Friday, April 08, 2016

Selling our enemies the rope to hang us

Panama is not the world's largest off shore financial centre.

Mossack Fonseca is not the worlds largest offshore lawyer.

The scale of the leak of confidential information is huge, but in fact it represents the tip of the iceberg for the flow of offshore money it represents. The British Overseas territories, especially Bermuda (for insurance), the Cayman Islands and the British Virgin Islands (for trading funds) and the Channel Isles (for private equity and other fund structures) handle a much larger flow of funds. Panama is not the world's most trusted jurisdiction and as a result the level of criminal transactions could be a higher percentage there than in the UK controlled jurisdictions or Luxembourg or Malta. Nevertheless the fact is that the funds flows detailed in the stolen data are still a relatively small amount of global offshore transactions.

The press in the democratic world is predictably outraged, and, equally predictably, is focusing on the wrong target. Singling out individual stories is great human interest, and of course it is an easy target to highlight some public figures who have used the off shore centres to game their domestic tax system. However there are two stories which the newspapers are studiously ignoring. 

The first is why such a system of offshore finance is needed in the first place. It is not simply that political leaders and other potential and actual criminals are hiding ill gotten gains. In fact the off shore system is universally used to even out discrepancies and inefficiencies between different jurisdictions and promote cross border funds flows. The reason they are needed is that without them global investment and trade would be a fraction of what it actually is. Yet in a sense the off shore centres are only a necessary evil because the taxation systems of most nation states are irretrievably broken. The centres have delayed the dread day of reckoning when full blown reform of the taxation system is enacted or a collapse in investment brings about a global depression that would dwarf any we have yet seen. The media do not address the fundamental issue of why off shore finance exists on such a scale, preferring only the easy answer of a public witch hunt of prominent individuals involved.

The second uncomfortable truth is why the destination of a great deal of hot money has ended up being the London property market. It is clear that in parts of Prime London a major percentage of the housing stock has been taken out of the market as Asian, Arab and Russian investors buy a portfolio of property on a "buy to leave" basis. The huge surge in London property prices which has driven a wave of house price inflation across the UK is rooted in hot money, at least some of which is indeed criminal. Despite half-hearted attempts, offshore companies pay essentially no tax on UK property and the result has been a boom that has increasingly driven Brits out from their own capital. Successive governments have failed to recognized the massive damage this is continuing to do to our global level of competitiveness.

So as allies of Assad or Putin or other murderous regimes squat tax free in Mayfair, those who might have been living in Central London are pushed miles form their places of work and recreation.

The core of the Offshore scandal is taxation. The inefficient and distorted way that governments have chosen to fund themselves is the direct cause of this. Doing away with offshore centres, without first creating an open, transparent and stable taxation regime would have a catastrophic effect on the global economy. So the Mossack Fonseca data theft is pretty much the last warning.

Tax reform is an issue which can wait no longer. If democratic government is going to maintain its legitimacy in the future, then political and financial figures must accept now where the blame truly lies and completely transform what, how and where it seeks to gain its finance.

Thursday, March 24, 2016

The Rise of Stupid Politics

When people take a position in any argument, in principle they should base their views upon a platform of facts. Sometimes those facts might be interpreted in different ways, but as the old Guardian motto had it, "Comment is Free, but facts are sacred". This "Dialectic" has been the basis for rational argument for centuries.

Not any more.

We are seeing the rise of political comment and political practice that is not based on any kinds of facts at all. "Evidence based policy" is so rare that these days it has to be specially commented on. The fact is that, from Donald Trump to Katie Hopkins, emotion and not truth is now becoming the primary source of policy.

OK Katie Hopkins makes her money from being a pantomime villain, but in fact very few people get the joke. Her opinions, like those of Donald Trump, or most of the Brexiters in the UK are not based on facts- they are almost entirely made up, and border on the irrational. In a single speech that Donald Trump made recently, he made the largest number of factual errors that Factcheck had ever seen.

