Wednesday, 27 May 2015

CAMERONS RENEGOTIATION WILL NOT BE EASY

The British Governments plan to renegotiate the terms of its membership of the EU do not come at a good time. The EU is tackling the possibility of Greece leaving the euro, and Ukraine going bankrupt while simultaneously being dismantled by force by Russia

Now, while doing all that, the EU has also to address itself to a, yet to be revealed, British renegotiation agenda. It is likely that this agenda, to some extent, will be shaped around David Cameron’s assessment of what he has a good chance of being conceded.  He is touring EU capitals to find that out. That is a sensible and pragmatic approach on his part.

What he gets will probably not satisfy the 100 or so Tory MPs who simply want the UK to leave the EU. And with a majority of only 12, David Cameron cannot ignore these MPs.  Other EU leaders will have to judge how close they should go to their bottom line, just to satisfy opinion in a country which may  leave the EU  anyway. 

There is one issue on which David Cameron’s demands are already very explicit and clear...the rights of recent EU immigrants living in the UK. This may, or may not, include Irish immigrants living in Britain, but I expect it could be difficult in EU law for Britain, inside the EU, to discriminate in favour of the Irish against other EU nationals
The Conservative Manifesto could not be clearer on the position of recent immigrants from other EU countries. It says that 

“If (EU) jobseekers have not found a job within 6 months, they will be required to leave “ .

This seems to be in direct conflict with Article 20 of the EU Treaty which gives EU citizens a right to “move and reside freely within the territory of (other) member states”.
Furthermore, the Manifesto recalls that the Government  has  already banned housing benefit for EU immigrants, and goes on to say

“We will insist that EU migrants who want to claim tax credit and child benefit must have lived here for five years”.

This seems in flat contradiction of Article 45 of the EU Treaty which requires

“the abolition of any discrimination based on nationality between workers as regards employment, remuneration, and other conditions of employment.”

Tax credits are a form of negative income tax. If discrimination in respect of tax credits were to be permitted, it would become impossible, within the EU, to resist a proposal to apply different income tax rates, or different tax free allowances, to people of different EU nationalities.

The irony of the UK Governments position is that they want a stronger Single Market, with greater freedom to sell goods and services, and move capital, across boundaries within the EU. But they wish to resist the freedom of movement of workers across EU boundaries ! This will be seen by many in the rest of the EU as ideologically biased, as well as discriminatory.

Angela Merkel, a politician who always looks for hard evidence, will be interested to discover that, between 2005 and 2014, only 33% of immigrants to the UK came from other EU countries, like Ireland. Only 2.5% of all benefit claimants in the UK originate from other EU countries, and EU immigrants to the UK are only half as likely, as native UK subjects, to claim benefit. 

Another knotty question, within the UK itself, will be the position of the devolved governments in Scotland , Northern Ireland and Wales.

For example, given their electoral support level, how can David Cameron exclude the Scottish Nationalists from the UK negotiating team?  Offering to include them could be good politics. Excluding them from the negotiating team, if they requested a place, would make a Scottish exit from the UK more likely

A UK demand  is likely to be the repatriation of more powers, from Brussels to the 28 member parliaments, including Westminster. The difficulty here is that a comprehensive “Competence Review” by the  UK Foreign Office, across the whole range of EU powers, failed to come up with  many concrete suggestions for powers that ought to be repatriated.

The UK may also demand a “red card “ system, whereby EU laws, already approved  in the Council of Ministers and the European Parliament ,where the UK is already well represented in both, could be derailed  by vetoes from a number of national parliaments. This would prolong and delay, the already laborious, process of EU law making. 

It would also run directly counter to another UK demand, for completion of the EU Single market. For example, the outstanding matters of creating a Single market in Digital Services, in Energy, and in Capital for lending, all in the UK’s interests, require more new EU laws,  not less.  

The unintended often happens in politics.

The proposed “red card” would, I believe, be more likely to be used by other EU states  to block things the UK wants, than the other way around.

These difficulties all suggest that David Cameron should seek to reframe the entire negotiation, both in the way he presents it at home, and in the rest of the EU. 

Rather than looking for exceptions for the UK, he should emphasise Britain’s capacity to take the lead in  the EU in clearing away barriers to economic growth across all of Europe, a stance that would play to his country’s strength, and would  put others on the back foot.

Tuesday, 26 May 2015

BILL O HERLIHY

Bill was truly a man of many talents.
While others can pay more eloquent tributes than I can, to his genius as a broadcaster and entrepreneur, I remember his willingness to take a clear political stand in the early 1980’s, while others, for perfectly understandable commercial reasons, kept their opinions to themselves. 

This was brave, risky, and patriotic and it showed the true character of the man.

I extend sympathy to his wife , Hilary , and his entire family.
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Statement by John Bruton, former Taoiseach

Monday, 18 May 2015

HOW CAN DEMOCRACY BE RECONCILED WITH GLOBALISATION? CAN OUR NEEDS AS INVESTORS, CONSUMERS AND CITIZENS BE RECONCILED?



