Austin Mitchell and the economic woes of Europe

Found an amusing post on left-wing British Labour MP Austin Mitchell's blog, where he wonders what John Maynard Keynes and John Kenneth Galbraith would make of the current economic organisation of the EU, or more specifically, the Stability and Growth Pact and the dominance of bankers in setting monetary policy.

"Bankers Rule. Not OK. Never could be in fact. The priority of bankers is to fight inflation not get growth, which they fear as destabilising. Their instincts are deflationary. Their aims are to keep interest rates high (bankers love that, can't think why) and keep the exchange rate as high as possible, like a phallic symbol: proud when it's hard."
...
"Enthrone all that lot and what do you get? Europe today. There are benefits for small countries because the interest rate premium they paid for smallness is gone so Ireland Greece, even Spain, are bowling along. Yet for big, grown up, economies and the great majority of the people the result is disaster. The French can riot, the German unions demand, the Italians switch from one set of crooks to another, but no one can bring down unemployment, simply because they can't boost demand, borrow or spend. The only real strategy open to governments is "reform". That basically means cutting welfare, wages and public spending, firing workers and generally embarking on Merkel deflations."

"In the good old days of full employment and high growth the Germans kept the D Mark low to keep exports pounding out. Can't now. France and Italy periodically devalued to boost demand and accelerate growth. Can't now. Business invested and expanded production for export led growth. Can't now. In fact the smarter capitalists, rather than sit around to face the limitless future of misery Bankernomics offers them, are shifting as much as possible overseas. The interests of bankers are quite distinct from those of capitalism, workers, politicians or the people."

Mitchell then makes a comparison between the so called "battle against inflation" and another recent example of a declaration of war on an abstract concept.

"Of course all we losers can't be told that. So we're enrolled in a "battle against inflation". This excuses misery by a fight against a dead enemy in the same way as the politicians proclaim the "war against terrorism" to excuse repressive measures and the loss of civil liberties. So here we all are then, just as Orwell described life in 1984, mobilised to fight unwinnable wars against invisible enemies in order to distract attention from the misery, unemployment and alienation all around. That's Bankers' Europe. The two Johns would have had fun pointing all that out but it just makes me want to cry."

Personally I am not as Euro-sceptic as Austin Mitchell, but in terms of identifying one of the euro-zone's key economic problems I believe Mitchell hits the nail on the head. I have long thought the Stability and Growth Pact is a unworkable and inflexible monetarist piece of nonsense. Member states of the EU are forced to restrict annual budget deficits to 3% of GDP, and to make matters worse this restriction is calculated from year to year, thus making it impossible to take into account any wider economic cycles. In essence, it attempts to outlaw Keynesianism.

The fact that the Pact has been applied inconsistently since its introduction is another demonstration of its impracticality. The EU Council of Ministers did not apply any sanctions against France and Germany when they exceeded the budget deficit "limit" year after year.

At the time the Masstrict Treaty was being negotiated in the early 1990s Europe was dominated by centre-right governments with sympathy to monetarist reductionism, who held a simplistic view of the economy where inflation was the only evil worth worrying about. Yet when Europeans later decided to elect centre-left governments, plans for greater social spending were hampered (in some cases) by the restrictions of the Stability and Growth Pact.

While some form of economic agreement is needed to maintain a multi country currency like the Euro, this should not be used as an excuse to write extremist economic assumptions into "law" at the expense of democracy.

OEs in the future

With the price of oil continuing to climb, it could well become too expensive to travel to Europe for the big OE.

At least by plane.

Thus I was interested in this story in the Jakata Post about the proposed Trans-Asian Railway (TAR). A train ride all the way from Singapore to Glasgow! Less jet fuel burned into the atmosphere would have environmental benefits, and there would be more interesting scenery than clouds on the way.

"Covering a distance of almost 81,000 kilometers in 26 countries, the line would consist of a northern corridor connecting Europe and the Korean Peninsula through China and Kazakhstan, and a southern corridor linking Thailand with Turkey through countries like Myanmar and India."

For many Kiwis and Aussies, Singapore is a regular halfway point on the long haul flight to London. So could we see environmentally conscious Kiwis and Aussies flying to Singapore to get the train?

In reality I suspect it would be something people might do once in their lives. As for myself, I have always wanted to travel the Trans-Siberian, so taking the train from Singapore seems like a natural extension.

Update: Unfortunately the Jakata Post website does not seem to understand the concept of permalinks and why they are a good idea. I have fixed the link - but I don't know how long it will stay current.

Indonesian Government considers buying back port from Hutchison

The Indonesian Government is considering buying back port operators PT Jakarta International Container Terminal (JICT) and PT Terminal Petikemas Surabaya (TPS) from the current foreign investors as they have failed to expand the ports as promised.