In fact these are not mistakes: they are outrageous, brazen lies, which he does not retract.

The same applies to most of the comment from the Leave camp. The twisted logic that says that the Brussels bomb attacks prove that the EU is a threat to the Queen's peace in Britain is utterly outrageous.

This info graphic provides the facts as to why. The level of terrorism in Europe is actually at a fairly low point compared to most of the last forty years. In that time of course, well over half of terrorist murders were in the UK as a result of Irish terrorism. Given that the withdrawal of the UK from the EU would probably restore a working border between Northern Ireland and the Republic, it is far more likely that leaving the EU would increase direct terrorism against the UK itself. The risk is obvious, but as they say, never let the facts get in the way of a good story. 

Only a spectacularly stupid commentator like, say, Katie Hopkins would deny the truth of that risk.

Meanwhile in Scotland, stupidity runs riot. Today, March 24th 2016, was the proposed independence day for Scotland. During the referendum campaign the SNP made a case for economic independence that was totally dishonest. Yet the implosion of practically every single economic statement ever made by the SNP is met with a barrage of denial from separatist fanatics. It seems the majority of Scots are still prepared to vote for a party that not only got it wrong, it actively mislead the Scottish people. If there is any case for Scottish independence, it must be built on reality, in other words one built on real sacrifice and hardship, not on the easy lies of the SNP. Worse, those who raise rational arguments with the SNP are subjected to a brutal hate campaign led by thugs. It is irrational at best, at worst, it is a threat to the very basis of freedom.  

If today had been independence day, Scotland would be in a very serious crisis, and not only an economic one, but a political one too. Even the most lurid issues raised by "project fear" would have been nothing compared to the grim reality.

Likewise, if the UK votes to leave the EU, the most lurid problems raised by the so-called EU "project fear" may also be as nothing compared to the reality- and the Brexit supporters do not have any idea how to address the problems that their disastrous miscalculation could create. Most of the "facts" raised by the Leave faction are in fact provably not true.

Some of the more patronising political figures complain that the issues are blurred by "politics" and so, for example, Tom Hunter is printing at his own expense a guide to the issues. OK fair enough, but frankly it is up to the voters to do more to educate themselves- indeed they have a civic responsibility to do so.

In the end, the voters get the stupidity they deserve. It is nearly three thousand years since the Greeks established the rules for searching for the truth, the dialectic, which was popularized by Plato's Socratic Dialogues. Voters who do not use the dialectic end up like the wife of the Monty Python Professor of Logic: totally screwed.

The poisonous irrationality of the politics of the stupid needs to be addressed and defeated. Otherwise irrational Fascism and irrational Communism may prove to be the forerunner of a far darker hell, and one from which our species might not recover from. 

Friday, March 18, 2016

Justification by Faith

Next Sunday- Palm Sunday- Holy Week begins. It is a time when the long fast of Lent reaches its conclusion and the critical events of the Passion of Christ are remembered. 

Personally I find it a sombre and powerful time.

Yet for many in the West the idea of commemorating the crucifixion is absurd and possibly dangerous. For many, to ascribe power to the legendary judicial death of an obscure Jewish carpenter is to ignore the truths that we see all around us. Christ does not mention the things we know today, because he did not know them, therefore he must be merely a product of his time, and therefore not transcendent or divine. Some go further and suggest that Christians or indeed any other religious follower are self deluding or arrogant because they refuse to accept the truths of science.

Personally I do accept the truths of science. I accept the sceptical method. I am in awe of the majesty of the the vastness and stunning beauty we see in the heavens- and the science that helps us start to understand it.

I also know that we know so little. In a Universe where even the Milky Way itself is a mote of dust in the near infinity of space, our perception of reality is limited and partial. Beholding the Universe is something that is essentially impossible, and even the attempt puts us in a position of utter humility. The scale and power of what is out there is quite literally beyond our comprehension.