In his book, “Supercapitalism; the Transformation of Business, Democracy and Everyday Life”, Robert Reich argued that the technologies  were developed to fight the cold war – computers, software, telecommunications and super-light alloys, along with containerization and cheap transport, opened up previously closed markets to global competition.

This has meant that the effective control of economics is no longer exercised by national governments, that could be accountable to national electorates, but is now exercised at global level where competitive forces are much stronger than democratic impulses. The forms of democracy remain, but the substance has moved elsewhere.

Because goods and services can be sourced anywhere in the world, competition between firms is now more intense than at any time in history. As Reich sees it, competition has drowned out other concerns. Human needs, such as the need for a measure of job security, now take second place in many firms to achieving the lowest possible consumer price, and the highest possible returns to investors.

In practice, the situation is not a stark as Reich says.  Even in the US, where the law gives firms great freedom to hire and fire, firms recognize it is in their commercial interest  to make their staff feel secure in their jobs, so as to maximise their productivity and commitment to the firm. As jobs become more specialized, firms want to avoid the cost of retraining new people to replace someone who has left because they felt insecure in their job. “Employee engagement” is a key metric of success for management. 

Reich argued that, all of us have three roles, as a citizen, as a consumer, and as an investor. 

Many people exercise their “investor” role indirectly, through pensions and insurance policies to which they contribute.  Global Competition has put our demands as consumers and investors, far ahead of our needs as citizens.  As Reich sees it, firms compete for markets, and for shareholders, in a much more intense way than before, because better communications, freedom of capital movement, and open markets.  They can no longer afford the high wages and the philantrophic approach, that was possible before the arrival of globalization. Otherwise they would go out of business.

As consumers or investors, it is true that we are not always aware to the fact that the much lower prices we are getting in the shop, or the higher return we used to get in our pension fund,  came to some degree at the expense of our own job security and our own environment.

Reich argued that it is futile to expect corporations to behave differently. Under law, their obligation is maximize the return to their shareholders. It was a waste of time asking corporations to be good citizens. Only people can be citizens, he argues. This is an overstatement. To retain valuable employees, firms have to show that they are doing socially valuable things, whether in their main business or as part of corporate social responsibility programmes.

Reich contrasted all of this with what he called the “Not Quite Golden Age” - between 1945 and 1970 – when competition was less intense, and companies had resources to spare to act as good citizens, and to pay good wages to those who were lucky enough to have a job.

That was then possible because the predominant industrial system was one of mass production, and the costs of setting up for mass production were so large, that firms who were already established , had a  protected market in which they could overcharge consumers. That ability to overcharge allowed them to be philantrophic and/ or to pay higher wages. 

They did not have to pay much attention to shareholders either, because national exchange and capital controls meant that investors had limited choices about where to put their money. This gave their trade unions much greater bargaining power, so wages and job security were better, for those lucky enough to have a job. But the downside of all this was a lower overall level of employment and economic activity. It is also worth saying that in the “Not Quite Golden Age”, while wages may have been relatively higher than they are today, the jobs were held mainly by men, women worked to a greater extent in unpaid work in the home. The new era of globalization has coincided with a big increase in the paid workforce, and far more women in paid employment, and the resultant local competition for jobs may have contributed to downward pressure on wages. There has been a trade off between more jobs, and more pay, and more jobs has won.

Reich said this “Not Quite Golden Age” will never come back. The forces driving globalization are physical and technological, and they cannot be reversed by political action in one country, unless that country seals itself off from rest of the world, like North Korea. Even East Germany had to take down its wall.

Unfortunately Reich put forward few remedies to the problems he analysed so well.

He suggests a transfer tax on shares, a law to briefly postpone redundancies, and greater trade union rights. But, if one country tried to put these measures into force on its own, even a big country like France, it would probably lose investors and market share, and then have to reverse these measures under pressure of market forces. 

This is the weakness of much modern Socialist and Social Democratic thinking. It offers solutions that would have worked in the “Not Quite Golden Age”, but that are impractical now, because they fail to recognize the changes wrought in the global economy by globalization since 1970.

The only way to introduce a democratic balance into global capitalism is to attempt to make rules at global level, or at least at supranational level.

Just as climate change can only be tackled by democratically agreed global agreements, the excesses of global competition can only be managed at global level too. 

The G20, not national capitals, is where the action is. But the G20 is not democratically elected, whereas national governments are.  We need to imagine a new politics of globalization, and create official fora in which voters have a sense that they can impact the work of bodies, like the G20, the OECD, and the World Trade Organisation. The European Parliament, one of the world’s few directly elected supranational parliaments, is model that may be followed more widely. Why not have the next step be a directly elected parliament to oversee the work of the OECD?