. Migrants pour in as local citizens avoid manual labour or employment with poor pay and conditions.

A further consequence of the curse is that the rulers of resource rich states – like many an individual living on an unearned income – get an excessive and unrealistic idea of their own abilities. Saddam Hussein was the worst example of such megalomania, starting two disastrous wars against Iran and Kuwait. But the Shah of Iran was not far behind the Iraqi leader in grandiose ideas, blithely ordering nuclear power stations and Concorde supersonic passenger aircraft.

Muammur Gaddafi insisted that Libyans study the puerile nostrums of the Green Book, and those failing that part of the public examinations about the book, were failed generally and had to re-take all their exams again.

Can “the looting machine” in the Middle East, Africa and beyond be dismantled or made less predatory?

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Its gargantuan size and centrality to the interest of ruling classes probably makes its elimination impossible, though competition, transparency and more effective bureaucratic procedures in the award of contracts might have some effect. The biggest impulse to resistance locally to official corruption has come because the fall in the price of oil and other commodities since 2014 means that the revenue cake has become too small to satisfy all the previous beneficiaries.

The mechanics and dire consequences of this system are easily explained though often masked by neo-liberal rhetoric about free competition.

In authoritarian states without accountability or a fair legal system, this approach becomes a license to loot. Corruption cannot be tamed because it is at the very heart of the system.