As a small boy I watched the launch of the Apollo Moon missions, and for me the names of Neil Armstrong, Buzz Aldrin, Mike Collins, Pete Conrad, Alan Bean, Dick Gordon, Jim Lovell, Fred Haise, Jack Sigert, Al Shepherd, Ed Mitchell, Stu Roosa,  Dave Scott, James Irwin, Al Worden, John Young, Charlie Duke, Ken Mattingly, Gene Cernan, Jack Schmitt and Ron Evans carried an almost mystical magic. These men, together with Frank Borman, Bill Anders and Tom Stafford are the only humans have have ever seen the whole of the Earth with their own eyes. Their reflections on the meaning of their mission, notably in the film "The Shadow of the Moon", express profound truths about our place in the Universe. All of them express a sense of spirituality in the way they describe our home Planet in the vacuum of space. Many of them indeed followed spiritual or religious paths on their return home.

Learning more compels us to understand that most truth contains quibbles and qualifications. We need to learn humility. For some the idea of religious faith is the opposite of humility, it is irrational certainty. Perhaps for some it is. I certainly don't feel that way. I accept that faith seems to demand a belief in the impossible. Almost by definition I question this faith at every turn. Yet recently, since the beginning of the liturgical year in Advent, I have attended the Lutheran service in Tallinn. The pattern of Confession, Kyrie, Gloria, Lessons, Sermon, Creed, Sanctus, Lord's Prayer, Pax, Agnus Dei, Nunc Dimittis, Benediction and Postlude is an ancient one. In the mediaeval church of the Holy Spirit, though the congregation is very small in this most secular of societies, the Lutheran music tradition is strong and beautiful. Taking Communion should objectively not mean too much, but in fact I feel considerable emotion. I am moved by the idea that the Universe might have a presiding spirit within it and that our existence may not be merely from some random course of events. The service makes me mindful of my fellow congregants, of wider humanity, the world and the worlds beyond the worlds. I take in the message of peace, forgiveness and trust that is distilled from the approved version of the Christian story. Whatever the details of the origins of Christianity, whatever the complete truth of the New Testament, the faith that is preached today is a subtle and sophisticated analysis of human frailty and human strength. 

In the symbols of the liturgy I am actually surprised to find not an empty, dust-filled irrelevance, but a profound sense of purpose. I do not claim that Christianity is the only religious way to encounter the purpose of existence, in fact I do not claim that religious faith of any kind is necessary. I only claim that for some, such faith is and has been a positive force.

Therefore I will ask of others only what I would offer myself: a sense of respect. I would ask that you do not denigrate faith as a "conversation with an invisible sky fairy". I would ask that you accept that others have different points of view and that these points of view may have a value that you may not understand or believe. I would ask for tolerance and an open mind. Even, at a stretch, I would ask for kindness.

We live in a staggering Universe. We should all show humility to the living things that share our stunningly beautiful Planet- a living jewel of Earth hung in the blackness of space.

As Eastertide begins, I remember a Good Friday radio broadcast on the BBC from years ago. It was a retelling of the Passion and used Vaughan Williams Fantasia on a theme by Thomas Tallis as incidental music. When I hear it, I think of my homeland and my family, many of them now living under the eaves of the green hills of Gloucestershire where Vaughan Williams was born. I also think of the passage of time that makes music possible and the Spacetime that we all exist within.

Truth is founded on doubt and uncertainty, it is a way to attempt to understand, even when there are inevitable limits to our understanding- such limits exist even deep at the heart of quantum mechanics. I think the same fundamental conditions apply to faith too.

Maybe understanding doubt is the most profound lesson we can learn from the time we are given here.

So as Holy Week begins, I wish you patience, understanding and joy.

Thursday, March 17, 2016

Taking the long road

George Osborne's budget was an incoherent collection of gimmicks. It was not designed with any other purpose but the promotion of its author and a certain faux stability ahead of the EU referendum in three months time. 