Transportation Minister Hatt Radjasa said the government has seen no progress or evidence of a serious intention on the part of the foreign investors to turn the ports into an international hub.

And who are these 'foreign investors' who have failed to deliver on their promises?

• British company P&O Ports, and;
• Hong Kong-based Hutchison Port Holdings Group

Earlier this year the Christchurch City Council, through its assets arm Christchurch City Holdings (CCHL), proposed selling Lyttelton Port to the very same Hutchison encouraged by the promises made by Hutchison to expand the port and turn it into an international hub. Where have we heard that before!

Instead, Hutchison put their own interests first,
"The buyback plan is not a nationalism gimmick. It is a fact that the foreign investors in the two ports are only making Indonesia a feeding market for their operations in Singapore," said Hatta recently at the Presidential Palace.

Thankfully CCHL and Hutchison were unable to proceed with the asset sale as CCHL failed to acquire enough of the existing Lyttelton Port Company (LPC) to enforce a compulsory takeover. This does not mean the Christchurch City Council have given up on privatising Lyttelton Port. I heard Gary Moore say during the recent public hearings on the Long Term Community Plan that the council now have 74.1% of the Port Company. This puts CCHL extremely close to the 75% mark that would allow them to change the LPC constitution, which no doubt would be used to further the privatisation agenda.

You would hope, perhaps in vain, the Jakaka example would give CCHL pause for thought.

Tags: Politics, Lyttelton, Corporates, Hutchison, Privatisation, Christchurch

Photoblog: Going to the airport after the big snow

Took these photos on the way to the Airport. The parks along the way were quite picturesque. I liked the way the shadow of the trees left a shadow of green in the snow.

The following pictures were taken around 5pm, so by this stage some of the snow had melted :( But on the plus side we were able to get to the airport! Apologies for the quality of some of these shots, the camera on my phone is only 1.3 megapixel, and this is all I had with me at the time.

Here is Hagley Park



Harper Ave


Another park on Memorial Ave, on the way to the Airport


Russley Road Roundabout, near Airport


Snow on cars in the carpark


Looking over the runway as the snow melts. The norwest arch in the background is good to see, as in Christchurch this pattern usually signals a better weather for tomorrow. We can only hope!

Big snow in Christchurch, spare a thought for Geraldine

Had a rather exciting day as I had to ensure Mum got to Christchurch airport in order to get her connecting flight to London. Today, of all days! Spent most of the day glued to the radio, sussing out the goss on which roads were likely to be blocked as our little Renault is no snowplow. Mum had almost resigned herself to flying out tomorrow when we heard that Christchurch airport had reopened for incoming flights around 3pm. Yay!

Mum's friend Helen had even more trouble making the flight, as she had to make her way from snowed in Geraldine. For most of the day we were worried that Rusty and Helen had no show of making it to Christchurch. But as the southern snow subsided around noon, they decided to give it a go. Even with a 4 wheel drive and a set of chains, they still got stuck twice coming down the hill from Geraldine, and had to be pulled out by tractor type things (city kid language ok!), with the snow reaching the 'belly' of the car. Once they got onto the main road they had no major problems, but by then the day had already seemed too much of an adventure. Suffice to say we were very happy to see Rusty and Helen at the airport.

And spare a thought for the South Canterbury folks tonight - today Geraldine had no power, no water and over 2 feet of snow. Apparently there are four large 4WD's stuck in the snow on the main street, so it appears even SUVs can't get very far.

Hitchhiking Hone

Good to read that Te Tao Tokerau MP Hone Harawira has found a new way to keep in touch with his constituents - hitchhiking his way home.

While Hone is eligible for free airtravel and taxis as an MP, he continues to stand by the side of the road asking for a lift, not to save money, but to meet people.

"I meet a lot of people who don't go to meetings, so I get to know what's happening in their world. Ordinary people with ordinary issues," he said.

"People think I'm mad. I've always hitched and now that I'm an MP, I don't see why I should stop. I want them to know I'm still the same guy. I just want to keep it real."

Hone did not think it was a good idea for National leader Don Brash to follow his hitchhiking example.

"If Don Brash was hitchhiking in Kaitaia, one of my cousins would probably run him over."

Personally I have never hitchhiked. My Mum did once when she was young, but ended up completely in the wrong place. While it doesn't seem that much of a horror story now, sometimes the stories you hear as a child can cause you to hesitate before doing things as an adult. It must be said that sometimes this can be a good thing!

Russel Norman new Green co-leader

Russel Norman has been elected as the new Green party co-leader.