So, easy to criticize, but the fact is that at the moment, no political party in the UK is prepared to suggest the kind of reforms that are needed. The political cycle is too short for any government to reap the reward of the kind of radical changes that are required, but not long enough for the same government to avoid the negative consequences that such radical reform will inevitably bring with it. So, successive governments merely tinker with the system, knowing that to do more carries greater risks and limited rewards in the short term.

The cost of tax administration in the UK continues to increase, and the ever more complicated system imposes greater fiscal drag and ever more distortion of the economy. Incomes remain heavily taxed, while land is barely taxed at all- a distortion that has helped to create an increasingly dysfunctional housing market. Addressing the tax of land and property would help to release the significant percentage of the housing stock that is empty because there is no incentive to let it or sell it. "Buy-to-leave" has become a major problem across the country, but especially in London. It is a national scandal and one which Mr. Osborne's supporters have a vested interest in perpetuating. It is well beyond bizarre that HMRC's own office buildings are held in tax avoiding off-shore trusts, and high time that assets such as land and property were taxed in the same way, or at least to the same degree as income.

As for income tax itself, the highly regressive nature of the UK tax burden remains disguised by the nominally progressive setting of different tax rates, but it is still the case that the tax burden falls excessively on the lower and middle income groups. A wholesale reform and simplification of tax is long overdue. The current administrative cost of the collection of tax at over £20 billion is nearly five times greater than the fiscal gap that Mr. Osborne sought to plug with his regressive cuts to disability allowance and other benefits. The burden on the private sector is greater still. A flat tax with a tax threshold that is set at median income, so that only the top earners pay income tax is both far cheaper to administer and far fairer than the current system.

The Liberal Democrats have an opportunity to build a programme of effective, efficient and fair taxation. Now is the time for the policy teams to embrace a genuinely radical platform that unites taxation and benefits, as we have long advocated, but also to build in local and national accountability into the tax system. The original idea of pension and welfare insurance must surely be restored, and the promotion of savings and investment made fashionable once again. We have the opportunity- and as Mr. Osborne now, and Mr. Brown in the past show- no one else is prepared to offer leadership. Yet without reform, future chancellors too will be reduced to the ineffectual tinkering that George Osborne has presented to the House of Commons this week.

As the clouds of the next financial crisis gather, the time for action is already getting late in the day. We must set out on the long road to reform as soon as we can.

Friday, March 11, 2016

Tory Troubles.

With 100 days or so left until the EU referendum, it is clear that David Cameron is getting a good air war. The "leave" campaign is a shambles, and through a mixture of incompetence (Boris Johnson) and his own ruthlessness (Michael Gove), the Prime Minister is seeing off his political enemies. The betting is all one way, and perhaps the PM will maintain his position as one of the luckier and more astute political figures of the past decade.

However, post referendum, the clouds are already beginning to darken for both the Prime Minister and his party. Mr. Cameron has already said he will stand down before the election due in 2020. When and how he does so will dictate not only the future fortunes of the Conservative Party, but even, quite possibly, its survival.

The problem is that the Tories remain split top-to-bottom on the subject of the EU. More than half of Conservative MPs and probably a far higher percentage of the party membership are strongly in the "leave" camp. Only the senior echelon of the party, in the Cabinet and the payroll vote, does "remain" hold a solid lead. In a sense that is quite right, because the closer your are to the process of interaction between the EU and the UK government, the more you understand of the actual nature of the relationship (as opposed to the tabloid fantasies), and the more you are likely to support our continued membership. However, for a certain kind of Conservative activist, opposition to EU membership has become a Shibboleth that is deeply and viscerally emotional. The fact that the party leaders are so much more pro-"remain" is an act of basest treachery. There is growing and considerable bitterness at the ruthlessness that Mr. Cameron has demonstrated, and in certain quarters a belief that the entire referendum process has been denied fairness as the result of the support that Mr. Cameron has shown to "remain".

This "stab in the back" sense of victimhood that is out there may cause real problems for the Conservatives in the future, for if it continues then the referendum will not be the end of the crisis in the Tories, but the beginning of its break up. 

Tuesday, February 16, 2016

Diversity and other misnomers

In most corporations these days there is considerable emphasis on "diversity training". Most people look on it as a box ticking exercise, like fire alarms or health and safety briefings: a necessary bureaucracy by which the organisation demonstrates compliance with the law.

Yet, as with so many box ticking exercises, there is a core of essential and necessary work at the heart of the exercise. Organisations, like any group of human beings, can create cliques and foster a culture which fails to use each member of the group to their full potential. In short, respect for diversity is necessary if any group is going to fulfill the maximum that it can achieve. The search for excellence needs to embrace a broad range of points of view and a wide variety of experience. This is how corporations gain the best performance from their workers.

What is true for corporations is even more true for a political party that seeks to promote social and political excellence. Thus the heated debate amongst the Liberal Democrats as to why none of its MPs are anything except straight white males. To be honest, given the scale of the 2015 electoral massacre, the fact is that there are very few Liberal Democrat MPs of any description, so the random impact of the electoral dice is not really under the party's control. The idea that any one of these MPs should be stood down in favour of some other "more diverse" candidate is insulting to hard working MPs and also to the supposedly "more diverse" candidate- yet that is what more hot headed figures have seemed to suggest.

The party can, and to a great degree does, seek to put different kinds of candidates in winnable seats. The problem was that last time, we did not win any of them. To my mind, diversity campaigners in the party treat these in much the same way as corporations: a box ticking exercise. We lost genuinely excellent women MPs. We failed to elect MPs from a wide variety of ethnic groups- and despite criticism, this was not through want of trying. Several retiring MPs hoped that their successors would be women- but we did not hold a single seat. All our LGBT MPs lost their seats. So although some argue that we as a party can no longer say respect diversity, the fact is that while we could have done more, and intend to do more next time, we should also respect the talents of all our members- including the straight white males.

The whole point about diversity is not just that we should reflect the society that elects us, we should strive for excellence. The resignation of Kav Kaushik disappoints me because Kav is a genuinely excellent candidate and campaigner. Intelligent and articulate, Kav would have been a great MP- but too many people focused not on what she said, but who she is, and that is about as patronizing as politics gets. No wonder she felt that the Liberal Democrats were demonstrating hypocrisy of the worst kind: several of us were!

Personally I have felt that the party must promote the role of women more than it does. I believe in the principles of feminism and female equality. That for me is a far more urgent problem that some of the other issues in the diversity debate: ethnic minority issues and respect for sexual minorities. Yet across the debate we are simply talking about the process, rather than the goal. It is not just that we should be seeking greater diversity in our Parliamentary party for its own sake, we should be doing this because it allows us to gain higher quality candidates and MPs/MSPs and AMs, not to mention councillors. 

Diversity is not - should not be- a box ticking exercise. It is not a question of putting brilliant candidates into groups- it is the exact opposite: it is finding candidates who are genuinely excellent, regardless of those groups.

In the Liberal Democrat diversity debate, too many people seem to think that the group that people belong to is more important than their individual excellence- and Liberals should make sure that this should never happen. When excellent candidates like Kav feel they have to leave the party, there is something very badly wrong- I trust that there will be some reflection on all sides.

Monday, February 01, 2016

President Trump - a symptom of a greater problem

The United States, despite its almost religious reverence for their constitution, is prone to periodic political crises which can be almost existential in scope. The civil war was caused by the constitutional ambiguity concerning slavery, which poisonous legacy still defaces American society today. In the twenty-first century the idea that there could be any legal justification for slavery seems self-evidently absurd.

When Al Gore polled half a million votes more than George W, Bush in the 2000 Presidential election, even democracy itself took second place to the Constitution since it was Mr. Bush who was elected, by virtue of carrying more states and therefore winning the electoral college. The consequences of the incompetent arrogance of the Administration of the 43rd President- from Iraq and Afghanistan to the response to Hurricane Katrina  are also still reverberating today. Trillions of dollars and hundreds of thousands of lives have been lost around the world because Mr. Bush and his cohorts in the "Project for the new American century" fully achieved their policy goals, but the consequences were not far short of disastrous. 

At the heart of the American constitution there lies a crisis that could have repercussions that could be just as serious as the civil war itself. This is not the argument over whether the question of whether the right to bear arms should be regulated or not. The horrendous death toll of guns in the United States speaks for itself, and the foolish attempt by the NRA and its supporters in the arms industry to ignore the question of "a well regulated militia" and simply permit unrestricted access to murderous weapons is what makes the United States uniquely murderous amongst developed nations. In the eyes of the founding fathers, I suspect that the gerrymandering of political districts would be seen as a far greater crime against the Constitution. Gerrymandering has not merely entrenched and polarised the political oligarchy of the United States, it is undermining the legitimacy of Congress in a way that could lead to a major political breakdown.

Jefferson, Adams, Franklin, Hamilton, Washington and the others strove to find a balance in the three arms of the constitution: the executive branch -the Presidency- was checked and balanced by the legislative branch- Congress- and both were regulated by the judicial branch, and in particular, the Supreme Court of the United States. This system of checks and balances is generally held to be the key to the success of the constitutional order. Yet the fact is that the electoral system is now increasingly fixed: the level of wealth required in order to be elected to national office is beyond all but a very small elite that either possesses  such wealth independently or can raise it. Congress is now a cadre of wealthy extremists whose views only incidentally coincide with the majority view in the country. Life inside the "Beltway bubble" has more to do with money and political posturing than with finding practical solutions to the issues of the day. Unsurprisingly Washington, DC is extremely unpopular. The political legitimacy of Congress is increasingly challenged.

This matters, especially if the executive branch falls into questionable hands. Donald Trump is a man who, having inherited great wealth from his father, has expanded his wealth through highly questionable means with extremely dubious business partners. There is substantial evidence that he has had associations with organised crime. There is little doubt that his business methods are highly dubious. Yet, as we go into the first caucus of the 2016 electoral season, Mr. Trump is the front runner for the nomination of the Republican party. Of course there are many hurdles to overcome, but the political class of the US has been increasingly shocked to discover that despite their disapproval, he continues to lead in his race. Mr. Trump has advocated policies that would probably be unworkable and may even be  unconstitutional, but this has, if anything added to his popularity. Should he be elected and should he choose to implement these policies, it could be that Congress would be unable to oppose them- it would lack the political legitimacy to take on a genuine populist.

Of course the US has elected bad Presidents- such as Warren Harding or Richard Nixon- in the past, and has survived, but the fact is that a country that is so cavalier about its own democracy can hardly aspire to be a genuine role model at a time when so many challenges exist in the international order. Russia's tyrannical leader, Vladimir Putin, may have expressed admiration for Mr. Trump, but there is little doubt that he would exploit every opportunity to diminish US power and break the North Atlantic alliance. Mr. Trump's bluster about the use of force against peaceful neighbours like Mexico hardly suggests joined up thinking when dealing with the real challenges that the US faces- in the Middle East, Asia and across the world.

Many suggest that whatever Trump says is irrelevant, since he is unlikely to win the general election. Yet I beg to differ. Mr. Trump is already in the top five people most likely to be President of the United States. Supposing Mrs. Clinton was to face a return of questions about her conduct in office or the conduct of her husband. At the crucial moment it could be that Mr. Trump flukes a victory. 

The fact is that the United States is flirting with a leader who could be exposed to blackmail and subversion- and possibly that applies to both front runners. Still worse that leader could defy the constitution and likely get away with it.

The United States is on a knife edge- a blustering crook or a woman compromised by years close to the top. It is not a happy choice and it may be that without reform the system will no longer be able to maintain the order that has underpinned American creativity and power since the 1930s. Reforms to the constitution will be increasingly necessary in order to restore the democratic impetus- but in a self interested and narrowly isolated political class, it is hard to see where the power to enact such reforms can come from. 

Yet another existential crisis may be upon us.